CGT - 3 year rule

P

pigeon

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If my parent gifts a site to me and I build my house on am I right in saying that if I sell they will claw back CGT and stamp duty?

How much will I have to pay if I sell the house for €350,000
 
I don't think that a stamp duty clawback applies unless an property purchased/built as an owner occupier is rented out (other than rent a room scheme) within five years of taking ownership. However the three year rule on the clawback of CGT does apply. Note that this is the CGT that the parents would have been liable for at the time of the site transfer if it was not otherwise exempt and nothing to do with the eventual sale price of the property which, I presume, still qualifies for owner occupier PPR CGT exemption. See [broken link removed] (my underlining)
6. Transfer of a site from parent to child

Section 603A Taxes Consolidation Act 1997 provides that Capital Gains Tax will no longer apply on the transfer of a site from a parent to a child where the transfer takes place after 6 December 2000 and is to enable the child to construct a principal private residence on the site. The site must not be valued at more than €254,000 to qualify for the relief. However, if the child subsequently disposes of the site without having occupied a principal private residence on the site for at least three years, then the capital gain which would have accrued to the parent on the initial transfer will accrue to the child. However, the gain will not accrue to the child where he or she transfers an interest in the site to his or her spouse.
Click to expand...
 
The CGT clawback would be whatever your parents would have paid in CGT had the disposal of the site not been exempt. In outline terms this would be 20% of:



  • The fair market value of the site at the time of disposal (transfer to child)
  • Minus the original acquisition cost (indexed for inflation as appropriate)
  • Minus any allowable acquisition, improvement/renovation, disposal costs
  • Minus the individual annual CGT allowance of €1,270 (x 2 if the site was held you parents' joint names)
  • Minus any previously incurred capital losses (e.g. eircom etc.)
See [broken link removed] for more on CGT and try this calculator to get an idea of the scale of the potential bill. If in doubt get independent, professional advice.

Does that make sense to you?
 
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