Dwelling House Exemption

[Taxess]

Appears that my last post got deleted, so going to ask a shorten version of my question.

I inherited a property and qualified for the Dwelling House Exemption - under the rules one has to occupy the house for 6 years.

Suppose without the exemption my tax liability was 250k, and with it, it was nil.

If I give up the exemption, (but do not sell the house), is the liability I pay revenue 250k, or are there any fines/inflation/interest applied to that number from date of inheritance. From looking at the CAT manual and an example given regarding sale of a property, it would appear that there is no interest applied, but it's not in anyway definite. Given the monies involved, I would like a definite answer.

Has anyone come across this before?

 

[jpd]

When did you inherit the house?
How long did you live in it, if at all?

 

[Taxess]

A couple of years ago - so it' still within the 6 year period.
It's been my home for 20+ years, but due to change in personal circumstances I will not be occupying it in the next few years. or at least that's the plan.

 

[AAAContributor]

Obviously get advice on this.

I'm not qualified in this area, but from what I do know or resources I have access to:

There are a few circumstances where the clawback will not apply. Have you checked to make sure none of these apply to your situation?

As regards tax and interest, "CAT on the benefit is due and payable on the date the exemption ceases to apply. Interest on the unpaid tax runs from that date." Source: Capital Taxes Fundamentals manual Irish Tax Institute.

 

[Taxess]

Yes I've looked into getting advice, just haven't heard back yet - and I like to know as much about the situation in advance to ask any questions etc.

Could you send me/post a link to the CAT tax please. Based on what's above it wouldn't be backdated to date on inheritance, instead it would be the date at which the exemption ceases - which is good to know. Usually how would this work in practice - would I need to contact revenue about it? Let's say for argument sake we are 3 years into the 6 years, if I didn't contact revenue, how would they ever know?

Regarding the circumstances on clawback not applying, yea I need to get more detail advice on this - for instance could I quit my current job, and get a job close to where I will be living (in a different county)? The example revenue provide is being moved to a different location by current employer.

 

[AAAContributor]

Could you send me/post a link to the CAT tax please.

I just have a physical copy of the book. It's available for purchase here:

Manuals - Capital Taxes Fundamentals Manual 2021

taxinstitute.ie

However, the legislative basis where no interest is paid from the valuation date to the date the exemption ceases to apply is in s51(3)(e) CATCA 2003:

Capital Acquisitions Tax Consolidation Act 2003, Section 51

The electronic Irish Statute Book (eISB) comprises the Acts of the Oireachtas (Parliament), Statutory Instruments, Legislation Directory, Constitution and a limited number of pre-1922 Acts.

www.irishstatutebook.ie

Let's say for argument sake we are 3 years into the 6 years, if I didn't contact revenue, how would they ever know?

You're already on their radar. The relief you originally claimed would have been looked at closely by Revenue to ensure that all the conditions for the exemption have been fully complied with (at the time of inheritance). You would have had to show that the 3-yr occupation requirement was complied with etc. There has to be a chance that the claim is subject to audit down the line. Also, it is worth noting that Revenue can make enquiries up to 4 years after the 6th year (last year the conditions have to be complied with) and presumably for an unlimited period if there is fraud.

It's an interesting question about s86(7)(a)(iv) CATCA and the employment situation. Would Revenue be very strict in their interpretation and say you made a choice or could have availed of the replacement property exemption? I don't know the answer to this. I did a quick look for Tax Appeal Decisions but can see nothing where this particular issue is addressed. I'm out of my league at this point.

 

[Taxess]

Ok that's perfect regarding the interest. It's not going to cost me more than it would have.
On the job front - it's not an angle I really want to explore as I like my current job, but if it was a legitimate option I may consider it. The CAT manual states that if you are require to relocate abroad or in the state, that the clawback won't apply, - now I don't have to relocate, it's more of a want, for personal reasons.

I've been told that I'm legally allowed to purchase another property if I so wish without impacting the exemption, but my current home just has to be my main home, again it's not clear what "main" means - if I spend 7 months of the year here and use the other property as a holiday home, is that ok? My current job requires me to be on site, so that's why it won't really work,, and if I'm moving jobs well I might as well explore the employment query.

 

[fistophobia]

I thought you are not allowed to own another property?
Also, what if you already inherited from a parent, say a load of cash.

 

[Taxess]

I can't own another property at time of inheritance, but nothing stopping me from buying another property after I've claimed the exemption.
Well in my case, I was giving the figure of tax to pay on the entire estate (Cash + house), and then just the figure with the dwelling house exemption applied.