Revenue appeals tax exemption on inheritance of family home

The High Court will rule at a later date on a case with important implications for the assessment of taxes concerning the inheritance of a family home.

The action relates to a ruling by a tax appeals commissioner (TAC) last year that Dublin woman Leanne Deane is entitled to an exemption under section 86 of the 2003 Capital Acquisitions Tax Act, known as the dwelling-house exemption, after she inherited her family home at Aranleigh Mount, Rathfarnham, Dublin. The outcome has implications for many similar cases.

Ms Deane’s father, who was predeceased by his wife, died in October 2010. She and her brother inherited equal shares in their father’s estate. Under a deed of family agreement, they agreed she would inherit what had been the family home, where she had lived for many years prior to her father’s death, and where she currently resides.

Under that 2011 agreement, Ms Deane also acquired a share in four other residential properties. Her brother, as part of the agreement, received an interest in other assets in their father’s estate. She applied for an exemption under the 2003 Act, which was refused on the basis she had inherited a share in the other properties.

She received a notice of assessment from Revenue that she had to pay €52,000 in capital acquisitions tax as a result of inheriting the family home. She appealed to the TAC, which in late 2017 found she had satisfied the conditions necessary to avail of the section 86 exemption in respect of her family home and reduced the assessment to zero.

Arising out of the TAC’s decision the Revenue, represented by Jacqueline O’Brien SC, has asked the High Court to determine several questions including whether the decision Ms Deane is entitled to claim the exemption is correct in law.

Revenue also wants the court to determine if Ms Deane was precluded from claiming the exemption on the basis she was at the time of the inheritance beneficially entitled to any other dwelling houses.

Counsel submitted the TAC erred in the manner in which the decision had been arrived at. She said section 86 was designed to ensure that persons who inherited family homes, where they themselves had been living, would not end up with a tax liability that would result in them having to sell the property and ending up homeless.

Ms Deane, represented by Martin Hayden SC and Eoin O’Shea, says she is entitled to the exemption and the TAC’s decision should be upheld. At the date of her father’s death, Ms Deane did not have an interest in any other dwelling houses other than the family home and only came to have such an interest at a later date, it was submitted. Had she a share in another property before her father died she would not be entitled to the relief claimed.

It was also argued legislation concerning inheritance tax should, but fails, to provide certainty for such taxpayers. Ms Justice Caroline Costello has reserved her decision.