What documentation is essential too accurately determine the date of valuation for CGT purposes?

Selling a Half-Share of an inherited Family Home: Understanding Tax Implications in Ireland

Capital Gains Tax (CGT) on the Sale of Inherited Property

When you inherit a property in Ireland,you acquire it at its market value on the date of death of the previous owner – this is known as the ‘date of valuation’. Selling a portion of that inherited property, like a half-share, triggers potential capital Gains Tax (CGT) liabilities. Understanding these implications is crucial for maximizing your returns and ensuring compliance with Revenue regulations. This article focuses specifically on selling a half-share, but the principles apply proportionally to any partial sale.

Determining Your Capital Gain

Your capital gain isn’t simply the sale price minus what you paid. It’s the sale price minus the original value at the date of death, plus any allowable expenses. Here’s a breakdown:

1. Date of Valuation: Establish the market value of the entire property on the date the previous owner passed away. A professional valuation is highly recommended for accurate documentation.
2. Apportioned Cost: Calculate your cost based on your half-share. If the property was valued at €300,000 on the date of death, your apportioned cost is €150,000.
3. Allowable Expenses: Deduct allowable expenses from the sale proceeds. These can include:

Solicitor’s fees

Estate agent’s fees

Advertising costs

valuation fees

costs of improvements (not routine maintenance) – with proper documentation.

Annual Exemption: For a single individual, the annual CGT exemption is €1,000. For married couples/civil partners,it’s €2,000 (if filing separately,each can claim €1,000).

Applying the Exemption: In our previous example, a single individual could offset the €1,000 exemption, reducing the taxable gain to €19,000. The CGT due would then be €19,000 x 33% = €6,270.

PPR relief can substantially reduce or eliminate CGT, but its application to inherited property, and especially a partial sale, is complex.

Qualifying Conditions: To qualify, the property must have been your only or main home for the period of ownership. This is where it gets tricky with inherited property.

Inheritance & PPR: If the previous owner lived in the property as their PPR, some of that PPR relief may be transferable to you, but only for the period they qualified. The rules are intricate and depend on the specific circumstances.

Partial Sale & PPR: Applying PPR to a half-share sale is particularly challenging. Revenue will likely assess the proportion of the property that qualified for PPR and apply the relief accordingly. Professional tax advice is essential here.

Tax Reporting and Payment Obligations

You are legally obligated to report the sale to revenue within 60 days of the completion date. This is done through the Revenue Online Service (ROS).

Form CG1: You’ll need to complete Form CG1, detailing the sale, your costs, and your capital gain.

Payment: CGT must be paid by the specified deadline. Failure to do so can result in penalties and interest charges.

ROS Registration: If you aren’t already registered for ROS, you’ll need to do so.

Multiple Beneficiaries: If the property was inherited by multiple beneficiaries, each individual is responsible for reporting and paying CGT on their respective share of the sale.

Joint Ownership Before Inheritance: If the deceased jointly owned the property,the CGT implications are more complex and require careful consideration of their ownership share.

Improvements vs. Repairs: Distinguishing between capital improvements (which add value and are deductible) and routine repairs (which are not) is vital. Keep detailed records of all expenses.

Non-Resident Beneficiaries: Different rules apply to beneficiaries who are not tax residents of Ireland.

**Professional