The much awaited changes to Family Home Relief under Section 86 Capital Acquisitions Tax Consolidation Act 2003 also known as Dwelling House Relief were published in the second amendments to the Finance Bill 2016 on Friday 4th November.
The whole section has been re-written with significant changes to the relief both for gifts and inheritances proposed.
The proposals provide that relief from inheritance tax will only be given under ‘family home relief’ if the disponer is living in the property at the date of their death. However if the disponer is absent from the property due to mental or physical infirmity this condition will not apply.
The proposals also include a change to the rules around beneficiaries owning additional property at the date of the inheritance which allows them to inherit an additional property at the same time as the dwelling house but still obtain relief from inheritance tax subject to the normal conditions applying.
Also proposed is that relief from gift tax is effectively almost abolished and will only be given if the property is gifted to a dependant relative which is defined as a relative who is ...
(a) permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself or herself ...or...
(b) of the age of 65 years or over.
There have also been some other minor changes proposed around the conditions under which it is acceptable for a beneficiary to cease to occupy the house after the inheritance / gift, for example the concession that if a beneficiary leaves the property as a result of requiring long term care, has been tightened up and also the age at which the concession applies has been increased to age 65 from age 55.
There is still a considerable amount of discussion and lobbying around the changes and there could be some changes before they are finalised.
When the new legislation is finalised on the passing of the Finance Act, we will update you fully.
Source: Irish Life plc, Life Advisory Services (November 2016)
Michael Keville T/A MK Financial is regulated by the Central Bank of Ireland