I am advised by Revenue that the transfer of one acre of land by a person to a sibling to build a house on that land constitutes a disposal of the land for capital gains tax (CGT) purposes. Any gain arising on the transfer of the land is liable to CGT for the person making the disposal. The first €1,270 of gains made by an individual in a tax year are exempt from CGT.
Relief from CGT is available for a transfer of land by a parent to his or her child to enable the child to build a house on the land provided certain conditions are met. This relief does not apply to transfers between siblings.
The transfer of land where no consideration has been paid for the land, or where any consideration paid was less than its full market value, could result in a gift tax liability for the sibling receiving the gift. For gift tax purposes, the relationship between the person who provides the gift and the person who receives the gift (i.e. the beneficiary) determines the life-time tax-free threshold - known as the Group threshold, below which inheritance tax does not arise. In the case of the gift between siblings, the Group B threshold (currently €32,500) applies, inter alia, where the beneficiary is a brother or sister of the disponer.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on a benefit. Where a person receives gifts which are in excess of their relevant tax-free threshold, gift tax at a rate of 33% applies on the excess over the tax-free threshold.
As the transfer of land constitutes both a disposal for CGT purposes and a gift for gift tax purposes, a credit is given for any CGT paid against a gift tax liability in respect of the same land.
Stamp duty at the rate of 6% of the market value applies on the transfer of land. In this case the duty would be payable by the sibling receiving the land. However, there is a refund scheme in place in respect of the acquisition of land that is then developed for residential purposes. A refund of up to 2/3 of the stamp duty paid may be claimed where a house is built on the land and other qualifying conditions for the relief are met. A fixed timeframe for the commencement and completion of building work applies; construction work must commence within 30 months of the land being transferred and the house must be completed within two years of the commencement of construction.