Stamp Duty Issue

Bonzo1

Can anyone please advise..
I bought a house last year and moved into it (first time buyer, owner occupier). I am heading off travelling in the next few months and want to rent out my entire house. I have heard that if i do so within 5 years of me buying the house i will have to pay the stamp duty that i didnt have to when i bought the property (and at the higher investors rate of 4%).
My question is..As i will only be renting the property out for 1 year after which it will be my primary place of residence again, is there any way i can get round not paying the stamp duty and not be hassled by the tax man??
Any advice appreciated..

Borzoi

Bonzo1 wrote:

I have heard that if i do so within 5 years of me buying the house i will have to pay the stamp duty that i didnt have to when i bought the property (and at the higher investors rate of 4%).
..

Yep, absolutely true - the revenue catching you and this being enforced is another issue, but are you prepared to rsik it?

SparkyLarks

*If the first-time buyer rents the house within five years Revenue will claim back or 'clawback' the difference between the higher stamp duty rates and the duty actually paid. The only exception to this is the 'Rent a Room' scheme where part of the house is rented out. If the house is sold within five years there is no clawback

As the house will still be your principle primary residance( all you bills Tax forms ect will still go there). you can rent out the rooms in your house and as long as you don;t earn more than 7200 per annum then you won;t have to pay tax or stamp duty.

I'd look into that If you can

MorningStar

Borzoi wrote:

Yep, absolutely true - the revenue catching you and this being enforced is another issue, but are you prepared to rsik it?

It might be hard for them to catch you but you never know what will happen in the future. Loads of non-resident account holders felt the same.

If the right incentive comes in or opinion gets worse against landlords it may be very popular to shop landlords. The view of tax dodgers never becomes better and the tax man is going after foreign property now.

lomb

renting rooms in it is fine. u can rent them all bar 1 i suppose and tell the tenets the gig, that u have keys but u wont b there...get it in writing in the lease and not even the revenue can do anything about it. ps get ur tax bills sent to the residence and keep the esb etc in your name also, that should cover u well.

grumpytrousers

MorningStar wrote:

It might be hard for them to catch you but you never know what will happen in the future. Loads of non-resident account holders felt the same.

If the right incentive comes in or opinion gets worse against landlords it may be very popular to shop landlords. The view of tax dodgers never becomes better and the tax man is going after foreign property now.

If you're going to rent out your house, then you'll have to register with the Residential thingummy board as a landlord and provide your PPS number. Admittedly it doesn't go straight to the revenue, but it does go to one govt agency...who can share with another. The chances of you getting caught are high enough, especially if a tenant wants to claim rent relief.

For the cost versus penalty thing, I'd have a word with a solicitor/accountant...

lomb

grumpytrousers wrote:

If you're going to rent out your house, then you'll have to register with the Residential thingummy board as a landlord and provide your PPS number. Admittedly it doesn't go straight to the revenue, but it does go to one govt agency...who can share with another. The chances of you getting caught are high enough, especially if a tenant wants to claim rent relief.

For the cost versus penalty thing, I'd have a word with a solicitor/accountant...

u dont have to register if u rent a room...

MorningStar

lomb wrote:

u dont have to register if u rent a room...

You need to be an owner occupier for that and limited rental income too. He is talking about renting the house out. Legally he should be paying investment stamp duty, registering the property and paying tax on the rental income.

grumpytrousers

lomb wrote:

u dont have to register if u rent a room...

Quite true.

The OP was saying that he wanted to rent out the house....

lomb

MorningStar wrote:

You need to be an owner occupier for that and limited rental income too. He is talking about renting the house out. Legally he should be paying investment stamp duty, registering the property and paying tax on the rental income.

he is the owner occupier legally if he signs a lease stating he is renting rooms , keeps the esb in his name that its furnished and habitable and that he keeps a room for himself etc etc.
u may not like this but it is not against the law, it is tax avoidance, not evasion. if the rent is above the 6 grand threshold than he pays income tax on the rent in the usual way.
unfortunately if u go this route the interest isnt tax deductable although u may get a personal tax allowance

lomb

grumpytrousers wrote:

Quite true.

