Section 86 of the Capital Acquisitions Tax (CAT) Consolidation Act 2003 provides an exemption from CAT, in certain circumstances, for persons who acquire their family home by way of gift or inheritance. The relief was introduced in order to reduce the tax burden faced by individuals on receipt of the family home. The relief does not apply a threshold to the value of property that is being transferred.
In order to qualify for the relief, the beneficiary (i.e the person receiving the gift or inheritance) must have resided in the house for a minimum of 3 years prior to the gift or inheritance and must not have had an interest in any other dwelling house at the time of acquisition/inheritance. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of 6 years commencing on the date of the gift/inheritance. These conditions were included in the legislation in order to restrict the relief to genuine cases and avoid the relief being used as a means of tax avoidance. In the case referred to by the Deputy, the individual concerned would not qualify for relief under Section 86 as the individual has an interest in another property.
However, the CAT code includes group thresholds, below which no CAT is liable. Disposals from a parent to a child are exempt from CAT up to the value of €478,155. This threshold is increased on an annual basis in accordance with the CSO Consumer Price Index. Any other gifts/inheritance that might have been received within the same group by an individual since 5 December 1991 are also taken into account when applying the thresholds for the purposes of calculating CAT. If the total value of all inheritances and gifts received since this date is above the relevant threshold, then a 20% CAT will apply on the difference. In this regard, where the individual referred to by the Deputy has not received any other gifts or inheritances from his or her parents, he/she will only be liable to inheritance tax on the value of the property above €478,155.