Finance Bill makes huge changes to Dwelling House Relief for CAT

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I am amazed that this has not got more coverage:

"From now on it will only apply to those inheriting a house where they are living with an aged relative to care for them, or to young children whose parents have died.

It will also apply in the case of a house gifted to relative aged 65 or more, and property gifted to an incapacitated relative.

The exemption was introduced to protect someone living with and caring for an older person in the pensioner's home. The fear was these people may have sacrificed their chance to own their own home.

But the open nature of the exemption meant it allowed a son or daughter inheriting a property to avoid tax provided they lived in it for at least three years, and continued to live there for six years after inheriting it. The property being passed on did not have to be a family home - it could have been a second property or holiday home. If they met these conditions they were, up to now, able to inherit the property tax-free."
 
I agree with the restrictions.

But it should have been further restricted to €300k even within those categories.

Brendan
 
This tax relief was on the statute books for a very good reason and I fear its withdrawal will have serious unforeseen consequences, particularly for vulnerable adults living semi-independently in accommodation provided by parents.
 
There are merits in the dwelling house exemption for siblings living together all their lives and one dies leaving their 1/2 to the other. If they are under 65 there may be an exposure to CAT.

But it was abused I thought that a first step would be to restrict the existing relief to €250k and see how that worked.
 
Gordon Gekko said:
Probably worth highlighting that the Dwelling House Exemption was massively restricted today in a change to the Finance Bill.

It facilitated the tax free transfer of a residential property.

With the caveat that I have not had time to review the legislation in detail, the exemption can now only apply in circumstances where the actual family home (i.e. where the donor lives) is inherited by a person who also lives there.
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To be fair, I highlighted this almost a month ago.

The lurch to the left continues.

This exemption should have been capped rather than abolished.
 
Unless something has changed, the passing of the Finance Bill as I understand it (likely to be December 20th).
 
Maybe they should have changed it so that the dwelling house could exceed the CAT threshold without triggering a liability, but still use up the threshold?

Case 1 - Qualifying house worth €700,000 left to one child - no CAT liability.
Case 2 - Qualifying house worth €700,000 plus cash/shares worth €100,000 - CAT due on €100,000
Case 3 - Qualifying house worth €300,000 plus cash/shares worth €100,000 - CAT due on €20,000

Would also lead to abuse, but all reliefs due in one way or another and if the dwelling house relief is supposed to prevent a person being thrown out of their home to meet a CAT bill it would achieve that objective.
 
Hi Brendan

Any law which protects cohabiting siblings and vulnerable adults from hardship arising from excessive or inappropriate taxation is never a bad law.

I guarantee you this amendment will be repealed or substantially changed within 5 years.
 
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T McGibney said:
Yes (or at least so we're told), but how many times is this ever going to be in any way feasible ?
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Not many of course, but a couple of meaningful cases could yield significant funds for the Exchequer. Although, probably not, as the person doing the €100m property will just do something else.
 
The law has been tightened to protect the people it was originally intended to protect. If there are vunerable adults living semi-independently, they may inherit the family home as well as the second home. In most of these cases, parents will have put structures in place to look after these kids after their demise. It's not the government who should be blamed for this, it is the people giving their kids houses tax free that should.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
The law has been tightened to protect the people it was originally intended to protect.
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No it hasn't. There are no provisions in the new legislation to mitigate the effect of the changes on vulnerable adults, cohabiting siblings and others who will be affected.
 
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