Amendment limiting the availability of Dwelling House Relief
February 14, 2018
Finance Act 2016 introduced measures that significantly restrict the availability of Dwelling House Relief (s. 86 CATCA 2003).
Under the new Dwelling House Relief legislation:
Relief is available for inheritances of a dwelling house or part of a dwelling house.
Relief will not generally be available for gifts of a dwelling house, or gifts which convert to inheritances due to the death of the person making the gift within 2 years of the date of the gift. This proposed provision represents a significant restriction of the relief and could lead to unforeseen capital acquisitions tax liabilities for people who receive a gift of a house.
Dwelling House Relief will however be available on a gift of a dwelling house which is made to a dependant relative, i.e. a relative of the person making the gift or his spouse/ civil partner, and who is permanently and totally incapacitated by reason of mental or physical infirmity.
Generally speaking the house must be occupied by both the person making the gift at the date of death and the beneficiary of the gift at the date of the inheritance (but this requirement does not apply in cases of a gift to a dependant relative).
A new deemed occupation clause allows a donor or beneficiary to count a period when he is out of occupation of his home due to mental or physical illness as a period of occupation. If this provision is being relied on to avoid a clawback of the relief, then the medical condition must be certified by a medical practitioner.
The age at which a beneficiary can take a property without being subject to clawback provisions has been increased from 55 years to 65 years.
The taxation consequences of this amendment are significant, so one should seek taxation advice on the implications for future gifts and inheritances.
For further information contact:
Name: Marie Bradley, Managing Director, Bradley Tax Consulting