Stamp Duty - Slightly Different Question

Hi there,

Just looking for advice. I bought a house with my brother 2-3 years ago. It was my first house, but not his - so we ended up paying stamp duty at the investor rate on it, as we owned it 50/50. Neither of us have ever lived it in, it has been rented out.

Now I'm looking to sell this house, and buy with my girlfriend, who would be a first time buyer. Just wondering, as I have never bought as house as a first time buyer, am I one? Is it like a token you get to use once, or is it gone once you buy a property, whether you buy as a first time buyer or not.

If I'm not a first time buyer, then my girlfrienda and I will be charged stamp duty on this house we buy. Seems odd to me, means I'd never have been allowed my rights as a first time buyer?

Any ideas?

From Revenue Website

Frequently Asked Questions

Who is a first time buyer?
A first time buyer is a person, (or, where there is more than one buyer, each of such persons):
• who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house (in Ireland or abroad) and
• where the property purchased is occupied by the purchaser, or a person on his behalf, as his/her only or principal place of residence and
• where no rent, other than rent under the rent-a-room-scheme, is derived from the property for five years after the date of the current purchase.

"Just wondering, as I have never bought as house as a first time buyer, am I one?"

Like being a born again virgin?

"Seems odd to me, means I'd never have been allowed my rights as a first time buyer?"

Well you might have bought on your own first time round but you didn't.

Its fairly tightly worded so in short, no, you are not a first time buyer. But if you and g/f buy a new house there is unlikely to be stamp duty payable as owner occupiers.

mf

This situation for me perfectly shows up the problem as regards FTB status under stamp duty. We have 3 people, 2 of whom will never get to use their FTB status.

I disagree. They have chosen , or are choosing, a particular way forward. In doing so, they have made the choice to forego FTB status with any benefits that accrue. It is said to be a benefit to genuine FTB's trying to get a foot on the ladder.

Most Taxes are artificial anyway - but there has to be parameters.

mf

I don't get it - if me and my girlfriend by a house, and its been deemed that I am not a first time buyer, then we will have to pay stamp duty, even as owned occupiers.

From my understanding, so long as its not a first time buyer then the rate is:
€381,001 - €635,000
7.5%€635,001+
9%
Is this not correct.

On another note - me and my brother bought the house together. If my girlfriend were to buy out my brothers 50%, would she have to pay investors rate stamp on this, even though she is also a first time buyer, because when we bought the house we had to pay it?

you're probably misreading what mf1 has said. no stamp duty for anyone on a new house (new meaning newly built - so long as it's not above a certain size), stamp duty as you have described above on a 2nd hand house.

thanks for that - my 2nd question is then. If my girlfriend wanted to buy out my brothers half of the house, would she then have to pay stamp duty - even though she is a first time buyer?

To recap when my brother and I bought the house, we paid the investor rate stamp, I was a first time buyer, he was not.

"If my girlfriend wanted to buy out my brothers half of the house, would she then have to pay stamp duty - even though she is a first time buyer?"

She is a FTB so no, she will not pay any stamp duty if she buys out your brothers share. But she will have to pay full market value for the half share ( less half the mortgage) as otherwise she will have a Gift Tax issue.

There are a lot of threads on the board about stamp duty/ gift tax so it would be worth your while searching them to get a good overview about what would be best for you all to do.

mf

mf1 I dont fully get it. When I bought with my brother I was a FTD he was not - so we paid stamp. If she buys his half from him - would she not be buying half of a house that is an investor house - since I am now deemed an investor?

would it not be the exact same as it was when I bought?

You have to look at these as separate transactions.

The first time you bought you bought a house in joint names - as both of you were not FTBs you paid stamp duty on that transaction.

If your g/f buys half the house, she is buying a legal interest in the house in a separate transaction and because she is a FTB she will not pay any stamp duty.

If you google Revenue and first time buyers, you'll get a very good overview.

mf

This is something that always confused me also.
I have a friend who bought a house with her boyfriend. He was not a FTB, she was, so they had to pay stamp duty.
Some years on, they broke up, sold the house, she now wants to buy a house herself but she has now lost her FTB status (even though that status made no difference to original stamp duty) and she will be hit for another lot of stamp duty.

