53 - 2015-09-29 Submission as Seen and Noted by Minister (1)

7/25/2019 53 - 2015-09-29 Submission as Seen and Noted by Minister (1)

1/22

Prin

S'rbrxissi0,i

Increase

25ol'

,10o./o

Page lofll

2016

I'ull

r

rar

01116-15

Title:

Changes to the Capitals

Acquisitions

Tax

tax-free

thresholds

and

related

issues.

(Budget

16#3)

Executive

Summary

Gili

and inheritanec taxcs apply'on amounts received

abovc certain

tax-iicc

thrcsholds. rvhich

hat'e

bccn rcduccd significantly'since

2008. With rising

property prices

some

pressurc

has

cmcrged

t


2/22


3/22

Print

Stibmission

Pagc2o,

ll

.

-lhe

dil'fcrcnccs

in

2016

cost is duc

to liming

issues;

(l)

rcprcscnts

thc

201(r

cost

ifchanges

arc nradc

on l].rdgct

night,

as has been

previous

practice'

while

(2)

*'ould hc

thc

cost

if

changes

arc

rradc

l'rom

I JanLrary

2016

Altemativel;-

an

increase

in

the

Croup

A

threshold

onlr,,

rvhich

applies

to

tlansf'ers

lrom

parenls

lo

thcir

children. rrrruld

cost

as

ltrllorls

(

millir:n):

(7,

increase

2016

(m)

(l)

i5

"10

Full

Year

(m)

15%

13.33%

400h

(2t

12

27

3l

J-)

4t

In this

case

the

(ireiup

ll

and C

thrcsholds

*'ould

remain

tlnchanged.

'I'rv-o

other

issucs arc

considered

in the appendices

to this

submission

but

not

recommendcd:

indcxalion

olthresholds

and the

reintroduction ofprogressive

C,'\'f

rates.

Detailed

lnformation

Comments

.

(25:09,'10l

5

l"l:l

7: 15)

Gary

'l

obin:

\'lrnistcr.

this

is

the annual

Budget

suhmission on

CA]'

rhresholds

r\c

present

lo

)ou

each

1ear.

As the Submission

suggests.

the

currenl

average

Dublin

house

price

is approx.282.000

rvhile

the

current

(iroup

A

threshold

(giftsi

inhcritanccs lrom

parent

to

child

that are

excmpt

in a

lifetime) is

225.0()0

|raving

previously

bcen

just

under

497.000

in 2007,

The Submission

recommends

a 33% in the

Group

A

rhrcshold

to

300,000 to

take

ellect

from

I

January 2016

ar a

qosr


4/22


5/22

PrinXrrbrl

isicrr

I'ageiofll

l.

Capiral

Acquisirions

'l'ax

is

the

tax

on

gifts

and inheritances.

A

3396

rate

applies

on

values

over

lil'etime

tax-free thrcsholds

defincd

by

the relationship

of

the

disponee

(beneficiary)

to the

dispone'r.

(irorrp

A:115.000

-

(llroadly

t() a son or

daughlcr)

Croup

Ii:

10.

| 50

-

(Parent,

sibling,

niece, ncphew

or

grandchild)

(iroup

C: 15,075

- (All

other

relationships.

cxccpl spouses and civil

partners.

who

are

exempt)

2.

'l-he

thre.sholds have been

reduced

a

number

of

times

over

recent

ycars

uhile rates

hale

been

increased

thaving

been

signilicantly

reduccd

in

2000). The

primary

reason

lbr these changes has

been

protection of yie)ds.

I

lorvever in

20

I

4

there

was a 397o

growth

in

y

ild

comparcd

to

20

I

.l:

200lt

332

521,208

2009

254

l5

o,.',o

.134,000

2010

238

250h

3

32,084

201 l 701?

283

201

l

279

225,000

Yield

(million)

Rate*

2014

387

I

l9n

Group

A

'fhreshold

Cmup

B .19.682

52.121

.11,400

tl13.208 33.500 10.150

30,150

Threshold

3.

A

very

large

parl

ol rhe

value

t'rf

gills

and inhcritances

is in the

lbrm

ol

residcnrial

propeny,

so

lhat

propcrty

prices

havc a

significant

impact

both

on CA'l'

yicld

ancl

on

thc

range

ol.people

who

are

subjcct

lo

lhe

tar.

Bccausc

falling

propcrt-v

prices

contributed

to redLlced

lields.

rhc

rhreshold

changes siner:

2009 desi-qned

ro

prolecr

1.icld

have

largcly

tracked

the

changes

in

propem

prices.

up

unril

201.1.

