Transfer apartment to sister

paul71

There are hundreds of methods available to the state. Neither of us know the circumstances of either the op or her sister but Revenue will determine to best collection method and apply it.

https://www.revenue.ie/en/contact-us/customer-service-contact/collector-generals-division.aspx

That is the Collector generals website. The Collector General is charged with the duty of collecting taxes which have been determined by The Revenue Commissioners, there are several thousand pages on the website describing their collection methods.

28064212

https://www.boards.ie/discussion/comment/122163021#Comment_122163021

The gifts you're comparing to would all fall well within the limits set out by Revenue for which tax does not need to be paid. That's not the case for a rental which could be a gift worth tens of thousands per year.

Also, just because you can't see a role doesn't mean the law doesn't exist. If you want to advocate for the removal of such a law, then by all means, do so, but the current law is quite clear

https://www.boards.ie/discussion/comment/122162978#Comment_122162978

https://www.citizensinformation.ie/en/money-and-tax/personal-finance/debt/specific-debts/

Mrs OBumble

https://www.boards.ie/discussion/2058352466/transfer-apartment-to-sister

Hi OP - I've been thinking about this some more (and despairing about the naivety of some posters above!)

There are two approaches, depending on your sister's circumstances, and the reason you want to gift the apartment to her.

If she's independent, not poor or disadvantaged, and you are being good to family - then you just need a good tax-advisor to work out the most tax-efficient approach, because tax is the biggest cost involved. (And of course a lawyer to help with the sales, and with formalising the paperwork for the caretaker-agreement she has while living there now!).

But if she's disadvantaged (eg disabled, low-income, health problems, a domestic abuse survivor - there are lots of reasons) - then a straight gift may not be the best way to ensure she has a home for the rest of her life. Eg if there's a costly maintenance issue with the building and the management fees increase beyond what she can afford, or if she gets involved with a manipulative person who takes advantage of her.

An option is for you to sell / gift the house to a 3rd party, who give her a tenancy for life with an affordable rent and who do all the property management. Some of the big voluntary housing agencies (eg Clúid, Tuath) have programmes for these types of deals, for older+disabled people. You may have to be a bit persistent to find out details, because often the lower level staff don't know about them. And I'm afraid I don't have current knowledge to help, beyond awareness that the schemes exist.

If you want to go down the latter route, then organisations like Age Concern may have more details of possible options.

SteM

https://www.boards.ie/discussion/comment/122162934#Comment_122162934

Alive but seemingly Revenue became aware of the situation when her mother passed and that's when the bill arrived.

SharkMX

I know a person (a solicitor) who has a relative living in his property rent free.

In fact he is paying that relative to "mind" the house. Not sure but i think he mentioned €100 per month. The relative hands him back the cash plus more to cover the management fees whenever he sees him though. The relative also gives him back cash he puts up for any decorating, repairs etc.

Bass Reeves

jennywondering it is great seeing you trying to provide for your sister. However for proper advice one would want a lot of personal details so it may be easier for you to give these details to a tax professional. It should not cost more than 500 euro.

There are many factors that come to play. Has your sister a child, is she a vulnerable adult, is she in poor circumstances. If you have a business your sister can be treated as a favoured niece if she worked for you in your business.

The state is not the big bad wolf many think. If your sister has not got the income to pay the tax( inheritance or gift) the state will defer it and collect it out of the proceeds Iof her estate. If she has no family and the proceeds of the house are immaterial to you then that is an option.

Another option is to give her a lifetime right of residency and will the house to any family she has or to whomever is your preferred inheritor( maybe a charity). I would not worry about the rental gift aspect if you sister has a low income, as you cannot get blood from a turnip. The only aspect of that is that she can absorb the pressure tge state may or may not apply

Furze99

https://www.boards.ie/discussion/comment/122163117#Comment_122163117

I can see the Revenue guidance but what is the root legislation that directs this?

I make products and I set retail prices for them. I can set any retail price I like in theory (disregarding what customer will bear) so I can choose to sell a product at €50 or €1. This clearly affects the potential taxes to the state but despite this, Revenue have no control over what price I set. In instances where the state does fix prices, it's very rare and controversial.

