Claiming relief on mother’s nursing home expenses

I note your advice back in February last year that there does not appear to be a link between any monies a parent may gift to their children and their “children’s” use of that money to pay private nursing home fees and subsequently make a claim for tax relief on the payments.

I am facing this situation myself. My mother will likely have to go into long-term care and I am looking at an alternative to the “Fair Deal” scheme.

The Revenue website directs you towards section 469 of the Taxes Consolidation Act 1997, updated in 2016. Section 5.2.1 (page 11) specifies that “tax relief on the full cost of maintaining an individual in a nursing home may be allowed in cases where the claimant has not been reimbursed . . . directly or indirectly, by the nursing home resident or by a third party in respect of such cost”.

This would suggest to me that it is not in order for a “child” to pay the nursing home costs and claim them back against their taxable income if monies are being gifted by the person in care to the “child”. I guess it’s down to the definition of “direct or indirect” payments. A “child” could logically argue that any payments they are receiving are part of their inheritance and not necessarily or solely for the purpose of paying for private nursing home care.

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Mr FD, email

The issue of nursing home charges and how to meet them is becoming increasingly relevant. But the situation you present is very particular – where the parent in receipt of the care can pay for it but the care is instead funded by a child and a “contra” payment is made by the parent.

Clearly, under section 469 of the Taxes Consolidated Act 1997, which covers the issue of tax relief on health costs, anyone who is paying the costs of another person’s healthcare can claim it as an expense against tax as long as the care or procedure meets the criteria laid down and is not already being reimbursed by another person or body – such as a private health insurer or a compensation claim.

The specific quote you cite is not section 469 of the Act itself, which is fairly brief, but the accompanying Revenue guidance notes which indicate how it should be regarded for the purposes of assessing tax liability.

In the article to which you refer, I wrote last February that there is no necessary link between a gift from a parent to a child under the capital acquisitions tax regime and payment of nursing home charges.

In that case, the man had paid €28,500 in nursing home bills. He had also received a gift from his mother of €100,000, as had his siblings. However, there was nothing to suggest his siblings were using that money to pay nursing home costs.

I argued that, in those circumstance, there was no reasonable way of drawing a direct line between one of three gifts and a separate expense.

Matter of interpretation

However, you are right when you suggest this is a matter of interpretation, and there is also the wider backdrop of a Revenue that is getting more exercised by what it sees as abuse of the tax code to allow parents fund the lifestyles of adult children in a manner that avoids tax.

And you’ll note the section 469, which deals with relief for health expenses, was reviewed last October eight months after the piece I wrote. While I suspect the Revenue has not been aggressively proactive in this area, it would not be sensible to assume they will turn a blind eye.

You claim for health expenses on a Med1 form and these days, as a matter of course, submitting a Med1 will lead to a request by Revenue to file a form 12 balancing statement of your tax affairs for the relevant year.

The bottom line is that if Revenue suspects you could not afford the costs of nursing homecare from your own resources, they will disallow any tax relief claim on bills they determine were effectively paid by your mother by virtue of money she has given you. You will only get relief for whatever portion of the costs the Revenue decides you have actually borne yourself.

You don’t say whether you have siblings and, if so, whether they too will be in receipt of similar monies from your mother. If not, it might harden Revenue’s conviction that this is simply a routing of funds with the express purpose of availing of tax relief.

There is, of course, no certainty that they will pursue the issue but, equally, there is absolutely no guarantee that they won’t.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.