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Buying house from family member at lower than market value price

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  • 26-02-2019 3:53pm
    #1
    Drieneba44!
    Registered Users Posts: 14 ✭


    Hi I would love some advice on the tax implications on me and my uncle.

    He built a second property and has rented it since building it (he has never lived there) but now is happy to sell it to at a lower than market value.

    The house is worth 300k and he is happy to sell to me at 200k.
    The house cost him approx 150k to build.

    What tax implications will we both face or what would be the best way to do the sale?

    Any advice or help welcome !


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    #2
    1874
    Registered Users Posts: 2,382 ✭✭✭1874


    Most likely, he will get charged CG on the actual value of the property so whatver percent of 150k,
    You would likely be charged tax on any reduced sale price, as a type of BIK or other,
    See an accountant, I guess its set up in a way that a seller would lose so much that it would not be worth their while/unviable to sell in this way. They'd pay CG based on its market price most likely and that could be a hefty bill.


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    #3
    decky1
    Registered Users Posts: 975 ✭✭✭decky1


    Trying to do this at the moment with my daughter, it's a nightmare, at the moment to do it- it will cost me 40.000 and her 20.000, house is worth 270'000 and would be letting her have it for 150'000 it seems it can't be done unless you want to give the tax man a good share,at the moment this is ongoing but it seems i can't even give it to her, they keep telling me the 'Treshold' is 320.000 but i still can't give it to her, it's all a mystery to me but i'm sure we won't win in the end.


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    #4
    lalababa
    Registered Users Posts: 1,726 ✭✭✭lalababa


    Just buy the house for 200k and say nothing.


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    #5
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    lalababa wrote: »
    Just buy the house for 200k and say nothing.

    Revenue do look into things like this so I wouldn't be following that advice.
    Also if there is a bank involved for mortgage they might not be happy either.


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    #6
    Spanish Eyes
    Registered Users Posts: 15,865 ✭✭✭✭Spanish Eyes


    decky1 wrote: »
    Trying to do this at the moment with my daughter, it's a nightmare, at the moment to do it- it will cost me 40.000 and her 20.000, house is worth 270'000 and would be letting her have it for 150'000 it seems it can't be done unless you want to give the tax man a good share,at the moment this is ongoing but it seems i can't even give it to her, they keep telling me the 'Treshold' is 320.000 but i still can't give it to her, it's all a mystery to me but i'm sure we won't win in the end.

    I don't understand why you cannot gift the house to your child. Were you given any reason? Do you own it with anyone else other than your spouse for example? Who are "they" that you refer to as saying you cannot do this?

    Yes there will be CGT and Stamp Duty to pay, but as I understand it, the value of the gift to your daughter will be 120k, (market value less consideration of 150k paid). So there should be no Gift Tax to pay based on current Gift Tax thresholds.


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    #7
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,294 CMod ✭✭✭✭Pawwed Rig


    My VAT alarm is ringing here OP. Pay for some professional advice before doing anything.


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    #8
    1874
    Registered Users Posts: 2,382 ✭✭✭1874


    If someone is the child of the seller, maybe they could gift be gifted the property as their inheritence, but with a provision for the current owner to have a right to reside there until death. I think people do that when there is one house, but if its not the primary residence, then Id image revenue would be looking for their cut,
    As a child it might be better to rent it off them for below market rate if they have no intention of selling it or any concern of renting it to anyone else, they could pay the owner an amount equivalent to the cost of the house over time, small enough to be affordable/allow the occupant to save/live, and inherit the rest, as nephew/niece that might not work out so well as the threshold is lower for inheritence, a solicitor/accountant will tell you all the legal ways to deal with it, better than getting caught later on and having to pay penalties and have nothing to show for it, CG can have write offs made against it and same for tax on any rental.
    Cant see what the benefit is to the seller?
    Maybe buy into half the house, own half in common with them, and do all the upgrades renovations,


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    #9
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,294 CMod ✭✭✭✭Pawwed Rig


    decky1 wrote: »
    Trying to do this at the moment with my daughter, it's a nightmare, at the moment to do it- it will cost me 40.000 and her 20.000, house is worth 270'000 and would be letting her have it for 150'000 it seems it can't be done unless you want to give the tax man a good share,at the moment this is ongoing but it seems i can't even give it to her, they keep telling me the 'Treshold' is 320.000 but i still can't give it to her, it's all a mystery to me but i'm sure we won't win in the end.

    Your daughter can receive gifts from you or her mother of upto €320K in her lifetime.
    You need a professional too. CAT/CGT offset is the first thing that is coming to mind. Potential VAT issue. Small gift exemption. If you do not understand the tax system it is crazy doing these things without advice.


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    #10
    Spanish Eyes
    Registered Users Posts: 15,865 ✭✭✭✭Spanish Eyes


    Pawwed Rig wrote: »
    Your daughter can receive gifts from you or her mother of upto €320K in her lifetime.
    You need a professional too. CAT/CGT offset is the first thing that is coming to mind. Potential VAT issue. Small gift exemption. If you do not understand the tax system it is crazy doing these things without advice.

    But if there is no CAT to pay there will be no offset surely?

    Not sure where VAT comes into it myself! SGE won't apply if there is no liability, well only to reduce the value of the gift for aggregation in the future maybe.


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    #11
    The Student
    Registered Users Posts: 1,238 ✭✭✭The Student


    Not sure where the VAT implications are.

    Few questions may help with the advice you receive. If this is not primary dwelling house and the value of the property has increased since you purchased it you will be liable for CGT.

    if value is below €320k and you have not given any gifts to your daughter before then she can inherit it without any tax implications.

    Some points to consider, once the property is your daughters legally it is also her husbands/partners so any separation and your daughters husband/partner is entitled to half the house.

    why not put the house in your and your husbands name, rent the property to your daughter and her husband/partner and avail of the small gift exemption of €3k per person so (€12k per year) and pay income tax on the balance. While this will cost you in the short term it also attracts a PRSI liability which will then entitle you to a state pension (if you do not have enough "stamps" up to know).


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    #12
    TeaBagMania
    Registered Users Posts: 1,192 ✭✭✭TeaBagMania


    or maybe ask about putting together a trust


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    #13
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,620 Mod ✭✭✭✭Henry Ford III


    If Revenue get a sniff of this there's potential capital gain of €150k for the uncle and potential for CAT for the OP


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    #14
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,294 CMod ✭✭✭✭Pawwed Rig


    The Student wrote: »
    Not sure where the VAT implications are.


    Neither was I the first time I gave advice on this. I fairly sh*t myself when it reared its head.


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    #15
    antiskeptic
    Registered Users Posts: 9,555 ✭✭✭antiskeptic


    Pawwed Rig wrote: »
    My VAT alarm is ringing here OP. Pay for some professional advice before doing anything.

    As I understand it, if the house was built less than 5 years ago then it's considered new for the purposes of VAT evaluation and VAT would be charged to the vendor upon it's sale.


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    #16
    Pawwed Rig
    Moderators, Category Moderators, Home & Garden Moderators, Recreation & Hobbies Moderators, Social & Fun Moderators Posts: 22,294 CMod ✭✭✭✭Pawwed Rig


    antiskeptic wrote: »
    As I understand it, if the house was built less than 5 years ago then it's considered new for the purposes of VAT evaluation and VAT would be charged to the vendor upon it's sale.


    It may depend on whether the 'intention' was as a trading transaction or not i.e. why was the house built? In addition there may be issues with values of land CUV/development value etc. You need to do a bit of digging on these transactions sometimes as they can be a minefield.


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