Stamp Duty & CAT on gifted site

M

mister mac

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Hi,
I was wondering if someone could shed some light on a taxation issue.

My fiance is being gifted a 2.4 acre site by her father, where we intend building our house next year.
I have looked on the Revenue website and seen that she will be exempt from CAT and qualifies for Consanguinity relief as regards the stamp duty.
Someone mentioned to me that up to one acre of gifted land from parent to child is exempt from S.D. Is this true? And in a case where the land/site is over 1 do they just charge the 2% on the remainder?

Any help much appreciated
 
There are 3 taxes involved in this transaction: Stamp duty, Capital acquisitions tax and Capital gains tax.

A one acre site transferred to a child for the purposes of constructing a principal private residence is exempt from Stamp Duty. The donor (father) will be exempt from Capital gains tax on the disposal. The value of the site must be less than €500,000.

As the site is 2.4 acres the balance of the 1.4 acres will be dealt with under normal rules, stamp duty is at half rate but based on the valuation. Capital gains tax will/may be payable.

CAT is based on the value of the property and whether there have been any prior gifts. Total gifts of less than €521208 from parent to child are exempt.

I suggest that your wife contact a solicitor familiar with tax before you go any further to ensure that you are fully aware of all taxation implications.
 
Thats fantastic information now here's one for you. all details are as above example... mother giving gift site to daughter, falls under all the thresholds, daughter is married what happens now... is her husband caught for 1/2 of the gift, site is valued at €40,000. Land only going into daughters name for now and she is hoping to put into her and husband name soon as. all advise is appreciated.
 
Gift of the site must be to daughter only to avail of all tax exemptions - and to avoid clawback, she can only transfer it into joint names after...I'm pretty sure...3 years.
 
I also thought you had to wait three years before transferring the land into your spouses name, however my solicitor brought this document from the revenue web site to my attention see, Section 83A of the SDCA.


http://www.revenue.ie/en/about/foi/s16/stamp-duty/part-5-reliefs-and-exemptions.pdf




Extract:
​
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.
Transfer of a site to a child​
Section 83A of the SDCA.​
This section provides for an exemption from stamp duty where a parent transfers a site to a child for the purpose of that child building their principal place of residence.​
The value of the site must not exceed €500,000 and the size, exclusive of the area that the dwellinghouse will be constructed on, must not exceed 1 acre.​
The child does not need to be a First Time Buyer to avail of the relief but can only avail of it once.​
Where relief under section 83A is claimed by a child on the transfer of a site from their parent, it will be regarded as having been properly claimed in circumstances where​

  1. the site is subsequently transferred into the joint names of the child and his/her spouse or partner,
  2. the transfer into joint names is being effected in the context of the raising of funds from a financial institution for the purposes of the construction a house on the site and
  3. the house constructed on the site will be occupied by the child, in conjunction with his/her spouse or partner as their only or main residence.
 
lialwarrior - thank you. That extra relief is potentially a huge benefit for many married couples!
 
Been researching this but unsure of correct answer. House bought 35 years ago for 6k, parents lived in it for 4 yrs then moved out. Their son living in it since then, parents now want to gift it to him. Solr says approx 60k will be due in gift tax. Current value of house 240k or so? Anyone confirm that solr is definitely correct and care to explain exact calculations? Thanks.
 
theo67 said:
Been researching this but unsure of correct answer. House bought 35 years ago for 6k, parents lived in it for 4 yrs then moved out. Their son living in it since then, parents now want to gift it to him. Solr says approx 60k will be due in gift tax. Current value of house 240k or so? Anyone confirm that solr is definitely correct and care to explain exact calculations? Thanks.
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Looks like capital gains tax payable by the parents on their disposing of an asset, rather than gift tax payable by the child on receipt of a gift.

House cost 6k in 1977 - indexation factor 5.238 - indexed cost 31.5k.

Capital gain is 240k - 31.5k = 208.5k

They lived in the house for 4 years, and they get an extra year of deemed occupancy, so 5/35 of the gain is exempt, or 30/35 of it is taxable.

208.5k x 30/35 = 179k

179k @ 33% = 59k CGT
 
There are a number of exemptions in the CAT code - Gifts / inheritances and one in particular relates to "Principal Private Residence" whereby the gift or inheritance of a dwelling house is completely exempt from tax provided the Beneficiary of the gift or inheritance has occupied the dwelling house, as their only or main residence, for a minimum period of three years prior to the date of the gift. In the case cited above, I believe the person in question would be completely exempt from CAT gift tax.

In relation to Capital Gains Tax, I'm wondering if it would be wise to pay out such a large amount of tax to facilitate transfer of the house to the son. I agree the CGT would be about 60K based on the figures provided
Dont forget that there would also be stamp duty payable at the rate of 1% on the gift.

The owners should consider instead, bequeathing the property to their son in their will(s) in which case there would be no Capital Gains Tax payable, no stamp duty payable and no CAT (Gift tax) tax payable. Presumably the Solicitor has already pointed this out. The son could continue in the house until his parents have died and then inherit the house without any liability to tax of any kind
 
I'd be with Dr Debt on this one, don't know how many more budgets this relief will continue for. In this context this not exactly why it was brought in.

How would others value the gift of free use of property for 31 years to the son?
 
Dr.Debt said:
There are a number of exemptions in the CAT code - Gifts / inheritances and one in particular relates to "Principal Private Residence" whereby the gift or inheritance of a dwelling house is completely exempt from tax provided the Beneficiary of the gift or inheritance has occupied the dwelling house, as their only or main residence, for a minimum period of three years prior to the date of the gift. In the case cited above, I believe the person in question would be completely exempt from CAT gift tax.

In relation to Capital Gains Tax, I'm wondering if it would be wise to pay out such a large amount of tax to facilitate transfer of the house to the son. I agree the CGT would be about 60K based on the figures provided
Dont forget that there would also be stamp duty payable at the rate of 1% on the gift.

The owners should consider instead, bequeathing the property to their son in their will(s) in which case there would be no Capital Gains Tax payable, no stamp duty payable and no CAT (Gift tax) tax payable. Presumably the Solicitor has already pointed this out. The son could continue in the house until his parents have died and then inherit the house without any liability to tax of any kind
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Hi Dr Debt. Could you elaborate more on your first statement please. I built a house on land still in my parents's name and have been in it for several years now...I am looking to get the land signed over to me but obviously there is now a house on it (That I paid for). Does your first statement offer me any relief? Many thanks
 
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