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Halves on a house

  • 14-11-2019 5:34pm
    #1
    adam88
    Registered Users Posts: 1,599 ✭✭✭


    Hi all. Looking for advice. Thinking of going halves on a house with my sister in Dublin. The plan would be that she’d rent 2 rooms under the rent a room scheme to go towards the mortgage.

    If she owned the house by herself the rent would not be liable to tax but I suspect that if I own half the house I’d have to pay tax on half the rent.

    Any way of working this so that I wouldn’t have a tax liability ??


«1

Comments

  • #2
    Heres Johnny
    Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    adam88 wrote: »
    Hi all. Looking for advice. Thinking of going halves on a house with my sister in Dublin. The plan would be that she’d rent 2 rooms under the rent a room scheme to go towards the mortgage.

    If she owned the house by herself the rent would not be liable to tax but I suspect that if I own half the house I’d have to pay tax on half the rent.

    Any way of working this so that I wouldn’t have a tax liability ??

    Are you going to live in it too?


  • #3
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    No. I’ve my own house and have lodgers in there already.

    Want to do things by the book but just wondering is there a way to legally avoid paying the tax


  • #4
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    adam88 wrote: »
    No. I’ve my own house and have lodgers in there already.

    Want to do things by the book but just wondering is there a way to legally avoid paying the tax

    If the rent pays anything off your mortgage repayments it's rental income and taxable.

    Your sister will have a CAT liability on use of half of the house.

    Best to talk to a tax advisor about it.


  • #5
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    davindub wrote: »
    If the rent pays anything off your mortgage repayments it's rental income and taxable.

    Your sister will have a CAT liability on use of half of the house.

    Best to talk to a tax advisor about it.

    Would she not be entitled to rent a room relief


  • #6
    gerbilgranny
    Registered Users Posts: 515 ✭✭✭gerbilgranny


    Rent a room relief is where a homeowner rents out a room in their own home - their own principal private residence.

    Think of it as a 'make use of the spare room' initiative.


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  • #7
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    gerbilgranny wrote: »
    Rent a room relief is where a homeowner rents out a room in their own home - their own principal private residence.

    Think of it as a 'make use of the spare room' initiative.

    This would be her home. She’d be living in it and would be her residence. I’d merely be assisting her in buying the house. It would be an investment on my behalf but would be her home


  • #8
    Calahonda52
    Registered Users Posts: 12,164 ✭✭✭✭Calahonda52


    adam88 wrote: »
    This would be her home. She’d be living in it and would be her residence. I’d merely be assisting her in buying the house. It would be an investment on my behalf but would be her home
    How many names on the deeds?
    Who is borrowing the mula?
    How many names on the debt?

    “I can’t pay my staff or mortgage with instagram likes”.



  • #9
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    Calahonda52 wrote: »
    How many names on the deeds?
    Who is borrowing the mula?
    How many names on the debt?

    Was thinking of going proper halves.

    Joint ownership, mortgage in both our names,,, it’s just I wouldn’t be living there She couldn’t afford it on her own


  • #10
    Calahonda52
    Registered Users Posts: 12,164 ✭✭✭✭Calahonda52


    Thanks.
    It might actually fly: let's see what the others think.
    .
    https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-type-of-residence-qualifies.aspx

    “I can’t pay my staff or mortgage with instagram likes”.



  • #11
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    adam88 wrote: »
    Would she not be entitled to rent a room relief

    She would be.

    But if any of the rent benefits you directly or indirectly, you are not entitled to it.

    She is receiving a gift of half of the house, there are Capitial Acquisitions Tax implications.


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  • #12
    Calahonda52
    Registered Users Posts: 12,164 ✭✭✭✭Calahonda52


    davindub wrote: »
    She would be.

    But if any of the rent benefits you directly or indirectly, you are not entitled to it.

    She is receiving a gift of half of the house, there are Capitial Acquisitions Tax implications.
    How do you figure that?

    “I can’t pay my staff or mortgage with instagram likes”.



  • #13
    Mrs OBumble
    Registered Users Posts: 25,656 ✭✭✭✭Mrs OBumble


    davindub wrote: »
    She would be.

