Revenue clampdown on investor stamp duty

ClubMan

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43,858
rubberduckey said:
Thanks Glenboy.

On a more somber note, i do take my responsibilities to the state quite seriously and do not want to break any tax legislation.

Can anyone on the forum or revenue tell me where the line is.

1. If i go on a 4 week holiday to Italy am i liable for stamp duty clawback,all the time returning to my original home in Dublin??

2. If i go on a 3 moth jolly to New Zealand to follow the lions rugby tour am I liable for stamp duty clawbank, all the time returning to my original home in Dublin??

3.If i go on a tour round the world for 6 months, never staying in one country for more than 3 weeks, am I liable for stamp duty clawbank, all the time returning to my original home in Dublin??


i guess this is the crux of the issue, advise would be most appreciated.


thanks,

P
I've trawled the Revenue site in detail looking for clarification in relation to how long an absence abroad and for what purposes is "exempted" in terms of the determining whether or not a property remains one's PPR but to no avail. Even the tax briefings don't seem to clarify this point. I guess that the only option is to ask Revenue directly and/or seek independent, professional opinion on the matter from a tax expert?
 

CCOVICH

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8,831
I would agree with ClubMan-and calling the Revenue would cost you nothing (except meybe the price of the phone call).

I would suspect that a lot of it comes down to what you are doing while you are abroad-pure travelling would mean that you would probably be in a hotel or campsite etc., while if you were working you would have some form of more fixed abode (temporary residence). I also think that the spirit vs. letter of the law would have to come into play at some point.
 
J

jonny

Guest
Does anyone know how soon you need to move in to be considered an owner occupier?

I am currently living outside Ireland and have been for over 3 years (and am therefore non-resident & ordinarily non-resident for tax purposes.)

I am buying a new house under 125sq metres (and am also a FTB) and it is due to complete some time in December. I will be moving back to Ireland permanently next September (2006) and will be moving in at that time with the intention of remaining in it for the forseeable future.

I will not be renting it out at all before this time and will likely take my time finishing it off in terms of putting down flooring, installing appliances and buying furniture probably waiting until I move back in September to do most of it. For now I intend to put an alarm on it, some curtains on the windows so it looks less obviously unoccupied and a sofa-bed to sleep on for the one or two short trips home I plan to make before moving back permanently in September. I will connect the ESB & Gas (in my own name) to dry it out and keep it dry and for heat/light when I am home on my short trips.

My solicitor seems to think I will not have to pay stamp duty but is there any danger I might be regarded as an investor or non owner-occupier? If Revenue are doing spot checks I likely won't be there to take their call (although I will be having a friend check my mail occasionally if they write).
 

ClubMan

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43,858
If you are not renting the property out and are still getting work done on it in preparation for moving in then I would not see any problem in terms of it being declared an investment property. However I am not a tax expert and if in doubt at least ask Revenue and maybe even consider getting independent, professional advice.
 

rubberduckey

Registered User
Messages
39
Thanks for the respnses.

i will ring revenue in the morning to try and find out about length of holiday etc.

Will update this thread with the response.

Thanks,

P
 

WaterSprite

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1,311
This is a fascinating thread. I don't have the bottom-line answer, but do have some comments (and apologies for the long post):

The key question is whether or not our travelling friend is evading any taxes that *should, legally, be paid*. We are not actually given enough information to make this assessement, but I am assuming that (i) she is travelling for a year, which may or may not span two tax years, the result of which may be that she is not tax-resident in Ireland for one particular year (ii) she will not be in any other country for longer than 183 days (also assuming that other countries have similar residence requirements to Ireland) and (iii) she is renting out her entire house for more than €7,620 per annum (i.e. she is receiving more than €7,620 in respect of one or more tax years)

If there is a legal obligation to pay tax and she is not actually paying that tax, then and only then can there be any question of legal or moral obligation. Neither Ubiquitous nor badabing has suggested that it would be morally "ok" for our backpacker to actually evade taxes - but we only get to this question *if* there is a law requiring her to pay such taxes. If there is no legal obligation to pay taxes then I think she is perfectly free to take off and travel to her heart's content and I hope she has a great time of it.

Having said that, have a look at:

http://oasis.gov.ie/housing/buying_a_house_or_flat/stamp_duty.html

Which says:

"A first-time buyer is defined as a person (or where there is more than one buyer, each person):
  • Who has not on any previous occasion, either individually or jointly, purchased or built on his/her own behalf a house in Ireland or abroad;
  • Where the property purchased is occupied by the purchaser or a person on his/her behalf as his/her only or principal place of residence and
  • Where no rent is derived from the property for five years after completion of the current purchase.*
*If the first-time buyer rents the house within five years Revenue will claim back or 'clawback' the difference between the higher stamp duty rates and the duty actually paid. The only exception to this is the 'Rent a Room' scheme where part of the house is rented out. If the house is sold within five years there is no clawback."


