Renting out too many rooms overrides PPR status?

O

ONEILP

Guest
Hi,

I was reciently gifted a site from my parents to build my PPR and as such didnt pay any stamp duty or other tax. House is almost finished and rather then pay a 1600 per month mortgage for a big empty house i have decided to rent out the three remaining bedrooms to eaise the burden but i will absolutely be living in the house.

My question is, i know if i breach the rent a room tax allowance im classed as an investor in the eyes of revenue, does this mean my PPR is now an investment property? Even though i dont own another property and it is my private residence so to speak?

My main worry is as a result of this Revenue will slap me with a sizable stamp duty bill as one of the conditions of not paying stamp on the site was that it was for my PPR.

Any advice is appreciated, i have used the search function but my own case seems to be unique but any links etc would also be helpfull

Thanks

P
 
I've heard the "certain number of rooms" clause mentioned before on Newstalk regarding SD and it is erroneous information. How many rooms are rented out is absolutely irrelevant from a SD context. Once it is your PPR and you are living there then there will be no clawback.

However, if you wish to avoid potential income tax issues then you should avail of the "rent-a-room" scheme and ensure the total rent is below the threshold of €7620.
 
Well, that's not strictly true. If you rent out all the bedrooms the house will not be your PPR as it won't be your sole or main residence.
 
Stamp Duty applies on purchase of properties, not on self builts


Newby,
The OP said he/she will rent out the 3 remaining rooms, not all the rooms.
So, advice for rent-a-room given above is correct.
 
I think you can rent as much of your PPR that you want and qualify for the rent a room scheme as long as you never collect more than €7,620 p.a. in rental income.

You should also check your home insurance policy in case it might be rendered null and void by housing lodgers.
 
ClubMan said:
I think you can rent as much of your PPR that you want and qualify for the rent a room scheme as long as you never collect more than €7,620 p.a. in rental income.
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It still has to be your sole or main residence... It has to be your residence so if you rent out all of it and do not reside in it. If you have no other house and wanted to live on the sofa (...shudder...) and rent out all other rooms for rent that is less than €7,620 p.a. then you will qualify for the RaRS. You will not qualify if you reside solely or mainly in another house.
 
Newby said:
Well, that's not strictly true. If you rent out all the bedrooms the house will not be your PPR as it won't be your sole or main residence.
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I know you're joking but I don't see why this would be case. Once the house is your PPR, it shouldn't concern the revenue where you sleep. Who says you are not sharing a bed with one of the renters?
 
ClubMan said:
I think you can rent as much of your PPR that you want and qualify for the rent a room scheme as long as you never collect more than €7,620 p.a. in rental income.
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I'm open to correction but does it not qualify for the RaR scheme irrespective of how much rent you receive (as long the house remains your PPR) but once above the threshold the entire amount becomes assessable for income tax.

So in certain situations it might be worthwhile exceeding the threshold.
 
room305 said:
I'm open to correction but does it not qualify for the RaR scheme irrespective of how much rent you receive (as long the house remains your PPR) but once above the threshold the entire amount becomes assessable for income tax.
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No... it must be under the threshold otherwise it is taxable.
 
Newby said:
No... it must be under the threshold otherwise it is taxable.
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Yes but for income tax only. So if you had no/low income it might be worth exceeding the threshold as you would pay very little tax in any case.

EDIT: Post crossed
 
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Any potential SD clawback and CGT implications would also need to be factored in.
 
room305 said:
Yes but for income tax only. So if you had no/low income it might be worth exceeding the threshold as you would pay very little tax in any case.

EDIT: Post crossed
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Agreed. It's very important to crunch the numbers. No point in charging 10k per annum and leaving it open to higher rate tax!
 
ClubMan said:
Any potential SD clawback and CGT implications would also need to be factored in.
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To the best of my knowledge, exceeding the RaR scheme threshold does not expose you to CGT or SD clawback. You can still classify the rental income under the RaR scheme you just need to pay income tax on the entire amount received.

This is my understanding based on when I last looked at the scheme a year ago, so perhaps this has been changed in the last budget? As I said in the previous post, I am open to correction on the issue.
 
room305 said:
This is my understanding based on when I last looked at the scheme a year ago, so perhaps this has been changed in the last budget? As I said in the previous post, I am open to correction on the issue.
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This has popped up on AAM before. No definitive answer has ever really been found/given, at least not that I read. My assumption would be similiar to that of room305, from the reading of the Revenue documents, but until Revenue gives a clear line I wouldn't have any confidence in that assumption.
 
If you have a link to that thread I'd love to have a read. The search function isn't throwing it up for me.

BTW - one subsection of the relevant section in the tax acts states the following:

"Where the gain accrues from the disposal of a dwellinghouse or part of a dwelling housepart of which is used exclusively for the purposes of a trade, business or profession, the gain shall be apportioned..." and effectively the element relating to the business will be taxable.

If you are letting out rooms in a PPR could that be described as a trade? Anyone got any thoughts???
 
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