A property owner can surely likewise decide whether to let someone use their property free, at nominal rent or full rent. The concept of a peppercorn rent is around a long time. What legislation is there concerning peppercorn rent?

What you're saying flies in the face of common sense and likely constitutional rights.

dublin49

I presume the motivation for transfer is to give your sister some security of tenure in case you get hit by a bus,why not leave it to a charity in a will but give her right of residency for life.Would you not try get your sister onto HAP ,you could then receive payment for her tenancy and it would regularize her situation,you could always rebate her any funds she is required to pay.

28064212

https://www.boards.ie/discussion/comment/122164335#Comment_122164335

Capital Acquisitions Tax Consolidation Act 2003

hero001

Once there is a transaction between connected parties, there are anti-avoidance tax laws that say that market value needs to be applied to the transfer. So you would normally be expected to have a valuation from an estate agent to support the value you use.

Most of the comments have been about the gift tax side of this, however, the transfer will also be a disposal from a Capital Gains Tax point of view. If the market value is in the region of Euro 280K, and the cost is in the region of Euro 130K, this is a CGT liability on a gain of Euro 150K less your annual exemption (Euro 1,270), at 33%, payable by the person gifting the property. There is a way of offsetting CGT against Gift tax (CAT) which arises on the same event, but this is something you need to take some professional advice on.

magicbastarder

On what basis do the revenue commissioners get to decide how much a house is worth? If they didn't, the whole inheritance tax/CGT system would fall asunder. 'yeah, this 100 acre farm is only worth €1 as far as I'm concerned...'

magicbastarder

https://www.boards.ie/discussion/comment/122164436#Comment_122164436

If the market value is in the region of Euro 280K, and the cost is in the region of Euro 130K, this is a CGT liability on a gain of Euro 150K

the original cost is not relevant if gifting the apartment, i'd have thought? it's relevant if the OP is selling an apartment they don't live in, as the tax would be liable on the OP - but in this case the tax would be liable on the OP's sister, who's getting the apartment (at market rate) and does not have a cost to offset against that value.

tohaltuwi

In her 80s (about 2004) my mother sold the family home, transferred proceeds to me where I bought an apartment for herself and myself to live in. It’s not like OP’s situation except had to pay the tax as calculated by house sale value, so was pretty straightforward. Revenue will calculate present house value, so it may take a bit more time, but it shouldn’t be too big a deal.

Allinall

https://www.boards.ie/discussion/comment/122164553#Comment_122164553

Capital Gains Tax has to be paid by the person gifting the apartment, if the current open market value is greater than the cost price, with all the usual adjustments for costs etc. That's assuming the gifter never lived in the apartment as their PPR.

The person getting the gift can claim a credit of their CAT liability up to the amount of the CGT paid.

https://www.revenue.ie/en/gains-gifts-and-inheritance/credits-you-can-claim-against-cat/credit-for-capital-gains-tax-cgt.aspx

magicbastarder

cheers, i'd always assumed that the person benefitting (i.e. receiving the 'income') would have to pay the tax, as they're the one making the capital gain. i didn't know the gifter would also have to pony up.

spaceHopper

If she has no kids, you are probably only making trouble for yourself. She'll have to pay tax and then if she were to die then you'd inherit and have to pay tax again. If she ever went into a nursing home they'd take 20% of it. I'd come up with an arrangement in writing. She has life time use of it, you still own it and she pays rent that covers the fees, insurance…..

hero001

Just to note that most of the Irish tax system works on a self-assessment system, so it's up to the taxpayer to calculate the tax due, so in this case you would need to calculate the market value.

You could stick any number on your tax return as the sales price and pay little or no tax. But if you get a tax audit, it's then up to you to justify what you have done.

Revenue will have their own valuation of the property, based on Local Property Tax returns and other sources. But if they are not happy with your valuation, they will look for the extra tax, plus interest (8%) and a tax penalty which range between 10 and 100% of the tax due.

