Land/site question

flatty

This skirts close to seeking legal advice, but it is sort of hypothetical, and an interesting question. It cropped up in discussion the other night where a friend had done his best friend a favour by helping him with some land leasing. He was wanting to help him further. His pal had had a bad time of it and was getting back on his feet. He was wondering about building on a small bit of land, but as finances were very tight, he couldn't afford to pay much, if anything. So, the landowner wondered whether it was possible in theory to draw up a legal agreement whereby the land is donated, but the house when built (it would be self built, and fairly rudimentary), would pass back to the land owner or his kids if the lad dies. Sites in this location would normally be a significant six figure sum.

Mr. Incognito

No

If the land is given for free CAT is payable

If it is a "loan" of land then you would need some fairly serious documentation but Revenue is very unlikely to accept it.

If the Land is used rent free CAT Is payable on what the rent ought to be.

Every lad in the pub has some bright idea as a tax scheme. Revenue have seen them all over the last 100 years.

Any loophole is swiftly closed and tax advisors make a very lucrative living out of advising on legal tax planning.

flatty

This wasn't planned as a tax scheme. Tax never even occurred to anyone. It was more helping out a pal, who's ex wife is an utter harridan, and it would be to absolutely ensure neither her nor anything to do with her could gain any entitlement. Best avoided altogether then. I wouldn't be paying tax on a gift.
Thanks.
What about a leasehold type thing, could that work?

flatty

PS, what is Cat?

Victor

flatty wrote: »

PS, what is Cat?

Capital Acquisitions Tax: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/index.aspx

It's a tax on receiving an asset at below the market price, as opposed to a tax on making a profit on the sale of an asset or on income.

flatty

If this was gifted as agricultural land (which it is), it would be valued at say 10k per acre. If this subsequently was granted planning, becoming much more valuable, would that cat retrospectively apply?
I genuinely had never heard of cat, and this genuinely isn't a tax scam.

davindub

Yes, you can grant a life estate, but you need to get legal advice on how to set one up and the on going management of the freehold. Offhand see part 4 of conveyancing r. act 2009.

As regards CAT, it will not be due on the Market value but rather an aggregated amount of the market value based on age. The rule is called "limited interest".


The potential development land will be development land once a house can be built, it will certainly be part of the market value calculation for CAT. You should get chartered tax advice on this as well.