The Government is to reform the capital acquisitions tax regime, allowing close family members to inherit the family home without paying large amounts of tax.
However, one of the main campaigners for reform of the tax has said the commitment in the revised programme for Government does not go nearly far enough and is likely to leave orphans and cohabiting couples in an unfair position.
In the Review of the Action Programme for the New Millennium, the Government parties say they will revise the tax so that the "impact of rising house prices does not place an intolerable financial burden on those inheriting the family home from close relatives".
According to Ms Jean Cashman, a member of the Institute of Taxation who has campaigned for reform, this is merely "putting a finger in the dike" and would leave many people in an inequitable position.
The move was welcomed by the Institute of Chartered Accountants in Ireland, but it also pointed to problems for those who are not legally married. The tax has been causing increasing problems in the booming housing market of recent years. In the three years from 1995 to 1998, the price of new houses rose by 60 per cent, according to statistics produced by the Department of the Environment. Secondhand house prices increased by 80 per cent.
At the same time, the personal tax thresholds at which capital gains tax applied rose by only 6 per cent. This has left many people inheriting property with large tax bills. Inheritance tax thresholds differ for different relationships. The threshold now stands at £192,900 for sons and daughters; £25,720 for nephews and nieces and £12,860 for others, including cohabiting and gay couples.
When the tax was introduced in 1976 it was possible to inherit £150,000 from both mother and father. That is the equivalent of £932,000 now.
According to Mr Kieran Ryan, tax spokesman at the ICAI, a liability of over £100,000 could arise where the deceased partner of a couple was the sole owner of a home valued at £300,000. "The rise in the number of couples choosing not to marry in the first instance and those entering into second relationships results in the existing provisions representing an increasingly serious problem for a large number of people," Mr Ryan said.
The web address for the Campaign Against Inheritance Tax is http:// www.iol.ie/jcashman/index.htm.