1. Capital Gains Tax (CGT)
CGT applies in relation to any life time transfer of property including the transfer of a site
CGT is charged on the person who sells or transfers the property.
A charge is applied even if the person who transfers the property is not receiving any consideration or payment in return for it. In such a case the property is deemed to be disposed of at market value and CGT is charged on that value.
Tax is payable on the difference between the value of the site at the date it was acquired by the transferor and the value it has on the date of the gift to the transferee, at a rate of 33%.
However, in the case of a transfer of a site from a parent to a child, a CGT exemption is available.
CGT exemption on the transfer of a site from parent to a child
If a person transfers land to their child to build a house which is to be the child’s only or main residence, the transferor will not have to pay CGT on the transfer.
In order to qualify for this exemption, the site must be:
- an area of no more than one acre
- with a value of no more than €500,000
In addition, the child is required to build a house on the land and occupy that house as their only or main residence for a period of three years.
Clawback of the relief
The exemption will be clawed back in circumstances where the child does not comply with the requirements.
So, if the child disposes of the site either
- without having built a house on the site
- having built a house on the land, but without having occupied that house as their only or main residence for the full period of at least three years,
This clawback does not apply in a situation where the child disposes of the land to a spouse or civil partner.