Purchasing second home for relocation within Ireland

DrWhiteSpike

Hi, 

My wife and I currently live and work in Galway and decided to relocate back home to Kilkenny to be closer to family. We are about to purchase our forever home in Kilkenny and are trying to decide what to do with our existing apartment in Galway. 

I will need to travel to Galway 3 days each week for work so plan to keep the apartment so I can stay overnight (wife works remotely). I’m thinking about renting out a room in the apartment to help cover the mortgage and my question is about the tax liability if I were to do so? I assume rent a room relief will not apply as our family home will be in Kilkenny?

Also about the tenant rights – I’ll likely sell the apartment in a year or 2 once I find work closer to home and I’m a little worried about getting tenant to leave given the situation with low rental availability.

Thanks for any advice!

dennyk

If you're staying in the apartment three days a week, that would likely be sufficient to make the arrangement a valid license arrangement rather than a tenancy. You'd probably want to have a written agreement to that effect to make it very clear, though. With a license agreement, there's no security of tenure; you can have your licensee out with "reasonable notice" at any time.

You are correct that you wouldn't be eligible for rent-a-room relief if you spend the majority of your time at your Kilkenny home, however, so you'll have to pay full income tax on the rental income from your licensee. Keep in mind that you will also only be able to claim partial CGT relief when you sell the apartment if you weren't living in it as your PPR for a couple years, though since the last 12 months of ownership is always eligible for relief, it probably won't result in very much CGT liability in the end.

DrWhiteSpike

Thanks so much for getting back to me, it's given me a lot to think about