The changes to the dwelling house exemption from CAT which came into effect on or after 25 December 2016 by virtue of amendment to Section 86 Capital Acquisition Tax Consolidation Act 2003 (inserted by Section 52 Finance Act 2016), mean the exemption will now only apply to inheritances and not gifts unless the house is gifted to a dependent relative who is permanently incapacitated or over 65 years of age.
The house must be occupied by the disponer and the beneficiary as their principal place of residence on the date of the inheritance except where the gift is to a dependent relative.The required occupation period for a beneficiary/successor is three years prior to the inheritance and six years after the inheritance as before (subject to certain replacement provisions). It must also be theonly dwelling house to which the successor is beneficially entitled or in which the successor has a beneficial interest at the date of the inheritance. Where, prior to taking a benefit, a disponeror beneficiary has moved out of the house because of mental or physical infirmity, then the disponer or beneficiary will be deemed to continue to occupy the property during that period for the purpose of Section 86.
The big change essentially is that now the house itself must be the disponersmain home where both parties reside prior to the inheritance, until now a parent could buy a home in which their child would live independently and then inherit it tax-free on their parent’s death.
As with a lot of tax relief’s clawback or withdrawal of the relief provision applies around the condition as to the six year holding period of the beneficiary. The age at which a beneficiary can take a property without being subject to thisclawbackprovision (six year rule) is now 65 years of age whereas previously before the amendment was 55.