CAT (Inheritance Tax) query

M

michaelm

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I have two bachelor uncles (brothers in their sixties) who have lived in the same house since they bought it, between them, 35+ years ago. For whatever reason, even though they bought it between them, it is in one name only. They are wondering about their tax position re inheritance. The official owner has named the undeclared owner as the beneficiary in the event of his death. My understanding is that in said case the uncle gifted the house would have to pay CAT on the market value of the house less around 52k threshold. And should the unnamed owner predecease the named owner then no CAT liability would arise. Is this understanding correct?

Is there any way the unnamed owner could avoid CAT?

One contrived idea I had was that, assuming they wanted to regularise the situation and spread the CAT gamble, as the house is worth around 300k, the owner could gift his brother 17% (50k) of the house each year for 3 years with no CAT implications and after which they would both own 50%; this would at least balance the ultimate CAT liability. My understanding is that the proposed Civil Partnership Bill will do nothing for my uncles situation. Any other options?
 
As far as i know, the €52 threshold is a once-off exemption - a brother can't give €52k a year to the other brother without CAT implications. One can give €3,000 a year to someone (regardless of relationship) each year CAT free. Can't help with the rest of the query though - sorry

Sprite
 
If the house was left in a will then the non-owning brother could claim dwelling house relief and take tax free.
 
That link to Dwelling house exemption gives all the information required - no tax being due provided certain criteria apply.

I recall attending a meeting about 15 years ago - conveynors could have been Age Action Ireland or some such group. Apparently up to that time if say three unmarried siblings shared ownership of a house, then when one died the remaining two were forced to sell in order to pay Inheritance tax/CAT. A pretty awful way to treat such a family group. Anyhow, the law was changed so that such people did not have to sell the roof over their heads to pay tax. Now that I've read the link, it's good to see that the people involved do not have to be siblings, provided they've lived there for 3 years and continue to do so for at least another 6 years if under 55 years - assuming my interpretation is correct. I notice the ruling says "may" - there's always wriggle room with this type of ruling!

Maybe I'm wrong but given the inheritance concerns of same sex couples, this rule seems to give protection to such couples provided they have lived together for 3 years? I hope it does. Given the diverse nature of what constitutes "a family" in today's society, it doesn't appear to be equally equitable to the whole of society since only married couples or their children can benefit from generous inheritance tax laws. Presumably, married or single, a home owner has paid their taxes during a lifetime. That's a can of worms I have no wish to open or debate;).
 
sherib said:
I notice the ruling says "may" - there's always wriggle room with this type of ruling! . . . Maybe I'm wrong but given the inheritance concerns of same sex couples, this rule seems to give protection to such couples provided they have lived together for 3 years? . . . That's a can of worms I have no wish to open or debate;).
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Yes, I'd be concerned that the application dwelling-house exemption may be somewhat arbitrary. And yes, let's keep this out of Letting Off Steam.
 
the whole area of dwellinghouse relief was changed dramatically in 2007 have a look at sec 116 of the finance act of that year
 
116.— (1) Section 86 of the Principal Act is amended by inserting the following after subsection (3):
“(3A) For the purposes of subsection (3)(a), in the case of a gift―
(a) any period during which a donee occupied a dwelling house that was, during that period, the disponer’s only or main residence, shall be treated as not being a period during which the donee occupied the dwelling house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the donee for that period,
(b) where paragraph (a)(i) of subsection (3) applies, the dwelling house referred to in that paragraph is required to be owned by the disponer during the 3 year period referred to in that paragraph, and
(c) where paragraph (a)(ii) of subsection (3) applies, either the dwelling house or the other property referred to in that paragraph is required to be owned by the disponer during the 3 year period referred to in that paragraph.”.
(2) This section applies to gifts taken on or after 20 February 2007.
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It seems to be only in relation to gifts. Some people say it closes off dwellinghouse relief for same sex couples in relation to gifts. At the risk of being prurient, what do you mean by 'services', guv?:eek:
 
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