# Stamp Duty Clawback



## Goldie (13 Jul 2006)

As a first time poster i must admit that i am very impressed with the wealth of information contained in the forum.

My query relates to the clawback of stamp duty for a FTB who rents out (not under rent a room scheme) their property during the five year clawback period. 

I have been asked by a number of friends how revenue would know you have rented the property and that you now have a SD liability. Personally i am not condoning tax evasion but i want to be able to let these people know how their 'idea' will actually be scuppered by Revenue. Would they have to make a declaration when selling the property that it hasn't been let, no tax liabilities etc???

I want to know so that i can let them know and its up to them to make an informed decision on their own tax affairs? Thanks.


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## Ned_ie (13 Jul 2006)

The Irish taxation system is a Self Assessment System. As such it is up to the individual to properly maintain their own tax affairs. On the slae of the property the individuals should complete a return of capital gains on which they make various declarations- one of which would relate to the renting of the property. 

However, regardless of that declaration, they are tax evaders on a range of taxes from SD, to income tax and capital gains tax. REvenue may not catch them but they could face serious penalties etc if caught.


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## ubiquitous (13 Jul 2006)

Goldie said:
			
		

> I have been asked by a number of friends how revenue would know you have rented the property



Who knows? Only Revenue knows, and they won't tell. Anything is possible including the following:

- report from a tenant
- claim from a tenant for tax relief
- examination of archives of letting ads, letting agents records 
- use of the land registry database of properties and property owners to compare against...
     : electoral registers
     : social welfare databases
     : the Revenue's own database
     : TV licence databases operated by An Post
- etc etc etc

I'm a bit puzzled why you want to take it upon yourself to "advise" your friends. Sounds like as good a way to lose friends as any. Why don't you let them fend for themselves?


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## ClubMan (13 Jul 2006)

Don't forget that by not being above board as they are legally obliged to be they lose the ability to offset 100% of mortgage interest and other allowable expenses against rental income. The immediate monetary benefits accruing from tax evasion in relation to investment properties could be a lot less than people assume and the potential monetary and other penalties that could arise if/when evasion is uncovered could be significant.


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## Goldie (13 Jul 2006)

Thanks for the replies. This was a topic that was raised over a few drinks with my friends recently. The attitude of most was 'i'd take a chance', i don't agree and at the time i didn't have the info to substantiate my arguement. Cheers.


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## FilthyRich (14 Aug 2006)

Okay, I'm having a minor stroke reading this post.

I bought an apartment in December 2002 for €187600. I was a First Time Buyer so I didn't have to pay stamp duty. I lived in it until August 2005. It has been rented out since then.

I thought that once I had registered with the PRTB and was declaring my rental income, that was all I needed to do to fulfil my tax and landlord obligations.

I never even heard of stamp duty clawback til a couple of months ago. Up until last night I thought it was only payable if you were selling within five years of purchase. I don't intend to sell my property.

Do I owe stamp duty clawback? If so, can someone please calculate how much?


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## Eeek!!!! (14 Aug 2006)

You should get some information here: www.oasis.gov.ie/housing/buying_a_house_or_flat/stamp_duty.html


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## CCOVICH (14 Aug 2006)

FilthyRich said:
			
		

> Do I owe stamp duty clawback? If so, can someone please calculate how much?


 
You owe stamp duty at the rate applicable to investors at the time you purchased the apartment, payable from the date the apartment was first rented, so in theory, interest and penalties apply from that date up until the date you file your payment and return. I make the rate of stamp duty to be 3%.



			
				FilthRich said:
			
		

> Up until last night I thought it was only payable if you were selling within five years of purchase. I don't intend to sell my property.


 
This is a widely held misconception. I have two friends who believe it to be true. One is a trainee solicitor, the other is a qualified solicitor.


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## bazermc (14 Aug 2006)

FilthyRich said:


> Okay, I'm having a minor stroke reading this post.
> 
> I bought an apartment in December 2002 for €187600. I was a First Time Buyer so I didn't have to pay stamp duty. I lived in it until August 2005. It has been rented out since then.
> 
> ...


 
Sounds like you are liable to clawback, it does not apply when you sell withing 5 years but it does if you no longer occupy the house as your primary residence


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## bazermc (14 Aug 2006)

CCOVICH said:


> This is a widely held misconception. I have two friends who believe it to be true. One is a trainee solicitor, the other is a qualified solicitor.


