If I sell a flat in the UK and give my son the money, what is my tax liability?
This is a complicated area, but Irish and UK tax could apply to the gift
There is a double-taxation agreement in place between Ireland and the UK in relation to capital acquisitions tax. Photograph: iStock
I hope that you can clear up my confusion about a UK flat that I part-own. I wish to dispose of it in order to help my son on to the property ladder, as he lives and works over there.
Does UK or Irish tax law apply if I gift it to him? And what about if I sell it and give him the money (the money would remain in the UK).
I am not sure if domicile has to be considered. Although I am British, I have lived in Ireland for 39 years, and will stay here for the rest of my life. And what about the double taxation agreement between Ireland and UK – does this come into it too?
I have tried to obtain information from the Irish and UK websites but am still confused so I would appreciate your opinion.
Irish tax law applies if you give a gift to your son. A charge to capital acquisition tax (CAT) applies in the following circumstances:
1. The beneficiary (your son) is resident or ordinarily resident in Ireland at the date of the gift; or
2. The disponer (you) are resident or ordinarily resident in Ireland at the date of the gift; or
3. The property in the gift is situated in Ireland.
As you are currently resident in Ireland, your son may be liable to CAT. And CAT will apply regardless of whether the gift is in the form of property or cash.
A liability to CAT arises if the value of the benefit is over a certain threshold. The relationship between the person who provided the gift (the disponer) and the person who received the gift (the beneficiary), determines the maximum tax-free threshold, known as the “group threshold”.
Group A applies to gifts received by a son or daughter of the disponer. The maximum tax-free threshold for this group is currently €310,000. A disposal below the value of this group threshold may not give rise to a CAT liability, depending on gifts previously received by him from you or his mother. The small gift exemption should apply, resulting in an exemption of the first €3,000 of the taxable value of the gift received by your son.
UK tax may also apply to the gift. A number of exemptions are available, and the charge to tax is dependent on the number of years the gift was provided before the disponer’s death. We recommend that you seek UK tax advice prior to the disposal of the property or gift to cover UK tax obligations.
There is a double-taxation agreement in place between Ireland and the UK in relation to CAT, which is known as Inheritance Tax in the UK. If UK tax also applies, a credit should be available for Irish tax paid. A credit is given only where the same property is taxed in both countries on the same event.
A gift of property is a disposal for capital gains tax (CGT) purposes. Irish tax legislation states that where a property is transferred by way of a gift to a connected party, the transfer is deemed to pass at market value. Therefore, while no consideration may be received for the property, you will be deemed to have received consideration on disposal – that is, the current market value of the property and as a result a CGT liability may arise.
Where CGT and CAT are liable on the same event, a credit for the CGT paid may be claimed in certain circumstances
However, consideration would need to be given to the impact of your domicile position. An Irish resident, non-Irish-domiciled individual is liable to Irish CGT on Irish gains and other gains to the extent they are remitted. As you plan on staying in Ireland for the rest of your life, you may no longer be UK-domiciled. Tax advice should be sought in this respect.
Please note, where CGT and CAT are liable on the same event, a credit for the CGT paid may be claimed in certain circumstances. The credit, however, cannot exceed the amount of CAT attributable to the same asset.
- Niamh Horgan, Tax Manager, RSM Ireland, rsm.global/ireland