# CGT/Inheritance Tax



## NGUYEN (27 Apr 2015)

Hi there

I have two questions:

*Question 1:*
Is a Non Resident person living and earning (paying PAYE) the UK for the last 20 years will be liable for Inheritance Tax and CGT (sale of building inherited) in Ireland.

*Question 2:*
Could you also let me know if a property is sold by the Executors  of a Will and the subsequent CGT liability if they are the chargeable persons, or if the each individuals that is inheriting the proceeds of the sale are responsible for filing the CGT liability ?  If one of the individuals fails to file for CGT would Revenue seek the liability for the Executors?

Thanks
Nguyen


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## Thirsty (27 Apr 2015)

Q1
Yes, if you've not already done so you'll need to apply for a PPS for the non-resident (if they don't have one)

Q2
With the exception of the non-resident, all other beneficiaries resident in Ireland are responsible for their own pay and file for inheritance tax.

In regards to the non-resident; as executor you have a secondary liability.  So you retain control of assets/cash until tax is paid.  Once you are satisfied that tax is paid, you write to revenue under Section 48.10 of the finance act advising that you intend to distribute estate with in one month of date of the letter.  If Revenue don't respond you are free to distribute estate.  

personally I would prefer a positive response from Revenue, but that's the way they do it.

I've posted on the DIY thread on this also.


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## NGUYEN (27 Apr 2015)

Thanks for your response. 
In all cases above there will be no inheritance tax due and the inheritance is below the threshold, however there is CGT due as the property increased in value from the date of death to the sale date.  Does the above apply to CGT?

Do you know if the CGT should be paid from the Estate or if each individual pays there share of the CGT allowing them to avail of the annual CGT exemption.  If the CGT can be paid by the beneficiaries and one beneficiary fails to pay are the Executors liable ?

Thanks again
Nguyen


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## Jon Snow (28 Apr 2015)

NGUYEN said:


> Thanks for your response.
> In all cases above there will be no inheritance tax due and the inheritance is below the threshold, however there is CGT due as the property increased in value from the date of death to the sale date.  Does the above apply to CGT?
> 
> Do you know if the CGT should be paid from the Estate or if each individual pays there share of the CGT allowing them to avail of the annual CGT exemption.  If the CGT can be paid by the beneficiaries and one beneficiary fails to pay are the Executors liable ?
> ...



The individuals haven't made any gain, the estate has, so the CGT is due by the estate (there's also no 1,270 annual allowance for an estate).


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## Thirsty (28 Apr 2015)

_The individuals haven't made any gain, the estate has_

IANAL... but I'm not certain of the above, it might depend on the asset and how the will was written.

Example:

If will says all assets to be sold and distributed equally to beneficiaries then Jon  Snow might well be right.

However if Asset X is to be left to Beneficiary A and the residue distributed to Beneficiaries B and C.  Then I think Beneficiary A would be responsible for CGT and not the estate.

Thinking it through again... I'm of the opinion CGT is the responsibility of the beneficiaries and not the executor.  If it get time later, I'll check the revenue site & update,.


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## john luc (17 Jun 2015)

When you say the asset has increased in value from the date of death to the sale of the house I am not sure what you mean. Is the value of the house at time of death the value you gave to the  probate office. The reason I ask is I am completing an Administration and a value of €155K was first got at the time of death but as it took approximately 2 years to process and the probate office asked for an update value which came in as €215K. that house then sold for €225K.


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## Woodie (17 Jun 2015)

john luc said:


> When you say the asset has increased in value from the date of death to the sale of the house I am not sure what you mean. Is the value of the house at time of death the value you gave to the  probate office. The reason I ask is I am completing an Administration and a value of €155K was first got at the time of death but as it took approximately 2 years to process and the probate office asked for an update value which came in as €215K. that house then sold for €225K.


CAT is due on the balance between what the house was valued on day of death and the amount realized in the sale - what it eventually sold at i.e 225K.  Estate expenses and so forth can be offset against this with the residue then distributed to beneficiaries.   
It is quite common in recent years for this to happen with the property bust and recovery.  My experience has been that lower value estates are often being double stung when other wealthier tax managed estates end up paying less or nothing.    I guess it's the old adage "Death and Taxes" where the less well off end upon the wrong side as usual.


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## mf1 (17 Jun 2015)

"My experience has been that lower value estates are often being double stung when other wealthier tax managed estates end up paying less or nothing. I guess it's the old adage "Death and Taxes" where the less well off end upon the wrong side as usual."

It is usually as a consequence of failing to take proper advice. Penny wise but pound foolish

mf


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## john luc (17 Jun 2015)

So for me the value is €215K and the gain is €10k less expences.


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## Sophrosyne (17 Jun 2015)

NGUYEN,

In relation to question 2...

According to TCA 1997 s 573, personal representatives are chargeable on gains arising on the sale of assets _during estate administration._

The assets are deemed to be acquired by personal representatives at the market value at the date of death of the testator.

If the assets were transferred to the beneficiaries and sold later, each beneficiary would be responsible for the CGT payable on his/her gain.


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## john luc (17 Jun 2015)

In my example there is only one beneficiary who inherits.


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## Sophrosyne (17 Jun 2015)

Are you asking a question john luc?


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## john luc (18 Jun 2015)

Yes sorry though I did ask. Am I right in assuming that I must first apply CAT to the estate gain of €70K as being the amount between the value at date of  death and the subsequent sale of the asset before the single beneficiary receives the proceeds and then they have to pay again on these. This is a happening as a single transaction in that all the assets are being liquidated and transferred to one beneficiary.


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## Thirsty (18 Jun 2015)

I'm a bit confused.... if the house is sold & Inheritance Tax paid, why would there be a second assessment of tax?


