Property Clinic

Heating surveys, noisy neighbours and tax implications for building in the garden

Thu, Apr 17, 2014, 00:00

This means you would pay CGT on the difference between the current use value and the sale price. You can only have one PPR at a time. Revenue attach various conditions to the seven-year CGT relief including: the land or buildings must be acquired during the period December 7th, 2011 to December 31st , 2014; the land or buildings (including rental property) must be situated in an EEA state (including Ireland); where the land or buildings are acquired from a third party, the consideration provided must equal the market value of the land or buildings; where the land or buildings are acquired from a relative, the consideration provided must not be less than 75 per cent of the market value of the land or buildings; the acquirer must continue to hold the land or buildings for a period of seven years from the date of acquisition; any income, profits or gains generated from the property within the seven-year period must come within the charge to Irish income or corporation tax, eg where an individual rents out the property during the seven-year period, the rental income must come within the charge to Irish income tax; and the transaction must not come within the anti-avoidance provisions which deal with artificial capital loss arrangements.

The last condition is important as Revenue will look closely at any transfer to related parties or transfers that appear to be for the purpose of tax avoidance. Selling anything to yourself is not a transfer but you might look at setting up a separate entity to develop the site. The element of the gain covered by the seven-year period of ownership is exempt from CGT.

Therefore, where a property is to be held for, say, 10 years, 70 per cent of the gain will be exempt from CGT. You should consult a tax specialist or accountant to explore the most tax-efficient way of developing the site and dealing with the ownership of your existing house and your fiancée’s. It is important to consider your long-term plan regarding ownership of the three properties. This should be considered not just in terms of rental income over the next few years but also in terms of securing your pension and retirement income. Many people are looking at self-administered pensions involving property purchase. Remember though that your pension cannot buy your house and cannot let it to you or a related party.

Simon Stokes is chair of the residential property professional group of the Society of Chartered Surveyors Ireland,

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