With every property transaction, there are tax implications
One of the advantages of rural living, especially for landowners, is the possibility of keeping family members together if you are lucky enough to be in a position to transfer a site to the next generation.
After the decision has been made to transfer a site to a family member, there are a number of practical issues that need to be considered to ensure that everything will run smoothly.
With every property transaction, there are tax implications and these need to be considered very carefully before committing to the transaction.
Stamp duty will be payable on the transfer, at a rate of 7.5% of the value of the site. Where the site is used to construct a family home, there may be a possible clawback available, up to a maximum of eleven-fifteenths of the amount of stamp duty paid.
Another tax which may impact the person receiving the site is capital acquisitions tax, or gift tax. Whether or not gift tax will be payable will depend on a number of factors including the relationship between the parties.
In a situation where a site is being transferred from a parent to a child, it is unlikely that any capital acquisitions tax will be payable as the threshold of a gift from parent to child is unlikely to be exceeded. The threshold will be lower where the transfer is taking place between more distant relatives (e.g., grandparents, aunts, uncles).
In some situations, a tax liability may arise for the person who is voluntarily transferring the site, in the form of capital gains tax.
The Revenue will base any potential capital gains tax liability on the value of the property at the time of the disposal. Revenue legislation gives farmers a tax relief in this area and, if a site is being transferred from a parent to a child, they are given an exemption from capital gains tax liability.
For parents, uncles or aunts, grandparents and their sons, daughters, nephews or nieces, the ritual of the transfer of a site is an emotional and exciting time but it needs to be undertaken in a manner that allows both generations to proceed without the stress and worry of unexpected costs, taxes or conveyancing consequences.
Our dedicated conveyancing team have the knowledge and expertise from years of experience in this area to guide the parties during the process from the early stages to completion.
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