moving PPR & retaining original house

D

DOTS1000

Registered User
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hello there I am hoping you can help me out with a query,


I have partially owned a property with my friend for a number of years and have lived there since purchasing the property and claim mortgage relief on this property.

A couple of years ago I purchased a second house with someone else however my original property is still my main residence. The person I purchased the second property with is living in that property and I did not rent my portion. I do not claim any reliefs on the second property.

I am looking at getting married in a few months and will be looking at moving into the second property (I will be marrying the person I co own the house with, it has been her PPR since the property was purchased).

I will not be selling my share of the original house right now (the market being at somewhat of a low point and my friend is not in a position to buy me out).

My questions are;

1) What do I need to do vis a vis mortgage relief when I change address, I presume I just need to notify the TRS guys?

2) When I look at selling the original property down the line, do I need to do something to make sure I do not pay CGT on everything since it will have been my PPR for a number of years? (assuming there is a gain of course!)?

3) What do I need to do with regards to my second property after I move in with regards to the cost basis for CGT should I sell it down the line since it has not been my PPR since I purchased it and also how will this impact the portion of the house that will effectively have been my wife's PPR since purchase date?

I realise this is quite confusing which is why I am trying to understand exactly what needs to be done and when.

many thanks
Dots
 
DOTS1000 said:
1) What do I need to do vis a vis mortgage relief when I change address, I presume I just need to notify the TRS guys?
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You need to stop claiming owner occupier mortgage interest relief on the first property once it ceases to be your PPR. You can claim the relief on the mortgage on your new PPR.
2) When I look at selling the original property down the line, do I need to do something to make sure I do not pay CGT on everything since it will have been my PPR for a number of years? (assuming there is a gain of course!)?
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If you don't dispose of your share of the first property within 12 months of vacating it as your PPR then some portion of any eventual total capital gain will be assessable for CGT. This is covered in many existing threads. If you want to avoid CGT then sell your share before 12 months is up.
Sorry - you'll probably need to clarify this one as it makes little sense (to me anyway).

If in doubt get independent, professional advice on the tax and other issues involved.
 
ClubMan said:
Sorry - you'll probably need to clarify this one as it makes little sense (to me anyway).

If in doubt get independent, professional advice on the tax and other issues involved.
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I think the third question relates to CGT on the second house (soon to be PPR). The calculations would be the same as for the first house (the PPR-into-investment property) only the other way around. So the second house becomes a PPR when OP moves into it and the CGT liability on an ultimate sale becomes apportioned accordingly depending on the time it was an investment property vs PPR. I'm not sure if, when OP goes to sell, he would be liable for only 50% (as joint owner) of the pro-rated, apportioned gain and that the g/f would be liable for no CGT (she being the resident of the PPR for her entire term of joint ownership) but I'd imagine so. A call to revenue would probably clarify. Also, always advisable to seek independent financial advice on such matters.

Sprite
 
thanks guys this is helpful and pretty much confirmed what I read on prior posts (but I hadn't seen any quite so round about as my queries!!)

WaterSprite you are correct re my third question.

I'm trying to avoid forking out for professional advice but some of this is a bit confusing and I don't want to end up with a tax bill & penalties in the future so I guess I may have to. Re Revenue; it is difficult to get hold of someone in the Revenue who will actually awnser the questions factually and concisely (all caveats and potentially's i.e. they don't really seem to know or want to be pinned down)

ClubMan re the 12 month time period, if I retain the property do you know whether I need to inform Revenue of the value of the original property (for CGT cut off) and similarly for the basis of CGT on the Second property (do I need professional valuations and at what point; immediately at the switch of PPS or at the 12 month mark you mentioned?).

Also am I right in thinking that if I change over the PPS and then do nothing (subject to informing Revenue of valuations of both properties) that I have no tax liability until I actually sell either one of the properties?

thanks again for taking the time to reply

Dots
 

If you want definitive advice, then you will have no option but to "fork out for professional advice" as you put it. The sort of "advice" that Revenue dispense is not advice at all. They are not interested in minimising your tax liabilities, merely ensuring your tax compliance, and they will not accept responsibility for errors & omissions.

On the other hand, you might be better off letting nature take its course and worrying about CGT and long-term tax planning only if and when you ever get around to selling your property. There is little point in selling into a slump at the moment just to avoid a relatively minor tax charge. And on the assumption that you won't be selling soon, who knows what changes will have been made to the tax system in the meantime? You could spend a little or a lot on tax advice now and find later on that the advice is now obsolete due to legislative changes in the meantime.
 
