Owner occupier buyers letting out house within 5 years

Re: first time buyers letting out house within 5 years

Can you clarify the context of this post please? It's just that this post is contains nothing that has not been poster here before many times in relation to the stamp duty clawback applicable to the rental within five years of purchase of a property originally purchased as an owner occupied PPR.

Re: first time buyers letting out house within 5 years

i haven't seen anything about the late penalty charge or the reduction in same penalty.

Re: first time buyers letting out house within 5 years

It has been mentioned several times that the SD clawback is due once the property is rented out and, as with any tax liability, failure to discharge the liability on time may lead to interest and/or penalties. No harm in you posting this explanatory message directly from Revenue but I was just confused about the context of the post.

Re: first time buyers letting out house within 5 years

Would this apply when the first time buyer has purchased a new house or is it just second hand houses?

Re: first time buyers letting out house within 5 years

It applies to any owner occupier (FTB or non FTB) who rents the house (new or second hand) out within the first five years of ownership. Basically any owner occupier who coverts any PPR property to an investment property in the first five years are treated like an investor and the SD clawback (and other tax issues) apply. It's to stop people exploiting owner occupier benefits but then renting the property out. Note that the rent a room scheme can be availed of without triggering the SD clawback and other rental property tax implications.

I've edited the thread title in case there was some confusion that this might apply to FTBs only.

Does this Stamp Duty clawback apply if you rent out your house while you're out of the country? If you're away, and it's still your Irish PPR..?

yes - afraid so

The [broken link removed] mentions this:

WHO IS AN OWNER OCCUPIER?

An Owner Occupier is a person who purchases a house which is to be occupied by the purchaser, or a person on his behalf, as his only or principal place of residence and no rent, other than rent under the rent-a-room scheme, is derived from the property for a period of five years from the date of the current purchase.

Click to expand...

I've never fully understood when the bit that is underlined applies. Maybe a tax expert can comment?

On the other hand unless you are seconded by your work to work abroad then it is very unlikely that you can retain your PPR status on the Irish property while abroad.

I believe the ' or a person on their behalf' is intended to cover the situation where you have a dependant relative who lives in the house as their principal place of residence and you don't charge them rent.

Thanks Vanilla. Do you know if this means that the individual could have their own PPR plus another property which is not classed as an investment property because their relative lives there rent free? Is there a TCA or tax briefing reference on this by any chance?

Yes. Many people are unaware of this (including people who should like brokers and solicitors) but a second home being used by a dependent relative rent-free is treated as a PPR from a stamp duty point of view. Sorry I don't have a reference but if you ring revenue they will confirm it.

Thanks - I was just always curious about when the "on their behalf" clause applied. That seems to clear it up.

So if one were to go abroad for a year, leaving behind a two-bedroomed PPR, one *could* rent out one of the rooms, to a maximum of EUR7,620, under the rent-a-room scheme - and be subject to no clawback?

If you're abroad for a year then the property is unlikely to be still classed as your PPR. You'd need to check with Revenue to be sure. If you are an owner occupier of your PPR then you can rent more than one room and collect €7,620 tax free and with no SD clawback or CGT implications under the rent a room scheme. Above this limit all rental income is assessable for income tax and the normal investment property tax treatment applies.

Hi Simp,

With reference to your recent post re: using the rent-a-room scheme while abroad for the year, you may be interested in the reply I got from revenue today. Below my question and answer: -

My question:

Good Morning,

We are heading off to Australia for a year in March 2006. We have a mortgage and currently we are renting a room to someone under the rent-a-room scheme - are we still ok to do this even though
we are heading off for a year? I was under the impression that the house
would still be considered as our PPR because we will have spent some of
both tax years 2006 (2-3 months) and 2007 (9 months) in it, and the rent of course is under the yearly threshold for the year EUR7560.00 currently p/a.

Our trip is for the most part a backpackers holiday with maybe some
incidental seasonal work to supplement our cost of living.

Answer from Revenue today: -

Hi,

If you refer to tax leaflet IT70 section re rent-a-room-relief it states
that
;

A "qualifying residence" is a residential premises in the State, which is
occupied by an individual as his/her principal private residence during the
year of assessment.

To enable us to determine if you qualify for rent-a room-relief we would
require after the 31st December 2006 or on your return to this country
1. details of any foreign income received by yourself
2. what countries you had visited
3. exact period you were away
4. if you own property abroad
5. exact dates that you occupied your property here

Regards,
Revenue

Sorry it doesn't exactly answer your or my question, but it seems to imply that there are some circumstances in which you could do this depending on the criteria they use to assess points 1 to 5 above. Any tax experts know what they might be?

I just phoned the Revenue, and an extremely cagey lady informed me that if you leave the country the Revenue most likely won't recognise that you have a PPR here - even if you're working with an Irish company abroad, and paying Irish taxes. She said that the definition of PPR was one for the Tax Inspector.

So one probably *wouldn't* be lable for clawback if one *didn't* rent out any part of the home.

Any income exempt under the rent-a-room scheme would be contingent on the Tax Inspector's determination of whether you were maintaining a PPR here. But if he made a favourable determination you could have one or more people in the house paying up to EUR7560 in rent (max) - without clawback.

Any rental income over the EUR7560 threshhold *would* mean clawback. And the clawback is of the full amount - and is not on a pro-rata basis - and, as pointed out it incurs penalties from the day you rent out a room.

Yikes. But I can't see why someone who had no other residence, and was paying Irish PAYE, should be hit for clawback if work sends them away for a while and they want to avail of the rent-a-room...

Remember that Revenue only give out information - and it's not always accurate in my experience - and will not stand over it in the event of any dispute over interpretation of the relevant legislation, so if you want advice then go to a professional, qualified, authorised tax advisor.