Family home has to be sold to pay the CAT?

In a situation where someone inherits the family home worth €1m, and don't qualify for the Dwelling House Exemption, and they have a liability of €200k for CAT which they can't pay, does Revenue make any allowances?

Do they allow the payment to be deferred?
What interest rate do they charge?
Or do they insist on the sale of the home?

Brendan

Brendan Burgess said:

In a situation where someone inherits the family home worth €1m, and don't qualify for the Dwelling House Exemption, and they have a liability of €200k for CAT which they can't pay, does Revenue make any allowances?

Do they allow the payment to be deferred?
What interest rate do they charge?
Or do they insist on the sale of the home?

Brendan

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About 8% Brendan.

If the person lives there, they should get the exemption assuming they have no other property.

And if they don’t, it should be sold.

I don’t really see an issue as they’ll either be exempt or have assets to sell to pay the tax.

What is the 8% ? Is that the interest rate?

Hi Gordon

I find the Revenue website confusing. I thought it was quite a limited exemption?

Qualifying conditions on, or after, 25 December 2016
You will be exempt from Capital Acquisitions Tax (CAT) on the inheritance of a dwelling house if, at the date of the inheritance:

the house was the only or main home of the person who died (this condition does not apply if you are a dependent relative)
you lived in the house as your only or main home for the three years immediately before the date of the inheritance
you do not own, or have an interest in, any other house

If a man has lived with his father for three years and inherits the family home, he is exempt from CAT.

But if he has lived in a house he didn't own, and inherited the family home, he would not be exempt.
If he owns his own home, he is not exempt - but that is fine, he can sell his own home and pay the CAT.

If his own home was let out and he had a big mortgage, he might not be able to pay the CAT.

In that case, Revenue charges 8% a year.

Brendan

I knew I had come across it recently on Askaboutmoney, but that was a more complex case.

Brendan Burgess said:

What is the 8% ? Is that the interest rate?

Click to expand...

Yes, Revenue charge a daily rate which equates to about 8% annually.

In terms of those examples, I don’t think having to sell a property is a big deal because the person has the assets to do so.

The “purpose” of the legislation is to exempt someone who cohabits with the deceased and doesn’t have another property. If they have another property, sell that. And if they don’t live in the deceased’s property, then it wasn’t the survivor’s home, so it shouldn’t matter.