CGT on New Build

M

marathonic

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I am in the process of completing a new build house. My situation is as follows:

I was living at home and trying to save a large (about 25%) deposit for my first home. However, last year I had a huge fallout with my parents and ended up moving in with my aunty. I then came across a cheap site and decided to build my own house. I got a mortgage in February and began building the house. The house will be complete next month. It is my first house and so I would qualify as a first-time-buyer.

However, during the housebuild, I moved to a lower paid (but more fulfilling) job and am finding the mortgage payments quite tough now that I have drawn down most of the mortgage.

On the plus side, in the past few months I have patched things up with my parents and have moved back home. They have said that I can sell up the house and stay with them until my salary rises enough that I can comfortably afford a mortgage.

I am happy to have things patched up with my parents but am worried that, if I sell the house, I will have to pay CGT on the profits. I know that I will lose my FTB status but will I have to pay CGT?

It may be better for me to move into the house for a while first so that it can be classed as my PPR. How long do I have to have lived in the house for it to be my PPR? I would assume that ESB bills, etc. would have to be in my name for a certain period of time. Could any of you confirm the situation with regards to tax for me? Thank you.
 
I presume that there was no occupancy clause attached to your planning? Otherwise it may be difficult to sell your house.
 
No there was no occupancy clause. It's really just the CGT that I can see as a potential problem.
 
Not being smart but what happens if you fall out with your parents again.

would it not be better to keep the house for the future since you do not own another
 
I would like to do that but it just does not seem financially viable at the moment with my new job coupled with the increase in interest rates since the end of last year.
 
It was you PPR as far as revenue are concerned, you never let it out and more importantly you resided there. The property was never treated as an investment property,You took out a residential not a commercial mortgage. Don't make a mountain out of a mole hill.
 
secman said:
It was you PPR as far as revenue are concerned, you never let it out and more importantly you resided there. The property was never treated as an investment property,You took out a residential not a commercial mortgage. Don't make a mountain out of a mole hill.
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I understood that the house is not yet completed?? Therefore OP can't have lived there yet.

Personally I'd live in it for a couple of months and then sell if I had to. There is no capital gains tax on a PPR and, as far as I'm aware, no actual time limit on when you can sell. It's probably better to move in and have utilities put into your name, just in case it's ever checked in the future. People sell up quickly for all sorts of valid reasons. The problems only arise if you rent the property, then first time buyers are subject to stamp duty at investors' rate and capital gains tax on sale. I don't think you've anything to worry about.
 
Why would stamp duty at investors' rate apply? The OP built the house. He did not buy it.

Personally I'd live in it for a couple of months and then sell if I had to. There is no capital gains tax on a PPR and, as far as I'm aware, no actual time limit on when you can sell. It's probably better to move in and have utilities put into your name, just in case it's ever checked in the future.
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The OP would do well to heed this advice with caution. If he is not genuinely living in the house, and this fact becomes apparent to the Revenue for some reason, they may well ask him some awkward questions. By the time any queries arise, the situtation will already be at a stage where the OP would be facing the possibility of interest & penalties on top of a tax arrears settlement, if things went the wrong way for him.
 
The OP was saving for his first HOME, this was never meant to be an investment property, all he has to do is live in it for a period of time, setting up the usual utility bills and then it is his PPR. In any event I would seriously consider letting a room in the property, availing of the rent a room relief, whilst still living in it. This is perfectly LEGAL. This would help you with the mortgage and keep you on the Property ladder.
 
If the OP genuinely lives in the house, there indeed is no problem. I'm not sure for certain if doing so for a token period such as a couple of months would be suffficient. Taxpayers are in a catch-22 position on this as the tax laws specify no minimum period for this purpose and the issue appears to be at the discretion of tax inspectors. This is why I suggested the OP heed the previous advice, but with caution.

ps no need to SHOUT!
 
ubiquitous said:
Why would stamp duty at investors' rate apply? The OP built the house. He did not buy it.



The OP would do well to heed this advice with caution. If he is not genuinely living in the house, and this fact becomes apparent to the Revenue for some reason, they may well ask him some awkward questions. By the time any queries arise, the situtation will already be at a stage where the OP would be facing the possibility of interest & penalties on top of a tax arrears settlement, if things went the wrong way for him.
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Does stamp duty clawback not apply if the OP built the house??

I suggested the OP live in the house for a while, not pretend to live there. OP would prefer to be able to afford this and if s/he tries it for a while, taking advantage of RaRs, TRS, etc. it might be possible to hold on to the house. Otherwise if s/he cannot afford to do so, it is perfectly legal to sell IMO. I know where you're coming from though. I remember a few years ago, Revenue were looking into people who bought houses as PPR and then sold within a year or so to buy another. They did this on numerous occasions over 5 years or so, thereby making a tidy profit with no liability for capital gain.
 
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