Dwelling House Relief – Budget 2017

16 Jan 17

There has been a lot of talk about the Help to Buy Grant for First Time Buyers which was announced in Budget 2017. However another less talked about, but none the less, significant change was the amendment to Dwelling House Relief. The new amendment was signed into law on Christmas Day 2016.

Under the old rules anyone could be gifted or inherit a home tax free if they had lived the property as their main residence for three years prior to the gift or inheritance. The rules are now much more stringent and harder to satisfy.

Due to the perceived abuse of Dwelling House Relief, Revenue pushed to tighten the rules. The following amendment was passed in the Finance Bill.

“Section 86 of the Capital Acquisitions Tax Consolidation Act 2003 provides that inheritances of a dwelling house taken on or after 25 December 2016 will be exempt from capital acquisitions tax provided the following conditions are satisfied:

  1. The donor must have occupied the dwelling house as his/her only or main residence at his/her date of death. This requirement will be relaxed in situations where the deceased person had to leave because of ill health e.g. to live in a nursing home;
  2. The beneficiary must have continuously occupied the dwelling house as his/her only or main residence for a period of three years immediately before the date of the inheritance. Where the dwelling house on which the exemption is claimed, replaced another dwelling house within the three year period, this condition will be satisfied where the beneficiary has continuously occupied both houses as his/her only/main residence for a total period of three out of the four years, immediately prior to the date of the inheritance;
  3. The beneficiary must not be entitled to an interest in any other dwelling house at the date of the inheritance and
  4. The beneficiary must continue to occupy the dwelling house (except where such beneficiary is aged 65 or over) as his/her only or main residence for a period of six years from the date of the inheritance. The exemption will not be withdrawn where the recipient requires long term medical care in a hospital/nursing home/convalescent home or is required by reason of his employment to reside elsewhere.

The exemption also applies to residential properties that are gifted to a dependent relative of the donor. 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/herself or who is over the age of 65.

In the case of a gift of a dwelling house to a dependent relative, the dwelling house is not required to have been the principal private residence of the donor.”

This amendment has big implications for anyone looking to pass on a property to their next of kin. The person making the gift and also the person receiving the gift or inheritance will both need to have lived in the property. The beneficiary will also need to have no interest in any other dwelling houses.

Do you have a tax efficient Inheritance Plan in place? Please get in touch if you would like to discuss your Inheritance Planning needs.

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