Tax due if lived rent free in mothers house

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dakra51

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Can anyone advise if there are tax implications if the beneficiary of a will has lived rent free in the house for a number of years?

In this case the property was left in equal share to a number of family members. However one of them who was not working or claiming social welfare lived in the house for the past decade, caring for the incapitated mother, but was not registered as a carer.

A solicitor has said that this will be regarded as having received gifts from the deceased and could well wipe out tax exemption.
 
I think you need to reconsider your choice of solicitor.

Technically, there is an annual gift if someone lives in a house rent free. The value of the gift is the amount of rent which would be payable in the open market which, in the case of a house inhabited by an elderly woman, I'd imagine is very low. Each year, a gift of up to €3,000 may be received from any person and ignored for tax purposes - so assuming that the value of the "free rent" was less than €3,000 per annum there is no way it would impact on their tax free threshold on the inheritance.

And, as you state that the person was living there caring for their incapacitated mother, then I think it is arguable that the "free rent" was not free at all and there was no annual gift.
 
Nige /Joe90

Are you stating that if an adult member of my family - niece,daughter, mother-in-law- lives in my house rent free, and the value of her room , along with heating,food, TV etc, is worth far more than €3.000 p.a. then they are liable for tax on the value above 3k ?

Are you aware of any incident where Revenue pursued adult children staying rent-free with parents -or Mums living with their children ?

I'd be amazed if Revenue tried to tax members of a family because they lived rent-free with their relations.
 
Oldnick, the OP posed a question which was answered, with caveats about taking care of an elderly parent which is an important feature in the case, that any deemed gift would not exceed the 3k annual exemption and so would not be taxable.

I'm not aware of Revenue following anyone where they are living with a parent. In a case where the child is living rent free in a property belonging to the parent not with the parent then the gift should be included in aggregated gifts for CAT purposes, hope that clarifies the point.
 
Edited to substitute my further questioning with possible reply here :-

I note that Capital Acquisition tax Act 2003 section 40 does indeed indicate that there is a gift tax involved even for children parents staying free in one's home.

Surely this means there are millions to collect in CAT from all those old Mums or stay-at-home kids living free in their childrens/parents home?
Are their no informants who could tell Revenue that Billy ,now 23 is living free with Mum and Dad- and is avoiding gift tax ?

I maybe shouldn't admit this but I've a (barely) adult niece living with me for a year and I haven't charged her a penny , nor does my sister charge us when we stay with her less often but en masse.

Seriously does anyone have any case history on this?
 
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I have never seen it returned but lets look at it.

Are we agreed that the provision of free board and lodgings to a child is a gift?

In the absence of an exemption a gift is taxable under Capital Acquisitions Tax with the relevant threshold applying.

The €3k small gift exemption applies so a husband and wife could gift up to €6k to a child each year no issue and a lifetime threshold of €250k.

Taking care of an elderly parent. I personally would not consider a gift to arise when taking care of a parent as in my view it is the repayment of a loan the parent had granted the child in their formative years. But that is not specified in legislation.
 
Yes, I understood what the legislation says.

I am just amazed that
1)there would be no exemption for someone who is a relative staying in one's home (and,as you say, there is no exemption for one's parents)

-and

2) If this, really, is the law then how come Revenue are not checking up on all the people staying free in their relations homes.
Surely this tax, at 33%, is a large source of income for the state.
 
Not sure where the Revenue would get much.

€6,000 per year from a husband and wife exempt. €250k exempt for children. Would not go after parents living rent free.

How many others?
 
Lads seriously, is this thread actually happening, or am I hallucinating after a long weekend of over-indulgence..!?

The legislation says that the value of a deemed gift will be "a sum equal to the difference between the amount of any consideration in money or money's worth, given by the person referred to in subsection (2) for such use, occupation or enjoyment, and the best price obtainable in the open market for such use, occupation or enjoyment".

To me, the key word as underlined is SUCH - in a family situation the person is using (or occupying/enjoying) your house as a family member, not as a regular tenant.

Try putting an ad in the local paper / on Daft for someone to come and live with you as family in your house and see what kind of offers you get; that's the open market value of the deemed gift, and presumably Revenue's opinion would be it is nil or negligible (unless you've got a big family and they get into a bidding war...! :D)
 
Good point Mandelbrot.

I'm off to tell my mum over breakfast that instead of money for lodging this month she should be happy with my company and witty repartee, cos she would not get money off anyone else.
;-)
 
Thank you all for your replies. I can assure you that this is a genuine question which is causing great stress for the individual involved.

I hope that your views are indeed correct and that no liability will arise.
 
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