 
So in short never get tax advise from someone not qualified to give it, unless the solicitors also studied tax, which does happen!!!!


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## FilthyRich (14 Aug 2006)

Eeek!!!! said:


> You should get some information here:


 
I checked out Eeek's link and have copied this info from it.

*If the first-time buyer *rents* the house within five years Revenue will claim back or 'clawback' the difference between the higher stamp duty rates and the duty actually paid. The only exception to this is the 'Rent a Room' scheme where part of the house is rented out. If the house is *sold* within five years there is _no_ clawback.



Now can anyone explain this to me: If I decided to sell the apartment within the five year period, I wouldn't have to pay stamp duty clawback. Therefore, do I not have a five year period in which to decide whether I'm going to sell or not? Surely, no clawback should be required before this five-year period has expired?

What's the point in my paying the clawback now if I'm still entitled to sell the apartment in a few months' time without having to pay it? (This is hypothetical as I have no desire to sell. But I'm a woman and we're allowed to change our minds!)

Would they refund it to me? Hardly!


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## CCOVICH (14 Aug 2006)

FilthyRich said:


> Now can anyone explain this to me: If I decided to sell the apartment within the five year period, I wouldn't have to pay stamp duty clawback. Therefore, do I not have a five year period in which to decide whether I'm going to sell or not? Surely, no clawback should be required before this five-year period has expired?


 
It's very simple-you can take 5 years to decide whether you want to sell it or not.  This does not give you the right to rent it while you are deciding.


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## thewatcher (14 Aug 2006)

"A stamp duty 'clawback' arises where rent, other than under the 'Rent a Room scheme' is obtained within the five year period (or up to the date of a sale during this period) from the date of the purchase deed. The amount of the clawback is the difference between (a) the stamp duty payable at the higher rates which would have applied at the date of the purchase deed and (b) the lower duty (if any) paid as a result of obtaining the benefit of the reduced rates. "

You're not reading it correctly,once you rent out the property other than the rent a room scheme within 5 years you ARE liable for stamp duty.

If you go over the 5 years and then rent it out there is no clawback.
As a first time buyer you didn't pay any stamp duty,if you sell the property without having rented it out within 5 years there is no clawback.

From the info you have posted you *ARE *liable for the clawback and should have paid it 12 months ago,you can find the interest and penalties by searching as someone posted them on another thread.
If i was you i would contact the revenue,before they contact you i'm sure they will deal with you sympathetically.


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## ClubMan (14 Aug 2006)

thewatcher said:


> If i was you i would contact the revenue,before they contact you i'm sure they will deal with you sympathetically.


If I was you I'd contact an accountant/tax advisor for advice before contacting _Revenue_.


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## liteweight (14 Aug 2006)

Just curious, what happens if FilthyRich decides to move back into the property and then sells it at a later date?


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## Howitzer (14 Aug 2006)

liteweight said:


> Just curious, what happens if FilthyRich decides to move back into the property and then sells it at a later date?


 
You become liable for stamp duty from the moment you start to rent out the place. What you do subsequent to that is irrelevant.

Maybe you're thinking of the CGT liavbility that he'll be liable for upon selling?


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## ClubMan (14 Aug 2006)

If a property bought as an owner occupier _PPR _is rented out (other than under the rent a room scheme) within 5 years of purchase then the _SD _clawback applies. End of story. And moving back into it as one's _PPR _doesn't change that one iota. Moving back in might mean that less of a _CGT _liability arises when the property is eventually sold. Basically on a sometime _PPR_/sometime rented property some portion of the eventual resale gain is assessable for _CGT_. This portion is calculated with reference to how long the property was rented versus a _PPR_. This is explained many times in many similar threads.


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## bazermc (14 Aug 2006)

With all anti avoidance systems intoduced into legislation you must look at the reason behind the need for a clawback provision then you will fully understand how it works
The stamp duty clawback rule is to avoid abuse of the relief given to owner occupiers of new properties under 125sq mts. Without the clawback you would get investors buying poperties claiming occupation, staying for one night and then renting out. Thereby ensuring no stamp duty cost.
Therefore, *logically it does not apply should you decide to sell*, the five year period to me is a mute point it could be lowered, maybe a year or two would be appropriate?


