Getting Married:Move out of PPR

[inchydoney]

I have searched through the site looking for an answer on this, but to no success. Perhaps you can help.

I own a house and live in it. Treated as PPR. I also avail of the rent a room scheme.

My girlfriend owns a house but it is rented out. Treated as investor and pays tax on rental income.

Plan is to get married and move into her house. Please don't suggest moving into my house to keep existing PPR as is-the decision has been made.

I need to clarify my tax implications:

• I originally paid 4.5% stamp duty in 2002 when I bought my PPR. Now that I am moving out, will i have to pay the clawback (i.e 1.5 % extra). This will mean me paying an extra 5000 euro as soon as i rent it out.
• I presently get mortgage tax relief on PPR - can I move this to her house. Can we then both claim the TRS - i think it is 66 euro each per month.

Id appreciate if anyone could answer these questions

Thanks

 

[ClubMan]

I originally paid 4.5% stamp duty in 2002 when I bought my PPR. Now that I am moving out, will i have to pay the clawback (i.e 1.5 % extra). This will mean me paying an extra 5000 euro as soon as i rent it out.

Yes if you rent it out before five years are up and assuming that 4.5% and 6% were the relevant SD rates in 2002.

I presently get mortgage tax relief on PPR - can I move this to her house. Can we then both claim the TRS - i think it is 66 euro each per month.Id appreciate if anyone could answer these questions

You can only claim owner occupier mortgage interest relief on a loan used to purchase or renovate your PPR. If she has a mortgage on the property then when it reverts to being a PPR then she can claim this relief on it. If you are added to the mortgage (not sure about property) deeds then you can also claim it. But such a change could have other tax implications (e.g. stamp duty on the transfer of part of the property to your beneficial ownership, capital acquisitions tax etc.) as long as you are unmarried.

 

[inchydoney]

Thanks Clubman for the information. It is hard to believe that because of my change in circumstances, revenue will penalise me to the tune of 5000. I thought maybe if there was a legitimate (ie getting married and moving into your partner's PPR or being sent away for work reasons) reason for changing your PPR, one would not have to pay the clawback.

This situation must happen to plenty of couples, and I wonder are people actuallly paying the clawback.

Because of the clawback, there is an incentive there not to declare rental income and continue saying the house is your PPR until the 5 year period has elapsed.

The only other option would be to sell it when I move out (no clawback applies) and reduce the mortgage on her PPR.

Thanks

 

[ClubMan]

Thanks Clubman for the information. It is hard to believe that because of my change in circumstances, revenue will penalise me to the tune of 5000. I thought maybe if there was a legitimate (ie getting married and moving into your partner's PPR or being sent away for work reasons) reason for changing your PPR, one would not have to pay the clawback.

There is a way to avoid this clawback. Don't rent the property out (at least in the first five years of ownership) and/or sell it thereby pocketing a CGT free gain. If you retain and convert the property to an investment/rental property then the normal taxation for investment properties applies.

Because of the clawback, there is an incentive there not to declare rental income and continue saying the house is your PPR until the 5 year period has elapsed.

If you don't rent it out until the five years are up then no SD clawback applies. There may be lots of incentives for tax evasion but it doesn't make it justifiable.