Now I am a lawyer, but not a tax lawyer. My interpretation of the above statement coupled with my initial assumptions leads me to believe that she is, in fact, evading taxes. The problem arises, however, not from her residence or the fact that she is not in the country, but the fact that she will be netting more than €7620 in rent.


If her house remains her principal OR only place of residence, then she remains within the FTB stamp duty exception. I don't believe that "residence" in this context is based on the 183-day rule. For example, there are lots of people who travel on various business trips for more than 183 days in total, but I do not believe that anyone could argue that, when they come home to the same house each time they return, that house is not their residence. Note that I am assuming in this case, and in the case of our backpacker, that these people have not stayed in any one country or location for long enough to be deemed to be "resident" in that country (under any definition of "residence", including the 183-day rule).


Her problem, as I see it, is that, according to my assumptions, she is receiving more than €7,620 in any one tax year for renting out a room, or rooms, in her home. From the Revenue wording, the rules seem black and white - if you receive more money than that, not only is the rent taxable but you ALSO lose out on 100% of the FTB benefits as regards stamp duty. So if you get €7,621 in any one year, then you lose all of the benefits of your reduced stamp duty. Bear in mind also though that this is an annual figure: you could rent out a double room in your 2-bed house for 6 months for 1270 per month in one tax year and do the same in the following tax year and, if you didn't receive any other rental income from that house, you would still fall into the terms of the Rent a Room Scheme. This is not tax evasion, no more than is claiming a refund for income tax paid in a year where you were non-resident in Ireland.


I am interested to see what the Revenue actually says about this - the above reasoning is merely my personal interpretation of the government-supplied material.


Sprite
 

Mellow

Registered User
Messages
12
Hi Guys - below answer I got from the revenue when I asked the question about utilising the rent a room scheme while myself and partner take year off to travel:

"Revenue Dublin South County PAYE" <SouthCountyPAYE@revenue.ie> wrote:

To qualify for rent-a-room relief one of the conditions is that the
residence
must be occupied by the person receiving the rent as his or her sole main
residence.If you are abroad you do not qualify for this relief because you
would not be occupying the property.
In respect of Capital Gains Tax Section 604 (3) states that the gain shall
not be chargeable gain if the dwelling house or the part of the dwelling
house has been occupied by the individual as his or her only main residence
throughout the period of ownership or throughout the period of ownership
except for all or any part of the last 12 months of that period.
It also states that any period of absence not exceeding 4 years where as a
condition of your employment you are obliged to work abroad .A period of
absence will only be ignored under the above rules if both before and after
the total period of absence the house was occupied by the individual as
his/her principal private residence and throughout which he/she had no
residence or main residence eligible for relief.
Maybe these conditions may help.

Regards

CCorcoran
Customer Services


)


*************************************

This e-mail has been received by the Revenue Internet e-mail service.

*************************************


Dear C Corcoran,

Thank you for the quick reply.

Can you please advise the criteria used to assess points 1 to 5.

Need to know this because if we are not deemed suitable to have utilised
the
rent-a-room scheme after we come back, we will have rental income tax,
stamp
duty and capital gains tax implications. So if you advise the criteria for
1
to 5 below, I can make sure that we abide by that criteria.

Thanks for your help.

Kind regards,

Catherine


"Revenue Dublin South County PAYE" <SouthCountyPAYE@revenue.ie> wrote:

>
>
>
> Hi,
>
> If you refer to tax leaflet IT70 section re rent-a-room-relief it states

> that
> ;
>
> A "qualifying residence" is a residential premises in the State, which is
> occupied by an individual as his/her principal private residence during
the
> year of assessment.
>
> To enable us to determine if you qualify for rent-a room-relief we would
> require after the 31st December 2006 or on your return to this country
> 1. details of any foreign income received by yourself
> 2. what countries you had visited
> 3. exact period you were away
> 4. if you own property abroad
> 5. exact dates that you occupied your property here
>
> Any query on your SSIA you should contact SSIA section,Limerick, e
> mail;www.trsadmin@revenue.ie=0D
>
> CCorcoran
> Customer Services=0D
 

shnaek

Frequent Poster
Messages
594
This is indeed an interesting debate. From my point of view I cannot see why the issue of stamp duty claw back arises at all. Surely the point of stamp duty relief was to make it easier for someone to buy their first home. What does it matter what you do with it? You have your first home, well done, case closed.

