Irish Times: First-time buyers may lose stamp duty relief

Dare I risk saying that this seems like a sensible and just application of the tax code?

I have posted previously about the distortion created in the housing market by having anything other than a uniform property purchase tax (or stamp duty, you can call it what you will). I still stand by that.

The development yesterday is the clarification by the Revenue Commissioners that they will seek stamp duty when a non-first time buyer has an interest in the property.

That seems fair enough to me. The first time buyer exemption (which I don't agree with but that's not relevant) is to facilitate first time buyers, not syndicates who include a first time buyer.

The "helping hand" so many parents are giving their children to "get a foot on the first rung of the property ladder" (to borrow that nauseous phrase) simply pushes up prices for those who don't have well endowed parents. It doesn't matter whether the parents are handing over cash or are guaranteeing borrowing otherwise beyond the first time buyer's reach - in either case the result is higher prices being bid.

This could take some of the heat out of the bottom end of the market.

Well done, Revenue.

oysterman.
 
The first time buyer exemption (which I don't agree with but that's not relevant) is to facilitate first time buyers, not syndicates who include a first time buyer.
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Hmmm...maybe it's just me, but I have visons of a group of Fat Cat property tycoons appropriating the incentives of a FTB when I read that sentance. That mightn't be what you meant, and it's certainly not what's happening.

There was a time in this country when 2 people married, bought a house, and lived there forever.


Things have changed.


If we're going to offer incentives to FTB's, it seems, to be fair, we have to acknowledge the FTB permutations that exist in modern Ireland.


Imposing a stamp duty on more people does not mean more people will save longer to buy a house.


Taxing FTB's with rich (or at least, not poor) parents won't make houses more
affordable.


Whatever the contributing factors, buying a house today is beyond most FTB's. I read somewhere (will look for the source in a minute) that more than one billion euro was collected last year in property stamp duty. How much of that was be borrowed in secret or offered from a parent who could ill-afford it?


I agree that Revenue should look for stamp duty from colluding investors. But it seems reasonable we should give the other FTB's a break.


J.


(By the way, I'm neither a FTB, nor parent of a FTB)
 
Scotty said:
But it seems reasonable we should give the other FTB's a break.
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But where do you draw the line? Why should an FTB whose folks can afford to subsidise them (and who go on the mortgage deeds) benefit from the same perks as those who don't have this option? Personally I reckon that, like the FTB grant, they should consider doing away with market skewing stuff like FTB tax breaks and level the playing pitch for all owner occupier buyers.
 
Personally I reckon that, like the FTB grant, they should consider doing away with market skewing stuff like FTB tax breaks and level the playing pitch for all owner occupier buyers.
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Or perhaps give non ftb owner occupiers the same tax breaks as investors.
 
Clubman,

If it comes down to a choice between giving the same perks to FTB's who have parents that can subsidise them...and giving no perks to FTB's who don't have family money...I'd rather everyone gets a hand.

The children who have parents of means (or FTB's who can tap the credit union for a no-trail loan) will still be able to buy a house on a level playing pitch, it's only the other guys who'll be left in renter's paradise.

The system isn't perfect the way it is, and I certainly don't know what would be better. But until the renting and/or house price situation improves I think all FTB's deserve some type of perk.

J.
 
elcato said:
Or perhaps give non ftb owner occupiers the same tax breaks as investors.
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But that would presumably mean subjecting owner occupiers to the same rates of stamp duty and CGT on the sale of their PPR as investors.

scotty said:
But until the renting and/or house price situation improves I think all FTB's deserve some type of perk.
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I disagree but there you go. Also, judging by anecdotal evidence here and elsewhere of landlords moaning that they can't let or that rents are falling maybe things already have improved in the rental market as far as tenants are concerned?
 
ClubMan said:
...maybe things already have improved in the rental market as far as tenants are concerned?
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Lower rents could well be the start of it, but I was talking about the bundle of issues that surround being a renter (tenant's rights, length of lease, size and layout of apartments, credit rights, etc.). Anyone who lives in rented accommodation would never confuse it with living in a home.

I don't disagree with the theory of giving FTB's no special treatment, but in practice, here and now, forcing some into long-term or permanent rented accommodation is more sentence than option.

J.
 
Scotty said:
Lower rents could well be the start of it, but I was talking about the bundle of issues that surround being a renter (tenant's rights, length of lease, size and layout of apartments, credit rights, etc.). Anyone who lives in rented accommodation would never confuse it with living in a home.
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The PRTB, and in particular their dispute resolution service, is arguably another move in the right direction in the context of balancing the rights and reponsibilities of the two parties (tenant and landlord)?
 
