Tax implications further down the line

[Kilkenny]

Hi,

I'm living in Dublin but can not afford to buy up there so i bought locally at home in Kilkenny. I intend to register my new house as my primary address however i obviously will not be living there as I work in Dublin. I intend to rent out two rooms of the three bed house to pay the mortgage. Do you think this is a risky situation? Will i get caught for capital gains tax in the long run when i do eventually afford to buy in Dublin or where-ever i may be then? Any advice would be greatly appreciated.
Thanks,

 

[ClubMan]

I intend to register my new house as my primary address however i obviously will not be living there as I work in Dublin.

If by "register my house as my primary address" you mean that you will consider this your PPR (Principal Private Residence) in order to avail of owner occupier benefits (e.g. lower rates of stamp duty on the purchase, owner occupier mortgage interest relief, rent a room scheme etc.) then this is not legal.

I intend to rent out two rooms of the three bed house to pay the mortgage. Do you think this is a risky situation?

If you are referring to the tax evasion issues outlined above then this is a risky and not very prudent an approach to take.

Will i get caught for capital gains tax in the long run when i do eventually afford to buy in Dublin or where-ever i may be then?

And stamp duty clawback, and income tax on rental income etc.? Hopefully yes if you do try to evade tax.

 

[MOB]

Based on what you have outlined, Clubman is right. However, for those who are looking at a similar (but not identical scenario), take some hope from the following:

1. There is no time limit for how long you have to be in a house before it becomes your principal private residence; Mind you, it is certainly crucial that you have first lived in the house (though in theory, I suppose even a week would do).

2. The portion of the tax code which deals with this area makes specific recognition of the fact that you might have your principal private residence in one place but be obliged for a period to live elsehwere due to work commitments.

3. I think they allow you to live away from home for up to four years without losing the principal private residence exemption.

4. I think that it is longer if you have to live somewhere abroad, and as best I recall there is also some provision for the situation where you have to live somewhere on your employers direction (e.g. manning a gate lodge at night).

5. I seem to recall that following the absence you must return to the house (if only for one night) to have the interim period treated as exempt.

All of the above is from memory of tax exams ten years ago, rather than any recent application of the law, so do please research further before relying on it.