The fact that the effect the stupid piece of legislation had was to push up prices does not escape me either, nor anyone else who has been observing the property market. So we all pay higher taxes anyway when we buy a house, as the prices have been forced up. If the revenue had left things as they were house prices would be cheaper (a little anyway ;) ) and there would be no need for this debate, or for wasting revenues time chasing up nonsense like this when there is serious evasion going on out there.

(PS someone is going to say all evasion is serious yada yada yada - yes, that is true. But we never needed to create this situation in the first place. Pure short sightedness again the culprit)
 

dam099

Frequent Poster
Messages
866
shnaek said:
This is indeed an interesting debate. From my point of view I cannot see why the issue of stamp duty claw back arises at all. Surely the point of stamp duty relief was to make it easier for someone to buy their first home. What does it matter what you do with it? You have your first home, well done, case closed.
Its to give owner occupiers an edge over people who are really investors but might seek to avoid the stamp duty by pretending to occupy for a nominal amount of time.
 
P

Paulo

Guest
Has anybody being through the process of paying SD Clawback ? as I need to do this.

I have recently realised I need to pay this. I paid my rental income taxes as required.

Reading through the SD10 leaflet from the revenue ( http://www.revenue.ie/leaflets/sd10_03.pdf ) , I believe the rate of 5% SD is the one I need to pay is from table 1, as I purchased my house in 2000 for 270K Euro; initially let it in 2002 as I was posted out of the coutry with work and returned in 2004. The rates in table 3 scares me.

Can somebody in the know confirm this ?

Also, who is the professional required to process this ? Tax Accountant ? Solicitor.
 

strewth

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Messages
15
Hi. could you explain this to me please? I am hoping to go travelling in May for a year. Can I rent out my apartment tax free?
 

CCOVICH

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Messages
8,831
strewth said:
Hi. could you explain this to me please? I am hoping to go travelling in May for a year. Can I rent out my apartment tax free?
Did you read this post? Did you read any of what has been said in this thread?
 

wexford

Frequent Poster
Messages
56
That girl may also have to repay her first time buyers mortgage interest relief... if a ftb rents out within five years, they lose the their mortgage interest relief entitlement...


i think legislation should provide for a 12 month break for certain reasons in five years - people want to head off when they are young, healthy and have minimum responsibilities - and i'm told the longer one waits to go, the harder it is... losing one's nerve!


:(
 

Shakespeare

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Messages
116
Wexford

"Losing" the owner-occupier interest relief does not refer in this instance to a claw-back of what has been claimed. It was claimed when the person was in fact an owner-occupier. What the comment refers to is the inability to continue to claim it when no longer an owner-occupier and instead become an investor in which case you offset the interest portion of the mortgage payment (and other exps) against the rental income when calculating the rental profit/loss for tax purposes.

Shakespeare
 

Rookieinvest

Registered User
Messages
16
I was told today that The Sunday business post of the 5th of March had a further article on the Tax authorities updating their systems to cross reference property owners rental returns/mortgage interest relief/number of properties held etc etc in order to catch people who have avoided paying the correct stamp duty on ther house and tax evaders who didn't pay the clawback and people who haven't filed returns. Looked on the website and can't find it - does anyone have access to the link (if it exists)?
 

Glenbhoy

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Messages
435
Rookie, I think that article was in the Indo/Sindo a few weeks ago - their website is free to browse on. It basically said the revenue are working on a database which will finally cross reference all data on an individual - or so the theory goes - this is what we all thought they had years ago, until you deal with them and realise their systems can be shambolic. Whether this comes to fruition soon or not is another matter, but undoubtedly it will arrive within a few years (but then of course the staff will require a massive increase in salaries to operate the system ala the guards PULSE sytem).
 
D

dirtyfingers

Guest
just to clarify?

if i don't leave the country, and just stop working - does the same apply????

i.e. - if i'm living in my main residence, renting the other rooms according to the letter of the law, having paid ftb SD rate, getting mortgage interest relief etc. That's all fine, yes?

But....if i leave the country - I suddenly owe stamp duty clawback??

just a real world example:

I live in Cork. I can NOT afford a house in Cork.

If i buy a new house as a FTB in for eg. Limerick, to get on the property ladder and continue to pay rent in another house in Cork, for which I don't claim rent relief.

I go to Limerick regularly with work, and would use my house on those occasions, while possibly renting the other rooms (never my room).

Is it then fair or justifiable to lose my FTB SD allowance when I don't have another primary residence? When I don't claim rent relief?

I can understand the logic of not being allowed to have both advantages - ie claiming rent relief, AND mortgage interest relief, and FTB rate. But is the core of the FTB sytem not designed to assist and allow first time buyers to purchase a house, and deter investors from pricing them out of the market?


Any ideas?
 
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