Gintax answers Sunday Independent readers’ questions on tax.

Article published 28 February 2021

Tax on house transfer to daughter

Query: I am a mother considering selling a house (second property of mine) to my daughter. To help my daughter get onto the property ladder, I would like to sell it to her for much less than I paid for the house originally and also, for much less than the market value of the house – which is currently €225,000. I have heard that even if I paid €145,000 for the house and sold it to my daughter for €100,000, I would still have to calculate Capital Gains Tax as if I had sold the house at the market value. Is that correct, even though I have made a loss?

Answer: Your understanding here is correct.  You are deemed to have sold the house at its market value for Capital Gains Tax (CGT) purposes which means that €225,000 will be regarded as taxable proceeds.  You mention that this is your second property and thus I assume it is not your main home.  This is important as an exemption could apply if was your principal private residence.  In any case, a general CGT exemption may be available if the house was purchased in the period from 7 December 2011 to the end of 2014. 

The undervalue sale is also technically a taxable benefit of €125,000 for your daughter, subject to Capital Acquisitions Tax (CAT).  This amount is well within your daughter’s tax-free threshold of €335,000 (for gifts/inheritances taken from parents) so no CAT should arise.  To the extent your daughter has taken prior benefits from you or her father, then the available tax free threshold will be reduced.  For completeness, if she is subject to CAT then she will be able to reduce her liability here by your CGT paid.   Finally, she will also be subject to stamp duty at 1pc on the acquisition, calculated on the market value.   

Article published on 29 March 2020

Tax exempt farmland lease & USC

Query: I have farmland leased under a six-year lease and consequently, I am exempt from paying tax on the income earned from the lease. I do, however, have to pay the Universal Social Charge (USC) on the income. I also incur small expenses such as supplying electricity for the deep well pump, electric fence, and any repairs to the well pump which may arise. The Revenue Commissioners tell me that I must pay USC on the original amount before any expenses are deducted, whereas I was of the opinion that USC should only be paid on the amount left after deduction of expenses. Who is correct? John, Co Limerick

Answer: You are correct in your understanding of USC. When the USC was introduced in 2011, the intention was that it would apply to a very broad base.

So while the rent of certain farmland is exempt from income tax, this income remains subject to USC. The rules for USC are more restrictive than those for income tax - for example, no deduction is available for certain capital allowances or expenses brought forward from a previous year. However, the type of expenses allowed for both income tax and USC is the same.

In general terms, a USC deduction should be available for the costs of repairs as well as supply of electricity, where you had agreed in the lease to pay those.

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Article published on 12 January 2020

Tax relief on carer fees

Query: My mother needs a carer and the cost of hiring one is about €7,000 a month. As I have income taxable at the top rate and she does not, I am paying the carer's fees. The carer started at the beginning of this month (that is, January 2020). Can you tell me how I claim the tax relief on the cost of a home carer and if there are any conditions I must meet to ensure I qualify for the relief?

Also, can I claim the tax relief on a monthly basis (that is, as I pay the fees) or must I wait until the end of the relevant tax year to claim it? It would be much easier for me to afford the fees if I could get the benefit of the tax relief each month. Paul, Co Galway

Answer: Tax relief is, indeed, available for eligible carer fees at the top income tax rate, currently 40pc. In order to be entitled to the relief, your mother needs to be totally incapacitated due to mental or physical infirmity.

Furthermore, the carer cannot be employed as a housekeeper only. The relief is capped at €75,000 per annum for each cared-for person - so given your total carer fees for the year will come to €84,000 (based on monthly fees of €7,000), around €9,000 of costs will not qualify for the relief in 2020.

Assuming you are paid through the PAYE system, you can indeed make the claim during the year - by completing a Form HK1.

Once this claim is accepted by Revenue, the relief will be available on a basis similar to your existing tax credits to reduce your monthly PAYE tax liability over the course of the year. It is not yet possible to make this current year claim online.