Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 D'Olier Street, Dublin 2, or e-mail to dcoyle@irishtimes.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.

Inheritance

I am 22 and have been left a house by my aunt, who died in August last year. I have to pay inheritance and probate tax on the home. When the tax free allowance for Class B relatives was increased in the Budget, I assumed it would apply to me but I have now been informed it only applies to beneficiaries whose relatives died in December or since.

I do not officially own the house, as the will has not been processed yet. My solicitor warns me I may have to pay interest on the tax from the date my aunt died even though I do not officially own the house and have not received the tax bill. Where do I stand and are there any other reliefs or exemptions available to me as a nephew?

Mr N.L., Kilkenny

You are one of a sizeable group of people who appear to have lived in hope that the widely flagged reform of the capital acquisitions tax (inheritance tax) regime would reduce their liability.

Unfortunately, as you have discovered, while there has been a substantial review of the scheme, the more liberal approach is not retrospective. As such, it applies only to people who died on or after December 1st, 1999. The fact that you or the executor of the estate did not process the will or receive the benefit of the estate until after that date is irrelevant.

Regarding the likelihood of paying interest on the tax bill, time limits are set down for payment of probate tax, which is levied at 2 per cent on the net value of the estate, if the value of that estate is more than £40,000 (€51,000). There are certain exemptions but, it does not appear that you would benefit under them, unless you were living with your aunt in the house as your main residence prior to her death.

Basically, probate tax must be paid within nine months of the death. Any later than that and interest becomes due; any earlier and a discount is available. As such you still have some time to sort out probate.

You don't say who is the executor or personal representative of your aunt's estate under the will. The importance of this issue is that it is this person who is responsible for sorting out probate and paying the tax.

The first step in sorting out probate is to get a probate self-assessment form (Form PT1) and complete it before returning it to the Revenue Commissioners together with another form (Form CA24) giving a valuation of the estate and a copy of the will. When the valuation is agreed and the tax paid, probate can be granted by the courts. Until then, the assets of the estate cannot be distributed to the beneficiaries.

Remember too, that the executor or personal representative has a legal responsibility for paying the correct taxes, including probate tax and inheritance tax, and ensuring that all assets and liabilities have been recorded. That is why, in all but the most basic of wills, an executor often turns to a solicitor for help in sorting out the deceased's affairs.

It does not appear that there are other reliefs available to you as a nephew. I know this is difficult as it may put you in the position of having to sell your aunt's house to meet the tax bill. This is precisely the reason for some of the reforms in the inheritance tax regime. It sought to offset the rapid rise in property prices, which forced many people to dispose of family homes upon bequest.

Unfortunately, this is primarily aimed at children and, in any case, comes too late for you.

Capital gains tax

I read in your Budget supplement that people who had lived in a property for more than 10 years would not be liable to capital gains tax on selling the property. However, when I went to sell a property in such circumstances, I discovered this was not the case and I am now stuck with a capital gains tax bill of £12,000. What is going on?

A.N., e-mail

The issue to which you refer was addressed in this column last month, not the Budget supplement. The relief from the sale of property due to the length of ownership is a very specific one. It is known as retirement relief and relates to the disposal by people over the age of 55 of business assets to someone other than a child. In this context, a farm qualifies as a business. If the value of the assets is less than £375,000, no capital gains tax is charged in such circumstances. Above this figure, capital gains are charged on the amount above the threshold.

If the disposal is to a child or, indeed, a nephew or niece who has been working the business/farm for five years up to the time of the disposal, no capital gains is levied regardless of the value. In such circumstances, the child or other relation receiving the asset must hold onto it for at least six years or lose the relief.

Interestingly, although called retirement relief, there is no requirement to actually retire following such a disposal.

Having said all that, it is unclear precisely what your relationship to the property you are selling is. If it is your principal private residence/family home, no capital gains tax is due anyway as the family home is exempt from capital gains, as long as you have occupied it as the family home throughout your ownership of it.

If it has been rented out for part of your ownership, that portion of the proceeds will be liable to capital gains tax. For the purposes of capital gains, the family home can include surrounding grounds up to one acre.