Dáil Éireann Debate, Thursday - 17 May 2018
60. Deputy Jan O'Sullivan asked the Minister for Finance the detail of the law regarding inheritance tax for siblings who are joint owners of a home in which they live together; if there have been recent changes to the tax imposed on a surviving sibling in the circumstances; and if he will make a statement on the matter. [21817/18]
View answerI am informed by Revenue that section 86 of the Capital Acquisitions Tax Consolidation Act (CATCA) 2003 provides for a dwelling house exemption which allows for property to be inherited tax-free where the inheritor is already living in the home subject to certain conditions. Firstly, the inherited dwelling house must have been the deceased person’s principal private residence at the date of his or her death. This requirement is relaxed in situations where the deceased person had to leave the house before the date of death because of ill health; for example, to live in a nursing home. In addition, the beneficiary must not have a beneficial interest in another residential property. Finally, the beneficiary must have lived in the house for 3 years prior to the date of the inheritance and must continue to live in the dwelling house for 6 years after the date of the inheritance.
Amendments to the dwelling house exemption in Finance Act 2016 sought to realign the exemption with its original policy objective i.e. to alleviate the hardship of an inheritance tax liability for a person who inherited a house in which he or she had been living with the deceased and to ensure that the person did not have to sell the house to pay the tax liability. Along with the requirement that the dwelling house be the principal private residence of the disponer, the changes also meant that the relief would only be available for inheritances. With one exception, it is no longer possible to receive a tax-free gift of a dwelling house. The exception is where a person gifts a dwelling house to a ‘dependent relative’. For this purpose, a dependent relative is a direct relative of the donor, or of the donor’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself or herself or who is over the age of 65.
If a beneficiary qualifies as a ‘dependent relative’ then there is no requirement that the dwelling house be the principal private residence of the disponer or that the beneficiary remain in the dwelling house for 6 years after the date of the inheritance. For this purpose, a dependent relative is a direct relative of the disponer, or of the disponer’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself or herself or who is over the age of 65.
The dwelling house exemption applies to siblings living together as it does to any other persons living together who satisfy the qualifying conditions for the exemption. The changes made in Finance Act 2016 as described above affect all such persons.
