Nursing home repayments liable for tax

Caroline O’Doherty

However, it is thought the number likely to receive repayments large enough to incur the tax will be a tiny percentage of applicants.

Department officials have drawn up draft proposals for the repayment scheme, which is expected to pay out at least 1 billion to around 20,000 residents and the beneficiaries of the estates of up to 50,000 deceased residents.

The draft will be brought before the Dáil for approval before the end of the year but as legislation will have to be enacted to set up the scheme, it is unlikely to

begin processing applications until early next year.

Among the rules is the condition that repayments to the estates of deceased nursing home residents will be treated the same as any legacy and taxed accordingly.

Under normal rules for calculating inheritance tax, people who receive repayments in the name of a deceased spouse are exempt from taxation regardless of the size of the repayment.

Sons and daughters will receive repayments of up to E466,725 before being eligible for tax while parents, brothers, sisters, nieces, nephews and grandchildren can receive up to E46,673 before they are taxed.

All other beneficiaries can receive E23,336 before hitting the tax barrier. In all categories, the portion of the inheritance that exceeds the exemption threshold is taxed at 20%.

The vast majority of repayments due to applicants are expected to be worth no more than several thousand euro. A rough

average based on the anticipated payout and likely number of applicants comes to just over 14,000 below the lowest threshold.

One tax expert said yesterday: "The exemptions are generous and should cover the bulk of claimants. I would imagine only a very small number will be hit for tax.

"They would be people who had a relative in care in a nursing home for many years."

It is not clear yet whether the names of people who receive repayments under the scheme will be automatically passed on to the Revenue Commissioners for scrutiny to see if any tax liability arises.

Revenue Commissioners spokesman, Dave Coleman, said: "Normally, inheritance tax would be a self-assessment issue but this is quite an unusual case. We will know more when the details of the scheme are finalised."

The Health Service Executive (HSE), which will run the scheme has already begun logging applications through the HSE Midlands Area office in Tullamore.

But a spokesman said he could not confirm how the information submitted would be treated until the scheme was formally set up.

It has also been proposed that repayments to beneficiaries of the estates of deceased residents be considered income for the purposes of calculating social welfare entitlements.

Beneficiaries will be able to opt not to receive repayments but to have the money transferred instead for

investment in nursing home services.

In that case, it would be discounted for income assessment and would not be liable for inheritance tax.