Newly built house - sell it and pay Vat/CGT or gift it to my teenager?

I think it’s worthwhile to work out what the potential CGT is right now assuming the disposal proceeds are €800k.

To do this,you need to ascertain what your allowable build /construction costs are and deduct this from the 800k and the resulting figure is subject to 33% CGT
 
Hmmm.

See the first few posts in this thread.
 
Windsor23 said:
I already owed the site and built on it at a cost of approx 450k so it seems like a fairly straightforward CGT situation no?
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Builders also own the land they build houses on. If you build and never live in the property, what would make it 100% clear to Revenue that you are not a property developer?
 
Leo said:
what would make it 100% clear to Revenue that you are not a property developer?
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Because I'm a taxable person, not a company? Builders typically set up companies for that purpose and as I understand it, also sell the land under a separate contract. I won't be doing that.
 
Windsor23 said:
What am I missing in this case that would trigger this kind of taxation treatment? I already owed the site and built on it at a cost of approx 450k so it seems like a fairly straightforward CGT situation no?
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As above, my recommendation is to hire a tax consultant as it's complicated and fraught topic.

In the meantime, see the Notes for Guidance on Section 640 TCA 1997 on pages 2 and 3 here: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/tca/part22.pdf
 
Windsor23 said:
Because I'm a taxable person, not a company? Builders typically set up companies for that purpose and as I understand it, also sell the land under a separate contract. I won't be doing that.
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The key distinction between you and Cairn Homes plc is not that it's a company and you're an individual; it's that it carries on the trade of building and selling houses and you don't — you've only built and sold a single house, and a single transaction is not a trade.

Unfortunately, it can be "adventure in the nature of a trade", and the amount earned from an adventure in the nature of a trade is subject to income tax, not CGT, so Tom is correct. Whether a transaction is or is not an adventure in the nature of a trade can be a pretty blurry line, and you should definitely get specific advice from an experienced tax consultant on your circumstances and the facts of your case before you make any decision about what to do with the house you've built
 
TomEdison said:
Unfortunately, it can be "adventure in the nature of a trade", and the amount earned from an adventure in the nature of a trade is subject to income tax, not CGT, so Tom is correct.
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Interesting. Does the same apply to those who section off a piece of their garden to build a house in the subplot? I truly had no idea the tax treatment for a one-off would be this complex.
 
Every case is decided on its own facts, but if you buy a house and garden and live in it and much later, subdivide the garden to build a second house, and then sell one of the houses, I think you're safe enough.

At one extreme, if you see a promising development site, buy it, develop it and sell the development, that's highly likely to be seen as an adventure in the nature of a trade.

At the other extreme, if after your eleven children have flown the coop you find the house you've lived in for 30 years is bigger than you now require, so you carve off a part of the garden, build a little bungalow on it and then sell off the big house, that's not going to be an aventure in the nature of a trade.

In between those two extremes, there's a whole host of possible permutations and combinations of facts. You didn't buy the site — you inherited it. You bought land to enlarge your farm, changed your mind and decided to sell it (but not before building a wee house on it, because why not?). You built the house for your old granny to move into, but didn't she die just as it was finished, so you decided to sell it. The site is part of your garden, or it isn't. The site is adjacent to land that you retain ownership of, or it isn't. Etc, etc.

The issue is decided based on the totality of the facts, and the facts can be infinitely varied. Hence, expert professional advice is needed. But, in general

- if you bought the site intending to exploit it for economic activity of some kind, or

- if you built a house inending to monetise it by selling or renting it,

then if you sell the finished house, it could well be regarded as an adventure in the nature of a trade. But if you have owned the land for yonks, or bought it for a non-economic purpose, and you didn't build the house to monetise it, but circumstances change and so you sell the house, then it's less likely to be adventure in the nature of a trade.
 
This is all so helpful, really appreciate your taking the time on it - thank you so much.
 
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