Home economics: Our property finance expert answers your questions

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Q My wife left our residence in Dublin three years ago to go to her sister’s house in Co Tyrone. The reason was that her sister, and only sibling, was in very poor health and needed full-time care. She has now died and left her estate to my wife, who has paid the inheritance tax due in NI/UK, and the question is whether she is now liable also for inheritance tax in the Republic? It’s causing us some tension and worry. 

A I can understand why and I’m sorry for your troubles. 

I asked Joanna Murphy, CEO of Taxback.com, for her advice. She says an individual is taxable in Ireland when they are ordinarily resident here (at least 183 days in a tax year or 280 days in two consecutive years). It appears from your email that the benefit was a UK property and the disponer (your late sister-in-law) was not an Irish resident. Whether or not tax is due here will depend on whether your wife is considered Irish resident at the time of the benefit, says Ms Murphy. The relationship between disponer and beneficiary is key to assessing any liability. A Group B relative (siblings) are entitled to only €32,500 tax-free (this is a lifetime cumulative threshold). Anything over that is taxed at 33pc, so on a property that could land you with quite a hefty bill. 

“The UK inheritance tax paid can be set against your wife’s Irish tax liability in accordance with the double taxation agreement between Ireland and the UK”, adds Ms Murphy. “Dwelling house exemption should also be considered; if it was the main/only residence of the disponer, continually occupied by the beneficiary during the period of three years preceding the inheritance and is the ONLY residence to which the beneficiary is entitled to at the date of inheritance there may be some leeway or relief, however to qualify, your wife would need to remain there for a further six years, which may not be what you have in mind. 

My advice is to have a chat with Revenue here (they are very approachable and deal with this stuff all of the time) or ask your solicitor to get a handle on the requirements.

Don’t worry too much, but don’t let it delay too long either, or you may end up with unintended interest and penalties should there turn out to be a liability. In any event there will be a tax declaration to complete, whether or not there is a tax liability. 

Q We are close to closing on a property in Dublin, and went sale agreed with contracts ready to sign just before the lockdown. We were asked to return to our lender for a ‘Covid review’ as my wife’s job has been affected; I’ve updated the agent on our progress only a few days ago, but discovered the other day that the property had been put back on the market online. We were not informed and the agent said it is still sale agreed but they are ‘actively taking inquiries’ from other parties to ‘protect their client’s interests’. Is this normal? It seems very underhand. 

A I’m inclined to agree. It’s bad form at best and worrying for you at this time. The property market is all but dead at present, so perhaps the pressure is creating poor practice with a minority. 

I asked Pat Davitt, CEO of the Institute of Professional Auctioneers and Valuers (IPAV),  who told me that while the agent certainly should have informed you before re-listing the property, as contracts have not been signed, he or she is within their rights to relist the property, on the client’s instruction.

“It’s not sold until contracts are exchanged and there may be a concern that you might not now be able to complete the sale given the financial position, so the agent is entitled to continue to list it”.

He adds: “There is so little happening in sale completion at the moment given the circumstances that you may well complete the financial review and close before anybody else puts in an offer. If you want to pull out, you have that option also, of course”. 

The Ryan Review

There’s been a week of torrid financial statements emanating from the two so-called ‘pillar’ banks. Bank of Ireland and AIB’s numbers were, not unexpectedly, pretty dire. Massive provisions have been made against the Covid-19 backdrop as both lenders face into a tsunami of defaults over the coming months. Just as well they’re not paying any tax, eh?

Borrowers should note that the rock-and-a hard-place position that lenders find themselves in right now means both a contraction in lending (BOI reported it had suspended all mortgage LTI/LTV exceptions), and a burning need to get credit lines moving again.

This dichotomy will most likely result in tighter underwriting of all loans. While nobody who availed of the Mortgage Moratorium will appear on the Central Credit Register, don’t think for a minute it hasn’t been, ahem… noted.

Indo Property

Source: Irish News