December-06-2016 in Property
Significant changes to dwelling house relief are expected when the Finance Bill 2016 is enacted by the middle of December, meaning anyone meeting the conditions to claim the relief needs to act now in order to effect a transfer of property.
Under the current provisions set down in Section 86 of the Capital Acquisitions Tax Consolidation Act 2003, a gift or inheritance of a dwelling house taken on or after 1 December 1999 will be exempt from capital acquisitions tax (i.e. gift or inheritance tax) provided the following conditions are met:
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The beneficiary has occupied the dwelling house as his or her main residence for a minimum of three years prior to the date of gift or inheritance
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The beneficiary must not, at the date of the gift or inheritance, be beneficially entitled to any other dwelling house
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The beneficiary cannot have resided in the dwelling house with the disponer (i.e. the person making the gift) unless the disponer is compelled by reason of old age or infirmity to depend on the services of the beneficiary
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The dwelling house must be owned by the disponer for a period of three years prior to the gift
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After the beneficiary has taken a gift of the dwelling house, except where the beneficiary is over 55 years of age, the beneficiary must continue to occupy the dwelling house as his or her main residence for a period of 6 years to avoid a claw back of the relief. The relief will not be clawed back in the event that the beneficiary has to enter long term medical care in a nursing home or hospital or where a condition is imposed by an employer requiring the beneficiary to reside elsewhere.
Once the disponer and beneficiary meet all of the above conditions, the beneficiary may claim dwelling house relief on the transfer which provides a complete exemption from gift tax on the value of the property transferred. Furthermore, there is no requirement for any marital or blood relationship between the parties nor does it affect the tax-free thresholds available to individuals. This has made the relief a very effective tax planning mechanism since its inception.
Under the provisions of the Finance Bill 2016, the availability of the relief is almost certain to be restricted from mid-December 2016 to inheritances and to gifts made to a dependent relative who is permanently and totally incapacitated by reason of physical or mental infirmity.
Indications are that the relief will be abolished from the date of enactment of the Finance Bill 2016 which is projected for mid-December and therefore it will not be open to the parties who met the criteria in advance of that date to claim the relief once enacted. Act fast to avail of this extremely beneficial tax planning provision.
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