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## FilthyRich (14 Aug 2006)

bazermc said:


> With all anti avoidance systems intoduced into legislation you must look at the reason behind the need for a clawback provision then you will fully understand how it works
> The stamp duty clawback rule is to avoid abuse of the relief given to owner occupiers of new properties under 125sq mts. Without the clawback you would get investors buying poperties claiming occupation, staying for one night and then renting out. Thereby ensuring no stamp duty cost.
> Therefore, *logically it does not apply should you decide to sell*, the five year period to me is a mute point it could be lowered, maybe a year or two would be appropriate?


 

I see your point bazermc. And thank you to everyone else for your replies. I just feel a bit sick at the moment. I wasn't trying to con anyone when I bought my apartment. I wasn't an investor. I thought it was going to be my home for a long time to come. My circumstances changed. I met someone and we decided to buy a house together.

I thought I was doing everything by the book. I didn't know anything about Stamp Duty Clawback. If I had known about it I would have paid it on time. Now it appears my ignorance is going to cost me a lot in penalties.

My username is not reflective of my current financial state. It was reflective of a dream. This day has just been absolutely rotten.


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## liteweight (14 Aug 2006)

bazermc said:


> With all anti avoidance systems intoduced into legislation you must look at the reason behind the need for a clawback provision then you will fully understand how it works
> The stamp duty clawback rule is to avoid abuse of the relief given to owner occupiers of new properties under 125sq mts. Without the clawback you would get investors buying poperties claiming occupation, staying for one night and then renting out. Thereby ensuring no stamp duty cost.
> Therefore, *logically it does not apply should you decide to sell*, the five year period to me is a mute point it could be lowered, maybe a year or two would be appropriate?



Very good. I get that!

 Howitzer I wasn't thinking of capital gains. Just thought I saw somewhere that there were some exemptions from the Stamp Duty claw back with regard to travelling abroad i.e. if a FTB had to leave the country at the request of his employer???


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## ClubMan (14 Aug 2006)

FilthyRich said:


> I thought I was doing everything by the book. I didn't know anything about Stamp Duty Clawback. If I had known about it I would have paid it on time. Now it appears my ignorance is going to cost me a lot in penalties.


Just shows that anybody getting into a business (in this case rental property management) that they know little or nothing about should really seek independent, professional advice about the tax and other issues involved.


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## Howitzer (14 Aug 2006)

There do seem to be a lot of similar posts to this, I wonder if Revenue may be open to an amnesty of some description in the foreseeable future?


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## CCOVICH (14 Aug 2006)

Howitzer said:


> There do seem to be a lot of similar posts to this, I wonder if Revenue may be open to an amnesty of some description in the foreseeable future?


 
Why? The actual rules (as opposed to perception) seem clear to me-and I would like to know how anybdoy can reasonably claim otherwise?

Ignorance of the rules is no defence.


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## Howitzer (14 Aug 2006)

CCOVICH said:


> Why? The actual rules (as opposed to perception) seem clear to me-and I would like to know how anybdoy can reasonably claim otherwise?
> 
> Ignorance of the rules is no defence.


 
Certainly wouldn't argue with you but the precident set by all the amnestys of the last 10 years seem to indicate whenever there's a big lump of people caught out they like to give people the opportunity to pay their liabilities (+interest) without incurring penalties and/or prosecutions, whilst at the same time ensuring maximum publicity.


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## CCOVICH (14 Aug 2006)

Fair enough, I guess that makes sense.


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## bazermc (14 Aug 2006)

This post should me locked and made a sticky.  It seems to be the most commonly asked on AAM, I have lost count of the amount of times I have seen this question being asked this year alone.  I suppose it is indicative of our overheating property market.


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## CharlieC (15 Aug 2006)

So if somebody incurs the clawback and has to pay the investor SD rate, that means they have ceded their FTB status for ever more without ever actually benefiting from its SD exemptions.


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## ClubMan (15 Aug 2006)

Yes - they are no longer a _FTB _as far as _SD _on a subsequent property purchase goes regardless of the clawback. Although they can still benefit from _FTB _rates of owner occupier mortgage interest relief for a full seven years.


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## liamwoods (15 Aug 2006)

I am an owner occupier of a 2-bed apartment that I would like to rent out so I can go abroad to the states for a year or two, but I have only owned the property from new for 3 years. So I would be liable for SD clawback, I assume. The apartment would fetch about E1,300 per month if let out. What if I was to Rent the master bedroom under the rent a room scheme for about E800 and leave some belongings in the single bedroom(This would pay most my mortgage). I know this means the tenant(s) would lose their rights, but they would have a cheap one-bed apartment and we could make a verbal agreement that I would be away most of the year (wink-wink: all of it). Everbody wins? Would I get away with it though? It sounds like it is legal anyhow.


