Inherintance tax

duckcfc

Got a question on inheritance tax i would like answered if possible.

If one inherinted a house from a brother back in 2008, and say the house was worth 100k, how much inheritance tax would one owe. And would the tax have to be paid even thou one still hasnt sold the house up untill 2016. What if the house doesnt get sold, is the new owner still liable for this tax!

If the house was to be sold, does one get hit with 2 taxes,one for inheriting and then again for selling in 2016.

edit, the house is in south and the owner resides in the north.

barneystinson

The clue here is in the name - inheritance tax, it's a tax on an inheritance, so whether you sell it or not is irrelevant.

As for how much tax, it could be anywhere from zero to 22k, depending on the relationship with the deceased.

When you do sell it, you are exposed to capital GAINS tax, on the difference between the value you sell it for and its value when you inherited it.

BorneTobyWilde

Can a person buy a house he knows he will inherit for a euro before he inherits it. If current owner agreed a sale price of a euro, could one buy at a euro to avoid inheriting the house.

Water John

No, that's a gift of the remaining value.
Reasonable market value or it will be questioned by Revenue.

BorneTobyWilde

Water John wrote: »

No, that's a gift of the remaining value.
Reasonable market value or it will be questioned by Revenue.

Has a person no right to sell what's theirs at a price they want.

Water John

Yes, but its the person getting it is taxed on the gift received.

Gavlor

BorneTobyWilde wrote: »

Has a person no right to sell what's theirs at a price they want.

You can sell it for whatever price you like however revenue are entitled by law to apply fair market value to any asset that transfers ownership.

tea and coffee

the tax becomes due on grant of probate (well, by the end of that taxation period anyway). \the house is valued at time of inheritance (usually time of death), so the 2008 threshold applies for Group B, which was about 52k. So CAT (inheritance tax due on the remaining 48k at either 22% or 25%- as it changed around a bit in 2008). to be honest, I'm surprised that the revenue didn't send out a form IT38 once the probate had been done- the papers are normally sent on to them by the Probate office.

Of course, if Probate hasn't gone through yet, it's a different story, and I'm afraid I don't know the situation then- but you would still be liable at some stage.

Water John

Plus 8% interest per year on the bill.

duckcfc

tea and coffee wrote: »

the tax becomes due on grant of probate (well, by the end of that taxation period anyway). \the house is valued at time of inheritance (usually time of death), so the 2008 threshold applies for Group B, which was about 52k. So CAT (inheritance tax due on the remaining 48k at either 22% or 25%- as it changed around a bit in 2008). to be honest, I'm surprised that the revenue didn't send out a form IT38 once the probate had been done- the papers are normally sent on to them by the Probate office.

Of course, if Probate hasn't gone through yet, it's a different story, and I'm afraid I don't know the situation then- but you would still be liable at some stage.

It's for my sister who married a guy in Omagh. Shes been living there 40 years and her brother in law left a house in the South to her husband when he died. Everything has been sorted out but they've just left the house as is and hadn't went near it in years. They have received letters from revenue and have just buried their heads in the sand. They couldnt afford any tax back in 2008 and certainly not now with one being sick and both not working.

They have been thinking of selling just to have done with it because it's just a major worry but they wanted me to fund out a few things first.

So basically, if someone leaves you a house, you could be worse off because of tax issues.

What if the house was worth 100k in 2008, and they owe 40k going by my calculations from answers on here. The house has fell into a bad state with Alot of work needing done. They sell for 25k. Do they still owe 15k tax from inheritance tax and CGT from sale? If so, if i was my sister, id be digging up my brother in law and giving him his deeds back! Lol. All jokes aside thou, how can that be fair if someone leaves you something, you can be worse off for it. Doesn't seem right to me!

duckcfc

Gavlor wrote: »

You can sell it for whatever price you like however revenue are entitled by law to apply fair market value to any asset that transfers ownership.

Does any taxes pass on to the person buying it if they sold it and hadn't paid the full inheritance tax and CBT

AlexisM

duckcfc wrote: »

So basically, if someone leaves you a house, you could be worse off because of tax issues.

No. Tax is never more then the value of the asset. You can make yourself worse off by your own action or inaction though.

duckcfc wrote: »

What if the house was worth 100k in 2008, and they owe 40k going by my calculations from answers on here. The house has fell into a bad state with Alot of work needing done. They sell for 25k. Do they still owe 15k tax from inheritance tax and CGT from sale? If so, if i was my sister, id be digging up my brother in law and giving him his deeds back! Lol. All jokes aside thou, how can that be fair if someone leaves you something, you can be worse off for it. Doesn't seem right to me!

What could have/should have happened was - inherit house for 100K, sell for 100K, pay inheritence tax (say 15K) - windfall of 85K cash. It's hardly revenue's fault/problem that the house was left to fall into disrepair and is now worth less then the value at the time your BIL came to own it. And yes, they still owe the tax (plus interest) from what it was worth at the time they inherited it. It's unlikely that there is any CGT if the property has reduced in value.

duckcfc wrote: »

Does any taxes pass on to the person buying it if they sold it and hadn't paid the full inheritance tax and CBT

No.

tea and coffee

Yes, they are still liable, and by their inaction could now owe more than it's worth - that is my understanding of it. They need to get onto a solicitor.

Immaculata

duckcfc wrote: »

It's for my sister who married a guy in Omagh. Shes been living there 40 years and her brother in law left a house in the South to her husband when he died. Everything has been sorted out but they've just left the house as is and hadn't went near it in years. They have received letters from revenue and have just buried their heads in the sand. They couldnt afford any tax back in 2008 and certainly not now with one being sick and both not working.

