My wife and I are in the process of separating. Under the terms of the likely agreement she may stay in the family home, taking on mortgage repayments etc, while I hope to buy a small apartment nearby.
I understand that as a separated buyer I will not have to pay stamp duty on this purchase. She has now told me that she may not in fact be able to afford the repayments and may sell the house. Do we both, then, become exempt from stamp duty?
A legally separated person whose ex-husband or wife continues to occupy the family home and who is buying a property for their use is treated as a first-time buyer for stamp duty. But it is not true to say that you are exempt from stamp duty no matter what you buy. If the second-hand house or apartment is priced at €317,500 or less then you as a first-time buyer/separated person are exempt but, if the price of the second-hand apartment is more than this, then you will have to pay stamp duty at the appropriate rate. The situation changes if it transpires that your ex has to sell up as part of the separation; neither of you will be considered as first-time buyers and both of you will be subject to stamp duty on your next property purchases whether those purchases are new or second-hand properties.
Site gifts and tax
You recently answered a question in relation to parental gifts (financial or property inheritance) having no tax implication up to the value of €456,438. I would like to clarify this further for those of us who live in the country and may be given a plot of land/site by parents on which to build a house - does the Group 1 threshold (and therefore the same logic of value balance for future property inheritance) also apply to a site in relation to it being exempt from tax if the site is valued at less than €456,438?
According to Cora Murray, director of research and publications, Irish Taxation Institute, the tax position gets more complicated when non-cash transfers, such as land, are made. This is as, in addition to the potential Capital Acquisitions Tax (CAT) charge on the person receiving the gift, there are also capital gains tax (CGT) implications for the person making the gift, and there may be stamp duty implications. In certain instances the CGT charge may be offset against the CAT liability to prevent double taxation.
In this case, your parents may have a capital gain on the transfer of the site. This arises regardless of whether you have provided any kind of payment. There is a relief from CGT on the transfer of a site to a child, provided certain conditions are met. This could have the effect of reducing the giver's liability. You will be treated as receiving a gift from your parents, to the value of the site. If this is below the CAT Group 1 threshold, then there should be no tax charge, subject to the aggregation rule. You will also need to examine if there will be a stamp duty liability, as land is being transferred. Again, because it is an intra-family gift, relief to reduce the charge should be available. Because this kind of transfer raises more issues that a straight cash gift, it is strongly recommended that you seek professional taxation advice before you proceed with the transaction.
Send your queries to Property Questions, The Irish Times, 10-16 D'Olier Street, Dublin 2 or e-mail propertyquestions@irish-times.ie.
Unfortunately, it is not possible to respond to all questions. The above is a representative sample of queries received. This column is a readers' service and is not intended to replace professional advice. No individual correspondence will be entered into.
