Tax on a gift

Eircom_Sucks

Not sure if on right thread

This is for a friend

His gf’s dad and sister inherited a house their mother owned , the house has since been sold and both got an equal share , no capital gains tax as under the threshold , but the gf’s dad wants to give her 100k to help her buy a house

Will they be stung for tax on this ?

Eircom_Sucks

Eircom_Sucks wrote: »

Not sure if on right thread

This is for a friend

His gf’s dad and sister inherited a house their mother owned , the house has since been sold and both got an equal share , no capital gains tax as under the threshold , but the gf’s dad wants to give her 100k to help her buy a house


Will they be stung for tax on this ?

No. A parent can give their child up to 320k tax free

Eircom_Sucks

barrier86 wrote: »

No. A parent can give their child up to 320k tax free

Any link to that ?

Plz

Rulmeq

Eircom_Sucks wrote: »

Any link to that ?

Plz

https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/what-are-group-thresholds-rates-and-aggregation-rules.aspx

The limits are here: https://www.revenue.ie/en/gains-gifts-and-inheritance/cat-thresholds-rates-and-aggregation-rules/cat-thresholds-post-november-2011.aspx but you should read through all the pages so you don't miss anything (these are life time limits)

Pawwed Rig

Bit confused as to the relationships here. Was it his go Dad and Dad's sister or the gf sister? Whose mother? The gf or the Dad?

Who are 'they' that will be stung for tax? Is it the gf alone or the gf and your friend.

Eircom_Sucks

Pawwed Rig wrote: »

Bit confused as to the relationships here. Was it his go Dad and Dad's sister or the gf sister? Whose mother? The gf or the Dad?

Who are 'they' that will be stung for tax? Is it the gf alone or the gf and your friend.

Mate and gf

Its her dad and aunt

Dad wants to give the daughter 100 k

Riskymove

barrier86 wrote: »

No. A parent can give their child up to 320k tax free

I think it is cumulative which is something to bear in mind for the future

Pawwed Rig

Eircom_Sucks wrote: »

Mate and gf

Its her dad and aunt

Dad wants to give the daughter 100 k

And was it the Dad's mother or the gf mother that died?
Is your friend getting anything or just the gf?

Iscreamkone

Can someone gift another - 3k per annum worth of property?

Over 20 years this could be 60k worth of property outside of other capital gains limits?

Calahonda52

Iscreamkone wrote: »

Can someone gift another - 3k per annum worth of property?

Over 20 years this could be 60k worth of property outside of other capital gains limits?

how would you prove it to the tax-man?
Its not CGT, ,its CAT

Pawwed Rig

Calahonda52 wrote: »

how would you prove it to the tax-man?
Its not CGT, ,its CAT

You would have to convey €3k worth of property each year which would cost a lot in legal fees. You would also hope that Revenue do not apply anti avoidance legislation.

Pawwed Rig

Pawwed Rig wrote: »

You would have to convey €3k worth of property each year which would cost a lot in legal fees. You would also hope that Revenue do not apply anti avoidance legislation.

They can’t apply anti-avoidance legislation for legal tax avoidance. Ok it’s very complicated with property but the principal is no different to gifting 3k cash per year over many years to pass on a lump sum of money tax free (and not eating up lifetime threasholds). This method of transferring cash is 100% legal.

Calahonda52

Ariana Uneven Recorder wrote: »

They can’t ....

relax carry on

Ariana Uneven Recorder wrote: »

They can’t apply anti-avoidance legislation for legal tax avoidance.

https://www.revenue.ie/en/self-assessment-and-self-employment/tax-avoidance/legislative-tools-to-challenge-tax-avoidance.aspx

Pawwed Rig

Ariana Uneven Recorder wrote: »

They can’t apply anti-avoidance legislation for legal tax avoidance.

If the sole purpose of a transaction is to avoid tax then they definitely can and have.

Calahonda52

Calahonda52 wrote: »

I'd happily fight them on any attempt to ignore their own rules. They allow 3k per year tax free transfers per person, they make no reference to it being illegal doing it every year to transfer a sum of money tax free over time. This is a very common way of transferring money and assets and you will be advised to do this by a tax consultant.

