Revenue clampdown on investor stamp duty

ClubMan

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According to the Sunday Business Post:
Revenue in stamp-duty crackdown

The Revenue Commissioners are cracking down on buyers of new houses and apartments who do not pay stamp duty.

The officers are checking whether buyers are living in the properties. Owner-occupiers who buy a new property do not have to pay stamp duty, but they must continue to live in the property, otherwise they are regarded as investors.

Investors who avoid stamp duty, by claiming to be owner-occupiers and then renting out the property, could be hit with a double tax bill - the unpaid stamp duty plus tax due on any rent paid.

...
 

beattie

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Is this really a large scale occurrence, I would have thought that it is a very big chance for someone to take incase one tenant they may have would end up reporting them to the revenue at any stage if there was a falling out.
 

stuart

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Is it any surprise?
The amounts of money involved are massive

I have been stating this for about 2 years now and have been warning any existing/potential clients of this problem

It is not difficult to be caught
Revenue have tax payers PPS numbers from tax returns/tenants reporting them

They also have their PPS numbers from the stamp duty return filed by the solicitors

It will be like shooting fish in a barrell

You need to register for the link

http://www.unison.ie/irish_independent/stories.php3?ca=299&si=1456259&issue_id=12908

stuart@buyingtolet.ie
 

ClubMan

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stuart said:
I have been stating this for about 2 years now and have been warning any existing/potential clients of this problem
Is there any "whistleblowing" legislation whereby an intermediary such as yourself (not sure what your precise role/profession is) is obliged to report actual or suspected tax evasion by clients to Revenue?
 

mf1

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I posted this a while ago as an indication of where the solicitors might have a problem if engaging with clients to defraud Revenue - I was criticised at the time for posting incorrect information by a contributor (obviously with serious tax knowledge and expertise) although I never found out to what he was referring. Anyone got an up dated legislative reference?

I think that its clear from this board that stamp duty is regarded by many people as an irritant ( can't deny that!) but one that should be avoided ( if possible) and further evaded if there is any possibility of geting away with it. Like stuart says, I regard it as a no brainer for a non owner occupier to purchase and claim the f.t.b. or owner-occupier relief - it is just too easy to spot, stamp duty is a self assessment tax and it will almost inevitably come back to bite you on the bum if you do not address it properly.





For the purposes of clarifying where the solicitors possible liability arises............

I quote Section 8(1) Stamp Duties Consolidation Act 1999.


8.— (1) Except as provided for in this section, all the facts and circumstances affecting the liability of any instrument to duty, or the amount of the duty with which any instrument is chargeable, are to be fully and truly set forth in the instrument.

(2) Where it is not practicable to set out all the facts and circumstances, to which subsection (1) refers, in an instrument, additional facts and circumstances which—

(a) affect the liability of such instrument to duty,

(b) affect the amount of the duty with which such instrument is chargeable, or

(c) may be required from time to time by the Commissioners,

are to be fully and truly set forth in a statement which shall be delivered to the Commissioners together with such instrument and the form of any such statement may from time to time be prescribed by the Commissioners.

(3) Any person who—

(a) fraudulently or negligently executes any instrument, or

(b) being employed or concerned in or about the preparation of any instrument, fraudulently or negligently prepares any such instrument,

in which all the facts and circumstances affecting the liability of such instrument to duty, or the amount of the duty with which such instrument is chargeable, are not fully and truly set forth in the instrument or in any statement to which subsection (2) relates, shall incur a penalty of—

(i) £1,000, and

(ii) the amount, or in the case of fraud, twice the amount, of the difference between—

(I) the amount of duty payable in respect of the instrument based on the facts and circumstances set forth and delivered, and
(II) the amount of duty which would have been the amount so payable if the instrument and any accompanying statement had fully and truly set forth all the facts and circumstances referred to in subsections (1) and (2).


mf
 

Eurofan

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beattie said:
Is this really a large scale occurrence, I would have thought that it is a very big chance for someone to take incase one tenant they may have would end up reporting them to the revenue at any stage if there was a falling out.
Plenty of people willing to take the risk though. I know of two personally who would be liable. One has moved to the UK and is renting out her FTB house in Ireland while she lives abroad, no stamp duty clawback, no tax declared. The other simply bought up to a nicer house and is doing the same. I suspect there are quite a few amateur landlords in the latter catagory. I couldn't sleep at night waiting for that letter to come in the mailbox...
 

RainyDay

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Eurofan said:
Plenty of people willing to take the risk though. I know of two personally who would be liable. One has moved to the UK and is renting out her FTB house in Ireland while she lives abroad, no stamp duty clawback, no tax declared. The other simply bought up to a nicer house and is doing the same. I suspect there are quite a few amateur landlords in the latter catagory. I couldn't sleep at night waiting for that letter to come in the mailbox...
And what's the betting that in 5 years time, when the Revenue bill (including interest & penalties) does arrive, they'll be whinging about how it's all Revenue's fault and how they should have caught them out earlier!
 

