Written answer
Tax Code
The Tánaiste outlined the six-year occupancy requirement for the Capital Acquisitions Tax dwelling-house exemption and existing exceptions, including illness, age, employment relocation and certain replacement homes. He did not indicate whether the requirement would be reduced, citing the practice of not commenting on potential Budget tax decisions in advance.
417. Deputy Naoise Ó Muirí asked the Tánaiste and Minister for Finance if he has considered amending the capital acquisitions tax dwelling house exemption by reducing the current six-year post-inheritance occupancy requirement; if he has assessed the impact that the existing rule may have on housing mobility and the availability of larger family homes; and if he will make a statement on the matter. [65268/26]
Comment on this
Section 86 of the Capital Acquisition Tax Consolidation Act 2003 provides for an exemption from Capital Acquisitions Tax on the inheritance of a dwelling house where specified conditions are met.
To qualify for the exemption, the inherited dwelling house must have been the deceased person’s only or main residence at the date of their death. This requirement is relaxed in situations where the deceased person had to leave the house before the date of death because of ill health; for example, to live in a nursing home. In addition, the beneficiary of the inheritance must not have a beneficial interest in any other dwelling house at the date of the inheritance and at the valuation date.
The beneficiary must have lived in the house for 3 years prior to the date of the inheritance and must continue to live in the dwelling house for 6 years after the date of the inheritance.
Where a beneficiary does not comply with the condition to occupy the dwelling house as their only or main residence for six years after the date of the inheritance, the exemption will be withdrawn. There are, however, specific exceptions to this rule. The exemption will not be clawed back where the successor;
• dies within the six year period,
• was aged 65 or over at the date of the inheritance,
• has to live elsewhere because of a physical or mental infirmity certified by a doctor, or
• is required by his or her employer to live elsewhere, in the State or abroad, to carry out the duties of the employment.
In these situations, the exemption continues to apply even though the successor is not living in the dwelling house during the six year period.
In addition, if the beneficiary sells the inherited dwelling and uses all of the sale proceeds to buy a replacement home which they occupy as their only or main residence, the exemption is preserved where their occupation of the inherited and replacement homes together is at least six years within the seven years after the inheritance. However, a partial clawback may arise where the replacement property is of a lower value than the property sold.
Detailed guidance on the dwelling house exemption is available on the Revenue website at www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-manual/part-09-exemptions/section-86-exemption-relating-to-certain-dwellings.pdf.
As with all taxes, CAT is subject to ongoing review. As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.