Posted in New Legal Developments on 31 May 2017

If you are considering providing a dwelling house to your child or someone other than your child, please contact Cantillons for advice in view of the significant restrictions to the exemption for Inheritance and Gift Tax.

The Finance Act 2016 abolished the generous exemption from Inheritance and Gift Tax for dwelling houses.   Before the Finance Act 2016 was signed into Law a parent could bequeath or gift a dwelling house tax free to a son or daughter.   As a result of the 2016 Act a much more restrictive exemption applies.

The amended exemption only applies to inherited property unless the dwelling house is taken by way of gift by either a dependant relative or a person who becomes the beneficial owner within two years of the date of the donor’s death.  A dependant relative is a relative who is either,

  • Permanently or totally incapacitated by reason of mental or physical infirmity, or
  • Is aged 65 or more.

The following are the main conditions that must be met for a claim for exemption from inheritance tax to succeed.

  1. The dwelling house must have been occupied by the disponer as his/her only or main residence at the date of his or her death.
  2. It also must have been continuously occupied by the person receiving the inheritance as his/her only or main residence throughout the period of 3 years immediately before the date of the inheritance, or if the dwelling replaced another as the successor’s only or main residence, the two must have been continually occupier for periods that together comprised at least 3 years falling within the period of 4 years from the date of the inheritance.
  3. The dwelling house must be the only dwelling to which the successor had a beneficial interest at the date of the inheritance.

It is important to note that the exemption is withdrawn if the dwelling house is sold or disposed of  within 6 years from the date of the inheritance and the entirety of the consideration for the sale is not used to acquire a replacement dwelling, or if the successor ceases to occupy the house as his/her only or main residence during the same period of 6 years.   These restrictions do not apply where the successor is aged 65 or over at the date of the inheritance or where he/she is unable to reside in the house as a result of employment requirements or inconsequence of infirmity.

Contact us at Cantillons Solicitors at +353 (0)21 -4275673 or [email protected] if you would like more information.

*In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement.

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