    But if any of the rent benefits you directly or indirectly, you are not entitled to it.

    She is receiving a gift of half of the house, there are Capitial Acquisitions Tax implications.

    No she's not, if both names are on the deeds.


  • #14
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    I would maintain ownership and control of half the house, if or when it is sold I would receive half the sale of the house.

    What we are currently thinking the tax situation would be is the following

    For e,g. Total rent from tenants (housemates)
    10000

    She would get half and pay no tax on it (rent a room relief) I would also receive half and pay tax on my half.

    Could I sign over my half of the rent and let her pay that towards the mortgage ???

    I want to stress I’m not looking to evade paying tax only avoid or reduce my liability


  • #15
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Calahonda52 wrote: »
    How do you figure that?

    The ability of the sister to claim ROR?

    Revenue Tax Briefing

    "4.1 Sole or main residence
    The room or rooms must be in a residential premises situated in the State that is occupied by an individual as his or her sole or main residence during the particular tax year. An individual may live in more than one residence but can only avail of rent-a-room relief in respect of his or her sole or main residence. In general, an individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him or her. The individual does not have to own the residence and it could, for example, be occupied as rented accommodation.
    "

    I don't think the legal title to the property is material, once the rent is entirely received by the sister as her income and not the OP's, it should be claimable under ROR.


  • #16
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Mrs OBumble wrote: »
    No she's not, if both names are on the deeds.

    Sorry, where have you established this from?


  • #17
    dubrov
    Registered Users Posts: 3,541 ✭✭✭dubrov


    davindub wrote:
    Sorry, where have you established this from?


    There is no gift. The sister is buying half of the house herself


  • #18
    Calahonda52
    Registered Users Posts: 12,164 ✭✭✭✭Calahonda52


    davindub wrote: »
    Sorry, where have you established this from?
    .
    the first clue is in the title.
    .
    The rest is explicit in some of the OP's replies

    “I can’t pay my staff or mortgage with instagram likes”.



  • #19
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Calahonda52 wrote: »
    .
    the first clue is in the title.
    .
    The rest is explicit in some of the OP's replies

    I wasn't confused about the title situation. The post I replied to appeared to either state that ROR would not apply or that gift tax would not apply if there were two names on the deeds, gift tax would apply if the OP were not to receive a MV rental income on his half of the property from his sister or a rental income directly from the tenants and I covered the criteria for ROR in my reply to you.


  • #20
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    dubrov wrote: »
    There is no gift. The sister is buying half of the house herself

    Actually apologies for this, after re-reading my reply to the OP, it should have read "if she is receiving a gift of use of half of the house"

    This is referring to CAT implications of free use of a house and arm's lengths rules for rent received from a family member.


  • #21
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    Can someone break this down to simple English.

    If we buy the hosue together does she have to pay cgt on my half that I am allowing her to use???

    What happens to the rent that is received from the lodgers ??


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  • #22
    Marcusm
    Registered Users Posts: 10,175 ✭✭✭✭Marcusm


    adam88 wrote: »
    Can someone break this down to simple English.

    If we buy the hosue together does she have to pay cgt on my half that I am allowing her to use???

    What happens to the rent that is received from the lodgers ??

    If she has a 50% ownership interest in the house, I do not see that it can be a gift unless she has exclusive use of the house. You are not entitled to rent a room relief. She probably is. It would be indicative (but not determinatory) of a gift if she received and retained the lodger’s rent. Using the lodger’s rent to pay your half of the mortgage would still necessitate you taxing the rent in your own hands with limited entitlement (if any) to interest relief.


  • #23
    [Deleted User]
    Posts: 0 ✭[Deleted User]


    One way to structure this while not having to pay tax is that you both own half the house, both pay half the mortgage and the person living there received 100% of the lodgers rent.

    Then 3000 can be gifted per year tax free from the occupier to the other owner. It should cover most of their half of the mortgage, if the other owner has a partner/spouse then you can give them 6k per year tax free.

    Lots of other ways to work this also but unfortunately they can't be discussed here.


  • #24
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Alonso Big Cargo wrote: »
    One way to structure this while not having to pay tax is that you both own half the house, both pay half the mortgage and the person living there received 100% of the lodgers rent.