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## elcato (18 Jun 2015)

I am also confused. Who decides on the value of a property on date of death ? What is it based on ? If the house is to be sold on death and shared evenly I presume there is not differance between value at death and value of sale even though it could take up to a year to sell ?


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## Sophrosyne (18 Jun 2015)

john luc,

I assume your last question relates to Capital Gains Tax (CGT), rather than Capital Acquisitions Tax (CAT).

The asset can only be sold once.

If it is sold by the executor during the administration period, then the executor is chargeable to CGT on the increase in value between the date of death and the date of sale.

If instead it is transferred to a beneficiary, who later sells it, the beneficiary is chargeable.

The market value at the date of death is the amount that the property would have been expected to fetch on the open market at that date.


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## john luc (18 Jun 2015)

I explained poorly,my sister died and left no will and so her asset was her house that under the rules of administration passes to my mother. The house had an unprotected mortgage on it so the house needed to be sold to pay this off and then the proceeds left to my mother. At date of death the house was valued at €155K however we made some repairs to it and it has sold now for €225K. The repairs were paid by my mother. My question  was do I as administrator have to pay out from the estate for the capital gain and then my mother have to secondly deal with the remaining proceeds as CAT.


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## mf1 (18 Jun 2015)

Did you take any advices? 
Have you offset the mortgage and the repairs against CGT liability?
Did property vest in mother to avail of personal exemption?
I think ( not an expert) there is a provision for offsetting CAT against CGT if it relates to the same transaction

At this stage, ( actually an awful lot earlier!), I'd be having a word with my accountant

mf


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## john luc (18 Jun 2015)

I think your suggestion of it all being the same transaction is what I have being told but I cannot find this reference in the revenue website.


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## Joe_90 (18 Jun 2015)

But in this case the CAT and CGT are not arising on the same event.  The CGT arises on the sale of the property. The CAT arises on the inheritance of the funds from the estate.

Was your mother living in the house?

How much did your mother pay for the renovations. Say 30k

225-30-155 = 40k x 33% = €13
CGT
€225-30-13 = €182 depending on previous gifts could be no CAT.


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## Sophrosyne (18 Jun 2015)

john luc said:


> I explained poorly,my sister died and left no will and so her asset was her house that under the rules of administration passes to my mother. The house had an unprotected mortgage on it so the house needed to be sold to pay this off and then the proceeds left to my mother. At date of death the house was valued at €155K however we made some repairs to it and it has sold now for €225K. The repairs were paid by my mother.
> 
> My question  was do I as administrator have to pay out from the estate for the capital gain and then my mother have to secondly deal with the remaining proceeds as CAT.



The answer to your question is yes.

An allowance for CGT paid against CAT is available under section 104 of the Capital Acquisitions Tax Consolidation Act 2003.

However, as Joe_90 advised, this does not apply in your case.

What kind of repairs were carried out before the sale?


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## john luc (18 Jun 2015)

The repairs were €15K fees were €7K and the mortgage was €95K which had to be paid from the sale of the house.


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## Sophrosyne (18 Jun 2015)

For CGT purposes, what type of repairs were carried out?
What amount did your mother actually inherit?


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## john luc (19 Jun 2015)

The repairs at €15K were to replace a faulty roof extension with a new one. With having to pay off the mortgage of €95K and the relevant fees at €7K meant that there was not a lot left and so having to pay CGT knocks another hole in it. My mother did not live with her.


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## Gordon Gekko (19 Jun 2015)

It doesn't seem that bad.

CAT of roughly €10k.

CGT of roughly €16k.

Outlay of €22k.

Clear the mortgage of €95k and your Mum's left with roughly €82k.

The inheritance was only worth €60k originally.


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## john luc (22 Jun 2015)

As my Mother is the sole beneficiary she is entitled to cat A allowance here so no tax is due however having to apply CGT first means that the thieving government is getting their hands on family assets that have already being taxed throughout the lifetime.


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## Jon Snow (22 Jun 2015)

john luc said:


> As my Mother is the sole beneficiary she is entitled to cat A allowance here so no tax is due however having to apply CGT first means that the thieving government is getting their hands on family assets that have already being taxed throughout the lifetime.



The gain isn't "throughout the lifetime" though, that's the whole point. The gain that's taxed is the gain in the period of administration. If the estate didn't sell the asset and just passed it on to the beneficiary it wouldn't owe any CGT.


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## john luc (22 Jun 2015)

I understand your point  its the fact that the government gets to take a chunk of a family asset is the issue that  is bugging me. Its a painful story and the fact that my  sister died and her house has returned to a value still not near the value it was when she had to mortgage it to send someone packing and now because of the CGT v CAT rule means that a higher amount will be grabbed by the government


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## Jon Snow (22 Jun 2015)

john luc said:


> I understand your point  its the fact that the government gets to take a chunk of a family asset is the issue that  is bugging me. Its a painful story and the fact that my  sister died and her house has returned to a value still not near the value it was when she had to mortgage it to send someone packing and now because of the CGT v CAT rule means that a higher amount will be grabbed by the government



Um, yeah, ye'd be better off if it didnt increase in value because then there wouldn't be any tax due... 

Without wanting to appear indelicate, I have an issue with this concept of a "family asset" - I wonder is it just an Irish thing, this obsession with particular property. 

I have very fond memories of my childhood in our family home, but my parents later divorced and my dad subsequently gutted and remodelled it. 

He's always at pains to tell my siblings and I we won't be getting any inheritance, that he's going to spend every penny and enjoy it while he can. Fair play to him I say. My "asset" is the memories, and the place in time, not the physical place.


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## rockofages (5 Jul 2015)

The only way to avoid the tax would have been to have it valued in anticipation of its future higher value, by recognising property prices are going up again. You could have even over-estimated it as there are no real negatives to doing so.


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