They can also publish you as a tax defaulter, but the total settlement including interest and penalties would need to exceed Euro 50K, before this comes into play. You can also normally avoid being published by making a qualifying disclosure to the Revenue once the audit letter arrives.

SupaCat95

https://www.boards.ie/discussion/comment/122162832#Comment_122162832

And when Revenue come for you, they dont just come for what they are owed. They come for the principle plus interest plus penalties. They are reliable like that.

Furze99

https://www.boards.ie/discussion/comment/122164429#Comment_122164429

I don't have time, at the moment, to read the full act. But searching the full text for the term 'rent' throws up no results.

This act deals with the transfer of property etc and the capital gains accruing to the benficiary etc.

What we talking here is that the OP allows her sister to live in her apartment at a peppercorn rent. This is the OPs asset and for them presumably to enjoy and/or decide how they should use it. Why is this any of Revenues business?

Allinall

https://www.boards.ie/discussion/comment/122165350#Comment_122165350

Literally all dealings that have a financial impact are of interest to revenue.

Charging a reduced rent is deemed a gift and is taxable as such.

28064212

https://www.boards.ie/discussion/comment/122165350#Comment_122165350

Section 40.

Furze99

https://www.boards.ie/discussion/comment/122165370#Comment_122165370

Where does it state this in the relevant Act quoted above?? Capital Acquisitions Tax Consolidation Act 2003 https://www.irishstatutebook.ie/eli/2003/act/1/enacted/en/html

Rental income is no different from income from services or products. Businesses and individuals can generally decide what to charge for their services and products etc. With some exceptions like price controls on alcohol. Even where RPZs are involved, landlords can decide to charge less rent rather than more afaik?? They may have restrictions on raising rents but can reduce as they see fit. Is this not the case?

Allinall

https://www.boards.ie/discussion/comment/122165447#Comment_122165447

They can charge as low as they want.

It's the recipient of the below market value rent that will have the issue with revenue. It will be deemed a gift and taxed as such.

Section 5 in the act.

Furze99

Extend the idea to say homeless people living in state funded accommodation or elderly people of little means in nursing homes. These all benefit from accommodation at little or no cost to them. The state isn't putting charges on them and saying to old Mary, you gotta tax liability of €K for your free place in this home.

Furze99

https://www.boards.ie/discussion/comment/122165432#Comment_122165432

Thank you. That is indeed draconian and an aspect that would be politely ignored I'd think by many. Essentially the state is saying you may own property but the state then dictates what choices you make in terms of letting others use it.

How does leave the state itself, as pointed out above, it provides in various ways a very similar dispensation to citizens of lesser means.

SeanieRetrofitter

https://www.boards.ie/discussion/2058352466/transfer-apartment-to-sister

If you give it to your sister now you will have a CGT liability and your sister will have a CAT liability.

For your CGT, 1st & last years it's assumed to be your principal residence for tax purposes regardless of reality. So you'll pay CGT on 26 twenty-eights of the increase in value. I think because you bought in 1996, you can use the current value of the purchase price as adjusted for the CPI. €130k adjusted for inflation from April 1996 to April 2024 is €235k, so you'd be liable for 26 twenty-eights of 33% of €45k. So about €15k of a CGT liability; probably a bit less as you can write off expenses eg legal fees.

BTW, it sounds doubtful to me that a property bought in 1996 for IR£100k would only be worth €280k now. So expect to be audited all to hell by Revenue if you try and claim that's the current value. IR100k was fairly big money for a property in 1996, and €280k is fairly small money for a property today.

Your sister would be liable for CAT at 33% on everything over the sibling threshold, so around €80k. I'm guessing she doesn't have ready cash to pay that; if you paid it, there's be a further €24 on the additional gift, plus €8k if you paid that, etc etc. So that's another €100k it'd cost you on top of your CGT liability if you pay your sister's CAT liability.

I assume your actual goal is to ensure your sister has secure accommodation for the rest of her life? If this is the case, I'd suggest instead granting her an exclusive right of residence for life. These used to be valued at 10% of the value of the property, so it'd come in below her CAT threshold (assuming the €280k value is reasonable).

