Revenue eBrief No. 04/17

09 January 2017

Finance Act 2016 changes to Capital Acquisitions Tax Consolidation Act 2003

Changes to section 86 (Dwelling House Exemption) and Schedule 2 (Group Thresholds) CATCA 2003

The Capital Acquisitions Tax and Duty Manual has been updated to include a Part 24 on the dwelling house exemption to reflect changes to section 86 CATCA 2003 introduced by section 52 of Finance Act 2016. The changes have two principal effects.

Firstly, the dwelling house exemption will only be available for inheritances. With one exception, it will no longer be possible to receive a tax-free gift of a dwelling house. The exception will be where a person gifts a dwelling house to a dependent relative. For this purpose, a dependent relative is a direct relative of the donor, or of the donor’s spouse or civil partner, who is permanently and totally incapacitated because of physical or mental infirmity from maintaining himself or herself or who is over the age of 65.

Secondly, the inherited dwelling house must have been the deceased person’s principal private residence at the date of his or her death. This requirement will be relaxed in situations where the deceased person had to leave the house before the date of death because of ill health; for example, to live in in a nursing home.

These changes will apply to inheritances of dwelling houses or gifts of dwelling houses to dependent relatives on or after 25 December 2016.

Part 23 of the Capital Acquisition Tax Manual has also been updated to reflect these changes to the dwelling house exemption.

Part 03 of the Capital Acquisition Tax Manual has been updated to show the new group thresholds that will apply to gifts and inheritances taken on or after 12 October 2016.