help with clarifying revenue language on cgt

M

melanieb

Guest
I have been reading the revenue's web site trying to work out my cgt liability.

We have owned a house since 2002, lived in it till 2007 when we came to Australia for work & have been renting it out during this period. We are planning on returning to Ireland but at the moment the house isn't renting well & is a bit of a bind so are weighing up our alternatives. The following information is of interest to me but I want to be absolutely sure I understand it correctly:

In addition to the twelve months referred to above, the following periods of absence from the house are
also regarded as periods of occupation provided that, both before and after those periods, the
house was the owner’s only or main residence and that throughout those periods he/she had no
other house eligible for exemption:-
(i) any period throughout which the individual was employed outside the State
and
(ii) a period of up to four years during which the individual was required by the conditions of his/her​
employment to reside elsewhere.
Click to expand...

Does this mean that if we move back into the house in the next year or so we will be exempt from paying cgt under the line 'any period the individual was employed outside the state'
How long would we actually need to be back in the property for before we sold it for this line to take effect? The paragraph states 'before & after those periods' but doesn't state how long.

Really appreciate anyones help, I have been trawling sites for hours but don't really understand a lot of the jargon.
 
Unfortunately this applies to an empty residence. You rented it out. You are liable to income tax* on it here, and possibly in Australia.

The period you rented it out will not count for PPR.


*Irish liability very little due to rental expenses and perosnal allowances/credits, you also must make income tax returns.
 
As far as I am aware, the fact that the property was rented does not stop you claiming relief for the above.

There is no set time for the period you have to be living in the house after you return, but a couple of days or weeks would probably not be enough - 6 months would be likely to be OK.

I suggest you get professional advice with regard to this.

www.taxingtimes.ie
 
+1 re Domo's advice of getting professional advice, or you may end up relying upon the likes of Domo's other advice!

You rented out your residence and thereby became a landlord. Absences of whatever kind don't matter. PPR relief is for residences and not rental properties, which is what yours became.

The period the property is rented as a proportion of total ownership is CGT-taxable. If you live in it before selling it again (a question of fact as opoposed to a particular period of months), the proportion taxable declines by twelve months.
 
Setanta12, you are not correct on the requirement that melanieb would have to reoccupy the property to exempt the last 12 months of ownership. As long as the property was a PPR at any time the last 12 months are exempt.

Also, does the legislation provide that if the property is rented out during the period of absence abroad due to employment that the exemption does not apply to that period? I've never had to look at it in practice but can't see anywhere in S604 that this is the case.
 
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Thanks for your comments - at least I am not the only one not clear on this - I can find nothing that states whether it is relevant that I rented this property or not during the period we were 'employed outside the state'

Also with the residing in it before & after - it could be fact for a month which doesn't seem very long to me & would suprise me if revenue leaves such a loop hole?

I am PRTB registered & have been paying tax on the property since I left.

I will seek professional advice but haven't been lucky enough to find anyone who seems to be clear on all issues like this. Any recommendations appreciated.
 
Based on a review of my tax book (and not the legislation), this is my read of what applies:

  • You need to reoccupy the house after the period spent working abroad in order for the foreign based period to be allowed as deemed occupation.
  • The Revenue Commissioners 'generally' (per textbook) look for such occupation to be of at least 6 months duration. I don't know how strictly this requirement is applied in practice but better safe than sorry.
  • The fact that you rented the property while abroad doesn't have any impact on the CGT liability (obviously it affects Income Tax) nor does it affect the treatment of the 'deemed occupation' ie once you reoccupy the house, you can count all of the foreign work period as deemed occupation.
  • The final 12 months ownership is always treated as a period of occupation irrespective of whether you occupy it.
 
melanieb said:
I will seek professional advice but haven't been lucky enough to find anyone who seems to be clear on all issues like this. Any recommendations appreciated.
Click to expand...

MelanieB, just to note, with the exception of the incorrect advice given by Setanta12 (who actually crtiticised the advice given by another poster!!!), the advice of the other posters in this thread is consistent. That is:
a) the last 12 months will be exempt irrespective of whether you reoccupy the property;
b) the period you were required to reside abroad for reasons of employment and where all work duties were performed abroad will be treated as a period of occupation (subject to c) below) irrespective of whether you let the property or not during this period.
c) You will need to reoccoupy the property as your PPR in order for the period at b) to be treated as a period of occupation. The reason that there is no consenus on the length of the period of reoccupation is that Revenue have never confirmed the position. I think in one case Revenue have indicated that reoccupying the property for a few weeks would not be sufficient. Some people will say 6 months, others will say a period less than this would be sufficient. In the absence of a specific time period I would concentrate on being able to show that the property has once again become your PPR following your return to Ireland. For example, has the property once again become your primary postal address? have all utilities i.e. gas, electricity, NTL been returned to your name and have you paid bills in respect of these since your return, have you brought all your personal belongings back to the property (as opposed to holding some of them in storage in advance of a subsequent move from the property). Once the facts support that the property has once again become your PPR you should be comfortable exempting that portion of the gain.
 
Ok, I don't have access to my legislation here and while I had to indepth research this working in practice for various clients (while studying for the tax-qualification), I will admit I can't remember the exact specifics.

But I will say re-occupation is necessary for the 12-months relief.

I am still doubtful whether Revenue will grant full PPR relief if its rented out in the interim, that seems like an obvious loophole and against the spirit of the PPR relief. The relief is there so as not to penalise people who must reside elsewhere due to work and not at home.

If a property is rented out, you cannot reside there. However this is based on my supposition - I don't have ready access to the TCA or TaxFind.
 
Re-occupation is not necessary for the final 12 month relief, no , but for the years abroad to count for PPRR, yes.
S604 (5) (b) (i) any period of absence throughout which the individual worked in an employment or office all the duties of which were performed outside the State
is followed by the qualification
if both before and after the period the dwelling house ... was occupied by the individual as his or her only main residence.
 
Thanks again for all your input. Apologies if I wasn't clear but we were not transferred to Australia for work - my husband was offered a job over here independantly of the work he did there (although in the same industry) does that change things? i was hoping that we would still fall under part (i) any period in which the individual was employed outside the state.

Also - what is the situation with the revenue checks? I understand that we can obviously prove a period of occupation through bank statements, bills etc being in our name once more but as for all our possesions etc - surely we do not even notify the revenue of the sale until the property is sold by which time our things will either be in storage or a new property?

Finally, as joint owners would we both need to re-occupy? In this current climate we would have to expect to take at least 6 months to sell the property anyway so an option may be for me to come back until a sale is secured leaving my husband in employment here. He could then join me once we were in a better financial position for him to be out of work for a while (he is in construction & i know the jobs in that industry there are few & far between at the moment).
Sorry for all the questions but we need to think about arrangements & how best to work things - would hate to do something wrong & be left with a €40,000 tax bill because of an oversight.

Thanks again
 
Melanie, it doesn't matter whether you were transferred to Australia. You can claim the PPR exemption as you say, under S604 (5) (b) (i).

As to Revenue checks, the document trail would be proof enough of taking up residence there again. I don't see them coming out to inspect your table and chairs. Just in case, you could chat to the neighbours about how you have returned, and have the sale (if it happens) come as a surprise, not something planned beforehand.

I would think you should both take up residence again, since the house is a joint asset.
 
If you are planning to come back to live in the property to claim residency then move back to Australia that the substance of the transaction is tax evasion!

Also, I am nearly certain that there is something about why you left the property in the first place ie if you were required to move out as employers sent you to Australia etc.
 
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