minimising my capital acquisitions tax

bigtomw

Hi guys,
I inherited some land back in 2014, I gave it a go at farming but have decided it's not for me, so I am going to sell up, the place has been given a rough valuation of around 500,000 euros, from what I understand I will have to pay 33% tax on anything over 225,000, which would leave me with a tax bill of around 90,000,
I was wondering would it be okay to transfer half the place to my spouse, let her sell one half and me sell the other half, I am not trying to do anything illegal I just want to know the best way to minimise my tax bill,
Thanks

exaisle

33% of 225,000 is 74,250 so you're up 15,750 for starters.

It would be fine to transfer half the place to your wife and for her to sell her half, but it won't save you a cent... You inherited the property so the CAT liability falls to you. Transferring it would only involve you in additional legal fees.

If the current valuation is higher than the valuation when you inherited, the transfer to your wife doesn't leave you liable to Capital Gains Tax, but for GCT purposes, she inherits the property as if she acquired it when you did (at the valuation and date that you inherited it) so that if she disposes of it at a profit, she stands liable to GCT as if she was the one who inherited it.

The only gain here is that she could also deduct the first €1270 of the gain, saving €419 but the additional legal fees are likely to be higher than that...

bigtomw

exaisle wrote:

33% of 225,000 is 74,250 so you're up 15,750 for starters.

exaisle wrote:

It would be fine to transfer half the place to your wife and for her to sell her half, but it won't save you a cent... You inherited the property so the CAT liability falls to you. Transferring it would only involve you in additional legal fees.

exaisle wrote:

If the current valuation is higher than the valuation when you inherited, the transfer to your wife doesn't leave you liable to Capital Gains Tax, but for GCT purposes, she inherits the property as if she acquired it when you did (at the valuation and date that you inherited it) so that if she disposes of it at a profit, she stands liable to GCT as if she was the one who inherited it.

exaisle wrote:

The only gain here is that she could also deduct the first €1270 of the gain, saving €419 but the additional legal fees are likely to be higher than that...

Thanks for the reply, I thought this might be the case, but the amount of tax I will pay will be around 90,750 Euro, let's say it sells for 500,000 , the first 225,000 is tax free meaning I will pay 33% on 275,000 which is 90,750, again thanks for your reply

Lockedout2

It's €500k-€225=€275x33%=90k.

You should consider letting the land on a 5 year lease tax free and then sell the land no clawback of CAT after 6 years.

bigtomw

I propably should of mentioned this in the original post, I also have a child with autism which I get an incapacitated tax credit for in my full time job, are there any reliefs for people with disabilities / incapacitated

bigtomw

Lockedout2 wrote:

It's €500k-€225=€275x33%=90k.

Lockedout2 wrote:

You should consider letting the land on a 5 year lease tax free and then sell the land no clawback of CAT after 6 years.

I have considered this but, there are other reasons I want to sell so I would rather just sell the place now then hang on to it, but thanks for the reply

Lockedout2

Lockedout2 wrote: »

It's €500k-€225=€275x33%=90k.

You should consider letting the land on a 5 year lease tax free and then sell the land no clawback of CAT after 6 years.

+1

If you are over 40 you can receive 18k a year tax free if the land is rented out on a 5 or 6 year lease.

If the land is worth more than 18k per year to lease you can lease it for longer and get higher tax free amounts.

You won't have to pay any CAT then as you have owned it longer than 6 years. 90k is a lot of money to lose out for not hanging on a few years, especially as you could make nearly that extra tax free by leasing it and then sell it for what its worth with no CAT.

DmanDmythDledge

Given that it is farming land and a Group A inheritance you should get professional advice as to whether or not agricultural relief will apply. I would again stress to seek professional advice when considering the relief and not to take any advice from here.

Spanish Eyes

Alaya Mushy Sledgehammer wrote: »

+1

If you are over 40 you can receive 18k a year tax free if the land is rented out on a 5 or 6 year lease.

If the land is worth more than 18k per year to lease you can lease it for longer and get higher tax free amounts.

What scheme is that? Thanks.

Mr. Incognito

People are confusing the CGT RELIEF with CAT RELIEF.

Lots of inaccurate, misleading and plain wrong information here.

Speak to a professional not an anynomous internet forum.

Spanish Eyes

Spanish Eyes wrote: »

What scheme is that? Thanks.

http://www.revenue.ie/en/tax/it/reliefs/leasing-farm-land.html