Irish Times Property Clinic: Grandchildren aren’t liable for inheritance tax under certain conditions.
Question 1: My husband and I have a family home. We are rearing our grandson, who has lived with us for 10 years. He is 14. We want to transfer this house over to him now, as it is his home where he is being brought up. Can we do this, and would he have to pay tax on it? We don’t want him to have to move out of it when we die due to tax implications since it is his home.
Suzanne O’Neill writes: Dwelling house relief can provide an exemption from inheritance tax for the grandchild where all four of the conditions for the relief are met. The conditions are as follows:
- The house was the only or main home of the person who died.
- The person inheriting lived in the house as their only or main home for the three years immediately before the date of the inheritance
- The person inheriting the house does not own or have an interest in another house (or inherit another house from the same person, for example under their will).
- The house continues to be the person’s only or main home for six years after the date of the inheritance. However, the person is allowed to sell the house and purchase another main residence.
"The grandchild could meet the conditions of an informally fostered child and qualify for the parent/child gift/inheritance tax threshold of €335,000."
In addition, the grandchild could meet the conditions of an informally fostered child and qualify for the parent/child gift/inheritance tax threshold of €335,000. The conditions where the relief can apply require the foster child while under the age of 18 must have lived with the foster parent for periods of not less than five years and have been maintained and cared for by the foster parent at the foster parent’s expense. Claims for the relief by a foster child must be supported by the testimony of two witnesses. This would be advantageous if the grandparents have any other asset which they would like to leave to the grandchild.
Question 2. If someone owns two houses, one of which is the principal property and the second is very close by, within four kilometres, do you have to pay the NPPR tax for the second?
Suzanne O’Neill writes: NPPR (non-principal private residency charge) was a tax on second homes and existed up to 2013. However, if a house is being sold today and NPPR tax is unpaid, it must be paid along with any penalties that have accrued. The proximity to a person’s own home does not give rise to an exemption. The NPPR was effectively replaced by the Local Property Tax (LPT) which now applies to a person’s own house and to other houses which they own.
Published in The Irish Times. Answered by Suzanne O’Neill, Tax Partner at RSM Ireland.