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## CCOVICH (15 Aug 2006)

liamwoods said:


> I am an owner occupier of a 2-bed apartment that I would like to rent out so I can go abroad to the states for a year or two, but I have only owned the property from new for 3 years. So I would be liable for SD clawback, I assume. The apartment would fetch about E1,300 per month if let out. What if I was to Rent the master bedroom under the rent a room scheme for about E800 and leave some belongings in the single bedroom(This would pay most my mortgage). I know this means the tenant(s) would lose their rights, but they would have a cheap one-bed apartment and we could make a verbal agreement that I would be away most of the year (wink-wink: all of it). Everbody wins? Would I get away with it though? It sounds like it is legal anyhow.



Have a read of this long and interesting thread.


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## ClubMan (15 Aug 2006)

liamwoods said:


> So I would be liable for SD clawback, I assume.


Yes - can't see how there can be any doubt at this stage!


> What if I was to Rent the master bedroom under the rent a room scheme for about E800 and leave some belongings in the single bedroom(This would pay most my mortgage).


You can only avail of the rent a room scheme if you are an owner occupier. If you move abroad for a few years then it is unlikely that you could retain your owner occupier status.


> we could make a verbal agreement that I would be away most of the year (wink-wink: all of it). Everbody wins?


Not if it involves illegal tax evasion. The state and other compliant taxpayers lose out and hopefully the evader does too eventually when they are caught. Please don't ask for advice on evading tax or engaging in illegal activities on _AAM_.


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## liamwoods (15 Aug 2006)

Thanks for the advice. I am only looking for a way to legally avoid paying stamp duty clawback. This is simply a theoretical option I have put to you so I can better understand my position. Under no circumstance would I put myself in a position where I may be liable for clawback or penalties. 

The system just seems unfair, if I go abroad I will have to rent in the US. Renting out my place could leave me with a SD bill of about E25,000. Or I dont rent and I lose out on 15,600 potential rent in one year (plus I pay my mortgage) or I have to sell up and off the property ladder. All I want to do is live abroad for a year and now I can't because all of these options leave me skint. Guess I just need more money.


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## CCOVICH (15 Aug 2006)

liamwoods said:


> The system just seems unfair, if I go abroad I will have to rent in the US. Renting out my place could leave me with a SD bill of about E25,000. Or I dont rent and I lose out on 15,600 potential rent in one year (plus I pay my mortgage) or I have to sell up and off the property ladder. All I want to do is live abroad for a year and now I can't because all of these options leave me skint. Guess I just need more money.



It could be argued to be unfair if you 'have to' go to the US for a period of time for work, but not if it is your choosing.

If you are travelling for work (as opposed to a working holiday), the info in this post, which I linked to above, maybe of interest.


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## liamwoods (15 Aug 2006)

Thanks CCOVICH, had a long read through your last link. I am fairly certain there is no way around this for people in my situation. Guess I will have to wait the full 5 years but I'm young now and who knows, by then I might have serious commitments. Pity!


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## ClubMan (15 Aug 2006)

liamwoods said:


> Thanks for the advice. I am only looking for a way to legally avoid paying stamp duty clawback.


So why these comments then?


> we could make a verbal agreement that I would be away most of the year (wink-wink: all of it). Everbody wins? Would I get away with it though?





> The system just seems unfair, if I go abroad I will have to rent in the US. Renting out my place could leave me with a SD bill of about E25,000. Or I dont rent and I lose out on 15,600 potential rent in one year (plus I pay my mortgage) or I have to sell up and off the property ladder.


After most likely pocketing a tax free capital gain. Hardly penal.


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## liamwoods (16 Aug 2006)

Clubman.You have taken these quotes of mine out of their chronological order and only taken the pieces that suit your point. My "wink-wink" comment was followed immediately by "sounds legal anyway?" OK I admit It sounded devious. Also if I thought I would get away with it, I would be very tempted but the stress and worry of it catching up to me just isn't worth it.



ClubMan said:


> So why these comments then?
> 
> 
> After most likely pocketing a tax free capital gain. Hardly penal.



What do you mean?


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