It may become mandatory to report all inheritances and all gifts in excess of the small gift exemption (€3,000 a year) as the Government bids to strengthen the State’s inheritance tax system.
Currently recipients of a gift or inheritance are only obliged to file a capital acquisitions tax (CAT) return when their lifetime threshold (€335,000 in respect of gifts and inheritances from parents) is reduced by more than 80 per cent.
The Department of Finance’s Tax Strategy Group (TSG), however, said this placed “a significant burden on taxpayers to retain detailed records over a long period of time”.
“One possible solution” would be to legislate to make it mandatory to report the receipt of any benefit that reduces a recipient’s lifetime threshold, the group said.
“This approach would significantly reduce the record-keeping requirement currently in place for individual taxpayers,” it said.
In its paper on inheritance tax, the group noted that the current 33 per cent CAT regime netted the exchequer €634 million last year. The biggest single component of gift and inheritance tax receipts, €291 million, was derived from so-called Group B beneficiaries.
[ Top 10% of Irish earners now paying almost two-thirds of income tax and USCOpens in new window ]
The term ‘Group B beneficiaries’ usually refers to gifts and inheritances between brothers and sisters and aunts/uncles and nieces/nephews.
The tax-free threshold between these groups is currently €32,500 in contrast to the €335,000 applicable in the case of transfers to children. The TSP noted that increasing this €32,500 threshold to €35,000 would cost the exchequer just €9 million.
Raising the parent-to-child threshold of €335,000 to €350,000 would cost just €15 million while raising it to €400,000 would cost €52 million, it said.
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Taoiseach Simon Harris said recently that “unfairness” and “anomalies” relating to inheritance tax were issues that deserve to be considered in advance of the budget.
Minister of State for Finance Neale Richmond has also backed a cut to inheritance tax, claiming it was is placing “an undue burden on the squeezed middle”.
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