Home Economics: Answering your property questions
Personal Finance expert Sinead Ryan answers your property questions
Question: I moved to the UK for work last year, leaving my house vacant. My father died suddenly before Christmas and my mother is quite frail, but very independent. He looked after her and their house is in a rural location. I have convinced her to move into my house in the town as I'll be away for another five years. I'm not going to charge her rent and the sale of the family home will add to her pension and I'll have the security of her in the house. Are there any tax issues with this, for her or me?
Answer: This sounds, on the surface, like a good solution for both you and your mother. However, there are issues in tax terms, which I asked Barry Flanagan of Taxback.com to explain.
"Assuming your mother's home was her principal private residence, no Capital Gains Tax liability arises on sale, as it is fully relieved. Should you dispose of your own house in the future, any gain should be similarly relieved on the understanding that for the period of ownership, it was your PPR (an exemption exists for any period where, as a result of a foreign employment, it ceased to be your PPR).
"There is a Dependent Relative tax credit to claim if you maintain, at your own expense, a widowed mother, regardless of her age or the state of her health. Assuming you will be in receipt of income subject to Irish tax, your tax liability for the year may be reduced by the credit, which is currently €70 for the tax year 2017. Use Form DR1 or by annual tax return if you are the chargeable person. If your mother's income for the year exceeds certain limits, you may not be entitled to claim it.
"The final issue is potentially the most complex however. The provision of rent-free accommodation to your mother is likely to be regarded as a gift to her as, from your description, it seems unlikely she would be regarded as an incapacitated individual. The 'gift' is calculated as the open market value of the rent forgone. It can be reduced by the small gift exemption of €3,000 per annum and thereafter by any balance left from her lifetime 'Group B' threshold.
"It could be more tax efficient for either a life interest or a limited interest in the property to be conferred. The liability arising from either is dependent on several factors, such as the value of the property, the market rate of the rent and your mother's age. Therefore, it may well be worthwhile to engage a specialist tax consultant to examine the options and calculate any potential exposure for you both."
Question: I live in a former ghost estate. It was taken over by Nama and a builder is now finishing it off, so it's still a building site, but the houses in my row are finished and occupied and I've lived here since last September. My question is whether I now owe property tax? Is it still considered exempt or do I have to pay?
Answer: Don't worry. As far as Local Property Tax (LPT) is concerned, you, along with around 3,300 other people in 421 former and current 'ghost' estates are not due to pay anything until October 2019, even if they are currently being rebuilt or have already been rebuilt.
The next formal valuation date is November 1, 2019 in any event, so it will be due if you are occupying the house on that date, and you will need to get a sense of what it is worth and which band it falls into on that date. Your local authority will set the rate and you should be notified.