Can I cut CGT on house my father bought but which I paid for?
Revenue can look to commercial reality of any transaction and apply legislation to case
“If you want to make a case to the Revenue that the transaction should be taxed based on the commercial reality, you will need to provide back-up to Revenue clearly supporting your position.” File photograph: Getty Images
I was working in the Middle East in 2010, and my father purchased a house on my behalf as we thought at the time it would be easier. He drew down a mortgage of €120,000 for the house. I then made bank transfers of the same amount to pay off the mortgage.
We had dropped the ball, as we waited too long to put the house into my name and the house price climbed and capital gains tax was owed. We left it for years hoping the Government would reduce the rate of CGT. Now I would like to have the house in my name so that I could sell it and use the money elsewhere.
Could I after so long argue my point to the Revenue that I have proof that I actually paid for the house? Is there any possible way?
The Revenue can review any transaction and in so doing look to the commercial reality of it and therefore ignore the paperwork and apply the legislation to the specific circumstances as they interpret them.
The Revenue will usually only apply this approach when it will result in an outcome in their favour. This option, however, is also available to taxpayers who may present a case based on the commercial reality of the transaction rather than the legal form.
If you want to make a case to the Revenue that the transaction should be taxed based on the commercial reality, you will need to provide back-up to Revenue clearly supporting your position. This supporting material would include:
1) Evidence that you were living in the Middle East at the time of purchase
2) That your father never lived in or acted as landlord of the property
3) You ultimately paid the mortgage, giving details of your earnings abroad, bank statements and bank transfer documentation
4) NPPR and LPT documentation. In the event that these documents are not in your name, it will make the argument more difficult
The more documentation you can supply to support the commercial reality, the stronger you can make your case to Revenue. Any kind of written agreement or correspondence supporting the commercial interpretation will be persuasive.
It may also be worth assessing the property valuation at the time of the final payment for the mortgage to your father. In circumstances where the property was in effect transferred following the final payment, it may be possible to show that as the date of acquisition by you. There would still be a liability to capital gains tax and stamp duty, but these may potentially be less than would apply if the transfer was deemed to take place now.
The above is an initial assessment based on the limited information you have made available. Before you make any decision on how to proceed I would recommended that you seek taxation advice based on the detailed and specific circumstances to ensure the tax liability is mitigated in as much as is appropriate.
Padraig Connor, partner, LHM Casey McGrath, Chartered Certified Accountants; lhmcaseymcgrath.ie