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Tax bill on inheritance of a house that originally passed to mother


Capital Acquisitions Tax (CAT) applies to inheritances and is the liability of the beneficiary

Capital Acquisitions Tax (CAT) applies to inheritances and is the liability of the beneficiary

Capital Acquisitions Tax (CAT) applies to inheritances and is the liability of the beneficiary

Q I am looking for some information on options for retaining the home I currently live in. My mother inherited the home in 2009 following the death of her parents (my grandparents) within a few weeks of each other. It was her family home before her marriage to my father. I have been living in that home for nine years now. I'm single and work part-time. My parents still reside in their marital home and are in their 70s now.

It is their intention that I inherit the house I am living in upon their death. The home is my mother's family home, the title is in her name and my three sisters are expected to inherit my parent's current marital home.

Will there be tax implications for me or my parents in this regard? As my mother lives in the marital home and not her family home, I don’t think the dwelling house exemption applies?

I moved into the house in January 2012. House prices have hugely inflated over the last nine years. The house is now valued around the €480,000 mark — but it was valued at €245,000 in 2012 when I moved in. On a side note, I have been paying my parents €100,000 over the course of 13 years for the house. Rose, Dublin North

A On your mother’s demise, the tax that will be relevant here is Capital Acquisitions Tax (CAT). This tax applies to inheritances and is the liability of the beneficiary. Normally, CAT at a rate of 33pc applies on the value of any inheritances received above the recipient’s tax-free threshold. The threshold is currently €335,000 on all gifts or inheritances from parents. Therefore, assuming you have received no prior gifts from your parents, an inheritance now of the property would result in a taxable inheritance of €145,000 (being the market value of the property exceeding your tax-free threshold). This would give rise to a tax liability for you of just under €50,000.

The dwelling house exemption allows a child to inherit a family home tax-free in certain circumstances. Generally, the property would also need to have been the only or main home of the person who died but if (say) you were aged 65 or over at the date of inheritance, this condition does not apply. For now, this is not relevant as you are younger than 65. You would also need to satisfy other conditions such as not having an interest in any other residential property.

You mention you have paid your parents a sum of money for the property — I presume this is market value rent and so will not impact the CAT analysis above. Your mother will be liable for income taxes on this rental income. If no- or below-market value rent was charged to you by your parents for the use of the property, this would essentially be regarded as a taxable gift to you and erode your €335,000 tax-free threshold.

A question often asked by clients is the impact of transferring the property now as a gift. Should your mother transfer the property she inherited to you now, she would fall within the scope of Capital Gains Tax (CGT — the tax paid on any capital gain made following the disposal of an asset). The CGT exemption on principal private properties does not apply here as the house was not your mother's primary residence at any time during her ownership. CGT at 33pc would therefore arise on any gain — the gain being the difference between the value of the property in 2009 and the market value at the time of transfer. You would also have a CAT liability on the value of the gift in excess of the €335,000 threshold. However, you should be able to offset your mother’s CGT against your CAT liability. Stamp duty at 1pc would also arise for you. To the extent that you agree to pay your mother a sum of money for the house, this would reduce the value of the taxable gift by that amount.

How to value property correctly under new property tax rules 

Q Upcoming charges to the local property tax (LPT) mean that the next valuation date — for the purposes of LPT — will be November 1, 2021, rather than the current date of November 1, 2013. I live in a one-off house on 1.5 acres of land — which I treat as my garden. The area I live in is isolated and very scarsely populated and very few houses in the nearby area have come on the market in recent years — so it is hard to gauge exactly what value I should put on my home. How do I ensure I value my home correctly for the purposes of the LPT's new valuation date? Oisin, Co Kerry

A Yes — the LPT rules are indeed due to change, and it will be the first time since 2013 that properties will need to be valued. It is proposed that a valuation date of November 1, 2021 will be used for the years 2022 to 2025.

For guidance on LPT valuations, Irish Revenue provides a suite of information on valuation of property including links to various resources, along with an interactive guide which gives an indicative value for properties in a locality based on type, age and location. Adjoining gardens are automatically included as part of the property valuation. In due course, this Revenue guidance should be updated for the November 1, 2021 valuation date. In determining your home’s value, you should consider these general resources along with the specifics of your own property and garden; as it may have certain unique features. There is no specific requirement to obtain a professional valuation but you can do so if you wish. This may provide you with more comfort especially if your property or garden is valuable — or if there are unique circumstances.

As regards your garden, the rules have always required that up to an acre of land adjoining a house needs to be factored into the valuation. However, the new changes contain a technical amendment that where adjoining land exceeds one acre, it must be the part that is most suitable for occupation and enjoyment with the home that is included. You need to ensure that the garden element included is the part most appropriate to the property. I would not anticipate that this change would result in a significant difference for most homeowners. There will be further updated guidance issued in the coming months.

Tax bill on importing used car from UK

Q If I buy a used car from the UK, does the fact that EU VAT would have been paid on this car at the time of purchase make the car VAT-exempt on coming into Ireland? Con, Co Louth

A From January 1, 2021, Irish VAT at the standard rate (currently 23pc) must be paid on all used cars imported from the UK — apart from Northern Ireland. If the used car is imported from Northern Ireland, then Irish VAT would also apply if the car was first registered in Great Britain. However, if the used car was first registered in Northern Ireland and subsequently imported here, then no Irish VAT should apply. Irish VAT applies on all new or nearly new cars imported from the UK and Northern Ireland. However, a refund of any VAT paid (on a new, or nearly new car) in the North can be claimed from the dealer on production of a receipt of VAT paid in the Republi​c.

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