The relevant taxes are:
- Capital Gains Tax (CGT) – on the parent making the transfer of the site
- Capital Acquisitions Tax (CAT/Gift Tax) – on the child receiving the site
- Stamp Duty – on the child receiving the site.
These arise even where no money is received by the parent.
- Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is a tax charged on the capital gain (a profit) made on the disposal of any asset. The current rate of CGT is 33%. It is payable by the individual making the disposal not on the person receiving the asset – in this circumstances the parent transferring the site to the child.
There is full relief from CGT available where the site is transferred for the purpose of the child building their own home.
A parent can dispose of one site to a child free of CGT if the following criteria are satisfied ;
- Size : No greater than 1 acre (0.4047 hectare)
- Purpose : Principle Private Residence
- Market Value Up to a max of €500,000
It is important to note that CGT relief is obtainable if the child builds the house on the land transferred. It is not available if the parent builds the house and then transfers the house to the child.
The CGT exemption provides for a clawback of the relief if the land is sold by the child, unless the child has built the house and lived in it for three years as his principal private residence. The tax clawed back is assessed on the child rather than the parent.
- Capital Acquisitions Tax (CAT)
If you receive a gift, you may have to pay gift tax on it. If you receive an inheritance following a death, it may be liable to inheritance tax. Both these taxes are types of Capital Acquisitions Tax.
The value of the site and the date of transfer will determine whether there is CAT due on the transfer. A child’s threshold when receiving a gift from a parent is at present €280,000. If the value of the site is over € 280,000 or if the threshold has previously been used, the child would be liable to CAT. The current rate of CGT is 33%.
- Stamp Duty
The child will be liable to stamp duty on the gift of the site.