Capital Acquisitions Tax Consolidation Act 2003 section 86

Exemption relating to certain dwellings

Section 86 provides an exemption from capital acquisitions tax (CAT) for the inheritance of a dwelling house where the successor (beneficiary) occupied it as his or her main residence and meets certain conditions regarding prior occupation, ownership of other property, and continued residence.

• A dwelling house inherited by a successor is exempt from CAT where the house was the disponer's main residence at death, the successor lived in it for 3 years before the inheritance, the successor does not beneficially own any other dwelling house, and the successor continues to live in it for 6 years after the inheritance.
• The exemption is clawed back if the successor sells or disposes of the house, or ceases to occupy it as his or her main residence, within the 6-year relevant period, unless the successor is aged 65 or over, is absent due to certified ill health, is required by an employer to live elsewhere, or reinvests the sale proceeds in a replacement residence occupied for at least 6 of 7 years from the date of the inheritance.
• A gift of a dwelling house to a dependent relative (a relative who is permanently and totally incapacitated or aged 65 or over) is treated as an inheritance for the purposes of this exemption, and the requirement that the house be the disponer's main residence does not apply in such cases.
• Where the successor already holds, or later acquires from the same disponer, a beneficial interest in another dwelling house (including one held under a discretionary trust created by the successor), the exemption is denied or withdrawn, with the tax and interest charges adjusted accordingly.

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