They have been thinking of selling just to have done with it because it's just a major worry but they wanted me to fund out a few things first.

So basically, if someone leaves you a house, you could be worse off because of tax issues.

What if the house was worth 100k in 2008, and they owe 40k going by my calculations from answers on here. The house has fell into a bad state with Alot of work needing done. They sell for 25k. Do they still owe 15k tax from inheritance tax and CGT from sale? If so, if i was my sister, id be digging up my brother in law and giving him his deeds back! Lol. All jokes aside thou, how can that be fair if someone leaves you something, you can be worse off for it. Doesn't seem right to me!

Seems like your relatives wouldn't have been worse off for their inheritance if they had not ignored the whole issue. Although I realise that with both of your relatives not working and one of them not well, just the thought of the tax debt was probably overwhelming for them at the time they inherited.

It might not seem fair but if the revenue commissioners didn't charge interest on outstanding tax debts, hardly anyone would bother paying taxes. If the debt keeps increasing, then there's motivation in that.

I suggest your relatives need to either sell the house as is, pay the revenue commissioners as much as they can out of the sale, and take the loss. Although it would be expensive, that is the simplest way to cut their losses and stop the situation getting any worse. Easier said than done, though.

The other option might be to do some research, i.e. have some talks with some local estate agents and some local builders and see what you might get for the house as it is, and what you might get for it if it was repaired, and see what the repairs might cost. An idea of what the letting market in the house's area would be useful too. And then working from that information, your relatives could think about it and figure out if it is a better arrangement to repair the house and sell/let it and pay the tax debt that way.

Maybe your relatives could move into the house if it's at all habitable, sell or stop renting their house in Armagh, and work on it over time. I don't know what their situation is and what they are or are not eligible for, but sometimes people can apply for grants like these. Maybe the wider family circle includes people who work in contruction/house repairs and could chip in with assistance free or at cost. Maybe the credit union or the extended family would assist with a loan of funds.

With a bit of manoeuvring, it might be possible to sell the house to someone for the cost of the tax debt, breaking even on the situation, and then at least your relatives wouldn't have any further trouble. Or it might be possible to secure the fabric of the house, let it out, and eventually in time it would actually be of benefit to them financially, which is obviously what the relative who left them the place wanted.

tea and coffee

OP, On your calculations they owe TAX (@25% ~ ) on 48k of the house (if it was worth 100k to begin with for example)- they don't owe 40K in tax on a 100k house. So that would be roughly 10k, plus interest. If they sell the house for 25k, they might cover their liability

Water John

Was it ever valued as was in 2008?
There could be a bit of leeway on that. Who knows what condition it was in at that time.
Can't see the tax being 48K, hopefully.
10K in 2008 goes to 18K now.
20K in 2008 goes to 37K now.

I don't mean to be negative. Trying to be realistic. Compound interest on debt is always a burden.

duckcfc

Ya gotta love the tax man. Sounds like the mafia to me. Someone leaves a house,we want our wack, cant pay, tough, well put interest on. If you sell house for 25% of what it was worth, tough, you still owe us even if you sell the house for less than what it was worth when you got it! Whatever the outcome, they have just been handed a debt!

dogsears

duckcfc wrote: »

Ya gotta love the tax man. Sounds like the mafia to me. Someone leaves a house,we want our wack, cant pay, tough, well put interest on. If you sell house for 25% of what it was worth, tough, you still owe us even if you sell the house for less than what it was worth when you got it! Whatever the outcome, they have just been handed a debt!

They haven't just been handed a debt.

They were handed an asset in 2008 and didn't pay the tax relating to that. If they didn't have the cash they could have sold. They'd still be up on the deal and protected from the fall in the market since then. And they allowed it fall into disrepair. Sure there may be reasons, lots of people have circumstances where they find it hard to do what they should. But its not the taxman that should be held responsible. Its themselves. Sorry if that seems unsympathetic but there really isn't anyone else responsible.

barneystinson

duckcfc wrote: »

Ya gotta love the tax man. Sounds like the mafia to me. Someone leaves a house,we want our wack, cant pay, tough, well put interest on. If you sell house for 25% of what it was worth, tough, you still owe us even if you sell the house for less than what it was worth when you got it! Whatever the outcome, they have just been handed a debt!

It's one way of looking at it I suppose.

Personally, if someone left me an inheritance of whatever kind, ie property, money, shares, antiques, I'd be delighted.

When you inherit something valuable there's no such thing as can't pay - it may be a case of can't pay without selling, or borrowing against, the valuable thing. But that's very different than can't pay at all.

It's not Revenue's fault if the person involved drops the ball, they're grown ups and have responsibilities. If they didn't want them (the responsibilities) then I suppose they could have disclaimed the inheritance, although it may be too late for that now. Still struggling to see how they could possibly end up at an overall loss in this scenario, they just need to cop on, pony up for proper tax/legal advice and sort it asap.

jaykay74

Do they not have the option to refuse the item if it's got negative value (at this stage). Is there an obligation to accept the item gifted? Might be more hypothetical in this case.

duckcfc

jaykay74 wrote: »

Do they not have the option to refuse the item if it's got negative value (at this stage). Is there an obligation to accept the item gifted? Might be more hypothetical in this case.

The tax man then would claim it, auction it

barneystinson

duckcfc wrote: »

The tax man then would claim it, auction it

How so?