Gift and Inheritance Tax Ireland. Capital Acquisitions Tax. Dwelling House Relief. Dwelling House Exemption.

In general terms, Capital Acquisitions Tax is the Irish gift or inheritance tax arising on a benefit taken by or from an Irish resident individual. It also applies if a gift or inheritance includes Irish property, regardless of the residence of the person, either taking or giving the benefit.   It’s important to bear in mind that Capital Acquisitions Tax or CAT is paid by the beneficiary.  No CAT arises between spouses or civil partners.

Today, Revenue updated their guidance material on exemptions relating to dwellings in the form of a fourteen page document.  For full information, please click links:

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-exemptions/dwelling-house/index.aspx

https://www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-manual/part-09-exemptions/section-86-exemption-relating-to-certain-dwellings.pdf

As you’re aware, the rules differ for gifts and inheritances.  For example, under the Dwelling House Relief, an individual can inherit a property tax free, provided that person:

1. has been living in the property for a minimum of three years prior to the date of inheritance,

2. does not own or have an interest in another residential property at the date of the inheritance,

3. continues to occupy the property as their main residence for six years from the date of the inheritance, unless the beneficiary is aged sixty five years or more at the date of inheritance.

Other points to consider are:

• the dwelling house must have been occupied by the disponer (i.e. the person giving the property) as their only or main residence at the date of their death.

• Relief is not available if the beneficiary holds a beneficial interest in another dwelling at the date of inheritance.

• The Dwelling House Exemption will not be available if the same beneficiary acquires an interest in another dwelling house from the same disponer, after the “date of inheritance” and right up to the date the estate is distributed.

For gifts of a dwelling house, however, the exemption requirements are different.  From 25^th December 2016 onwards, the exemption no longer applies to gifts of dwelling houses, unless the gift is made to a “dependent relative” of the donor.  This effectively means that a gift of a dwelling house given to a dependent relative of a donor will be exempt provided the recipient of the gift is either (a) permanently and totally incapacitated from maintaining themself due to a physical or mental infirmity or (b) is aged at least 65 years. It’s important to keep in mind that for such gifts to qualify for the tax exemption, the donor does not need to live in the property as their principal residence.  In addition to the above requirements, the following qualifying conditions for a gift apply:

You will be exempt from Capital Acquisitions Tax  on receipt of a gift of a dwelling house if, at the date of the gift:

1. the dwelling house was your main home for the previous three years,

2. you do not own or have an interest in any other dwelling house, and

3. the dwelling house continues to be your only/main home for at least six years from the date of the gift, unless you are aged at least 65 years at the date of the gift or are required to live elsewhere because of a mental or physical infirmity.  This must be certified by a medical doctor.

For completeness, the term “relative” is defined as a lineal ancestor, lineal descendant, brother, sister, uncle, aunt, niece/nephew of the giver or the spouse/civil partner of the giver.

Accounts Advice Centre provides a full and comprehensive tax advisory and compliance service.  If you require specialist inheritance or gift tax advice, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.