Finance Act 2016
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Amendment of section 86 of Principal Act (exemption relating to certain dwellings) | ||
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52. The Principal Act is amended by substituting the following for section 86: | ||
“Exemption relating to certain dwellings | ||
86. (1) In this section— | ||
‘dwelling house’ means— | ||
(a) a building or part (including an appropriate part within the meaning of section 5(5)) of a building which was used or was suitable for use as a dwelling, and | ||
(b) the curtilage of the dwelling house up to an area (excluding the site of the dwelling house) of 0.4047 hectares, but if the area of that curtilage (excluding the site of the dwelling house) exceeds 0.4047 hectares, then the part which comes within this definition is the part which, if the remainder were separately occupied, would be the most suitable for occupation and enjoyment with the dwelling house; | ||
‘relevant period’, in relation to a relevant dwelling house comprised in an inheritance, means the period of 6 years commencing on the date of the inheritance; | ||
‘successor’ includes a transferee under an inheritance referred to in section 32(2). | ||
(2) In this section a ‘relevant dwelling house’, in relation to a disponer or a successor, as the case may be, is a dwelling house that— | ||
(a) was occupied by the disponer as his or her only or main residence at the date of his or her death, | ||
(b) was continuously occupied by the successor as his or her only or main residence— | ||
(i) throughout the period of 3 years immediately preceding the date of the inheritance, or | ||
(ii) where the dwelling house replaced another dwelling house as that successor’s only or main residence, the first-mentioned dwelling house and the dwelling house that was replaced as that successor’s only or main residence, for periods which together comprised at least 3 years falling within the period of 4 years immediately preceding the date of the inheritance, | ||
and | ||
(c) is the only dwelling house to which the successor is beneficially entitled or in which the successor has a beneficial interest at the date of the inheritance of that dwelling house, whether or not that successor had such an entitlement before the date of the inheritance or acquires the entitlement by virtue of that inheritance. | ||
(3) For the purpose of subsection (2), a disponer or a successor, as the case may be, is deemed to occupy a dwelling house for a period during which he or she ceases to occupy that dwelling house in consequence of his or her mental or physical infirmity. | ||
(4) Subject to subsections (5) and (6), a relevant dwelling house is exempt from tax in relation to the inheritance by the successor of the dwelling house and the value of the dwelling house shall not be taken into account in computing tax on any gift or inheritance taken by a successor who takes an inheritance of the relevant dwelling house. | ||
(5) For the purposes of subsection (4), a dwelling house shall not be regarded as a relevant dwelling house where it is taken— | ||
(a) by way of a gift, other than where it is taken by a dependent relative under subsection (9), or | ||
(b) under a disposition referred to in paragraph (c) of section 3(1). | ||
(6) Subject to subsection (7), a dwelling house shall cease to be regarded as a relevant dwelling house where— | ||
(a) the dwelling house is sold or disposed of (either in whole or in part) within the relevant period and before the death of a successor, or | ||
(b) a successor ceases to occupy the dwelling house as his or her only or main residence during the relevant period, | ||
and, as a consequence of such sale, disposal or cessation— | ||
(i) tax shall be chargeable in relation to the inheritance by the successor of the dwelling house, and | ||
(ii) the value of the dwelling house shall be taken into account in computing tax on any gift or inheritance taken by a successor who takes an inheritance of the relevant dwelling house, | ||
as if that dwelling house had not been a relevant dwelling house at the date of the inheritance. | ||
(7) (a) Notwithstanding subsection (6), a dwelling house shall not cease to be regarded as a relevant dwelling house where— | ||
(i) the entirety of the consideration for the sale or disposal of the dwelling house (in this subsection and in subsection (8) referred to as the ‘inherited dwelling house’) is used by a successor to acquire a dwelling house to replace the inherited dwelling house as the successor’s only or main residence (in this subsection and in subsection (8) referred to as the ‘replacement dwelling house’), the period of occupation of which as the successor’s only or main residence, when added to the period of occupation of the inherited dwelling house as his or her only or main residence, amounts to an aggregate period comprising at least 6 years falling within the period of 7 years commencing on the date of the inheritance, | ||
(ii) a successor is of the age of 65 years or over at the date of the inheritance of the dwelling house, | ||
(iii) a successor ceases to occupy the dwelling house in consequence of his or her mental or physical infirmity (which infirmity is certified by a registered medical practitioner who is registered in the register established under section 43 of the Medical Practitioners Act 2007 ), whether or not the dwelling house is sold or disposed of, or | ||
(iv) a successor is required to be absent from the dwelling house in consequence of any condition imposed by his or her employer requiring the successor to reside elsewhere for the purposes of performing the duties of his or her employment. | ||
(b) Subparagraphs (iii) and (iv) of paragraph (a) shall apply to a replacement dwelling house, as they apply to a relevant dwelling house. | ||
(8) Where the consideration for the sale or disposal of an inherited dwelling house, or a replacement dwelling house, as the case may be, (in this subsection referred to as the ‘sold dwelling house’) exceeds the consideration for the acquisition of any replacement dwelling house (in this subsection referred to as the ‘acquired dwelling house’) acquired as a replacement for the sold dwelling house, then the value of the sold dwelling house which is chargeable to tax under subsection (6) shall be reduced in the same proportion as the consideration for the acquired dwelling house bears to the consideration for the sold dwelling house. | ||
(9) (a) In this subsection— | ||
‘relative’, in relation to the disponer, or to the spouse or civil partner of the disponer, as the case may be, means lineal ancestor, lineal descendant, brother, sister, uncle, aunt, niece or nephew; | ||
‘dependent relative’ means a relative who is— | ||
(i) permanently and totally incapacitated by reason of mental or physical infirmity from maintaining himself or herself, or | ||
(ii) of the age of 65 years or over. | ||
(b) For the purposes of this section, a dependent relative who takes a gift of a dwelling house shall be deemed to take the dwelling house as an inheritance on the date of the gift. | ||
(c) Where a dependent relative takes a gift of a dwelling house, paragraph (a) of subsection (2) shall not apply for the purposes of determining whether the dwelling house is a relevant dwelling house.”. |