Stamp duty on new property

A

AAM2006

Guest
Myself and my OH have a house which we bought 20 months ago as first time buyers for €305000. However, we now want to move to a new bigger property worth €450000. We would like to keep the initial property and rent out some of the rooms, keeping one room available to ourselves as my boyfriend travels alot and would need the use of the room to be close to the airport.

Will we be liable to pay the stamp duty on the new house as it is over 124sq m? Will we need to pay stamp duty claw back on the first house?

AAM
 
Yes on both accounts. You will also have to register your first property with the PRTB and probably pay tax on any rental income. www.prtb.ie
 
AAM2006 said:
Myself and my OH have a house which we bought 20 months ago as first time buyers for €305000. However, we now want to move to a new bigger property worth €450000. We would like to keep the initial property and rent out some of the rooms, keeping one room available to ourselves as my boyfriend travels alot and would need the use of the room to be close to the airport.

Will we be liable to pay the stamp duty on the new house as it is over 124sq m? Will we need to pay stamp duty claw back on the first house?

AAM
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Have you read this thread?

Sell home or keep as an investment?

Bear in mind that "keeping a room" doesn't necessarily make it your PPR and qualify you for the owner occupier rent a room scheme if that's the plan. If you are married then you can only have one joint PPR. If you are not married then the first property only remains a PPR if one partner lives there full time basically.
 
Thanks for all the replies.

So basically we will end up having to pay stamp duty on both properties? This will amount to €15000 approx for first property and €34000 approx for second property?

If this is the case, this will change things for us in terms of finance. So would we be in a better position if we rented out the first property as a whole? What about capital gains tax? I am beginning to wonder why people would invest in a second property with all this extra expense.

BTW, we are getting married in December, not sure how this would changes things in terms of finance and tax concerning the houses

AAM
 
AAM2006 said:
If this is the case, this will change things for us in terms of finance. So would we be in a better position if we rented out the first property as a whole? What about capital gains tax?
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Your PPR is exempt from CGT if you sell it now. If you rent it out and sell it later, there will be a credit for the amount of time you had the house as your PPR, e.g. total period of ownership 7 years, lived in the house for 2 years, profit on disposal €70,000. You will pay tax on 5/7 of the gain, or €50,000.

AAM2006 said:
I am beginning to wonder why people would invest in a second property with all this extra expense.
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Their are other investment options out there.

AAM2006 said:
BTW, we are getting married in December, not sure how this would changes things in terms of finance and tax concerning the houses
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None, as far as I can see.
 
Ok so we will probably need to sell the first property in order not to occur costs that we won't be able to afford in the long run. I never thought it would be this complicated!

Concerning the new property, how much stamp duty would we need to pay? Is this calculated differently to second hand properties? New property is €450000.

AAM
 
AAM2006 said:
Concerning the new property, how much stamp duty would we need to pay? Is this calculated differently to second hand properties? New property is €450000.
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Yes

Over Floor Area of 125 sq. m


New houses or apartments which are purchased by an owner occupier (including a first time buyer) where the total floor area exceeds 125 square metres are charged with duty, at the appropriate residential property rate as per the table above, on the site value (excluding VAT) or one quarter of the total value of the house including the site (excluding VAT), whichever is the greater, subject to clawback.The size of the floor area must be certified by a qualified architect, engineer or surveyor

From

[broken link removed]
 
My OH was talking to someone at work about this and he said that his work colleague is currently doing something similar in that he bought an apartment last year and is now buying a house which will be his primary residence. He told my OH that his solicitor never mentioned anything about paying stamp duty. He said that he will also keep a room in his apartment and that his solicitor seems fine with this.

Is it the solicitors job to ensure that you pay stamp duty?

AAM
 
AAM2006 said:
My OH was talking to someone at work about this and he said that his work colleague is currently doing something similar in that he bought an apartment last year and is now buying a house which will be his primary residence. He told my OH that his solicitor never mentioned anything about paying stamp duty. He said that he will also keep a room in his apartment and that his solicitor seems fine with this.
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If he rents out the apartment within 5 years of buying, he will be liable for stamp duty clawback. Keeping a room in the apartment doesn't matter-you have to occupy the apartment to avail of any exemption under the Rent a Room scheme.

