If we build, what tax liabilities?

Hi All,,

Hoping someone can give me some advise re:building/finance & being FTB.
1) What financing options are open to you if you want to build? Can you
get 100% mortgage for building a house?

2) If we were to build on a side plot given as gift from parents, what tax
liabilities would come into play. CGT or stamp duty etc?

3) As FTB and intended owner/occupier, can we build whatever we want
and not incur Stamp duty on the cost of build (say 150K) + land gift?
I've seen maximum house size rules, the 317K threshold etc,
owner/occupier- and I'm confused as to what would apply in this case?

Thanks for any help
Michelle.

The overall context assuming that you will be given a gift of a site:

1. No, not a 100% mortgage to buy a site and build, but if the site has for eg a value of 50,000 and you want 150 to build, that is not a 100% mortgage, since you can take into account the value of the site. But one of the brokers who post here regularly can clarify that.
2. If the site goes from parent to child, there is an exemption currently depending on the value of the site if the child intends to build their future home on the site, from stamp duty and CGT. If you have to add the name of your partner to the site, the exemption may be lost. But if you post the rough value of the site, it might be that you could have a deed from parent/s to child first and then from child to child and partner without incurring either CGT, stamp duty or CAT, depending on the value of the site.

3. As above if the exemption applies there is no stamp duty, if not the stamp duty is on the value of the land passing at non-residential rates- max house sizes, owner occupier etc are not relevant.

Thanks for that Vanilla.

I'm not sure what the value of the site would be- it's only a small
side-of-house plot, but in these days that could be anything.
Can you tell me what the limits are for gift, transfers and stamp duty(parent to child and partner to partner)?

On the mortgage thing- if the site was gifted to us, are you saying we wouldn't need 100%? Even if we require 100% of the building costs? Would the same financing options be open to us, or are there any differences?

Thank you
Michelle.

Here are the thresholds for gifts:

GroupRelationship to DisponerGroup Threshold
2004(after indexation)2005(after indexation)2006(after indexation)
ASon/Daughter €456,438 €466,725 €478,155
BParent*/Brother/Sister/ Niece/Nephew/Grandchild €45,644 €46,673 €47,815
CRelationship other than Group A or B €22,822 €23,336 €23,908

The exemption on parent to child of a site transfer is as follows:

'The transfer of a site from a parent to child is exempt from stamp duty where the site transfer is for the purpose of constructing a house which will be the child’s main residence and where the value of the site does not exceed €254,000.'

The rates of stamp duty on non-residential property otherwise are:

Aggregate
ConsiderationRate of Duty
Up to €10,000Exempt€10,001 to €20,000 1%
€20,001 to €30,0002%
€30,001 to €40,0003%
€40,001 to €70,0004%
€70,001 to €80,0005%
€80,001 to €100,0006%
€100,001 to €120,0007%
€120,001 to€150,0008%
Over €150,0009%
You can see why it would be easier if you posted an estimate of value to give you a rough idea of the taxes etc.

In relation to the mortgage, there are far better qualified people who browse here who would be able to answer but I think the way it works is that your parents gift a site to you worth for eg 100K, and you obtain planning on it ( although it would be better if you got the planning before the transfer but thats another issue), and you get a quote of 150k to build your house. Well if the bank valuer concurs that the site is indeed worth 100k and that the completed house will be worth 250k, then you are only really looking for a 60% mortgage- of 150K. Does that make sense? In other words, depending on the value of the site you might well be able to obtain 100% of the building cost, although it would not be considered a 100% mortgage because of the equity you have in the site. Now of course obtaining 150k will depend on whether your incomes qualify you for this amount.HTH

That's excellent Vanilla, thanks a million for replying.

I think I'm safe on the income/mortgage thing once I'm off probation in job, in April. The brackets, I'll have to print them out and see where site ends up being valued!

On the transfer, we'll probably apply for the PP while the site is still in my parents name to see whether the whole thing would work or not.
Then if we got OPP, we could go down the legal route and get everything sorted.

Cheers, M.

Vanilla is right - once the site is in your name the value of it constitues the deposit and then, subject to you meeting the criteria in terms of income, etc - you can borrow 100% of the build cost.

Sarah

www.rea.ie

Thank you

Vanilla,

Are these values the value of a site before or after planning has been approved? I ask because we have been given (paperwork not finalised yet) a 2 acre site in area where houses on smaller sites fetch around 1.2m which does not have planning permission yet but with permission the value could be anything from € 250000 upwards (or so I have been told). Are these gift exemptions cumulative as there is a possibility of further "gifts" and do they affect inheritance tax in any way? All advice greatlty appreciated!

The relevant value will be the actual market value on the date the transfer into your name is signed- so if the transfer is signed before planning permission, it is that value which is relevant, if the transfer is signed after planning is granted, then the value may well increase according to what you are saying.

The threshold limits are for both gifts and inheritances taken during your lifetime. So for eg you have only the one threshold for both gifts and inheritances of approx €478k from your parents for your lifetime. Except for a yearly threshold of €3000 for gifts only which can be disregarded. And in the past a cut off date for prior gifts and inheritances was established, so that might be updated too at some point in the future.

Manu thanks for that..we had thought of doing the transfer after pp had been granted (if granted) but will now make sure we do it before as currently is only agricultural land. Are there exemptions for grandchildren also (minors) or do the same rates apply and can a daughter or son in law benefit from the same exemptions or is it blood relatives only? The reason I ask is that a relative is disposing of a number of his assets and obviously we want to limit the amount of tax we would have to pay!

In laws are considered as strangers in blood ( except that there is an exception in inheritance law, but that is not relevant here). There is currently no special exemption for grandchildren, and their threshold would be group B above, except again in certain inheritances.

Re: If we build....planning regs

Another query,for anyone who knows anything about planning regs

We had intended building in the garden of an existing dwelling.
The total space we were intending on using was quite small, big enough to build a very modest home, with not much left over.

However, we've been told that each new dwelling will incur a need for a private open space of it's own, of 60 sq metres (from the Dev plan).
This seems like a lot to me, is it? Roughly what size is that?
Also, does anyone know what planners in Ireland define a Duplex as (they only require 10 sq m). Is there anything else we can do which would reduce the open space needed?

Any suggestions appreciated, trying to think outside the box here, hehe!
Michelle.