7o?,.

e196,824

3}Yo

r250,000

ji9,,

225.000

25.02 00

30.150

https:rrrharcpoinl.irserrices.rov

iei rin.r,,l pprication

s,/S ubrr

iss

ions,,

Ia)*ours./r

5.,e

su

bm issionsrprinr.asoxl,is

28,09r20

t5

2007

t92

I

Group

C

24.841

26,060 e2t,7a0

16,604

16,750 15,075

15,075 15,U75

I

Threshold

I

I

I

*Rates

an


6/22


7/22

l'r ill \tltrll) l:.lrrll

I

htips:

'

sharcpoinl

it service

s.go\

. icrlin

Applicarions,s

ul_.nr

iss

ions, I

Paj.

lot

ll

ar

oulsrl

5

'cSubmiss ons.,prim.aspr,7ir.

liJ {}(),101

5

.1.

Propcrty

priccs reached a

peak

in 2007 and thcn bcgan

to fill. Thc CAT thrcsholds

continued

to risc

in

Iinc

rrith inllation.

blrt

then

since 2009

rvere

rcductd

through

a

scrics

of

discretionar,'

changcs as

proper11,

priccs

continucd

to

lall.-lhe

last

tinre

this

occurrcd

rvas late

2012,

sincc

rvhen

propcrt)'priccs harc begun

to

incrcass.

althoush this

process

has slr.;rved


8/22


9/22

I'rini\Sibmissi0n

Palc5oi'll

10. A

person

receiving a

gilt

or

inhcritance

ol' the

house

they usc as their main

rcsidence mav

be

lblc to

clairn

cluclling

housc

relicl'.

,'rhich

means

that

no C'A.l'is

palable

on strch

a

gili

or

inhcritancc.

pror

iclcd certain conditions are

met. As

sr"rch,

the "inlreritancc tax trap"

would

mostly

appear

to appl)

ltl

benellciaries

r.r

ho do not live in the

propt(),

in

qur"'stion.

or

{re other\\ise

incligiblc

lirl tire

cxe

rnptinn.

I

l. On11,

in

quile panicular

circumstances

rvould

an inheritor llnd it necessary to sell

a

propcny

to

pa)'the

aAl'

Iiability.

If thr) mo\c into thc

property.

various options other than

pavment

from

savings could

be open

to

thcm. including:

pavment

o1-the

tax fiom

the

sale

ol'another

propcrtyl

suhstiturion


10/22


11/22

I'rlril \Llhrxrs\lL)n

l>ngc6ofll

1"1. l'hcrc

are

lrvo

possible principles

on

rvhich

onc could say

thal

property prices

and

lhe tax fiee

thresholds

shou

ld

be

linked.

.

Onc

lroLrld

hs

that

the

thrcsholds

should bc linkcd

rvith

the

averagc amount recci\cd

through

gili tnd

inherirance. f]ecausc

propeny

rnakes

up a

large pan

of

thc

value

oltranslcrs

subjcct

to

('A

l. propert_v

prices

can

act

as a

prox

fi)r

thc amount thal

peoplc

receive throrrrh

gili

and

inheritancc.

A

rcason to lirllorv this

principle

might

be a

belicl that only

some

portion

ol'

recipients

(li)r

instance

the

top

quarter)

shoLrld

pay

CAT.

Ily

changing the thrcsholds in line

u,ith

thc

valLrc

olthe

assct+1,pe

''rhich

makcs up thc bulk o1'rcccipts this liaction

could be

roughll rnaintained.

l

hc

secund

would bc that lhc real value of'receipls is

deflncd

by

the

abilitl' thc)

convc) to

hold

or

buy

propen)'(cither

a

property

received

by

gift

or

inheritancc

or

anothcr onc

to be

tousht

lvith

thc rcceipt). rather than

the

avcragc

basket ofgoods

used in the

CPl.

ln

this

case,

as

propcrt), prices

go

rp

thc rcal value

of

a ta\

liec anlount would go dou,n

and

the nominal

amount should

be

raiscd.'l'his

may'be

most

rclclant

fbr

disponccs

r.r'ho

prclcr

to

nloYc

into

the

prop.-'n) *hich

they

rcccive

and

not sell it

-

ilrhe

thresholds

are

not related to

propcfl)',

priccs.

those

u,tro happen to lccei\e

a

propcn)

at a

lime

whtn

priccs

are

liigh u'ill

he

taxed to

a

grcittcr

c\tcrlt

than thosc

uho

happ,--n

to rr'ccilc

onc al a tinrc

whcn

prices

arc lorver.

I5. Or'crall. thc casc tbr

Iinking

C:\T thlcsholcls to

propcn,v priccs gcnerallr

is

nor

strong.

Notu ithstlnding this. an easing o1'thc inrposition

ol

CAT could

he

considcred to

Lrc

rppropriatc ru

light

of both

the significant

rolatilitf

in assct

priccs, parlicularly

propertv.

in

recent

vears. and thc

considcrablc incrcase in CA'l

1"ield

in 201,1.'l'his

could

be

done cither throuch

a rcduction

in

the

rate

clr

an incrsasc in

the thresholds.

i

7.

wirh

rcuard

lo

ad.lustmcnr

ol'thrcshords.

there

arc

a

number

of

oprions.

