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Will Revenue tax me for moving back into the family home with my child?

Rules limiting the tax-free benefit of the Bank of Mum and Dad are in place, but there are exceptions, including for those living with parents in the family home

Moving back into the family home with a young child is tough: worrying about whether it is a taxable benefit only adds to the stress. Photograph: iStock

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Dominic Coyle
Tue Feb 27 2024 - 05:15

Some of your Q&As relate to the various ways the “Bank Of Mom and Dad” try to assist their adult children to get a home, and it is shocking to see how difficult and costly the Revenue rules make it for all parties involved. Kathy Sheridan has also highlighted the obstacles placed in the way of common-sense solutions.

You advised that if a parent allows their adult child to live in a property owned by the parents that the child is liable for tax on the perceived benefit-in-kind, as the parents are forgoing the possible rental income.

I am a single mother in my early 30s who has tried to support myself and my child with the aid of HAP for a number of years. However, my most recent landlord advised that my apartment was to be sold. New accommodation is hard to find and rents are very high, so we’ve now returned to my parents’ home until the housing situation improves – being an optimist!

However, will I be assessed for benefit-in-kind tax on the €2,000-plus market rent in this area, or my last contribution of €400 to my rent? The prospect is frightening, it all seems so unfair. And what about the many adults who have never moved out of home – are they equally liable?

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Ms P.W.

Your particular case is obviously distressing. Renting these days is a tough enough gig. Doing so as a single mum and trying to secure accommodation with support from the Housing Assistance Payment (HAP) is even tougher, not least as a lot of landlords appear unsympathetic and rents, in any case, have gone so high as to push many places outside the reach of HAP beneficiaries.

None of us wants to move back in with our parents when we have grown used to our own independence and have family of our own. However, sometimes circumstances dictate that it is the least bad option. And most parents, to be fair, are very supportive when that is necessary.

In those circumstances, I can see how it might seem unfair that support from the Bank of Mum and Dad can come with a penalty but there are a couple of things to bear in mind here.

The first is that there remains a reasonably generous limit – €335,000 – on what a child can receive from their parents over the lifetime of the parents or in their wills without being liable for tax. That is on top of the €3,000 small gift exemption that they can receive from either or both parents every year without any tax implication at all.

That, of course, depends on whether the parents have the sort of financial resources that allows them to give that support to a child. But if they can, and if the adult child needs that support now, then it is great that it is available. If that means a tax bill on any later inheritance, so be it. Hopefully the adult child will be in a better financial position by that stage.

Holding off any support until a will comes into play – where a family has sufficient liquid assets to act now – runs the risk of permanent harm, financial and otherwise, for the adult child.

The other thing to note is that the rules on the Bank of Mum and Dad are largely there to stop abuse by people at the other end of the wealth chain – those with sufficient resources to financially support adult children, essentially enhancing the lifestyle of people who are already perfectly capable of fending for themselves.

They were tightened a decade ago precisely because some wealthy families were abusing the system to buy cars, homes, holidays and more for adult children who already had sufficient financial means to stand on their own two feet.

[ Single people are ‘the poor relatives’ when it comes to inheritance tax ]

The good news for you is that there are certain exceptions to the rules on the Bank of Mum and Dad, and one of them covers precisely the situation you are in.

Section 82 of the Capital Acquisitions Tax Consolidation Act 2003 outlines certain things that are specifically not liable to capital acquisitions tax (CAT) – inheritance or gift tax – nor do they count against your lifetime tax-free threshold.

The associated Revenue guide to the CAT treatment of receipts by children from their parents for their support, maintenance or education is really helpful in explaining the legislation in plain English. And it states, among other things, that in relation to the “non-exclusive occupation of the family home by a child (including, where relevant, the child’s spouse/partner) family member, Revenue’s view is that this does not give rise to a gift by the owner of the property to the family member.

“Thus, in line with Revenue’s long-standing approach, there is no question of trying to attribute a value to ‘bed and board’ provided by the owner of the house to a child (including where relevant that child’s spouse/partner) of any age.”

Non-exclusive essentially means you are living with your parents rather than them simply moving out of the family home for you. So this exception clearly covers your position. The law considers that the parents would be living there anyway and are incurring no financial cost from you moving back in.

That means that you will not be assessed as having received any financial benefit from having moved back into your family home, never mind being considered to have received a €2,000-a-month benefit in line with general rents in the area where your parents live.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice

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