Turning a PPR into an Investment Property, tax liable?

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bamboozle

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Hi tax experts, two friends of mine bought a house 3 years ago as a PPR, at the time no stamp duty was liable.

Recently one of them has bought another house with her partner, she now wants to take her Mortgage Interest Relief from the first property and claim it on the second.

However I believe this will result in the 1st property being declared an investment property and will be liable for a stamp duty claw back as it has not been a PPR for 5 years, is this correct?

I think the value of the first house was about 230k.

Many thanks
 
Re: Turning a PPR into an Investment Property, tax liable??

However I believe this will result in the 1st property being declared an investment property and will be liable for a stamp duty claw back as it has not been a PPR for 5 years, is this correct?
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Yes, have to agree with you on that

She can only claim MIR on the property that is her PPR. She can only have one PPR. The property that is not her PPR will be considered an investment property and the relevant stamp duty will be payable on it.
 
SD clawback will only apply if they rent out the former PPR within 5 years of purchase. Which property loan benefits from owner occupier mortgage interest relief is irrelevant here but she has no discretion in the matter anyway and must only claim it on her actual PPR at any time.

If the fromer PPR is not sold within 12 months of vacation as her PPR then some element of any eventual resale gain will be assessable for CGT. This is the case whether or not the property is rented out during that period or subsequently.

Obviously any rental income will be assessable for income tax. This stuff is summarised in the key posts and many similar posts in the Property Investment forum.

asdfg said:
The property that is not her PPR will be considered an investment property and the relevant stamp duty will be payable on it.
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This is not quite correct. SD clawback only triggers if/when the property is actually rented out within the first 5 years of ownership where it was originally purchased as an owner occupied PPR. I guess it's unlikely in this case but she could just hold onto it and not rent it to avoid SD clawback. Obviously this and all other investment/taxation issues need to be carefully analysed and most likely with the assistance of professional advice.
 
Thanks for the info,

The plan for the other owner of the house was to move out and rent it fully rather than try rent the 2 spare rooms under the rent a room scheme.
However this would trigger the stamp duty claw back,

How is the stamp duty claw back calculated?
 
bamboozle said:
The plan for the other owner of the house was to move out and rent it fully rather than try rent the 2 spare rooms under the rent a room scheme.
However this would trigger the stamp duty claw back,
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Rent a room scheme is irrelevant unless the person remains in the property as an owner occupier and this does not seem like the case here.
How is the stamp duty claw back calculated?
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SD that an investor would have paid on the original purchase less the SD (if any) actually paid at the time. Also - it is not calculated pro-rata depending on when during the initial 5 year period of ownership the property is rented out as an investment property: it's all or nothing.
 
So even if the other person is still living in the house she cannot benefit from Rent a room scheme?

And does this also mean that she looses her PPR status?

Many thanks, much appreciated.
 
bamboozle said:
So even if the other person is still living in the house she cannot benefit from Rent a room scheme?
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Sorry - I thought that there was only a single owner occupier. Any owner occupier can avail of the rent a room scheme. However if one remains and avails of it but there is a second joint owner who is a non owner occupier then I'm not sure what the tax implications are and this probably needs professional advice.
And does this also mean that she looses her PPR status?
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The fact that one joint owner vacates the place as an her PPR does not affect the owner occupier/PPR status of the other joint owner who remains there.

Apologies for any confusion caused.
 

looking at this myself recently.

Can I check the following. I bought a new apartment a couple of years ago. Apartment was new so no stamp duty payable. I was also first time buyer. If I rented if out tomorrow and bought a new house, would I be liable for a stamp duty clawback on the apartment?
 
If you bought the property within 5 years you would be liable to SD clawback
 
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