From time to time this blog deals with aspects of dwellinghouse relief that comes up in practice. Dwellinghouse relief arises under s. 86 of the Capital Acquisitions Tax Consolidation Act 2003 (“CATCA”) and it is designed to relieve hardship for say bachelor farmer brothers living together where one leaves the family home to the other, or similar type situations, such as co-habiting non-married couples.

There are a range of qualifying criteria for the relief, including that you cannot hold an interest in a property for the relief to apply. However, the rule is clear, in that, to be disqualified from the relief you cannot hold an interest (whether home or abroad) in any other dwelling other than the property that is the subject of the gift or the inheritance.

This is particularly important for example in the case of a dwellinghouse held jointly between a co-habiting couple. You would often come across this in practice. So say if Sean and Patrick are co-habiting and jointly own their property but are not married or in a civil partnership, can the successor still obtain the benefit of dwellinghouse relief? The answer is yes. You are not disqualified from the relief if your only property interest is the property that you are inheriting. This arises from the definition of “relevant dwelling house” in s. 86(2)(c) of CATCA which states that the dwelling house will qualify for the relief if it is:-

the only dwelling house to which the successor is beneficially entitled or in which the successor has a beneficial interest at the date of the inheritance of that dwelling house whether or not that successor had such an entitlement before the date of the inheritance or acquires the entitlement by virtue of that inheritance.

This can be a useful tax planning tool in advising co-habitees or siblings living together. However, oftentimes the planning doesn’t work because invariably the successor has an interest in some other dwellinghouse. It should be noted that ownership of other property such as farm, commercial property etc, does not disqualify one from the relief. It is ownership of another dwelling prior to the inheritance that will knock a person out from the relief.

Hope this helps and for other interesting articles on dwelling house relief, simply search “dwelling” in the search function of the blog and if you need any assistance on tax planning matters, probate or will drafting please email me on ckelly@hcalaw.ie