Selling my rented residence. Ho much CGT to pay?

I was living in a house from 2001 to 2004, It was my principal residence then. I moved out of it and began to rent it up to now. If I decide to sell it now, how much tax will I have to pay? Valued at around 300K

Willbee,

You will be entitled to relief for the period you spent living in the house; apportion the net gain between the periods of occupation and non-occupation. Subtract the costs of acquisition and disposal from the gain - property cost, legal fees, stamp duty etc. The net gain is taxable at 20%. The is no relief for revenue expenditure against CGT - this should be set against rental income for income tax purposes.

It's not possible to give a definitive answer without specific details. If you fancy posting the details I'm sure we'll have a shot at calculating a liability for you.

Banton.

Ok Banton, here are the details I have. I built new house and moved into it in June 2001 (Cost of site £15K and built house for around £130K at the time), I lived there on my own til I married in June 2004. Moved into another house and rented my own house for a cash income, so no rental income has been declared since June 2004 . If I sell now for say, €300K, What tax is to be paid?

willbee said:

I was living in a house from 2001 to 2004, It was my principal residence then. I moved out of it and began to rent it up to now. If I decide to sell it now, how much tax will I have to pay? Valued at around 300K

Click to expand...

You seem to have rented it out within the initial 5 years of ownership when the stamp duty clawback period was 5 years. This suggests that you are liable for a clawback of SD. If you have not already paid this then it is overdue so could also be subject to interest and/or penalties. The clawback amount is the amount an investor would have paid on the purchase less whatever you actually paid (possibly nothing).

As regards CGT - let's assume that it was rented out for exactly 4 years and you sell it in 2008 on the anniversary of purchase: this means that you owned it for 7 years in total, it was your PPR for 3 years and was rented out for 4 years which means that:

(4-1)/7 = 3/7 = c. 43% of the total capital gain over the period of ownership is assessable for CGT at 20%. You can deduct the usual allowable expenses and allowances and index the purchase price for inflation up to c. 2003 when calculating the actual CGT liability.

Since you have undeclared rental income you also need to regularise this situation too. Given that you potentially have two possibly significant outstanding tax liabilities you really need professional advice in my opinion.

See www.revenue.ie for more summary information about these tax issues but get professional advice if in any doubt about how to calculate your liabilities and make the relevant returns.

After making some enquiries, I was told by a friend that if I moved back into this investment property for 12 months and have it become my PPR, I would not be liable for CGT if I sell it then. Is this true?

No.

Thinks about it, sure wouldn't every landlord up and down the country be doing that if it was possible???

It's not possible.

You may move back in, and live there, but you will owe some CGT if you ever sell.

Here is a Revenue guide to CGT:

http://www.revenue.ie/leaflets/cgt1.pdf

Thank you for that.

willbee said:

After making some enquiries, I was told by a friend that if I moved back into this investment property for 12 months and have it become my PPR, I would not be liable for CGT if I sell it then. Is this true?

Click to expand...

Your friend is wrong. Get professional advice.

I am not a professional but I do know this much...

If you move in it becomes your PPR immediately. But some portion of any eventual resale gain will still be assessable for CGT in respect of the time that it was rented out. The longer you remain in it as an owner occupier the less this becomes over time. But there is certainly no 12 month or other cut off point after which, having occupied the property as your PPR, the CGT issue disappears.