Pawwed Rig wrote: »

If the sole purpose of a transaction is to avoid tax then they definitely can and have.

Sure of course the sole purpose if transferring 3k per year is to avoid tax on the transfer they allow this and can't come back and try to disallow it just cos they feel like it.

Peregrinus

Ariana Uneven Recorder wrote: »

I'd happily fight them on any attempt to ignore their own rules. They allow 3k per year tax free transfers per person, they make no reference to it being illegal doing it every year to transfer a sum of money tax free over time. This is a very common way of transferring money and assets and you will be advised to do this by a tax consultant.

Sure of course the sole purpose if transferring 3k per year is to avoid tax on the transfer they allow this and can't come back and try to disallow it just cos they feel like it.

As other have pointed out, the legal and conveyancing costs of transferring a serious of fractional interests in property, each worth 3k or less, would almost certainly exceed any saving in CAT, so the conversation is a bit unreal.

Having said that, I think there is a distinction between annual cash gifts of 3k, which the Revenue certainly would not challenge, and a series of annual transfers of fractional interests in the same property, which is highly artificial and very difficult to explain unless there is a prior intention and/or agreement for the cumulative transfer of a substantial interest in the property, and perhaps the entire interest, artificially split into a serious of fractional transfers in order to secure a tax advantage. And I think that is precisely the kind of thing they could successfully challenge under the anti-avoidance provisions.

Peregrinus

Peregrinus wrote: »

As other have pointed out, the legal and conveyancing costs of transferring a serious of fractional interests in property, each worth 3k or less, would almost certainly exceed any saving in CAT, so the conversation is a bit unreal.

Having said that, I think there is a distinction between annual cash gifts of 3k, which the Revenue certainly would not challenge, and a series of annual transfers of fractional interests in the same property, which is highly artificial and very difficult to explain unless there is a prior intention and/or agreement for the cumulative transfer of a substantial interest in the property, and perhaps the entire interest, artificially split into a serious of fractional transfers in order to secure a tax advantage. And I think that is precisely the kind of thing they could successfully challenge under the anti-avoidance provisions.

I agree that it would be messy transferring property in this way but in principal its no different to the yearly transfer of cash in order to gift a large sum of cash tax free and without using lifetime threasholds.

Peregrinus

Ariana Uneven Recorder wrote: »

I agree that it would be messy transferring property in this way but in principal its no different to the yearly transfer of cash in order to gift a large sum of cash tax free and without using lifetime threasholds.

Yes. But the reason annual cash gifts don't get challenged is because they make sense in themselves; they're not obviously contrived and artificial. I could easily spend on holidays, etc, 3k a year, if only a wealthy and indulgent relative would give me that. Whereas a 0.6% interest in a property worth 500k (say) is all but useless to me, and hugely disadvantageous to the donor, who would e.g, find it all but impossible to sell his residual 99. 4% interest in the property in the open market, or even to raise a mortgage on it.

So, basically, the latter looks contrived and artificial in a way that the former does not, which makes it much more likely that the Revenue would challenge it, and much more likely that they would succeed.

The default position is that tax evasion (false returns, concealing information, etc) is unlawful, but tax avoidance (arranging your affairs so that you incur a lower tax liability) is legitimate and effective. But the whole point of anti-avoidance provisions - there's a bit of a clue in the namne - is to change that default position, and to give the Revenue the power to set aside, or look through, artificial and contrived arrangements that have been entered into purely for the purpose of minimising tax liablity. I think this one would be vulnerable; it's certainly contrived and artificial, and it has no purpose but to reduce the tax liability.

scheister

My understanding of the above your mates gf's grandmother died. she left the house to her children one being the gf's dad. The Dad now wants to gift the his daughter 100k towards buying a house.

this is well under the lifetime limit for parent to child assuming no other gifts. Therefore no CAT for the gf. One item to watch out for is the gift is to the daughter not the daughter and your mate. This should be reflected in the deeds of the house as there is a recent TAC case on something similar.