confused about what to do with parents house/my house

BionicRasher

A little confused on what I can do or need to do

Ok so here is the scenario – and I hope this is an ok topic to post

Bought a house many years ago (well got a mortgage anyway along with a loan from the parents) and there are now just few years left on the mortgage and I am in a position to pay off the last bit in a lump sum (might have to spread it over a couple of payments but hope to clear it all soon)

The house was my family home for a while but after a short period I made a move to another house and I agreed to let my parents live in this house (as they had lived over a business premises that they retired from) and they paid rent/covered the mortgage. So each year I have been paying tax on rental income so It's all above board. So soon the mortgage will be finished and my parents will live there until they pass and once they die the house is mine to do with what I wish.

My question is how does the tax man look at this or do we need to contact the revenue to say that mortgage paid and I am no longer going to rent the house and get my parents to sign something like a right of residency or something like that to make it legal.

I am a bit lost on what needs to be done to get the ball rolling

srsly78

If you stop charging them rent then the taxman has nothing to be interested in.

Mr. Incognito

This is structured tax advice but i will allow it as we are not talking big money here.

While your parents are paying rent, you are technically a landlord and should be registered with the PRTB.

If you allow your parents to live there tax free they are receiving a benefit tax free and would have a liability to CAT on the uncollected benefit.

Gifts to parents can be made tax free up to the class B threshold which changes annually. Currently it is about 16K

The first 3k of every CAT gift every year can be made tax free. Thus the first 3K of the "gift" of the free use of the house would be free of any CAT consequences and does not affect your CAT liability.

In positions where parents allow their children a free use of property there is technically a liability to CAT but Revenue have not, to date sought to enforce this. I think the main reason is that there would be an uprising from middle Ireland and would become a political issue. However the other way round I have no doubt that they would come looking for it.

I cannot give you "advice" per se if you read the charter. I can only point out that if your parents are living in your house and contributing to bills, property tax, insurance and rates then all of these factors can be taken into account as consideration for their "free-use" of the property. You would then see how much the free use is worth to them and it would reduce your threshold every year until it was used it.

You'll need to seek a professional to do the actual calculations for you.

Regards,

barneystinson

Mr. Incognito wrote: »

This is structured tax advice but i will allow it as we are not talking big money here.

While your parents are paying rent, you are technically a landlord and should be registered with the PRTB.

If you allow your parents to live there tax free they are receiving a benefit tax free and would have a liability to CAT on the uncollected benefit.

Gifts to parents can be made tax free up to the class B threshold which changes annually. Currently it is about 16K

The first 3k of every CAT gift every year can be made tax free. Thus the first 3K of the "gift" of the free use of the house would be free of any CAT consequences and does not affect your CAT liability.

In positions where parents allow their children a free use of property there is technically a liability to CAT but Revenue have not, to date sought to enforce this. I think the main reason is that there would be an uprising from middle Ireland and would become a political issue. However the other way round I have no doubt that they would come looking for it.

I cannot give you "advice" per se if you read the charter. I can only point out that if your parents are living in your house and contributing to bills, property tax, insurance and rates then all of these factors can be taken into account as consideration for their "free-use" of the property. You would then see how much the free use is worth to them and it would reduce your threshold every year until it was used it.

You'll need to seek a professional to do the actual calculations for you.

Regards,

Just one minor addendum/correction to this - PRTB registration isn't required where
"A dwelling in which the spouse, parent or child of the landlord is resident and there is no written lease or tenancy agreement"

BionicRasher

Sorry for the stupidity but can you explain what CAT is?

Thanks for the advice on this – I presume I will need to go and talk to a solicitor and/or a tax consultant. Should I also consult with revenue and see what the recommended course of action is?

Mr. Incognito

CAT is Capital Acquistions Tax or a tax on a gift or inheritence.

Go to a sol or tax advisor and let them deal with revenue.

Pawwed Rig

Mr. Incognito wrote: »

Gifts to parents can be made tax free up to the class B threshold which changes annually. Currently it is about 16K

Sorry to be pedantic but Group b threshold is €33,500.
Otherwise OP do what Incognito says. A Tax advisor would probably be better than a solicitor.

BionicRasher

great info. thanks all

will speak to tax advisor ASAP

Shoxsdub

Don't know if anyone can answer this. I have a house Which I have started rent out. the rent is 100euro less than the mortgage per month. I have the house 8 years. I obviously do want to have any outstanding or ongoing bills. How do I register for tax and what rate do I pay.
I am a paye worker so not really up on the tax thing.

Citizenpain

Shoxsdub wrote: »

Don't know if anyone can answer this. I have a house Which I have started rent out. the rent is 100euro less than the mortgage per month. I have the house 8 years. I obviously do want to have any outstanding or ongoing bills. How do I register for tax and what rate do I pay.
I am a paye worker so not really up on the tax thing.

File a Form 12 with Revenue

Guide here
http://www.revenue.ie/en/tax/it/rental-income.html

just do a search on this site and you will get plenty more info

Shoxsdub

Citizen, that is brill. Cheers I will try and digest that over the weekend!!!