Whether it is the solicitor's responsibility to inform them of the stamp duty consequences is somewhat of a moot point-ultimately it is the taxpayer who is responsible for ensuring the tax is paid. Any negligence, incompetence etc. on behalf of the solicitor is a separate matter AFAIK.
 
CCOVICH said:
Keeping a room in the apartment doesn't matter-you have to occupy the apartment to avail of any exemption under the Rent a Room scheme.
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Revenue are quite clear on this. You may only have one PPR. Keeping a room in a second property doesn't make it eligible for the Rent a Room scheme as you are no longer an OO as it's not your PPR.

Your friend is far from the only person doing this, but anyone who does is leaving themselves open to the SD clawback, interest and penalties.... whether or not the solicitor is open to turning a blind eye.
 
Yes, exactly. I should have said

"you have to occupy the apartment as your PPR to avail of any exemption under the Rent a Room scheme".
 
From reading all the threads on here, that is what I gathered. But seemingly this guy is also saying that he does not have to pay stamp duty on his new place either as it's a new property. He said that it is 1600 sq foot approx and from what everyone else is saying, this would mean he should pay stamp duty on the new property too. But again, the solicitor has not mentioned this to him either. Maybe he will get stung with this and it wouldn't be soemthing I would like to risk myself but it does make me wonder about the job of the solicitor and also, how many people are actually getting away with this. Surely they cannot all be chased up.

AAM
 
It's been done to death on AAM. Just because people haven't been chased or caught up until now doesn't mean it won't happen in the future.

And it certainly appears to me that a new property of over 1600 square feet will attract some kind of stamp duty liability, not necessarily the full amount.

Has your mate received a S.68 letter from their solicitor?
 
As already linked to...
Over Floor Area of 125 sq. m
New houses or apartments which are purchased by an owner occupier (including a first time buyer) where the total floor area exceeds 125 square metres are charged with duty, at the appropriate residential property rate as per the table above, on the site value (excluding VAT) or one quarter of the total value of the house including the site (excluding VAT), whichever is the greater, subject to clawback.The size of the floor area must be certified by a qualified architect, engineer or surveyor.
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1600 sqf = 148.64 sqm

So yes, he should be paying stamp duty on the new property also (Depending on the price it should be SD'd with 1/4 of the value at (probably) 5, 6 or 7.5%)[check the table on the link provided by Ccovich for exact details].
 
AAM2006 said:
My OH was talking to someone at work about this and he said that his work colleague is currently doing something similar in that he bought an apartment last year and is now buying a house which will be his primary residence. He told my OH that his solicitor never mentioned anything about paying stamp duty. He said that he will also keep a room in his apartment and that his solicitor seems fine with this.

Is it the solicitors job to ensure that you pay stamp duty?

AAM
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I notice you say the OH's friend is 'now buying...' . The solicitor in question might assume that this guy knows he has to pay stamp duty and therefore won't mention it until he looks for the cheque! A solicitor, after all, is not a financial advisor!
 
Thanks again for all your replies, you make alot of sense. All the information has made us think twice about keeping the first house now especially if we intend on having a family in the next year or two. With the extra hidden costs, trouble with renting it out, it now seems to be too much trouble to take on.

My OH is going to have a chat with his work colleague and guide him towards this forum as I think he may get a bigger insight as to what he is getting into.

AAM
 
Also worth pointing out, Revenue will not accept claims of misinformation etc from solicitor as an excuse for non tax compliance. It is the individuals responsibility to ensure tax compliance at all times.
They could, possibly, try and sue/claim the money back from the solicitor, but this would be a very difficult situation and, IMHO, I doubt if it would be successful.

Might also be worth noting by your friend....
SD is on the pre Vat price of the property
Potential loss of other benefits
Interest on non payment
[Lots of other threads on Stamp Duty on AAM worth a read too]
 
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