CGT and/or CAT liable on site gifted to son?

[boomboom4780]

Hi,

I'm just wondering could anybody please help or advise me on my situation?

My father is gifting me a site to build my first house on. We are currently applying for planning permission. I had a meeting with a solicitor today and he has told me we will probably have to pay CGT and/or CAT.

I have searched numerous forums about this type of query as well as the Revenue website but cannot seem to get a definite answer as to whether me or my father will need to pay Capital Gains Tax and/or Capital Acquisition Tax. If anybody could please help clarify my situation it would be much appreciated.

I have not had the site valued as of yet but it is definitely nowhere near the value of 254,000 and it is only .75 of an acre so does this mean we qualify for exemption for CGT? I'm finding this very complicated to understand and CAT seems even more complicated than CGT. Is myself or my father required to pay any CAT?

As it looks likely we will have to pay either/or CGT / CAT at 25% of the value of the site, I have been advised to get the site transferred into my name before we (hopefully) get planning permission as the site is currently worth alot less now than what it will be if planning permission is granted.

We are First Time buyers and unfortunately we are seeing our costs soar before we have even got started! Between the Stamp duty been introduced in the last budget and the astronomical council development fees and now this CGT or CAT, it would make you feel like forgetting about the dream of building your own house and just buying a nice house for a pretty reasonable price?

 

[mf1]

"I'm finding this very complicated to understand"

It's not really that difficult.

CGT may be payable by your father as he is disposing of land. CAT may be payable by you as you are getting a gift for nothing!

You should talk to an accountant who will go through the very basic sums with you. All of which are part of the "build your own house on a site gifted to you" process.

"We are First Time buyers and unfortunately we are seeing our costs soar before we have even got started!"

But if you did not do your sums properly before you started were you not working off an entirely unrealistic base?

mf

 

[Gervan]

If the value of the site is under €500,000, the area is less than one acre, and the gift is from your parent to enable you to build your principal private residence, your father should have no CGT to pay.
As regards CAT, if you have received no prior disposals from your parents, this gift is below the threshold.
I note you say "WE" are first time buyers, which sounds as though you have a spouse or partner. If the gift is to both of you, this changes the tax view.

 

[boomboom4780]

Thanks for your reply MF,

"We are First Time buyers and unfortunately we are seeing our costs soar before we have even got started!"

"But if you did not do your sums properly before you started were you not working off an entirely unrealistic base?"

Unfortunately there is only so much you can budget for prior to actually getting planning permission & starting the build. The process started about 9 months ago and during that time Stamp duty has been abolished & TRS is been phased out / abolished for FTB's. We didn't have the funds to get things done quicker, there's alot to doing a self build as we are continually finding out and the phrase "add on
10% to your cost's" is definitely proving to be true. Maybe we were a bit naive not taking CGT or CAT into account but we were led to believe that we would be exempt as our circumstances our below the thresholds.

Hi Gervan, Thanks for your reply. Yeah sorry, I didn't mention my Fiance in my original post, I know she would have to pay CGT on the gifted site but we were exploring the idea of not putting her name on the site until we're married next year as we were told that this might mean her not having to pay CGT?
Anyway we intend to get some proffesional advice but was just seeing if anybody on this forum would have some good advice or be able to clarify our situation so thanks for your replies.

Cheers, BB

 

[Troy McClure]

For reasons mentioned above I think your liability will be low. Your solicitor should know that.

Have you got your planning in place? If you can get to the first mortgage drawdown before end 2011, probably finished foundations, you will be locked in for you TRS for the 7 years. This relief is substantial if your both FTB's.
A mortgage application now is very thorough and drawout process. We have just done it. We are using a builder and I cant imagine the hassle if going direct labour.
It sounds like you were not aware of a lot of the other costs of building a house. Dont forget your council fees (substantial) not to mention ESB connection 2k, your solicitor and someone the banks will accept for engineer signoffs and evaluations.
We got joint mortgage without my wifes name been on the site but some banks may insist on it. I would wait until I am asked.

 

[boomboom4780]

Thanks for your reply and advice Troy.

We submitted planning application a couple of wks ago so we're just trying to get as many things ready as possible while we're waiting on our Planning permission. We realise that this whole process is going to take time and are desperate to atleast get the build started this year so we can claim TRS for the full 7 years. ( we're both FTB's )
We will be going the Contractor build route and are just waiting on our Architect to finalise the Build spec drawings before we begin to tender. He will also be looking after Stage sign off's.
Ideally we want to have a contract ready with the builder we go with & have mortgage approval in place but until we are succesful with our PP we can't really commit. Thanks again for your reply, BB