Gifting a house...that was an inheritance

Khublei

Frequent Poster
Hello, I've asked a few people about this who can't give a straight answer. Maybe someone here might know.

Basically, my still-very-much-alive parents want to gift me a house. I'd guess the value is around €250k. It's essentially a site, first thing I'll be doing is knocking and rebuilding. This house has been my home for 7 years (but I know the law changed on that).

My father inherited this house in the mid-90s when it was valued at £40k. So that's a lot of CGT.

The question is - can it be simply gifted to me, as it's below the inheritance threshold for gifts from parents to children? Or does the CGT complicate things? Would I have to pay CGT when they gift it to me? I'm guessing I could have a tax bill for around €65,000.

Thanks!
 

Joe_90

Frequent Poster
There are two separate taxes Capital Gains Tax on Gains for the parent and Capital Acquisitions Tax for the receipient of a gift.

The gift by your parents of an asset worth €250k will give rise to a CGT liability of (250 - (£40k/.78x1.277) = €185 - €1,270 x 33% = 60k.

As you say there is no CAT as it’s under the threshold.
 

Khublei

Frequent Poster
Thanks Joe. They could reduce the value by knocking it before I get it....but then I might not get given planning. I'm more likely to get planning (I've heard) if there's an existing dwelling. I'd be going for something the same size - just less falling apart.
 

Khublei

Frequent Poster
Does anyone think it would work if I got my name added to the deeds? Could I then get a mortgage, rebuild and inherit after they die? Is that mad / illegal?
 

Joe_90

Frequent Poster
If it’s your home and they are willing to gift it to you now then I’d take that.

Don’t leave it to deal with as part of an estate.
 

Khublei

Frequent Poster
Yea, I know. It would be messy, but I doubt any bank would tack €60k onto a mortgage so I could pay a tax bill. I have a deposit saved for the rebuild but not enough to pay that.
 

Gordon Gekko

Frequent Poster
Yea, I know. It would be messy, but I doubt any bank would tack €60k onto a mortgage so I could pay a tax bill. I have a deposit saved for the rebuild but not enough to pay that.
Why not buy it from them at undervalue and borrow the money from a bank to do so?

Some banks have de minimis levels of (say) €100k so find out what their minimum mortgage is. Then borrow the €100k. Then pay them €60k for the house and immediately pay back €40k of the mortgage.

It should be easy enough to make the numbers work.
 

Khublei

Frequent Poster
Would that work? Would that €60k to them be to pay the tax bill? I've been reading this here and it seems that it'll still be taken that the house is worth €250k so the extra would go towards my lifetime cap.
If I had the 100k mortgage, then at €60k, I'd still have to get another mortgage to rebuild, bank might not like that.
 

Khublei

Frequent Poster
ALso worth mentioning, this has never been my parents PPR. It was inherited by my father and they never lived in it. From what I've read that makes a difference.
 

Gordon Gekko

Frequent Poster
Would that work? Would that €60k to them be to pay the tax bill? I've been reading this here and it seems that it'll still be taken that the house is worth €250k so the extra would go towards my lifetime cap.
If I had the 100k mortgage, then at €60k, I'd still have to get another mortgage to rebuild, bank might not like that.
So borrow what you need to rebuild and pay your folks’ tax bill.
 

Vanessa

Frequent Poster
Why not buy it from them at undervalue and borrow the money from a bank to do so?

Some banks have de minimis levels of (say) €100k so find out what their minimum mortgage is. Then borrow the €100k. Then pay them €60k for the house and immediately pay back €40k of the mortgage.

It should be easy enough to make the numbers work.
I would get some advice on that approach. Revenue may get suspicious if you buy too far below market value. They would still see it as a gain and either you or the parents would be liable for payment
 

Gordon Gekko

Frequent Poster
I would get some advice on that approach. Revenue may get suspicious if you buy too far below market value. They would still see it as a gain and either you or the parents would be liable for payment
It would take place at deemed market value for CGT, CAT, and stamp duty purposes so I’m not sure what you mean?
 

Vanessa

Frequent Poster
It would take place at deemed market value for CGT, CAT, and stamp duty purposes so I’m not sure what you mean?
I am aware of a situation where one family member sold a property to another family member well below what similar properties in the same estate were sold for. This meant that the seller was not hit for substantial CGT and the buyer did not have to borrow as much thus reducing his mortgage and interest repayments.
The Revenue saw this manouevre as an attempt at CGT evasion and billed the sellers accordingly.
While you can make a case to Revenue about a lesser price in a. situation where the house needs good refurbishment and is not of the standard of similar properties the Revenue wont allow you to rip them off
 

RedOnion

Frequent Poster
Vanessa,
Gordon never suggested anything otherwise.

Whether the transfer is free, below market value, or at market value, the CGT liability is the same for his parents, and for stamp duty purposes.

What he's suggested is for OP to pay his parents enough to settle their tax bill, and borrow that money if he has to.
 

Khublei

Frequent Poster
Hello again people,

I'm here now 10 months later still trying to work this out. I'm a single person on an average wage so am trying to find a tax efficient (and totally legal) was to reduce my tax liabilities. I'd just like to run one suggestion that has been given to me by you all and hopefully someone will have a suggestion.

1. Parents apply for planning, get planning, knock house.
2. I inherit a site with planning.
3. When site is in my name I apply for mortgage and build the house they got planning for.

One tax advisor I spoke with said there is no CGT on a site. A parent is allowed give a site to a child tax free, it's something that was brought in for farmers apparently. So, is this true? Do people think this would work? The site is in a very urban area and not near my parents home so we won't even be pretending it's agricultural land. But the tax advisor said that doesn't matter. He said one shouldn't pay the tax on a house when it's not a house (well it won't be once it's knocked).

Would appreciate any thoughts on this plan.
 

Ravima

Frequent Poster
you need proper professional advice.

your father inherited the property in the mid 90's when it was worth €40K.

you have been living there for past 7 years.

Perhaps, market value is not €250K if you are sitting tenant. It might be worth €250K vacant. a sitting tenant could reduce the value.

proper written advice is required from a professional tax advisor.
 
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