DOTS1000 said:
ClubMan re the 12 month time period, if I retain the property do you know whether I need to inform Revenue of the value of the original property (for CGT cut off)
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No. I don't understand what you mean by "cut off" but bear in mind that any CGT is calculated on some portion of the total gain. The valuation at the time it converts from PPR to investment (or vice versa) is irrelevant if that's what you're thinking?
Also am I right in thinking that if I change over the PPS
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PPR?
and then do nothing (subject to informing Revenue of valuations of both properties) that I have no tax liability until I actually sell either one of the properties?
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Yes - CGT only becomes an issue when you dispose of an asset. If you rent your share of the original property out within 2 years of purchase then you could be liable for a clawback of stamo duty. You obviously must stop claiming owner occupier mortgage interest tax relief on the former PPR mortgage. If you rent your share of the original property out then the normal treatment of rental income with regard to income tax applies.
 
A fair point indeed! I have no plans to sell soon so I guess my main concern is what is the correct thing to do now to ensure I have no 'issues' down the line when it does come to calculating my tax liability!
 
thanks ClubMan

re cut off; I had it in my head that CGT would only be payable rom the valuation of original residence ater I switched PPR e.g. say I bought it 5 years ago for 80K and it's valued at 100K now when I switch PPR and I then sell it for 120K in 5 years, CGT tax liability is on the 20K ( 120K-100K ). But it seems I am wrong with this assumption. do you know how the CGT is actually calculated in this case?
 
As Clubman says (and have a search on the threads on this board as there's a lot of other info on this point), the valuation of your property (either one) on the date you change its status (from PPR to Investment or vice versa) is irrelevant for CGT purposes. The pro-rating calculation is calculated on a straight line basis, based on length of ownership. So you don't need valuations now; you just need to keep a proper record of your dates.

Although I'd agree that Revenue is not the right place to go for actual tax advice, I do find them helpful. If you put your query into an email, they will get back to you.

Sprite

p.s post crossed with Dots last post - as above, the CGT is calculated based on ownership, so if you live in the house as PPR for five years and then move and sell it another 3 years later (house valued at 100k when bought, 200k when sold), CGT is payable on 2/8ths of the gain (the full gain, minus 5 years living in it as PPR minus 12 months after you move out). There is lots of helpful information on other threads from people who have asked this very question.
 
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It is wrong. It's the original acquisition price and the ultimate disposal price that matter. Say you bought for €80K, live in it as your PPR for 5 years, move out and then eventually sell it for €120K 4 years later then the CGT would be:

20% x ((€120K - €80K) x (4-1)/(5+4))

ignoring expenses, allowances, indexation of the acquisition price (if applicable) etc.
 
thanks again guys, this is all useful info and has cleared a lot of my tax induced myopia, I will also dig around old posts for more CGT good stuff too.

I guess from what I'm reading from you guys though the main thing seems to be notifying Revenue when I move my PPR so that they record the date (which will ultimatley impact my future CGT calc on both houses per ClubMans calc).

Hopefully when the financial mayhem settles down in a decade or two I'll have the cash for some tax advice as I think at that point the real fun will kick in!

cheers
Dots
 
DOTS1000 said:
I guess from what I'm reading from you guys though the main thing seems to be notifying Revenue when I move my PPR so that they record the date (which will ultimatley impact my future CGT calc on both houses per ClubMans calc).
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There is no point in doing this for CGT purposes (although you will be doing so anyway for TRS purposes) After a certain period (possibly 4 years) they routinely put all correspondence into long-term storage. It is up to you to maintain your own long-term records.
 
You don't need to notify Revenue of the date you change your property for CGT purposes, but will have to notify the TRS people. Depending on the terms of your mortgage, you may also have to notify your mortgage provider.

Sprite
 
thanks WaterSprite

don't suppose anyone has an email address for Revenue that handles general queries, I couldn't see one on line
 
It depends on where you are based (Dublin? North/South City?) On the contact page of the revenue website, there is a list of offices and their relevant email addresses. For example, if you were in North Dublin, you could mail dublinnorthcitypaye@revenue.ie or
dublinnorthcityincome tax@revenue.ie. There's no CGT-specific email address that I could see but I'd try the income tax section first and they'd point you in the right direction I'm sure.

Sprite
 
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