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Gifting a property – Gift and Inheritance Tax

Gifting a property – Gift and Inheritance Tax

Dwelling house relief provided an exemption from Capital Acquisition Tax (being a tax on gift or inheritance) on the gifts or inheritances of a residential property to an individual provided certain conditions regarding residency in the property were met by the person receiving the gift of the property. It was so generous that the Revenue Commissions have since significantly restricted dwelling house relief, by no longer allowing for gifts (as opposed to an inheritance on a death) of houses in many circumstances and by limiting how it can operate in the context of inheritances.

Since the introduction of the new legislation in December 2016 an individual who leaves a dwelling house as an inheritance in a Will to a person who lived in the house as his or her only or main residence for three years immediately preceding the date of the inheritance, with the deceased person, then that individual will incur no Capital Acquisitions Tax liability on their inheritance of the property. If either the owner or beneficiary (the person who receives the inheritance) were absent from the house due to physical or mental ill health, they are deemed to have lived in the dwelling house at that time.

To qualify, the person inheriting must not have any interest (meaning some form of ownership) in another house at the date of the inheritance, in Ireland or abroad.

Since the change in the law, only gifts (made during the lifetime of the person making the gift as opposed to on their death ) to a “dependent relative” of the owner of the property, would qualify for dwelling house relief, therefore the law has become much more restricted in the context of gifts.

You must be a dependent relative; A “dependent relative” is defined as a relative who is “permanently and totally incapacitated” due to mental or physical infirmity and cannot maintain herself or himself, or who is of the age of 65 years or more at the date of the gift. “Maintain” means to support oneself by earning an income from working. “Permanent incapacity” means there is no prospect of the person recovering or the condition improving, to the extent that the person would become capable of maintaining him or herself. Therefore “incapacity” must be significant.

“A dwelling house” is defined as a building or part of a building which is suitable for use as a dwelling and includes grounds of up to one acre.

When claimed, dwelling house relief should be claimed in the relevant tax form by self assessment.The Revenue may look into any self-assessment as part of its audit procedures. If this is done, a person may be asked for documents, including:

  1.  Evidence of living at the property. 
  2. Doctor’s letter confirming incapacity.  
  3. Any other documentation relevant to the claim.

For further information please contact Eoin Murphy Solicitors

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