Selling a second home and capital gains tax query.

98-00

My father was left a house 30 years ago with a value of €130,000 it now has a value of closer €1,200,000. It would be classed as a second home as he doesn't live there.
If he sells it he will have to pay CGT which only has a low allowance, and given the figures above would have to pay over €350,000 in CGT.

The only tenants in the house are family not paying rent as such, just keeping the place in good condition.
There is no mortgage, property tax is up to date and no other money owed on the property.

Can anything be done to reduce or offset the CGT payable?

An creative accountants out there got advice.

CIARAN_BOYLE

He could lie and claim that it was his ppr for a period. This would be illegal and tax evasion.

He can of course claim indexation relief between the date of acquisition and sale at 2004 when indexation ceased. It would be around 1.5 times so it would increase the cost by about 65k.

If there was any renovation during the period owned he can claim it was capital improvement of the property. Many people will misclassify repairs as this to reduce their tax bill and this misclassification would be illegal and tax evasion.

namenotavailablE

98-00 wrote: »

The only tenants in the house are family not paying rent as such, just keeping the place in good condition.

Might there be a possibility of "dependent relative" relief?
See about halfway down that linked page.

Calahonda52

98-00 wrote: »

My father was left a house 30 years ago with a value of €130,000 it now has a value of closer €1,200,000. It would be classed as a second home as he doesn't live there.
If he sells it he will have to pay CGT which only has a low allowance, and given the figures above would have to pay over €350,000 in CGT.

The only tenants in the house are family not paying rent as such, just keeping the place in good condition.
There is no mortgage, property tax is up to date and no other money owed on the property.

Can anything be done to reduce or offset the CGT payable?

An creative accountants out there got advice.

is there not an income tax issue here: BIK?

Gift tax perhaps
https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-and-the-value-of-certain-benefits/free-use-of-property-and-interest-free-loans.aspx

yournerd

Can deduct all expenses put into the house, any loss available to carry forward to offset the gain, unfortunately 33% rate would still apply on the remainder.

Research the PPR Relief perhaps is a good option.

dogsears

Calahonda52 wrote: »

is there not an income tax issue here: BIK?

No.

For OP. If he was to move in so that the house became his actual PPE, at least the last 12 months would qualify. He would not need to actually live there for 12 months - but it should be enough for it to genuinely become his PPE. But that would only save tax on c 1/30th of the gain. May not be worth the trouble.

In light of the amount of tax at stake it would be well worth going to take advice from a tax advisor and laying all the information out to them.

Calahonda52

dogsears wrote: »

No.

For OP. If he was to move in so that the house became his actual PPE, at least the last 12 months would qualify. He would not need to actually live there for 12 months - but it should be enough for it to genuinely become his PPE. But that would only save tax on c 1/30th of the gain. May not be worth the trouble.

In light of the amount of tax at stake it would be well worth going to take advice from a tax advisor and laying all the information out to them.

Correction? Gift Tax?
https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-and-the-value-of-certain-benefits/free-use-of-property-and-interest-free-loans.aspx

98-00

Thanks for the advice. You have given us a few things to look into.

dogsears

Calahonda52 wrote: »

Correction? Gift Tax?
https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-and-the-value-of-certain-benefits/free-use-of-property-and-interest-free-loans.aspx

That's possible alright as a risk to the people getting the benefit of the use of the house. Would depend on degree of relationship, exactly what use they had of the house, how many of them there are, annual value of use of house etc. Would prob be worth raising in any tax advisor consultation as well.

NB There is an exemption for gifts (or inheritances) provided by a parent for support, maintenance or education of a child - this could be relevant to above, as well as the Small Gift Exemption

4ensic15

There is also the possibility of an offset. There may be an asset which has lost value and can be sold, thus creating a loss. Professional advice should be obtained from a specialist practitioner, not just the local accountant. There is far too much money at stake here.