ClubMan

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Eurofan said:
Plenty of people willing to take the risk though. I know of two personally who would be liable. One has moved to the UK and is renting out her FTB house in Ireland while she lives abroad, no stamp duty clawback, no tax declared. The other simply bought up to a nicer house and is doing the same. I suspect there are quite a few amateur landlords in the latter catagory. I couldn't sleep at night waiting for that letter to come in the mailbox...
It'd be interesting to know how many of individuals in this situation moan about so called "rip-off Ireland" and high taxes?
 

bb1

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it is a rip off, I have a friend who is gone travelling for a a year, she was in her house a year, no stamp duty paid as she was a ftb. She had the choice of handing over €12k to revenue for stamp duty clawback, paying tax on her rental income & then capital gains when she sells the house OR just renting the house out on the qt. The rent she is getting is covering her mortgage now but little else and she is going to move back in her house when she is back. Was she supposed to leave the house empty? She couldn't afford to pay the stamp duty. When she spoke to the revenue about this, the guy on the phone, basically said to say nothing!
 

ClubMan

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bb1 said:
it is a rip off, I have a friend ...
Your friend is the one who is ripping the state and the rest of us off by evading three taxes - stamp duty (clawback - the fact that she could not afford this is neither here nor there), income tax on rental income (the fact that it just covers the mortgage is neither here nor there) and CGT on part of the eventual resale gain.
When she spoke to the revenue about this, the guy on the phone, basically said to say nothing!
Sorry - I simply don't believe this.
 

RainyDay

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The real rip-off is the number of honest taxpayers who decided NOT to take a year of to travel because they couldn't afford the stamp duty impact. Your friend made her decision and then expects the state to accomodate her decision by changing the tax laws to suit her. That's not the way the system works, I'm afraid.

Anyway, just wait until her tenant claims tax relief from Revenue - Your friend might have a nasty shock awaiting her on her return.
 

bb1

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It's rented to non-nationals and she knocked more than enough off the rent to cover their benefit if they claimed rent allowance.

I'm not saying I agree with what she did, but I can understand where she is coming from, it's not like she's this landlord with a big portfolio of houses, she's covering her mortgage payments and that's all. I just think Revenue could be more accommodating of circumstances like this, fair enough if a person has 2nd house, but other circumstances such as a recent poster who moved out because they couldn't afford the mortgage for a year it is understandable why they would chance this tax evasion tactic. I know ye (moderators) won't agree but they are hundreds out there who are in similar positions & are chancing doing the same thing, not that this makes it the right thing to do.

 

RainyDay

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Hi BB1 - I hope she know that it doesn't matter how much she knocks off the rent. They are still entitled to claim the small tax relief that is available, and they will give her name address to Revenue when they do so. They can make this claim anytime up to 7 years after the start of renting (I think), so her nasty surprise could come way down the line.

The point of 'only covering her mortgage payments' make is sound like she is just keeping her head above water. Part of her mortgage payment is a capital repayment, so she is evading tax in order to reduce her debts with the bank. It's not like she comes out 'status quo' at the end of the period - she comes out ahead, and you & me & other compliant taxpayers have paid the price.

And btw, it's not just the moderators on this site who have objected to similar forms of tax evasion in the the past. Many other posters have raised similar objections.
 

quarterfloun

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Clubman....

Have you a crystal ball?

"and CGT on part of the eventual resale gain"

Property prices could fall as well. Would the Revenue be so kind hearted to issue a refund then....?
 

ClubMan

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quarterfloun said:
Clubman....

Have you a crystal ball?

"and CGT on part of the eventual resale gain"
"... if any". Happy now?

Property prices could fall as well. Would the Revenue be so kind hearted to issue a refund then....?
No - but they would allow the compliant taxpayer to carry capital losses forward indefinitely to be offset against subsequent capital gains.
 

Eurofan

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bb1 said:
I'm not saying I agree with what she did, but I can understand where she is coming from, it's not like she's ....
This is part of the problem to be honest. "Ah sure it's only a little tax evasion, it's not like I'm (insert relevant comparison here)".

It's an attitude that pervades Irish society at every level I'm sorry to say.
 

Glenbhoy

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In fairness the lady in the example need not be actually evading 3 taxes. If she had informed the revenue of her current status and paid up the stamp duty clawback, she would then be entitled to deduct the interest from the rent, this would probably result in little or no profits taxable, which given her current status would probably be covered by her tax credits.
In addition, if the revenue were to apply the clawback in a sensible way, ie a pro-rata clawback, I am quite sure more persons would be compliant! (I know that's not the point, but people are normally more willing to pay a tax which they perceive to be fair).
One other point, could this be a little bit of misinformation fed by the revenue to the press in order to boost compliance? I agree with Stuart though, that if the revenue were ever to get their house in order and have a fully integrated IT system (any offers D&T), it would be incredibly easy to catch the evaders!
 

badabing

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If you are going travelling for a year, the best thing to do is go in summer so you straddle 2 tax years, since you are travelling and not domiciled anywhere else, you are still living there, that way you can legally earn over 14k tax and stamp suty free by renting a room in your house. You also maximise your paye tax savings if you are a top rate tax payer by straddling 2 tax years
 

CCOVICH

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badabing said:
If you are going travelling for a year, the best thing to do is go in summer so you straddle 2 tax years, since you are travelling and not domiciled anywhere else, you are still living there, that way you can legally earn over 14k tax and stamp suty free by renting a room in your house. You also maximise your paye tax savings if you are a top rate tax payer by straddling 2 tax years
You have to occupy the house in order to avail of the rent a room scheme as far as I am aware (I asked the question on this site before). Residence and domicile have no impact in this regard.
 
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