CGT/Inheritance Tax

N

NGUYEN

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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
 
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.
 
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
 
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 ?

Thanks again
Nguyen
Click to expand...

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).
 
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,.
 
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.
 
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.
Click to expand...
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.
 
"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
 
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.
 
Last edited:
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.
 
I'm a bit confused.... if the house is sold & Inheritance Tax paid, why would there be a second assessment of tax?
 
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 ?
 
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.
 
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.
 
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
 
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.
 
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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