The OP was saying that he wanted to rent out the house....

hes just renting alot of rooms , he does need to keep the utilities in his name and tell the tenents the story and tell them he is living there but he isnt if u know what i mean.

grumpytrousers

lomb wrote:

hes just renting alot of rooms , he does need to keep the utilities in his name and tell the tenents the story and tell them he is living there but he isnt if u know what i mean.

I see what you mean .

One potential weakness in an otherwise cunning plan - the tenants are in a position of strength...they have the potential to do him over if they ever get hacked off with anything...and if they *did* choose to shop him for tax *ahem* avoidance, the revenue may not look too kind upon it...

MorningStar

lomb wrote:

he is the owner occupier legally if he signs a lease stating he is renting rooms , keeps the esb in his name that its furnished and habitable and that he keeps a room for himself etc etc.

I don't think that would hold up legally.

http://www.oasis.gov.ie/housing/buying_a_house_or_flat/stamp_duty.html

Pretty straight forward I don't think your argument will work. Occupancy requires a person to occupy the property if you aren't there you aren't occuping it. It is tax evasion not avoidance, there is no loophole. All it takes is one tenant to report you and it tends to be the first recommendation by anybody here.

SparkyLarks

ISo what your saying is, if you go on holiday you arn't occuping your house so are you liable for tax. Is that for the whole year or just for while on holiday.

The house is still his principal residance. He's just on a really long holiday. i.e 1 year.

however the thing to do is to ring the tax office and ask.
The'll tell you.

JackieChan

The fact is he will be renting the place while he is away...its nothing to do with the holiday per se.

SparkyLarks

Only if he rents a room, not the house.

The fact that he is going around the world shouldn't make him ineligible for the rent a room scheme, as he has no other principal residance.

If he rent's the house out then of course the income would be subject to Tax and Stamp duty would be clawed back.

To Rent a room under the rent a room scheme( up to 7200) would be tax avoidance and legal.

To rent the house and not declare it would be tax evasion and illegal

Zynks

I would call the revenue commissioners and discuss it openly. You don't need to identify yourself, and they are usually very helpful.

MorningStar

SparkyLarks wrote:

The fact that he is going around the world shouldn't make him ineligible for the rent a room scheme, as he has no other principal residance.

You are only entitled to certain schemes based on residency and/or occupancy. I would say it makes him ineligible if he is not in the country for a length of time. Lets wait to hear what the tax man says instead of repeating the same things.

SparkyLarks

MorningStar wrote:

Lets wait to hear what the tax man says instead of repeating the same things.

Exactly

When in doubt ask the professionals

resassoc

I quote from the Revenue:

"Who is an Owner Occupier?

An Owner Occupier is a person who purchases a new house/apartment which is to be occupied by the purchaser, or a person on his behalf, as his only or principal place of residence and no rent, other than rent under the rent-a-room scheme, is derived from the property for a period of five years from the date of the purchase.

Who is an Investor?

An Investor is any person who does not qualify for First Time Buyer or Owner Occupier reliefs as that person (or persons in right of the purchaser) will not occupy the property as their only or principal place of residence and rent received, if any, is not under the Rent-a Room scheme. Investors acquiring new and second hand residential property are subject to the full rate of stamp duty as shown in Table 1 and 3.

What is the rent-a-room scheme?

Under this scheme there is no clawback of the First Time Buyer or Owner Occupier reliefs where rent is received by the person in occupation of the house, on or after 6 April 2001, for the letting of furnished accommodation in part of the house.

When does a clawback arise?

A clawback arises if rent is obtained from the letting of the house, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property."

Have a look at
http://www.revenue.ie/doc/sd10a.doc for a full guide.

Declan
www.tramyard.com
www.resassoc.com