Capital Acquisitions Tax (CAT)

Dwelling House Relief (DHR)

Where the conditions for DHR are satisfied, a gift or inheritance of a qualifying residential property is exempt from CAT. Whilst Finance Act 2017 significantly restricted the circumstances in which DHR is available, it did not totally eliminate the relief. One of the key conditions in order to qualify for DHR is that the property, the subject of the gift or inheritance, must have been “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”. The application of this particular provision has been the subject of a recent High Court case.

In the case the taxpayer was a residuary beneficiary who inherited the family home, along with other residential properties comprised in her late father’s estate. Her brother was also a residuary beneficiary. The taxpayer claimed DHR in relation to the family home in which she had been living. The Revenue challenged the taxpayer’s entitlement to DHR arguing that as the taxpayer had inherited more than one property under the will she had a beneficial interest in multiple properties as at the date of the inheritance.

The taxpayer had won their case in the Tax Appeals Commissioners and Revenue had appealed that determination to the High Court. The High Court dismissed Revenue’s appeal and upheld the determination of the Tax Appeals Commissioner. Justice Costello stated that “Where a will makes no specific bequests and where all the property passes in the residue and is left to more than one beneficiary, it cannot be said that any one person has any right to any particular asset in the estate prior to the date when the net value of the estate is established”

In effect the court held that whilst the date of the inheritance for CAT purposes was the date of the testator’s death, this did not necessarily mean that a residuary beneficiary had a beneficial interest in any property comprised in the will as at that date.

Revenue have decided not to appeal this decision so similar cases may now be due a refund of CAT.

Return to Tax Issue - Spring 2019

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Ronan McGivern

Taxation Partner

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