Capital gains tax on gifted site

I am not a tax lawyer, but CGT is a tax on a disposal of an asset. You and your GF are not selling the site, so you are not subject to the CGT. Your parents, on the other hand, may need to pay CGT since they are disposing (gifting) the asset. But there is an exception (see below). Quote from

You dispose of an asset when you:

• Sell it
• Give it as a gift
• Exchange it
• Get compensation or insurance for it

If you make a profit or gain when you dispose of an asset, you pay Capital Gains Tax (CGT) on the chargeable gain. The chargeable gain is usually the difference between the price you paid for the asset and the price you got when you disposed of it. You can deduct allowable expenses such as the cost of acquiring and disposing of the asset.

...

The transfer of a site from parent to child is exempt if it is to build the child's principal private residence. The land must be less than one acre and have a value of €500,000 or less.

You need to consider separately Capital Gains Tax, a tax payable by someone who disposes of property, and Capital Acquisitions Tax, a tax payable by someone who acquires property for free, or at an undervalue. Depending on the circumstances of the acquisition, Capital Acquistions Tax is often called gift tax or inheritance tax. In this case we'll use the term gift tax, to avoid confusion with capital gains tax.

Gift by your parents to you - CGT

When your parents made a gift of the site to you , they disposed of it. They (not you) became liable to Capital Gains Tax on any chargeable gain that had accrued since they acquired the site. In order to calculate the chargeable gain they are treated as having disposed of it at its market value.

So, if they acquired it 20 years ago at a cost of (say) 10k and when they give it away it is worth 30k, there is a gain of 20k which (subject to any exemptions, deductions, reliefs, etc) will be a chargeable gain on which they must pay CGT. As Victor points out, there's an exemption for transferring a site for a house to a child, and this transfer may well come within it.

Gift by your parents to you - gift tax

You received a gift worth 30k.

You probably have no liability to tax on this gift, since you have a lifetime allowance of 335k for gifts and inheritances that you can receive tax-free from your parents. So, unless they have given you a very large amount of other assets as well, you'll have no liability at this point.

Transfer by you of half-share to your girlfriend - CGT

You will now gift a half share to your girlfriend. You're disposing of the half share, and are deemed to dispose of it at market value, but since you are disposing of it at the same value at which you acquired it, there's no gain, so no CGT liability.

Transfer by you of half-share to your girlfriend - gift tax

Your girlfriend is receiving a gift from you. Because you are not married or civil partners, you and she are unrelated.

Her lifetime allowance for gifts from people unrelated to her is 16,250. For this purpose all gifts and inheritances she has received from people unrelated to her (in excess of 3k in any year) must be aggregated. If she has never received any other gifts or inheritances from people unrelated to her then her full allowance is available, and 15k is within the allowance, so she'll have no liability to gift tax. (However, it's a lifetime allowance, and she will now use most of it, so her capacity to receive further gifts from unrelated people, free of CAT, will now be very limited.)

Far be it from me to suggest that such a consideration should influence you, but if you and she were to marry, then gifts between you would be free of gift tax (and inheritance would be free of inheritance tax).

Alternative approach

You can compress the transactions. Instead of giving the whole site to you, and then you giving half the site to your girlfriend, your parents could give the whole site to you and your girlfriend jointly. On the figures, this will have the same result - your parents dispose of the site and must account for CGVT; you get a gift worth 15k which is well within the allowance for gifts from parents, your girlfriend gets a gift worth 15k from people who are strangers to her. The only differences are (a) your parents can't claim the "transfer of house site to child" exemption for anything they transfer to your girlfriend; she is not their child and (b) your girlfriend does not have the option of marrying your parents before the gift is made to avoid using her her allowance for gifts from strangers.

You can no longer register a civil partnership in Ireland.

You could only ever do so if you and your partner were of the same sex; civil partnerships were introduced as a next-best-thing for same-sex couples who couldn't marry. Once same-sex marriage was legalised, there was no further need for civil partnerships.

You can probably avoid the CAT if your parents gift it just to you (should be within the lifetime threshold). When you marry there is no tax on transfer to your then wife.

Have a chat with your solicitor/accountant and see if there is some mechanism where your parents could keep ownership and you pay a rent, This rent could be offset against the annual €3k gift you can receive from both your parents so €6k total

Annual exemption from CGT of €1,270 - available for each parent.

The chargeable gain is €12,562.50 less €2,540 = €10,022.50

CGT @ 33% = €3,307

How is your partner granting a mortgage over property that they do not own?

OK. Slightly surprised at this. The bank is lending money to your partner, knowing that they will spend it on developing a property which they do not own, so they end up with a large debt but no asset. While this is perfectly lawful, it's an awkward position for the bank to be in if it all goes pear-shaped and they have to chase your partner for repayment. I would have expected them to require the transfer of a half-share in the property to your partner.

In this scenario, the loan is to you and your partner jointly, and both of you are legally obliged to repay it. But the mortgage — the charge over the property granted as security for the loan — is being granted by you alone.

If you are married now surely CGT can be avoided by your parents?

Yes, but if they transfer the whole site to you, no CGT because of that exemption, and then you transfer a half-share to your spouse, no CGT because they're your spouse. So you can avoid CGT on a transfer from your parents to your spouse.

Worked in banking for years, mortgages were often granted in joint names with site/house in one name for this very reason i.e. to avoid tax to the non relative partner who got the gift of site/property.

However I always pointed out to the non owner that they had all the disadvantages (debt) with none of the advantages (asset). Also advised them seek independent legal advice. It's a grand plan unless something goes wrong!

So your parents could have transferred to you and, after the happy day, you could have transferred a half-share to your spouse. Bingo!

No need to go to the legal expense of transferring site to spouse at all - the act of getting married looked after that.

Its probably best to check this out with your solicitor.

I suppose it depends on when you plan to get married or if you intend to just live together for the foreseeable future.

Exactly this, they aren't exactly entitled to half the property. But they can make a joint tenancy in the property through section 14 of the FHPA act. No stamp duty or land registry fees owed. Just wahtever the solicitor charges.