Capital Gains Tax – difficult question

Just talking to a friend in the office about a property he is going to purchase.

It's going to be his third house he has bought.
It will cost 360,000 euros, it's under125 m2, he will be living in the house.
He also says he lives in the other two houses.
He bought the first house 8 years ago.
He bought the second house 2 years ago, it's under125 m2.
He didn't pay capital gains 2 years ago.

Surly he must pay capital gains now even if he says he is going to live in the 3rd house. He says he's not going too!! Is he winding me up??

Having a good barney with him, but can't explain why he should pay tax, help needed, lol!!


PS he doesn't use any Tax schemes.

OngarGuy said:

He also says he lives in the other two houses.

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CGT is only relevant on the sale of certain assets. One's Principal Private Residence is exempt unless it was ever rented out. If your friend is telling Revenue that three different houses are his PPRs and especially if he is renting any or all of them out then he is most likely evading tax and is storing up some potentially very serious/expensive hostages to fortune by doing so.

OngarGuy said:

Is he winding me up??

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Yes - either that or he is (possibly inadvertently) breaking the law.

Avoiding for the moment the whole issue of PPR vs Investment property, Capital Gains Tax is only payable on disposal of an investment - so he doesn't have to pay any CGT until he sells a house and actually realises a profit- as it stands at the moment he hasn't made any capital gain for him to be taxed on

It looks to me like he is quite correct

edit: Post crossed with Clubman and UB

Correct emf, I thought he was talking about stamp duty, thanks for the help lads look like I was wrong, but would i have been correct if it was stamp duty?

Only if the property is let. Stamp duty becomes payable on the date the house is first let if used originally as PPR.
Not sure what happens from a stamp duty point of view if he buys and moves into a house his PPR, buys a second house declares this as his PPR and does not let first house, buys a third house declares this as his PPR and does not let either of the other houses.

If the houses are let then he is also liable to tax on Profit on Rental Income