.r.he

lblrorving

options

lrave

heen

costcd

by'

Revenuc (ru,

Jear

costs. with

a,

three

thrcshords

changing

bv

rhc

same

pcrcc'ntaBc):

.

.111]:i

increase,

brinring.the

Group

A rhresholc.l

ro

250.000:

28

million.

.

1?0-7:

increase.

bringing thc Oroup

A

threshotd

ro eZZOff0O:

,16

millir:n.

'

A

75y,

i,crease.

bringing

rhe

croup

A

rhrcsh,rd

to

ezti,zso:

56

nri[ion.

h n

ps:,"s

h

ar 'po

jn

L

ilsen.ices.gov.

ie,lil:A

pp

licat

ionsrsu

bm issions,

,

layouts.l

5'esubrn

iss

ions,prinl.asp\

?is

:8

09

:01-i

i

I

|

^-,

i^ l"-l^-.1

-

^-.,.:,^Lt..

^-,

--^---.^..^i-...--

I

|

16.

C.^'f

plals

an imponrnl pirn in

lrclands

cquitablc

and

progrcssirc

ta\

ivstcnr.

n

s .r

tax

on

I

llilctimc

rcecipt

,'l'uilts

anJ inhcritunccs

ir lulfils

thcsr'goals

morc

cffccrirell

rhan.

li,r instance.

an

I

l"r,rt.

r,,r.

.\ rcriucrion

i,

the

rarc

of L,\l

rrould

bc

morr' hcncficiai

ru

rh,,sc

pq;..11inq1

lcomparalirely

larr:er

gitts

and bequests.

s,hile

a

change

in

thresholds

*oulti

primarily

bcncilr

those

I

lrc'c.'iving

rilts

rnd hequests

rrt

u

value

comparatirclr

clo:,e

trr

thc

thrcshold.

rts

suclr.

ir

isl

I

tecu.nl",,.1*.i

tlrat anv

ovcrull crsing rrf

the tax hc d6ng

15rur*1, changes

trr the

fhr.csh,rltls rather

i

]than

a rcdtrcrion

in

the rate.

I

I


12/22


13/22

Print..-.r:rission I']J1 lol-Il

A

3i.j%

increase. bringing the Oroup A threshold to 300.000: 71 million

A

.10'7o

increase.

bringing the Group A thrcshold lo 315.000: 81

rrillion.

A 5 69,i,

ircreasc. bringing the Group A threshold to 350.000: 103 miliion.

A 78',.6

increase

.

bringing the Group A threshold to .100.000: 129 million.

19.

Dillerent sourccs

give dillerent ligures lbr

increases

in

property priccs

since the

thresholds

rvere last chilngcd in Deccmber 2012,

but it has bcen of the ordc.

of

249/o it'r

the avcrage

price

nalionall)'up

to

Q2

2015, Ar.c'rage

propert) prices

in Dublin have incrcased by

40%

in the

period

since the

thresholds

rvcre

last changed.

20.

An increasc

ol',109,i,

is not considcred appropriate

given

the

disparity

betueen thc.

Dublin

and

national rates ol

pricc

incrcases.

Ho$cvcr.

incrcascs

oi c.25%. bascd on

ahc

growth

in

national

prices.

or ll.ii96,

uhich u,orrld

repre'sent the mid-point bcnr.een

arcraqe

inrrearcs

in

propertr

prices

nationclly and

in Dublin in

that period.

could be.]ustified.

21. Another option

rvould

be to raise

thc Group

A threshold

only. As

u'e

ll

as

reduced

cost

thcrc

1rc

[\

'o

rcasons

that this option ntav bc

considcred.

One is that

thc majority

of

conccrn

around thc

issue

has

concenlrated on

tltc

passing

of

thc t'amily

home l'rom parcnr

'lo

child

through

inherirance.

l

his

kind of translcr is covcred

by the

Group

A

thrcshold.

l he

second

is

that. if

the

change is

to be

trased

on

chanqes in

properrl'

prices.

rhe

change'in

rhe

croup A

threshold

is

the most

meanirgful

in

that

regard.

'l'his

is

because,

rvhilc

a

change in

thc

Group

A

thrcshold

could

bring

thc inheritance

of

manv

homes

'ut

of the

cAT nct.

changes in

the

croup

B

and

c

thresholds

wiI

not

do so.

and rvill

rrakc

only

a snralldill'ercncc

to

any

individual,s

CIAT

liabiliry.

hllps:,sh:rrepoinl.irscn

iccs,gov.

ie,]tin,Applications,submissions,

lul

ours

l5

csubmis.rion

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53 - 2015-09-29 Submission as Seen and Noted by Minister (1)

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