First time buyer or investor?

[Eurofan]

Can someone confirm or deny (or point me in the right direction) the following.

I have a 'friend' who's buying a two-bed townhouse to rent out, it's quite some distance from where he currently rents so he has no intention of living there himself.

He's convinced that since he's a 'First Time Buyer' he's perfectly on the up and up not to have to pay stamp duty (prop value €185k). I'm trying, in vain, to warn him that he is in fact liable for stamp duty since he's not an owner occupier.

Not only that but if he proceeds down this route he'll potentially find himself with interest and fines to pay down the road. He can't afford to pay this now never mind months or years from now.

Hence i'm being accused of being a begrudger who doesn't want to see him profit from (the inevitable) capital gains he'll realise in the way i was lucky to myself.

I'm happy to see anyone doing well but he's involved with a genuine friend of mine and i'd hate to see her dragged into this if it goes pear shaped. He's going to be unable to handle more than a single month unrented etc. so stamp duty is a spanner in the works he doesn't want to know about.

Interestingly his solicitor advised him 'not to worry about it' since 'everyone does it'....

 

[ClubMan]

He's convinced that since he's a 'First Time Buyer' he's perfectly on the up and up not to have to pay stamp duty (prop value €185k). I'm trying, in vain, to warn him that he is in fact liable for stamp duty since he's not an owner occupier.

Unless he is going to live there or have somebody live there on his behalf rent free (under the relevant stipulation of the stamp duty legislation) then he is not a FTB but an investor. His solicitor should apprise him of this fact and his investor SD liability. He obviously loses his FTB status by doing this and cannot claim owner occupier mortgage interest relief etc. If he is planning to rent it out then he is obliged to declare and pay income tax on rental income. If/when he does this then the fact that he is not an owner occupier will become obvious to Revenue. If he does not do this and his tenants claim rent relief then his landlord status will become obvious to Revenue. If he plans to fraudulently rent it out under the rent a room scheme then he is storing up a potentially expensive hostage to fortune.

Interestingly his solicitor advised him 'not to worry about it' since 'everyone does it'....

Hmmmm. If this is actually true (you are obviously not privy to your "friend's" private consultations with his solicitor so must take his word for it) then it sounds like an incompetent or dodgy solicitor. On the other hand your "friend" could be simply telling porkies to convince you and/or himself about the viability of his dodgy strategy.

 

[Eurofan]

If he plans to fraudulently rent it out under the rent a room scheme then he is storing up a potentially expensive hostage to fortune.

Thanks for confirmation of what i thought, i'd actually completely forgotton about his mortgage relief too. Getting bloody messy.

Hmmmm. If this is actually true (you are obviously not privy to your "friend's" private consultations with his solicitor so must take his word for it) then it sounds like an incompetent or dodgy solicitor. On the other hand your "friend" could be simply telling porkies to convince you and/or himself about the viability of his dodgy strategy.

I gather he brought this up very late in the buying process with the solicitor and was given the quoted 'wink,nudge' advice. He was quite happy to take that as said but while he seems to appreciate that what he's doing puts him on very dodgy ground he just drops the "everyones doing it" quote.

I suggested getting written advice from said solicitor to the effect of what he claims to have been told but got a sigh and rolled eyes in response... I've tried appealing to his girlfriend (my actual friend of many years) but she seems to see little more than him 'getting a foot on the ladder and showing some entrepenurial spirit'.

Bug's the hell out of me though to see property mania gone so far that some people are in reality risking so much on speculation...

I'm close to giving up on this, would anyone have a link to the revenue guidelines i could give him on this before he actually signs? Thanks

Beyond that i'm washing my hands of it..

 

[ClubMan]

Some people who were aware of somebody else engaging in tax evasion might be inclined to report the perpetrator. One way or another, if he does engage in tax evasion then hopefully, for the sake of the many other compliant taxpayers, he will be found out one way or another in the short, medium or long term even without anybody assisting Revenue.

would anyone have a link to the revenue guidelines i could give him on this before he actually signs?

On what precisely? The Revenue documentation on all of the issues that I raised above is not difficult to find by browsing or searching their site.

Does your friend have any official hand, act or part in this transaction other than being happy to sit idly by while her boyfriend defrauds the state and compliant taxpayers? Why not point her and her boyfriend to this thread?

 

[Eurofan]

Does your friend have any official hand, act or part in this transaction other than being happy to sit idly by while her boyfriend defrauds the state and compliant taxpayers? Why not point her and her boyfriend to this thread?

Because i've already been accused in no uncertain terms that i'm either sticking my nose where it's not wanted and/or begrudging him an 'opportunity' to further himself.

I've found a revenue doc which clearly points out the owner occupier point for stamp duty exemption and have printed it off. I'll be giving it to him tomorrow but after that i'll have nothing further to do with it.

I'll grant there is undoubtably a moral case to be put forward for surrendering the information directly to the state but it won't be me who does it. I'm sad to admit that she does have a direct hand in the matter in that she works for the financial institution that has approved the mortgage and assisted in doing so.

I've cautioned them not because of the cost to the taxpayer but because of the inevitable eventual cost to him (them?) for being so foolish.

 

[ClubMan]

What I meant was if she had any beneficial ownership or personal involvement in the purchase that might expose her to risk down the line of repercussions arising from any tax evasion that might be uncovered in relation to this matter? If she has and cannot be convinced that this is not a prudent way to approach matters then that's not really your problem. If the matter is, as it seems to be, a cut and dried one of tax evasion then I for one would certainly be considering shopping the perpetrators.

 

[Martinslan]

I bought and closed on an apartment in Dublin in March. I got a letter from the Tax office last week asking me to advise them of the use I had put the property to since purchase!!! Looks like your "friend" would need to keep all matters above the table...
Slán
Martin