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Doherty welcomes move on Dwelling House Exemption abuse

4 November, 2016 - by Pearse Doherty TD


Sinn Féin Finance spokesperson Pearse Doherty has welcomed indications today that the government will move to restrict dwelling house inheritance tax exemption.

Teachta Doherty said the exemption was being abused by wealthy people to avoid paying taxes.

The move follows Deputy Doherty’s questioning of Department officials in a private brief on the Finance Bill and his questioning of the Minister about the loophole.

Deputy Doherty said:

“Yesterday I submitted an amendment to the Finance Bill to restrict the Dwelling House exemption to genuine circumstances where home sharers inherit a property and I am glad to see a government amendment seeking the same goal has been submitted. The work of the whistle-blower and journalists who have taken an interest in this area must be commended.

“This loophole permitted people of high wealth to buy up properties to pass on tax free to their children. My suggested approach which I am glad the government is now supporting is to restrict this exemption to genuine family homes.

“I have been raising this issue for some time after a whistle-blower brought it to their attention. 

“In May I asked the Minister what action he was going to take. I was disappointed by his response which lacked a firm commitment to act. I was also shocked to see how much the potential cost of this loophole could be.

“Last year €52m of tax was foregone because of this exemption. While we can’t say for certain what amount of that was as intended by the spirit of the legislation and what amount constituted an abuse, it does point to a potentially very costly loophole that needs to be shut.

“I look forward to teasing out the detail of my amendment and the government one next week.”

ENDS

PQ and Minister’s response follows:

Written answers 

  • Thursday, 26 May 2016 Department of FinanceTax Avoidance

Pearse Doherty (Donegal, Sinn Fein)

Link to this: Individually | In context | Oireachtas source

78. To ask the Minister for Finance why he has not acted on information his Department received from a whistleblower regarding the abuse of the dwelling house exemption by high wealth persons as a means of avoiding capital acquisitions tax; the details of anti-avoidance measures and the caps on relief he has considered to stop this supposed abuse; the number of persons who have availed of this exemption and the amount of capital acquisitions tax exempted in each of the years 2006 to 2015 in tabular form. [12447/16]

 

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas sourceThe dwelling house exemption is a provision of the capital acquisitions tax (CAT) legislation. It allows for the tax-free transfer by way of gift or inheritance of the residential property in which a beneficiary lives, subject to certain conditions. These conditions include a requirement that the beneficiary has been living in the property for three years prior to receiving it and that they remain living in the property for six years afterwards, except in certain special circumstances. It is also a condition of the relief that the beneficiary not be beneficially entitled to any other residential property at the time of the transfer.

The underlying purpose of the relief, which I consider to be reasonable, is to prevent so far as possible cases of hardship arising from a tax perspective when a person is gifted or inherits what is, in effect, their home. My Department and the Revenue Commissioners have encountered some evidence that individuals may be using the relief as a way of passing on wealth tax-free in a manner which is not in line with the core aim of the relief. This evidence has come from several sources, including information provided by an individual who claimed to have encountered the practice in a professional capacity.

My Department and the Revenue Commissioners are currently working to gather and assess information relating to such possible practices and to consider whether the current scope of the relief is in line with its original spirit. The Deputy's attention may have been drawn to this subject by media reports following the release by my Department of material relating to the issue in response to a freedom of information request submitted by a journalist. As is clear from the material released in response to that request, the work of investigating this issue and developing potential policy responses is current and ongoing. 

I am advised by the Revenue Commissioners that the available information in respect of dwelling house exemption from capital acquisitions tax is as shown in the table. The estimated cost for the Dwelling House exemption does not take account of the availability or otherwise of the relevant tax-free thresholds if the exemption did not apply.

 

Year

Numbers

Cost €m

  • 2008
  • 460
  • 43
  • 2009
  • 574
  • 36
  • 2010
  • 440
  • 26
  • 2011
  • 565
  • 45
  • 2012
  • 499
  • 38
  • 2013
  • 538
  • 35
  • 2014
  • 614
  • 41
  • 2015
  • 741
  • 52

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