How wealthy parents could gift homes to their children and pay no tax

ENORMOUSLY wealthy families used a tax loophole to buy luxury homes and then give them to their children, without paying a penny in tax, the Irish Mail on Sunday can reveal.

By exploiting the rules, the adult offspring could ‘inherit’ millions of euro worth of property from their rich parents, and not their fair share of gift or inheritance tax.

In one case a parent gave €4.2m worth of property to four children, with each getting a house worth €1.7m, €1m, €800,000, and €700,000 respectively.

More than €140m worth of property was handed over

‘A family gave €4.2m to 4 children tax free’

entirely tax free in just five years, using the loophole, a Revenue investigation found.

And, according to internal documents, the scale of abuse may actually be far worse. It said the tax lost was at least €18.7m but may be far higher.

The MoS has also discovered that the Revenue Commissioners had tried to cap the amount that could be exempted in 2000 but was ignored.

The Dwelling House Tax Exemption was intended for genuine cases – for instance someone caring for an elderly parent in their home. For this reason, the person inheriting the property had to be living there for at least three years, and they were not allowed to own any other property.

In the most blatant case, a man inherited a property tax free from his mother – but Revenue investigators discovered he had transferred three homes to his wife to qualify for the exemption.

The evidence shows it happened 440 times between 2011 and 2015, with over 100 of the cases involving properties worth more than €400,000. The report said: ‘The total market value of the 440 properties gifted by parents to children and claiming the [exemption] comes to €141.89 million.’

And 14 of the properties were worth more than €1m.

A copy of the report, obtained under Freedom of Information, explained: ‘Cases are coming to attention where wealthy parents are using this exemption to buy and gift houses to their children.

‘There is nothing in this exemption, as currently drafted, to prevent a parent with [say] four children from purchasing a dwelling house for each of them and gifting or bequeathing them… in practice, it can be difficult for Revenue to determine whether or not conditions are satisfied.’

Revenue examined tax planning advice from major accountancy firms, some of whom encourage ‘careful planning’ to use the exemption to pass on wealth.

The inquiry also revealed that use of the exemption was growing rapidly, with a 19% increase in cases between 2014 and 2015.

A separate set of FoI documents show how Revenue Commissioners expressed concerns when the loophole was originally introduced in 2000.

They suggested there should have been a cap on the value of the property being handed on, but their expert advice was not heeded – and the loophole remained in place until it was removed late last year.

The tax investigators also found many instances where people tried to claim the exemption but were caught out before they could.

In one case, a woman living in France tried to claim she had been living at a property she part-inherited from her uncle.

Others tried to claim exemption on properties they inherited from their parents even though they owned a house.

‘There were 14 homes worth more than €1m’