Brian O'Shea (Waterford, Labour)
Link to this: Individually | In context

Question 96: To ask the Minister for Finance his views on the increasing number of high net worth individuals avoiding capital acquisitions tax on multi-million euro house transfers as a consequence of section 86 of the Consolidated Capital Acquisitions Act 2003; if an audit of such transactions has been conducted by the Revenue Commissioners; and if he will make a statement on the matter. [10231/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

Section 86 of the Capital Acquisitions Tax Consolidation Act 2003, subject to conditions, grants exemption from Capital Acquisitions Tax in respect of a house comprised in a gift or an inheritance. One of the conditions is that the donee or successor must occupy the house for the period of 3 years ending with the date of the gift or inheritance. Where that house has replaced other property, the beneficiary must have resided either in that house and the other property for periods which together amounted to at least 3 years in the 4-year period prior to the date of the gift or inheritance. Another condition is that the donee or successor, if under the age of 55, must continue to occupy the house as his or her only or main residence for a further period of 6 years. However, there is provision to allow for a replacement house in that period and for situations where the individual concerned is not in occupation of the house because of work obligations abroad.

Amendments to this section are being made in the current Finance Bill which is due before the Seanad next week. These amendments are as a result of Revenue's experience in administering and auditing claims under this section, including taking issues before the Appeal Commissioners.

Firstly, relief will not be available where a donee lives in the principal private residence of the donor where that residence is gifted unless the donor is compelled by reason of old age or infirmity to depend on the services of the donee. This is to counter the argument that where a child is gifted a house by a parent having up until then lived in the parental home, that the 3 year period of occupancy of the gifted house is satisfied. The second change will require that the gifted house, and any house that it replaced, be owned by the donor during the 3-year period even if they were not his or her principal private residence. This is to counter a claim for relief where an individual sells his principal private residence to his parents for full value and then it is gifted back by the parent. It also counters the use of family trusts in gifting houses to children.