Tax implications on house purchased for dependent relative

S

saintstephen

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hello,
My wife and I have just purchased a new townhouse (160) for my mother in law to live in under this scheme. We raised the deposit of 30k on an equity release from our own home and the 130k on a interest only mortgage for 5 years on the property. The monthly cost is nearly 600euro ,obviously under the scheme the rent is alot less ,what is the tax situation with the added cost. I earn 35k my wife 15k.

Very grateful for any advice,
 
Re: Tax implications for rent a room scheme

If this townhouse is not your own PPR (Principal Private Residence) then the owner occupier rent a room scheme does not apply. However there are tax exemptions and (semi?) equivalent PPR treatment for second properties which are provided to (dependent?) relatives for use as their PPR where no rent accrues to the related owner. Check out the Revenue site for info. If in doubt get independent, professional tax advice.
 
I was told by the solicitor the house would not be liable for stamp duty because it comes under the umbrella of the rent a room scheme,
soory for the confusion
 
It may be exempt from SD due to the sort of "equivalent" PPR treatment (my non-technical term!) that I'm referring to above. See [broken link removed]. If rent accrues then I'm not sure that this exemption or any other tax exemption applies and suspect that it would be treated as a normal investment property and taxed as such. You should clarify precisely the expected tax treatment with your solicitor, make sure that they are able to make this judgement and check it with a tax expert if you are not sure.
 
You should verify this but I believe that Providing you supply the house to your mother-in-law rent free, I believe you won't be liable for capital gains tax if you want to sell the house when your mother-in-law passes away.
 
I think Squonk is on the right track in relation to CGT and I think something similar applies to SD. Have a look at the Revenue CGT/SD summary guides to get an idea. Basically in certain cases of a house being provided rent free to a relative/dependent (there may be some qualifications on this) then the normal FTB SD/CGT treatment applies. Not sure about the ability to claim owner occupier mortgage interest relief on the mortgage though. There may also be other relevant issues. Your solicitor should be able to advise but if not (and if they suggested that the rent a room scheme applies here I would wonder - although I could also be wrong!) then get an opinion from an independent, professional tax advisor.
 
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