An exclusive right of residence would grant almost the same level of protection as the title deeds if the priority is your sister having a roof over her head. In some respects more, as it would be effectively impossible for either you or her to accrue debts which could result in a lender taking the house.

If you want your sister to be able to pass on the property as an inheritance you could leave it to her in your will, per stirpes so it will automatically pass to her heirs if she predeceased you. I think she'd still be liable for CAT at that point though.

hero001

https://www.boards.ie/discussion/comment/122165711#Comment_122165711

Adjustments for CPI of costs for CGT stopped 20 years ago. So the CGT cost price would be closer to Euro 160K. A Life interest would be worth considering. There are tables for valuing this, based on age etc, but I have not looking that for many years.

SeanieRetrofitter

https://www.boards.ie/discussion/comment/122165943#Comment_122165943

You're correct, my mistake, I thought the CPI was applied up to present date. I missed that detail when I was looking it up before.

Having checked, a life interest or exclusive right of residence would be valued at at about 54%, and would still leave the OP's sister with a hefty enough CAT bill in the region of €35k.

A right of residence (not exclusive) on the other hand would be valued at 10%, which should eliminate the CAT liability altogether at the €280k valuation. Funnily enough, Revenue provide a formula for calculating the value of the right of residence, but then say they'll accept a valuation of 10%.

For my money, the exclusive right of residence or life interest is the way to go if it can be made to work financially in terms of paying the tax due, as it gives the OP's sister the best protection in her old age. A non-exclusive right would rely on either the OP not predeceasing her sister or the OP's heirs not being barstards— for example, by using the absence of the word "exclusive" to enable them to move into the property and making the OP's sister's life unbearable. It'd be nice if people could be relied upon to be nice to their extended family but that is often not the case.

https://www.revenue.ie/en/gains-gifts-and-inheritance/valuation-date-value-certain-benefits/rights-of-residence.aspx#:~:text=You%20can%20file%20your%20IT38,Revenue%20Online%20Service%20(ROS).&text=The%20value%20of%20a%20right,market%20value%20of%20the%20property

28064212

https://www.boards.ie/discussion/comment/122165625#Comment_122165625

the state is saying you may own property but the state then dictates what choices you make in terms of letting others use it

The state does this all the time with many, many aspects of everyone's lives. It's part of living in a civilised society

How does leave the state itself, as pointed out above, it provides in various ways a very similar dispensation to citizens of lesser means.

In much the same way that an individual can't enforce their own prison service - the state and an individual are not comparable or interchangeable in law. This particular law refers to individuals. It does not restrict the state from doing anything.

an aspect that would be politely ignored I'd think by many

They are free to do so. While Revenue are free to enforce the law. And if it comes to court, telling a judge "I think it's draconian, so I don't think the law should apply to me" is going to get you about as far as it would for any case

Furze99

https://www.boards.ie/discussion/comment/122166117#Comment_122166117

I'm not so sure about that. For example as an individual citizen you can buy a car tomorrow and lend it or give it to whoever you like to use, so long as they are licenced and insured. You can do any amount of work for someone and not charge them.

As to the state and the equivalence of laws applying to it, take VAT. When that was introduced, the state exempted itself and local authorities etc from VAT. This lasted so long till some private carpark owners in Dublin took a case to the courts for unfair competition. Their parking charges had perforce to be higher than those run by Dublin Corporation. They won and thereafter the state must charge VAT like commercial companies.

So I don't quite buy the idea that the state can regard the OPs sister different from a tax pov, to another similar citizen whose accommodation is funded by the state. That's having your cake and eating it. One law for the citizen and another for the state.

Taken to it's conclusion, this argument would say that the OP would be better to keep or sell her apartment and sure, let the state sort out her sister's needs. As that would be a lot more tax efficient. She's unlikely to do this of course and rightly so, but it shows up a very basic inequity. That's not in the interests of the state, otherwise it foots a bigger bill than it needs too.