    Then 3000 can be gifted per year tax free from the occupier to the other owner. It should cover most of their half of the mortgage, if the other owner has a partner/spouse then you can give them 6k per year tax free.

    Lots of other ways to work this also but unfortunately they can't be discussed here.

    No, you can't claim rent is a gift.


  • #25
    Professor Genius
    Banned (with Prison Access) Posts: 391 ✭✭Professor Genius


    adam88 wrote: »
    Hi all. Looking for advice. Thinking of going halves on a house with my sister in Dublin. The plan would be that she’d rent 2 rooms under the rent a room scheme to go towards the mortgage.

    If she owned the house by herself the rent would not be liable to tax but I suspect that if I own half the house I’d have to pay tax on half the rent.

    Any way of working this so that I wouldn’t have a tax liability ??

    Halves on a house? Celtic Tiger is well and truly back !


  • #26
    [Deleted User]
    Posts: 0 ✭[Deleted User]


    davindub wrote: »
    No, you can't claim rent is a gift.

    Who said the gift is rent? Co-owning a house and the occupier receiving rent a room money does not exclude the co-owners from gifting money to each other if they wish to.


  • #27
    adam88
    Registered Users Posts: 1,599 ✭✭✭adam88


    How much would a tax consultant or tax accountant charge to sort this out


  • #28
    Calahonda52
    Registered Users Posts: 12,164 ✭✭✭✭Calahonda52


    adam88 wrote: »
    How much would a tax consultant or tax accountant charge to sort this out
    Sort what out?: anyway most folk won't open a file for less than 2k

    “I can’t pay my staff or mortgage with instagram likes”.



  • #29
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Alonso Big Cargo wrote: »
    Who said the gift is rent? Co-owning a house and the occupier receiving rent a room money does not exclude the co-owners from gifting money to each other if they wish to.

    I say it is. An revenue auditor will say it is. Why are you proposing it? I couldn't believe that anyone who has any professional knowledge would even suggest this. An accountant or tax advisor wouldn't even file this for you.

    What you are proposing is tax evasion and a silly one at that, Revenue are very tuned into idiots who think they can swop income for gifts.


  • #30
    [Deleted User]
    Posts: 0 ✭[Deleted User]


    davindub wrote: »
    I say it is. An revenue auditor will say it is. Why are you proposing it? I couldn't believe that anyone who has any professional knowledge would even suggest this. An accountant or tax advisor wouldn't even file this for you.

    What you are proposing is tax evasion and a silly one at that, Revenue are very tuned into idiots who think they can swop income for gifts.

    There is no obligation to file a gift of 3k or under so you are showing your lack of knowledge there.

    A revenue auditor can sing for it, he cannot do anything about a gift between individuals of 3k or under simple as that.

    Also Using the small gift exemption for transferring money between individuals will 100% be given as advise from a tax advisor. It’s a perfectly legal way of moving money and it is common place to use it in ways like the above and for a multitude of other similar types of scenarios.


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  • #31
    davindub
    Registered Users Posts: 1,447 ✭✭✭davindub


    Alonso Big Cargo wrote: »
    There is no obligation to file a gift of 3k or under so you are showing your lack of knowledge there.

    A revenue auditor can sing for it, he cannot do anything about a gift between individuals of 3k or under simple as that.

    Also Using the small gift exemption for transferring money between individuals will 100% be given as advise from a tax advisor. It’s a perfectly legal way of moving money and it is common place to use it in ways like the above and for a multitude of other similar types of scenarios.

    For gods sake, your IT return...…it's 3k short....that is where the offense is being committed. Whomever files it for you signs and submits and when they do, there is a nice red warning about deliberate or carelessly submitted returns. So no lack of knowledge on the subject.

    Have you experience in telling revenue to go sing for it? I'll tell you if revenue ask you to make a prompted qualifying disclosure and you didn't rectify the above = prison time as well as the interest and penalties.

    As I stated it is tax evasion, I am categorically telling you, if you reduce your Case V income by 3k in lieu of a gift, you are committing an offense by filing. I don't know what tax advisor you used, but if you have done this on the advice of one, you had better rectify the situation.


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