Changes to dwelling house relief 

In general, an inheritance received by a beneficiary is subject to Capital Acquisitions Tax (CAT) at a rate of 33% however there are a number of exemptions/reliefs which may be available to either reduce or eliminate the charge to tax.

The dwelling house exemption relief allows someone to inherit a property tax-free provided that they have lived in it for three years before the homeowner’s death, remain living in the house for six years after the inheritance and that it was the main home of the person who has died, subject to a number of additional conditions. One of the main conditions for this exemption is that the person who inherits the property does not own or have a share in another property at the date of inheritance.

Following a recent High Court judgement, Revenue has amended its rules on the treatment of applications for this tax break. The court concluded that where a second property (or a share in a second property) was inherited as part of the residue of a will, the beneficiary would still meet the eligibility criteria for dwelling house relief. (The 'residue' is the term used to describe what property is left over after the deduction of specific gifts outlined in the will, debts, legacies, tax and the expenses of administration).

Revenue have acknowledged that taxpayers who paid CAT on a home which, under the now revised rules, would have qualified for an exemption, may apply for a refund of that tax.

If you inherited a property in the past number of years which you believe should now qualify for the exemption following Revenue’s change of view, you have an opportunity to amend your tax submission and make a claim for a possible tax refund.

For further information or help contact a member of our tax team.