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Parent to child rent gift?

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  • 31-03-2015 5:41pm
    #1
    averagejoe123
    Registered Users Posts: 270 ✭✭


    Hi,

    My folks bought a property 12 months ago with the intention of having my brother staying there rent free for 3 years up until a point where they intend to transfer the property to him. As far as I know this can be done with minimal tax implications as long as certain criteria is met.

    What/is any are the implications of him not paying rent for the 3 years?

    If he was to start paying rent would my folks have to register as landlords?

    Is there a minimum level of rent that can be charged on a property in this scenario? Property value roughly €250k.

    Many Thanks

    Joe


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    #2
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    There are no tax implications of him not paying rent. If they're not receiving income from the property there is nothing to tax. If they do charge him rent then that income subject to usual allowable expenses will be added to their other incomes and subject to tax at up to 52%. They will have to register with Prtb. Add the rental income to their return and pay any tax due.
    Only if he is employed by the parents could rent free accommodation be seen as a notional benefit in kind in which case he would have to pay income tax on the notional rent amount.

    In terms of transfer in 3 years time. It will be treated as a gift for capital acquisitions purpose from parents to child. Once it's under the threshold for lifetime gift between parents and child should be no CAT. However the transfer value will be the market value at the date of transfer. It will also be a deemed disposal for capital gains tax. So if the transfer value is higher than what the parents paid it may be subject to capital gains tax or if less there will be a loss to be carried forward against future capital gains. In terms of transfer you will have solicitors fees and stamp duty.

    I'm not a tax expert, don't work in that area, so I'm happy to be corrected on any of the above. Above is my understanding however I could be wrong.


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    #3
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    Baby01032012 wrote: »

    In terms of transfer in 3 years time. It will be treated as a gift for capital acquisitions purpose from parents to child. Once it's under the threshold for lifetime gift between parents and child should be no CAT.

    I'd imagine they are trying to avail of the dwelling house relief which is exempt from CAT and therefore wont eat into the thresholds. That's why the 3 years is significant as that's how long you need to live in the property to avail of this relief.


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    #4
    Humour Me
    Registered Users Posts: 360 ✭✭Humour Me


    Edit: just spotted Baby's response re CGT on the transfer in 3 years


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