ClubMan said:
The PRTB, and in particular their dispute resolution service, is arguably another move in the right direction...
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Yes, it is. But right now, renting is not a realistic alternative to owning. So, right now, observing the spirit of the FTB incentives is a more civic course of action than ensuring some potential FTB's never have a home, which is, arguably, the consequence of the guidelines issued by Revenue last month.

J.
 
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Also, judging by anecdotal evidence here and elsewhere of landlords moaning that they can't let or that rents are falling maybe things already have improved in the rental market as far as tenants are concerned?[/QUOTE]


The anecodatal evidence (stories) I hear, are that the only reasonable rents are if you share a flat/house. Older single people who are not homeowners - and there are a lot of them - may not want to share with flatmates. And they find rents prohibitive. Neither can they save for a deposit. Catch 22. They may earn more than 36K, which is the cut off point for Shared Ownership in Dublin; but not enough to buy a small house except somewhere they would be socially isolated, miles away from their city based friends. And heaven help the single parents amongst them, crippled by childcare costs!
 
Press Release from Revenue this evening. Sorry it's in stupid PDF format, so it doesn't cut and paste well:



Revenue Reassures First Time Buyers of Second Hand Houses The position regarding claims for first time buyer relief where the purchase monies are not provided entirely by the first time buyer was addressed in material which was published on the Revenue website in April this year. The stamp duty treatment was included in an answer in a FAQ format as follows: What is the position where the purchase monies are not provided entirely by the first time buyer? To qualify for the relief the entirety of the purchase monies, including any borrowings, must be provided by the first time buyer. Any person, who provides part of the purchase monies or who is a party to any borrowings relating to such purchase, is also regarded as a buyer of the house and the relief will not be available unless that other person is also a first time buyer. … This treatment applies whether or not all the parties providing the purchase monies, or all the parties to any borrowings, are actually named in the deed of transfer. Notwithstanding this treatment, to take account of the particular circumstances which have arisen, Revenue is prepared to accept that a child, who is a first time buyer, will not be precluded from claiming first time buyer relief where a parent acts as a co-mortgagor in the following circumstances: 1 of 3
The transfer of the house is taken in the name of the child. It is the intention of both the child and the parent that the parent is not to take a beneficial interest in the house. The parent has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase. It is not intended that the parent will be contributing to the repayment of the mortgage in the normal course. Where the four conditions set out above are satisfied, Revenue will treat the parent as effectively acting in the role of guarantor for the loan. Consistent with the above approach, Revenue will also be prepared to treat persons other than parents of the first time buyer, who satisfy similar conditions to those set out above, as effectively acting in the role of guarantor for the loan. Their involvement in that capacity will not be treated by Revenue as precluding a claim to first time buyer relief. In such circumstances the conditions are as follows: The transfer of the house is taken in the name of the first time buyer. It is the intention of both the first time buyer and the other person that the other person is not to take a beneficial interest in the house. The other person has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase. It is not intended that the other person will be contributing to the repayment of the mortgage in the normal course.
2 of 3
3 of 3
Revenue do not propose to seek a claw back of stamp duty where transfers have taken place before today which comply with either set of conditions outlined above. There is no need for taxpayers or their advisors to consult Revenue unless the circumstances surrounding the purchase are different to those outlined above. The relief from stamp duty is intended to benefit only genuine first time buyers and Revenue will continue to user our audit programme to ensure that there is no abuse of the relief.
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Yeah - saw that reported on the RTÉ News this evening. See [broken link removed] for a HTML version of the Revenue press release.
 
Although you might not be considered a ‘first time buyer’ for stamp duty purposes (because of the Revenue statement) you can still be exempted from stamp duty.

There are two sections in the Stamp Acts that exempts purchasers of new houses from stamp duty. You don’t have to be a first time buyer to avail of this relief but you do have to be an owner occupier – i.e. occupy a new house or apartment as your principle place of residence for 5 years. Also, in this time, you cannot derive any rent from the house or apartment – rent under the ‘rent a room’ scheme is ok though.

The two cases where the stamp duty is exempted (or reduced) is where it’s a new house under 125 sq. metres (and a floor are certificate has been obtained) or where stamp duty can be charged on the greater of i) the total cost of the site, or, ii) 25% of the aggregate cost of the site plus building cost. For example, many off-plan purchases are structured so that the purchaser enters into two contracts, one for the site purchase and one for the apartment construction. Eg a house costing €240k might be €70k for the site and €170k for the construction. Stamp duty charged on the higher of €70k (site) or €60k (25% of €240k)… €70k purchase is exempt from stamp duty.
 
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