FTB Renting out PPR

Hi:-

My girlf and I bought our house in December 2005, and now we're thinking of moving abroad for a while.
If we were to rent out the house - our only house, principal private residence - would any clawbacks apply?
We're receiving Mortgage Interest Relief, and paid stamp duty at 3% (grrrr).
Our solicitor at conveyancing assured us that as it's a PPR, we would not be liable for any clawback - but just checking...

Ta.

If you rent out the property, I figure that you would owe another 3% in stamp duty (you would have paid 6% if you had not been a FTB). Your solicitor is incorrect.

There is no clawback of interest relief, but you can longer claim TRS when you are renting out the property. You can set interest expenses against rental income when making a tax return.

you will be liable for the stamp duty clawback at the investors rate which i think would be 6% so in effect you will have to pay back the same amount of stamp duty that you arealy paid - pro rated since 2005. If i were you i would get a different solicitor unless you picked him up correctly but then again he is not you financial advisor so its not up to him to give advise on your tax liabilities..

TTV said:

you will be liable for the stamp duty clawback at the investors rate which i think would be 6% so in effect you will have to pay back the same amount of stamp duty that you arealy paid - pro rated since 2005.

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Could you explain the 'pro rated' part?

And if you rent out a former PPR then some portion of any future resale gain will probably be assessable for CGT.

Yes - this was my reading of the situation at the time, but I didn't argue with the solicitor as my girlf was seriously talking about pulling out the of the sale if we were liable to an extra 3%!
Solicitor was fine, but came as part of a mortgage broker service and seemed extremely stressed (left the firm the week after we closed!)
I should ask my accountant for advice on this.

But...
If we stayed below the rent-a-room threshhold then would we bypass these liabilities? If so, then for a year away this might be more tax-efficient.

I.E.
Rent €1400x12=€16,800 <- Full Rent
Clawback=€10,000
Gain=€6,800

Rent €625x12=€7620 <- Rent-A-Room
Clawback=€0
Gain = €7620

Of course, for 2 years, full rent would be more efficient...

P.S. I think TTV meant pro-rata

simp said:

If we stayed below the rent-a-room threshhold then would we bypass these liabilities? If so, then for a year away this might be more tax-efficient.

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Only if you can legitimately claim the property to be your PPR while travelling which I doubt since it's not like you are being seconded in work to work abroad etc. But you should get independent, professional advice for your specific situation to be sure. If your PPR status was intact and you could avail of the rent a room scheme (again - which I doubt) then no SD clawback or CGT issues would arise.

TTV said:

you will be liable for the stamp duty clawback at the investors rate which i think would be 6% so in effect you will have to pay back the same amount of stamp duty that you arealy paid - pro rated since 2005.

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If you mean that the SD clawback is charge pro-rata then you are wrong - it's an all or nothing thing. A property originally bought as an owner occupier PPR which is rented out (other than under the owner occupier rent a room scheme) is subject to a clawback of SD of the amount that an investor would have paid at the time minus whatever the purchaser originally paid. It doesn't matter if the property is rented out in month 59 of ownership - the full SD clawback still applies.

ClubMan said:

Only if you can legitimately claim the property to be your PPR while travelling which I doubt since it's not like you are being seconded in work to work abroad etc.

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I should have clarified - my girlf works for a big Irish NGO and she is indeed seconded to work abroad - and having done one year of separation, the next time she is seconded abroad I'd like to go with her... So I think we might be an applicable case..?

You need to get independent, professional confirmation that your PPR status will be intact. Your solicitor may or may not be qualified to comment authoritatively on this. If s/he claims to be then get it in writing.

Thanks ClubMan - I will seek advice about this.