Retirement Relief

Heisenburg81

Say I was aged 50 and inherited a dwelling house from my parents and had no group a prior benefits and mv less than threshold.
If I decided to run a b and b business from the property for 6 years, and didnt reside there but had a person employed to manage it and live there, could I avail of Retirement Relief if I sell it on marketed as being a b and b house?

Lockedout2

No because you did not own the asset for 10 years.

Heisenburg81

Lockedout2 wrote: »

No because you did not own the asset for 10 years.

Ok ten years ownership.
What Im getting at is if the property was sold after being used as a b and b could it get relief? Even though it is a dwelling house.

barneystinson

Heisenburg81 wrote: »

Ok ten years ownership.
What Im getting at is if the property was sold after being used as a b and b could it get relief? Even though it is a dwelling house.

Theoretically yes, of course, but think about what you're suggesting.

To avoid CGT at a max of 33% (the rate may well go back down again but is unlikely to increase much), on a potential gain (which itself isn't guaranteed), you would have to commit to:
- either running a full time B&B business or employing someone else to do it (a scenario I don't think I've ever seen with a B&B),
- paying all the appropriate overheads, like rates and insurance.

Any part of the house not used wholly & exclusively as B&B (staff accommodation or retained for your private use) could arguably still fall outside of RR.

Compared to other options like liquidating the house immediately and investing in your asset class of choice (and thus avoiding CGT other than to the extent the MV increases between inheritance and sale), or letting the house (and if you choose, paying an agent to take care of everything that goes with that), is your option likely to result in a better bottom line after-tax return over a ten-year time horizon...?

Heisenburg81

barneystinson wrote: »

Theoretically yes, of course, but think about what you're suggesting.

To avoid CGT at a max of 33% (the rate may well go back down again but is unlikely to increase much), on a potential gain (which itself isn't guaranteed), you would have to commit to:
- either running a full time B&B business or employing someone else to do it (a scenario I don't think I've ever seen with a B&B),
- paying all the appropriate overheads, like rates and insurance.

Any part of the house not used wholly & exclusively as B&B (staff accommodation or retained for your private use) could arguably still fall outside of RR.

Compared to other options like liquidating the house immediately and investing in your asset class of choice (and thus avoiding CGT other than to the extent the MV increases between inheritance and sale), or letting the house (and if you choose, paying an agent to take care of everything that goes with that), is your option likely to result in a better bottom line after-tax return over a ten-year time horizon...?

Well, when you put it like that..!! Sound advice

Lockedout2

I think the question throws up an interesting area in Retirement Relief for sole traders v shareholders.

Certain "passive investment" sole trades could potentially qualify for RR while it was probably never the intention.

In this example I'm not sure that a house used in these circumstances would be a bnb at all, there could be issues with Planning ect if the operator does live in the house and therefore that at a practical level may not work.

Another question might be would a property used for Airbnb qualify for RR?

I'd agree that in principal the house in the OP query would qualify for RR.

Heisenburg81

Lockedout2 wrote: »

I think the question throws up an interesting area in Retirement Relief for sole traders v shareholders.

Certain "passive investment" sole trades could potentially qualify for RR while it was probably never the intention.

In this example I'm not sure that a house used in these circumstances would be a bnb at all, there could be issues with Planning ect if the operator does live in the house and therefore that at a practical level may not work.

Another question might be would a property used for Airbnb qualify for RR?

I'd agree that in principal the house in the OP query would qualify for RR.

If Revenue wish to treat Air b n b as a Case 1 trade, then the corollary surely is that the income generating assets would be eligible for retirement relief?
They can't have their cake and eat it!!