I never understood it before until I read MF1's posts - thank you for the clarification.

I feel there is an unfairness in it somewhere though, stamp duty should be calculated taking into account the FTB status of buyers, if 3 people buy and 1 is a FTB then it would seem to me to make sense that the stamp duty is reduced by 1/3 to take that persons status into consideration.

MF1 forgive me for constantly treading the line of tax evasion (on stamp duty) but if you have two people buying a house, one of whom is not an FTB, is there some way then of them each separately buying half so at least the FTB can claim the benefit of no SD on their half?? Also will the SD paid by the non FTB be calculated on the market value of the house and then reduced to take account that they're only buying half a house?

mf1 - sorry for being slow on the uptake I think I get it. We ( me & my bro) bought the house together, both NOT FTB therefore stamp.

If she buys his part from him - she is a FTB buyer his share of the house, therefore will not have to pay stamp.

thanks for that

As you will have probably grasped at this stage, I am a practising solicitor so this is the kind of query I deal with on a daily basis. My function is to advise clients on their liabilities and, if there is a tax efficient mechanism that can legitimately be used to minimise a liability, then that is fine. The problem is , as I said, that there is generally a certain degree of artificiality about tax and given that as a solicitor I carry a secondary liability for stamp duty, there is no way I will get involved in anything that will not withstand rigorous scrutiny by Revenue.

A good example of this is a "born again" FTB - its all very legitimate - a divorced man regains his FTB status after selling the family home to his wife thereby restoring him as an FTB. He wants to buy again. He is a FTB. Problem? He has remarried and they need to use the proceeds of sale of her house to buy the house they really want to buy. She is not a FTB. If they buy together, he loses FTB status and they pay stamp duty.

Solution? Buy in his sole name with sole borrowings and him solely making repayments. BUT He can't borrow enough to buy the house they want to buy. So, if they buy together, they pay stamp duty. They'd prefer not to but again given that the exemption from Stamp Duty for FTB's was to assist FTB's getting on the property ladder.....what can you say?

Der Kaiser - this is the reason that solicitors charge fees for conveyancing!
What you suggest will not work because of the Certificates a purchaser needs to sign up to in their Deed. What you suggest would amount to a series of transactions. Revenue might never spot it ( but given that they do track transactions by PPS numbers it is possible) but the Solicitor should never facilitate it.


"2. IT IS HEREBY FURTHER CERTIFIED that the consideration (other than rent) for the sale is wholly attributable to residential property and that the transaction effected by this instrument does not form part of a larger transaction or series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration (other than rent) which is attributable to residential property or which would be so attributable if the contents of residential property were considered to be residential property exceeds €. "

mf

mf1 - sorry one last query. does it matter what % of the house the person had / is buying?

Like with my brother it was 2/3rds me, 1/3 him mortgage wise. however, the deeds are just in both of our names - we never did contracts to say what % we have each. Therefore how will it be managed with my girlfriend?

EG: say we bought the house for 300k and it is now worth 390k. My GF will have to give my brother 1/3 of 390k.

Will she just get a mortgage for the 130k, and her name will go onto the deeds instead of my brother?

Thanks MF1, I really should be paying for this!

gc2006 - these are all the questions you need to be asking your solicitor! Its all very well asking general queries on a moneyboard but you're into nitty gritty now where really specific advice has to be taken on your own very individual situation. A money board is no substitute for that and should not be regarded as advice to be relied on.

You're in a bit of a minefield here. Its not clear what percentage of the house your brother owns - does he own 50% but only pay 1/3 mortgage or was he only supposed to own 33%? And if he was only supposed to own 33% is that quite clearly reflected in the Deed?

It matters because if he owns 33% that is all he can sell. You would have to sell the balance to your g/f to make it up to 50% unless she will just take 33%.

Go talk to the solicitor.


mf

mf1 - yeah appreciate that - just really wanted to get my head around the concept and see where we stand.

Thanks for the advice - much appreciated