Buying for a relative?

Suppose a relative-my Dad were to buy a House for me, what would be the taxes he or I would have to pay and what would be the consequences on my part for this purchase?
I know about CGT but would there be any way of avoiding it?
Lets say he has around 500k to spend.

Any feedback would be hugely appreciated lads!

Just to be clear - are you saying your Dad would buy the house for you ? OR it is another relative ?

That’s right, my Dad would buy the house for me.

Be careful here and get proper advice (I am very rusty here).

Some points:

  1. Your Dad can ‘gift’ you money but you need to pay tax on it (painful - similar to CGT rate) - you then buy in your own name.

  2. Your Dad can buy the house in his own name and you can rent at a low rate (he will pay income tax at full rate on the rent.). You can then get the house as part of your inheritance (but will pay CAT above whatever threshold exists). This is a classic ‘Irish route’ where people try to keep rent very low / forgiven (works unless the Revenue does an audit on your Dad). It can also be customised where you don’t get full ownership of the house on the passing of your Dad to stay below the CAT threshold (i.e. goes to you and your siblings, who then rent it to you at a really low rate ad-infinitum). Can get messy however if too complex (or if you fall out with your siblings!)

  3. Your Dad can give you a loan on which you pay interest (use mortgage rate) and you eventually pay principal back. The house is in your name. Another interesting route as (as every politician a.k.a Bertie knows), one of the most effective ways to circumvent tax is to take it as a loan that never really gets re-paid. i.e. your Dad forgets the loan documentation and never lists it in his ‘estate’ (becomes a forgotten asset). Interest is forgotten after a time etc.

I’m sure there are other ‘schemes’ but they are the 3 that I know of.

Note - all ‘schemes’ to circumvent tax look great until the Revenue does an audit (on which many will collapse!)

When I looked around christmas tax free thresholds for gift/inheritance taxes have been steadily decreasing over the years and now offspring are beginning to be taxed on relatively modest inheritances. I see this trend continuing as it is easy money for government and the government is broke.
Planning based on current thresholds would be unsafe.

The threshold is now quite low; 225k IIRC

You might look at inheritance planning generally - the simplest thing to bear in mind here is the 3k a year annual small gift allowance. Your Dad and his spouse (i.e. not necessarily your mother if applicable) could gift you 3k each. They could also gift your partner - even if you’re not married. So that’s 12k p.a. if they are really generous…

Gifting you 225k now and going guarantor or buying the other half and gifting you as much as possible every year is the simplest way IMHO

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citizensinformation.ie/en/mo … s_tax.html
revenue.ie/en/tax/cat/gift-inheritance.html

Gift tax is charged on taxable gifts taken on or after 28 February, 1974, and Inheritance Tax is charged on taxable inheritances taken on or after 1 April, 1975. An inheritance is a gratuitous benefit taken on a death and a gift is a gratuitous benefit taken otherwise than on a death.

Once the taxable value of the gift or inheritance has been determined the amount of tax payable will depend on whether the appropriate tax-free threshold has been exceeded. The rates of tax are as follows-

The threshold amount - Nil
Excess 33%

*This rate was introduced on 6 December 2012.

Gifts or inheritances of Irish property are liable to tax whether or not the disponer is resident or domiciled in Ireland. Foreign property is liable to tax where either the disponer or the beneficiary is resident or ordinarily resident in Ireland at the relevant date.

Various exemptions from gift and Inheritance Tax have been provided for. For example, the first €3,000 taken as a gift by a beneficiary from a disponer in any one year is exempt from tax as are gifts and inheritances taken by one spouse or civil partner

carefully read the “dwelling house” section in the first link given by slasher there.

it may be that your father can buy the house himself, and if you live in it for 3 years, he can pass it to you. i’m not sure about all that, but look into it carefully.

When doing my CPD on Estate Planning in November the dwelling house relief was explained as a tax free way to pass on a property.revenue.ie/en/tax/cat/leaflets/cat10.html

Also were you did not qualify for Dwelling House Relief at time of death as you did not occupy the property for 3 years this tax tip was given

Tax Tip given at the time :- “Using a Discretionary Trust to Qualify for Dwelling House Relief”

  • If there are no children living in the house at the date of death but it seems likely that one of the children would be interested in occupying the property, it may be possible to pass the property into a trust until such time as the dwelling house exemption would be available

  • This would allow you to satisfy the condition that the Beneficiary must occupy the property for 3 years before date of gift/inheritance

As you would be living in the house I assume you would not need to worry about setting up a Discretionary Trust

Why can’t his Dad just buy the house and his son live in it rent free? I’m sure there are lots of instances of people living in relatives houses.

He could be a house-sitter

What if the father was to pay OP €0.01 to occupy and mind the house for him? Especially if it was not habitable/legal for renting purposes on the basis that - say - no microwave was provided?

EDIT: beat me to it…

+1 Use Dwelling house relief

Because obviously if Revenue find out and put the two together they will ‘deem’ it a gift and charge the CAT.

If you look at most of the Tax Acts you’ll see Revenue expect transactions between relatives to be carried out as if they were ‘at arms length’.

The dwellings house exemption is the way to go but it’s important to note your tied to the house for 9 years (3+6) - so you wouldn’t want to have to re-locate for job/personal circumstances.