Home Economics: Answering your property questions
Advice from our property expert on tax liability from a gift of land from an uncle and on the tax thresholds for gifts from grandparents.
Question: I bought land from my uncle eight years ago and built my family home on it. He has now left me the rest of the land in his will which amounts to just over an acre. His understanding was that it was ‘mine’ (that ultimately he would be leaving it to me) and he was using it in his lifetime. This is also the belief of the executor, his brother. However, I’m concerned there may be a tax liability for me now (from a gift of land this size) and don’t know what to do. I’ve no intention of building on it, but want to be certain of my title.
Sinead replies: You don’t need to read John B Keane to know that this is often the stuff of family angst. It is promising that the executor is ‘on your side’ in this, otherwise I imagine you’d have a battle of “He said, I said” proportions on your hands. However, I did run your query by solicitor Susan Cosgrove of Cosgrove Gaynard, who says: “It is worth checking with the solicitor who acted at the time of the sale and indeed the solicitor who drafted the will to see if any indication of this intention was made at either the time of the sale or the drafting of the will.
“If a mistake was made and these weren’t his directions then this is something that needs to be investigated, however, at the time of selling the property to you eight years ago, the deed would have clearly set out the area being transferred and any intention to transfer the balance but reserve the right to remain in the property.
“Furthermore, when making his will, it is extremely likely that the solicitor involved reviewed your uncle’s assets and obtained instructions to specifically bequeath the remainder of the lands to you then.”
In any event, from a tax point of view, you can inherit up to €30,150 tax free from an uncle, but this is an overall amount, and must therefore include any lifetime gifts. If you paid full market value for the original land, it can be disregarded, but you will need to get this new land valued appropriately. Capital Acquisitions Tax is chargeable at 33pc.
Question: My son is buying his first home with his fiancée and while we have no money to help him out, his grandparents want to give him a deposit towards it. They see it as an inheritance and it will replace what he might have got in their will. Can they do this or is there a problem? It will be around €20,000 and they are in their late 70s, but in good health.
Sinead replies: There’s absolutely no problem with them doing this. However, it should be noted that there may be a tax implication for your son down the road. Although the tax-free threshold for a grandson receiving a gift from a grandparent is €30,150 (Group B), this is a cumulative threshold and includes all future gifts and inheritances. So, for now, it’s tax free.
However, Barry Flanagan of Taxback.com suggests: “The grandparents can also gift to a ‘stranger’, (ie their grandson’s fiancée) under the “Group C” threshold up to €15,075 and separately grandmother and grandfather can each gift €3,000 to both the grandson and his fiancée (ie €12,000 in total). This can be done without any tax consequences, as the relevant Small Gift Exemption of €3,000 will apply on all four gifts. The balance could be gifted in the same way next year.
“To complete the transaction in 2016 however, the balance of €8,000 may still be transferable tax free if there are no other gifts. It would reduce the grandson’s threshold to €22,150 for future gifts.”
The Ryan review
The plan for housing published by the new government has many elements that would make you wonder why they weren’t thought of before now. If it comes to fruition, it includes a Help to Buy scheme for first-time buyers (they already get a refund of the admittedly risible DIRT tax) including an SSIA-type arrangement and letting them offset rent paid against the Central Bank deposit rules, although we should probably wait to see what the CB thinks of that first.
A new court is to deal with mortgage arrears. Quite what different rules it will operate under is anyone’s guess, but won’t it simply lead to faster repossessions?
Social housing is to be proffered via 35,000 new units (although we might go blue in the face if we hold our breath on the timing of that one) and a welcome 15pc increase in rent supplement. The new Minister will need to keep a wry eye on whether that merely ups rents overall at the lower end of the market.
The proposed tax/VAT breaks for builders may simply serve to put the difference in their pockets instead of discounting house prices. However, one measure the new government ought not do, despite promises to the contrary, is fiddle around with mortgage interest rates, for here it is caught between a rock and a hard place.
Yes, we pay double the variable rate of our EU counterparts (4pc vs 2pc), and yes, banks are currently borrowing free money to do it. But we want to sell off the bailed-out entities, and making them profitable is the only way to attract buyers. They do that by selling loans, even extortionately priced ones. So, any promises to “do something” about that are vacuous at best.