Rental Income, Clawback, VAT and the like

M

Monetarist

Guest
My girlfriend opted some time ago to rent out her apartment. She commenced renting it circa 2 years after purchase. She had originally purchased as a FTB and paid zero Stamp Duty. Anxious to be tax compliant, she filed a return for 2005 to reflect the rental income. I understand that as well as paying tax on the rental income, that she may face claw-back of the Stamp Duty. Is this something she must actively raise to Revenue or is it something they should notify her about? (On the assumption that since she is being tax-compliant that they would have the relevant details for her and she is not hiding anything) Basically I'd be interested to know which side need to be proactive on the clawback issue? The second part of my query relates to VAT. I seen elsewhere on the site that the possibility exists to register for VAT, receive a VAT refund on the purchase price, charge VAT on subsequent rents to a point (about 10-12 years) where the original refund is negated and then deregister. Would this be a possibility in her case? Can you register now and receive a refund in respect of a purchase a number (3) of years ago, even though the property was originally purchased as a principal residence, and can only now be described as an "investment" because of her changed circumstances, i.e. living rent free with ME?
 
Re: Rental Income, Clawback, VAT and the like!?!

Monetarist said:
My girlfriend opted some time ago to rent out her apartment. She commenced renting it circa 2 years after purchase. She had originally purchased as a FTB and paid zero Stamp Duty. Anxious to be tax compliant, she filed a return for 2005 to reflect the rental income. I understand that as well as paying tax on the rental income, that she may face claw-back of the Stamp Duty. Is this something she must actively raise to Revenue or is it something they should notify her about? (On the assumption that since she is being tax-compliant that they would have the relevant details for her and she is not hiding anything) Basically I'd be interested to know which side need to be proactive on the clawback issue?
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It's up to your girlfriend to inform Revenue, but there is some evidence, on other threads, that Revenue have sought people out. There are penalties for not paying the clawback on time. AFAIK this should be done shortly after it ceases to be your PPR. Not sure of timescale, maybe someone else can give you that information.



The second part of my query relates to VAT. I seen elsewhere on the site that the possibility exists to register for VAT, receive a VAT refund on the purchase price, charge VAT on subsequent rents to a point (about 10-12 years) where the original refund is negated and then deregister. Would this be a possibility in her case? Can you register now and receive a refund in respect of a purchase a number (3) of years ago, even though the property was originally purchased as a principal residence, and can only now be described as an "investment" because of her changed circumstances, i.e. living rent free with ME?
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You must register for VAT before you purchase the property. It is too late in your girlfriend's case.
 
Re: Rental Income, Clawback, VAT and the like!?!

Not sure of timescale, maybe someone else can give you that information.
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From revenue website
Clawback

A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years from the date of the conveyance or transfer, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property. A clawback will not arise where the property is sold to an unrelated third party during the 5-year period
 
Re: Rental Income, Clawback, VAT and the like!?!

Thanks folks for the advice and information.
 
Re: Rental Income, Clawback, VAT and the like!?!

liteweight said:
It's up to your girlfriend to inform Revenue, but there is some evidence, on other threads, that Revenue have sought people out. There are penalties for not paying the clawback on time. AFAIK this should be done shortly after it ceases to be your PPR. Not sure of timescale, maybe someone else can give you that information..
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Once the property was let for the 1st time Stamp Duty became payable. SD must be paid within 1mth of it becoming due so she should get her skates on!
NB to note that it's the full SD amount that would have been payable had she not received the exemption - you cannot reduce by 2/5ths as it was a PPR for 2 of the 5 yrs.
Ask your solicitor for the exact amount and write them a cheque. Your solicitor should be able to persuade the Rev to waive any penalties/interest (if any)...
 
liteweight said:
You should also note that stamp duty will be payable at investors' rates.
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Weren't the price brackets (- ie value at which Stamp Duty Applies and at what Rate for Investor/Owner-Occupier) increased/widened in the last year or so? Is the price bracket that applies in the case of a clawback the one that was in effect at the time of purchase?
 
o2bwise said:
Is the price bracket that applies in the case of a clawback the one that was in effect at the time of purchase?
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Yes.
The clawback is calculated as if the SD was being paid on the day of purchase at investor levels (%s).
 
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