Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

86 Exemption relating to certain dwellings

Summary

This section provides that gifts or inheritances of a dwelling-house taken on or after 1 December 1999, will be exempt from capital acquisitions tax provided the following conditions are complied with:

  • the recipient must have occupied the dwelling-house continuously as his/her only or main residence for a period of 3 years prior to the date of the gift or inheritance. Where the dwelling-house has directly or indirectly replaced other property, this condition may be satisfied where the recipient has continuously occupied both properties as his/her only or main residence for a total period of 3 out of the 4 years immediately prior to the date of the gift or inheritance;
  • the recipient must not, at the date of the gift or inheritance, be beneficially entitled to any other dwelling-house or to any interest in any other dwelling-house; and
  • the recipient must continue, except where such recipient was aged 55 years at the date of the gift or inheritance or has died, to occupy that dwelling-house as his/her only or main residence for a period of 6 years commencing on the date of the gift or inheritance i.e. the relevant period.

Any period of occupation by a beneficiary of a gift of a house that was during that period the disponer’s only or main residence will not be regarded as a period of occupation in the house prior to the gift of that house unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the beneficiary for that period. The house that is gifted, or any house that it replaced, must be owned by the disponer for the relevant 3-year period prior to the gift.

A recipient absent during any time in the relevant period because of working abroad is considered to remain in continuous occupation of that dwelling-house. The exemption will not be withdrawn where a breach of the condition regarding occupation subsequent to the gift or inheritance is as a result of the recipient requiring long-term medical care in a hospital, nursing home or convalescent home, or as a result of a condition being imposed by an employer on a recipient to reside elsewhere.

The exemption will be withdrawn where the recipient sells or otherwise disposes of the dwelling-house within the relevant period, unless the sale or disposal is as a result of the recipient requiring long-term medical care in a hospital, nursing home or convalescent home, or unless the recipient was aged 55 years or over at the date of the gift or inheritance. However, where the recipient sells or disposes of the dwelling-house and invests some or all of the proceeds in a replacement dwelling-house and continuously occupies both for a total period of 6 out of the 7 years commencing on the date of the gift or inheritance, the clawback will be limited to the extent of the proceeds of the sale or disposal not invested in the replacement dwelling-house.

Details

(1) “dwelling-house” is defined as a building or part of a building used or suitable for use as a dwelling together with a curtilage of up to one acre;

“relevant period” is defined as the period of 6 years commencing on the date of a gift or inheritance of a dwelling-house.

(2) Where a remainderman predeceases a life tenant and 2 charges for capital acquisitions tax arise on the death of the life tenant, the capital acquisitions tax on the first inheritance is allowed as a credit against the capital acquisitions tax on the second inheritance. This provision ensures that where the second inheritance qualifies for dwelling-house relief, the first inheritance will also qualify.

(3) Subject to subsections (4), (5), (6) and (7), the exemption will apply to a gift or inheritance of a dwelling-house taken by a beneficiary who fulfils the following conditions:

  • (3)(a) the beneficiary must have continuously occupied the dwelling-house as his/her only or main residence for the period of 3 years immediately preceding the date of the gift or inheritance, or, where the dwelling-house has replaced a previous property, the beneficiary must have continuously occupied both properties for periods which together comprise 3 of the 4 years immediately preceding the date of the gift or inheritance;
  • (3)(b) at the date of the gift or inheritance of the dwelling-house, the beneficiary must not own any other dwelling-house or any interest in any other dwelling-house; and
  • (3)(c) the beneficiary must occupy the dwelling-house as his/her only or main residence for a period of 6 years after the date of the gift or inheritance.

(3A)(a) For the purposes of subsection (3)(a), any period during which a beneficiary of a gift of a house occupies a house that was during that period the disponer’s only or main residence will not be regarded as a period of occupation in the house by that beneficiary unless the disponer is compelled, by reason of old age or infirmity, to depend on the services of the beneficiary for that period.

(3A)(b), (c) The house that is gifted, or any house that it replaced, must be owned by the disponer for the relevant 3-year period prior to the gift.

(4) The 6 year occupancy condition contained in subsection (3)(c) will not apply where the beneficiary is 55 years or over on the date of the gift or inheritance.

(5) A beneficiary who is employed abroad will be deemed to occupy a dwelling-house during the period of that employment for the purposes of the 6 year occupation condition contained in subsection (3)(c).

(6) A clawback of the exemption granted under subsection (3) will arise where all or part of the dwelling-house is sold or otherwise disposed of within 6 years of the date of the gift or inheritance and before the death of the beneficiary. The exemption will not be lost, however, where the beneficiary was 55 years or over on the date of the gift or inheritance or where the sale or disposal of the dwelling-house was made because the beneficiary required long-term medical care in a hospital, nursing-home or convalescent home.

(7) A clawback of the exemption granted under subsection (3) will also arise where the beneficiary fails to occupy the dwelling-house as his/her only or main residence for the 6 year period specified in subsection (3)(c). The exemption will not be lost, however, where the beneficiary fails to fulfil the 6 year occupancy condition because he/she requires long-term medical care in a hospital, nursing home or convalescent home or because he/she is obliged by an employer to reside elsewhere.

(8) Where an exempt dwelling-house is replaced by another dwelling-house within the 6 year relevant period, the requirement that the beneficiary must occupy the first dwelling-house as his/her only or main residence for the duration of the relevant period will be satisfied if he/she occupies the first and any subsequent replacement dwelling-houses for a total of 6 out of the 7 years commencing on the date of the gift or inheritance.

(9) The occupancy requirement specified in subsection (8) will not be breached where the beneficiary is absent because he/she is:

  • employed abroad;
  • requires long-term medical care in a hospital, nursing home or convalescent home; or
  • is obliged by an employer to reside elsewhere.

(10) The clawback provision contained in subsection (6) will not apply where an exempt dwelling-house is sold or disposed of and replaced by another dwelling-house in accordance with subsection (8). However, this disapplication of the clawback applies only to the extent of the proceeds of the sale or disposal which are invested in the replacement dwelling-house.

Relevant Date: Finance Act 2015