moving abroad + CGT on Irish house: sell, do nothing or rent out?

D

dreamer

Guest
During the coming months I will be moving to live abroad and am unsure whether or not it is beneficial to sell my home in Ireland, wait but don't let it out or let it out.

I bought a house in 2001 for £169,000 (€214,585?) which is now estimated to be worth €350,000. I had to pay stamp duty at the time as it was a second-hand home when I bought it, so I didn’t get the first-time buyers grant. It has constantly been, and will be my principle private residence until August 2006. I rented 2 bedrooms under the rent-a-room scheme throughout this time, my rental income was always below the threshold of €7,600 so I was not liable for tax on the rental income as an owner-occupier and did not need to declare it.

In September I will start living and working permanently abroad. What CGT am I liable for if I decide to sell my Irish house? Does the renting of 2 bedrooms affect my full exemption from CGT? I know the timing of selling is important, as the house is still considered to be my primary residence during the following 12 months, but I’m not sure exactly what happens after that 12 months.


If I decide to let out my house while living abroad, does this cause me to become liable for CGT when I sell it? (I know I'm liable for tax on rental income) Also, if I buy a property as my principal dwelling abroad, does this affect my CGT status on my Irish house?


Any advice is greatly appreciated, I'm getting bogged down and confused reading the Revenue literature ...
 
yep I already read that post, and any similar ones I could find, thanks for the tip.

Unfortunately my case is slightly different, which is why I'm getting confused. SoI decided to describe my situation despite the overlap, the differences being;
- I will be living abroad, so my Irish house isn't necessarily a secondary home as it would be if I'm in a different property in Ireland
- I own the property outright (no mortgage)
- it's not the investment merits I'm confused about as much as change in capital gains tax liability due to my decision ... whether selling now or in a few years is still an investment risk that's another ball game!
 
dreamer said:
I rented 2 bedrooms under the rent-a-room scheme throughout this time, my rental income was always below the threshold of €7,600 so I was not liable for tax on the rental income as an owner-occupier and did not need to declare it.
Click to expand...

This is incorrect. Even though under the rent-a-room scheme there is no tax or PRSI payable below the threshold, the income must still be declared to Revenue each year.
 
I didn't realise that at all, thanks for the correction
 
Hi Dreamer,

There isnt really a straight forward answer to your question. It really depends on your circumstances. I moved overseas a few years ago and have can give you some thoughts based on my experience.

My understanding on CGT is that if you rent out your house you'll be liable for CGT for the portion of time that you rented out your house. So, if you had the house for 5 years and then went abroad for 5 years and then sold it you'd be liable for CGT on half the capital gain. Even if you move back you'll be liable for CGT for this period.

If you think it's likely that you'll buy a home in that country then you will probably need access to some sort of funds as well as borrowings to fund this purchase. How will you get these funds? If you dont have lots of extra savings - You have 2 choices: remortgage your irish home and rent or sell your irish home.

If you keep your existing Irish Home and remortgage this to buy a new home then you wont be able to claim an interest deduction on the rental income. Work out the calculations to see of you can afford to keep both homes without the interest deductions. Also bear in mind the costs associated with being a foreign-landlard including property management.

If you sell your home then you should have a good deposit to buy a home abroad. While this seems straight forward you have to consider if you can see yourself coming home and whether you think you be able to get back into the Irish market at a later point.

Ultimately my advice would be to realise that property decisions should be viewed as long term decisions (7 years plus) so:
1. Do you think you'll want to live back in your house in the shortterm?
2. Can you afford to keep 2 homes without any tax breaks?
3. Do you think you'll want to buy a house abroard in the shortterm?
4. If you sold your house here to buy a home in the new country and later discovered in a couple of years that you couldnt buy it back - would that piss you off or would you be happy with your decision to live aboard?

Good luck with the move.
Bovis
 
Dreamer, are you moving abroad to work as a condition of your employment? If you are, this changes your liability to CGT on PPR
 
Yes, I'm moving abroad as a condition of my employment. Do you know in what way it changes my liability to CGT? Hopefully for the better!

@ Bovis: thanks so much for your pragmatic advice - it's very valuable and highly appreciated. I can't answer all the questions you asked, even for myself, but it does put everything in perspective.
 
You may also need to consider the tax laws in the country you are moving to, depending on how they tax capital gains you could find yourself with a liability there too (though a tax treaty if one exists might help with that).
 
dreamer said:
Yes, I'm moving abroad as a condition of my employment. Do you know in what way it changes my liability to CGT? Hopefully for the better!
Click to expand...

You won't be liable for CGT if you've lived in the house for the whole time before you leave the country and if you return to live there. One of the main conditions for this exemption seems to be that you can't buy another property abroad, which would then become your PPR.

This is from the Revenue pdf on CGT:

"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."​

​
Best of luck,


Budapest
​
 
excellent stuff, thanks! I'm going to be reading that pdf again, very carefully ...

Do you think thats mean if I don't ever return to live in Ireland (and therefore the house) I am not liable for CGT once I sell the house within 4 years of moving abroad (which was as a condition of my employment)? If so, then my understanding is that instead of just 12 months, I have 4 years to decide whether to sell or not before incurring CGT liability. That would be wonderful.

Sorry about adding questions, I combined different situations and possible outcomes. Also, am I allowed to ask for recommendations for (reasonably priced) tax advisors on this website? If so, any suggestions?!
 
AFAIK the 4 year rule applies to living elsewhere in the state as a condition of your employment and that there is not a time limit on how long your employer requires you to be outside the state. However, I think you have to return to house and use it as your PPR after this employment for this rule to apply
 
Hi Dreamer,

I'm not a tax expert but my understanding is that there is no time limit if you're living and working abroad (as a requirement from your employer) and that you don't buy another home in the country that you move to. However, there is a requirement for you to move back to live in the house in Ireland at some stage in the future. If you do all of these things, then it appears that no CGT is payable.

Budapest
 
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