Can I avoid Gift Tax?

W

WillB

Guest
My girlfriend and I are purchasing her mothers house, which has a section of land on the side. We have agreed to buy the existing property for 200k (although worth 400+k) on condition that we build her mother a house on the side (not a granny flat). The mortgage will be in my name only and I will be seen as an 'outside buyer' with no ties to the family. When the house is assessed at being approx 400K in value, I understand the rev comms will see the difference of approx 200k as a 'gift' thus imposing gift tax of 20% on the difference. Bare in mind, my girlfriend will not be involved in any aspect of this, not on mortgage or deeds. Planning permission has been granted for building work, for what its worth.
Dear god help me! 40K i cant afford.
 
Spend a few hundred quid and get a professional tax advisor to look at it for you. Could save you thousands in the long run.
 
WillB said:
When the house is assessed at being approx 400K in value, I understand the rev comms will see the difference of approx 200k as a 'gift' thus imposing gift tax of 20% on the difference.
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If the gift is to you alone then this amount would presumably fall under the parent to child gift/inheritance tax exemption threshold of c. €480K. If it is jointly to you and your non married partner then the tax treatment (particularly of the partner's portion) would most likely be different.
 
But WillB is not related, it is his girlfriend's mother. Would your girlfriend consider getting involved, given that she may fall under the inheritance tax exemption that Clubman mentioned?
 
Sorry - I misread the original query as his mother gifting to him the amount of the discount below market value of the property.
 
But she will not be on the deeds or the mortgage as she has no income.
 
Not always practical but I would say;

Get the property transferred to your girlfriend and avail of the first threshold.

Then marry her and she transfers 50% to you and avail of exemption between spouses
 
The value of the house construction can be taken into account in reducing the value of the gift, but you still have a lot of tax issues, including stamp duty which is levied on the value of the house not what you're paying for it. As stated above employ a good professional to work out the best way forward
 
If building the house forms part of the contract then you are not gaining 200K but the differance between 200K and the cost of the house and that is all you will have to pay tax on.
 
Looks like I'll need to pay for some help guys. Money moeny money.
 
You could always refuse the gift if you feel that the tax bill is too onerous.
 
ClubMan said:
If the gift is to you alone then this amount would presumably fall under the parent to child gift/inheritance tax exemption threshold of c. €480K. If it is jointly to you and your non married partner then the tax treatment (particularly of the partner's portion) would most likely be different.
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Sorry, novice here, but just wondering if the difference between what I, as a son would buy a house from my dad for 200,000 and what it is worth 380,000. would i be exempt from paying gift tax? because the difference is less than €480k?

Also i think i would have to pay stamp duty, but is the stamp duty charged on the whole €380 or just the difference between what its worth and what i would pay for it?

Cheers
 
sorry about this, but im in a similar situation myself! lets say you buy the house for 200,000 how do the revenue know the house is actually worth 400,000 and that thus there is a gift of 200,000? surely someone could sell their house for whatever value they like (e.g. 200,000) whether its to a family member or not?
 
gravitygirl said:
sorry about this, but im in a similar situation myself! lets say you buy the house for 200,000 how do the revenue know the house is actually worth 400,000 and that thus there is a gift of 200,000? surely someone could sell their house for whatever value they like (e.g. 200,000) whether its to a family member or not?
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You can sell it for what ever price you want but stamp duty must be paid on the real value and the other portion has to be considered a gift because that is what it is.
 
but my point is, how do they know the 'real' value of the property? what's to say its not actually 200,000?
 
What does the gift/inheritance threshold of €480k refer to? if the gift is less than this, you dont pay tax is it?
 
gravitygirl said:
but my point is, how do they know the 'real' value of the property? what's to say its not actually 200,000?
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Don't cod yourself into thinking that Revenue don't keep a close eye on the property market as well as keeping archive data of historical market prices for different types of properties, areas etc.
 
Hi househunter7

househunter7 said:
What does the gift/inheritance threshold of €480k refer to? if the gift is less than this, you dont pay tax is it?
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here is an link which explains all.
 
Sorry, novice here, but just wondering if the difference between what I, as a son would buy a house from my dad for 200,000 and what it is worth 380,000. would i be exempt from paying gift tax? because the difference is less than €480k?
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What does the gift/inheritance threshold of €480k refer to? if the gift is less than this, you dont pay tax is it?
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Yes to both, but any future gifts (over 3K per annum) or inheritance from parents will be added to the gift portion above in calculating your total CAT bill. If this exceeds the theshold, currently 478K you will be taxed on the excess.

Also i think i would have to pay stamp duty, but is the stamp duty charged on the whole €380 or just the difference between what its worth and what i would pay for it?
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I could be wrong on this, stamp duty on transactions between family members is calculated at half the normal rates. Can't find a link
 
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