CGT on passing on house and land

mickdw · 22-02-2022 7:05pm #1

Our family home and some land is being passed down to son.

Now I don't believe there is an issue for parents with CGT for the house as it was primary residence.

I've read that there is a farm retirement CGT exemption but the lands in this case were not officially farmed - it's only a few acres.

I gather then that CGT would be due on difference between value when acquired and value now. These lands and house are long time family lands and the current owner (parent) basically took possession 50 years ago and got it registered into their name about 20 years ago.

My question is what valuation applies in this case. Nobody here has a recollection of having it valued 20 years ago and seeing as living in the property for 50 years' would it not be the value back then that would apply?

ari101 · 22-02-2022 7:35pm

Given you are asking about CGT I assume 'passed down' to the son is not a gift/for free.

Understanding how they came into possession; inheritance, gift, etc. might help. Even if they didn't register the land, if they were entitled to it 50 years ago (by inheritance for example), it would be the value then. However if the right to the property was acquired by agreement with other parties in dividing land 20 years ago (for example) that would seem a better date.

Begs the question - if they got the house/land for free did they ever deal with CAT on receiving it?

mickdw · 22-02-2022 10:48pm

It is a gift being passed down but it seems CGT applies regardless of whether selling or giving it away and is based on difference between value at date acquired and date passed down.

It was acquired from their parent originally with poor house and is only a few acres so not sure if CAT would be an issue back then.

The previous generation had 2 farms with house on each.

This house was unoccupied and father moved in while his brother took over the other farm.

Father built a new house on the land in circa 1980 without the handover being done from his father. This is the house being passed down now.

ari101 · 23-02-2022 8:35am

If you give it away for nothing there is no gain for the parents to be taxed on for CGT.

The son will be liable for CAT on the value of the property at the date of transfer now, but can use his lifetime 335k threshold for inheritance from a parent to hopefully avoid most of that. But it will not be available for future inheritance from the same person.

JoeSoaped · 23-02-2022 1:36pm

My understanding is:

CGT

The house and land will be deemed to have been transferred at market value even if no consideration(money) is received by the vendor, connected persons anti- tax avoidance rules apply.

The house and up to one acre of land can be transferred free of CGT, if PPR tax exemption applies.

Ideally, you’d want the valuation of the land at April 1974 as that’s when provisions for inflation were brought into tax legislation. So the value at that date would be the starting point in calculating the base cost of the land for tax purposes. You would multiply the value of the land at this date by a multiplier per the tax acts and this , in theory, would then reflect the appreciation of the land value due to inflation. This would be the base cost.

Base cost of house includes cost to build and relevant ancillary costs.

In the absence of an official valuation to determine base costs, a good place to start may be relevant land registry databases (if there are any). There, you may be able to research comparable sales transactions. This may be a good substitute. Relevant comparability factors may include: area of land, use and geography/location.

CAT

CAT would be applied on the net gift after application of the relevant CAT threshold(dependent on ancestral relationship between parties) and small gift exemption.

Any CGT paid on the gift can be used to partially offset/offset any CAT payable, where relevant.

It seems like Business relief would not apply in this scenario but agricultural relief may apply to reduce the taxable value of the gift, see google.

Stamp duty

Potential stamp duty costs will have to be considered.

mickdw · 23-02-2022 9:08pm

Thanks all.

Entire property is within 335k threshold re CAT.

Stamp Duty is only a couple of thousand for the house so not a big issue.

The parent giving the property receiving a tax bill for capital gains would be a serious problem though.

Marcusm · 07-03-2022 9:31pm

https://www.boards.ie/discussion/comment/118676760#Comment_118676760

A disposal between connected parties such as a parent and a child is deemed to take place at market value so whether or not a gain arises depends on the current market value and the available base cost. There is a general prohibition on providing comments on the taxation of property on this forum and your post is a perfect example of why the rule is in place.

CGT on passing on house and land

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