I read your recent article on inheritance tax and I noted a substantial difference between the tax-free inheritance of a child compared with that of a niece or nephew. Please explain who exactly qualifies under the more favourable Group A threshold?
A person is entitled to receive a gift or inheritance up to a certain value without being liable for tax known as Capital Acquisition Tax. The amount of tax payable depends on the amount of the gift or inheritance and the relationship between the parties.
For tax purposes the relationships are categorised into three different groups namely Group A, B and C. The Group A beneficiary can receive up to €225,000 tax free from a disponer (person giving the gift or inheritance). The gift or inheritance in excess of this amount is taxed at 33%.
The following category of individuals will fall into Group A:-
- A child of the disponer;
- Adopted child of the disponer;
- Step-child of the disponer;
- Foster child of the disponer (subject to additional criteria depending on whether the foster child receives a gift or inheritance);
- A parent taking an absolute inheritance from a child;
- A minor Grandchild (aged under 18 years) taking a gift or inheritance from his grandparent where the grandchild’s parent is deceased;
Group A may also apply to a niece or nephew if he or she has worked in the business of the disponer for the previous 5 years and also meets the following criteria:-
- The niece or nephew must be a blood relation;
- The gift or inheritance must consist of property used in connection with the business, (including farming);
- If the gift or inheritance consists of property then the niece or nephew must work more than 24 hours a week for the disponer at the place where the business is carried out.If the business is a small business carried out exclusively by the disponer then the niece or nephew must work at least 15 hours a week at the business.