Exemption from CAT/CGT

Sarah1916

My parents have a number of rental properties.

My husband and I have been very lucky to have been given the opportunity to live in one of these rental properties rent free for the last 5 years. Eventually my parents plan to transfer the house into our name.

I think we will stay in this house for another 2/3 years and then move to a bigger house. We will probably keep the current house as a rental property.

My question is if we would be exempt from any CAT or if my parents would be exempt from CGT on any gain from the house ( I am aware that they would have to transfer it to me at current market rate (even though no cash changing hands) and pay CGT on any gain since they purchased the property). The value of the property would be under the €320k threshold for parent to child but looking into the future for any other inheritance it would be good if I was exempt from paying CAT on this house.

Would I have to stay in the house for quite a number of years after the transfer if I was to be exempt? Are rental properties acceptable for exemptions or would it only be the case if this property was also my parents sole residence?

Any advise would be great. Thanks.

jimmy456

There is a CAT/CGT offset for taxes that arise on the same event. So in cases where there is a transfer of an asset which is subject to CGT. The CGT can be given as a credit against the CAT. Please bare in mind that CAT is on the market value of the asset while CGT is calculated on the gain!

The PPR exemption was altered a few years back so the situation you describe can't happen anymore.

You also may have a tax issue with respect to the free use of the property for the last 5 years. However you and your husband can receive 12k from your mom and dad each year tax free. If the MV of the annual rent is in excess of this you are eroding into the relevant thresholds.

Sarah1916

Thanks Jimmy - appreciate the reply.

dogsears

Your parents will most likely have a CGT liability on the gain in value during their period of ownership. Thus if the value is 300k when they transfer to you, and it cost them, say, 100k, their gain will be 200k and tax will be 33% ie, 66k.

If you are not liable for CAT by virtue of being below the threshold, the CGT/CAT offset is irrelevant because there is nothing to set off.

They will not qualify for Principal Private residence relief because they didn't live there - the fact that you live there doesn't affect this.

scheister

also take into consideration who they are gifting the house to. If the gift is 50/50 between you and your husband the taxes will be a lot as he is a stranger to your parents in Revenue's eyes. This would not be helped if you have been eroding the threshold over the last 5 years due to the rent free status.

scheister

scheister wrote: »

also take into consideration who they are gifting the house to. If the gift is 50/50 between you and your husband the taxes will be a lot as he is a stranger to your parents in Revenue's eyes. This would not be helped if you have been eroding the threshold over the last 5 years due to the rent free status.

I doubt there is a person whoever paid a cent of CAT or used up threashold for getting free rent.

Especially considering the op and his partner can receive 12k tax free per year under the small gifts exemption which would more than cover any liability.

Marcusm

OP, google “dwelling house relief” and CAT to get some reasonable information.