Say I buy a house today, refurbish it and sell it again in 6 months time (not that I am planning to do that). During those 6 months this is my principal private residence. Do I pay CGT on the gains, if there is any?
Per Mr. Anderson.
Interestingly, you could be living in house A now, buy house B and do it up then move into it making it your PPR. You then have a year to sell house A without paying capital gain tax on any gain on it. In effect, you’re permitted two PPR’s for a year.
In other words, you can bunny hop from house to house making capital gain each time without having to pay any CGT. You don’t have to wait 6 months even between moves either.
I was not aware of that.
If you are deemed by the revenue to be in the trade of buying houses to renovate and sell on, they could asses the gain to income tax
was thinking this; it’s the same for Day traders - stocks/futures/CFDs - subject to income tax even though CFDs don’t attract CGT in the firstplace
Thing is - it’s a PPR exemption - not that there was no tax due in the first place - i.e the burden is on you to prove the exemption applies
I’m not an accountant.
These are merely sources of income like so many other sources of income. And are thus subject to income tax. All income is subject to income tax unless for some reason or another that income is deemed (part) exempt by Revenue.
From Revenue FAQ on the matter of ones PPR:
*Do all disposals of assets give rise to CGT liability?
No, not all disposals (of assets) give rise to a charge of CGT. For example, any gains arising in the following circumstances (e.g. PPR) are not regarded as giving rise to chargeable gains and hence are not liable to CGT*
The answer as to whether a PPR is exempt is answered thus: “since there are no chargeable gains arising from my disposal of a PPR, exemption follows”.
That one’s motivation is to derive income is neither here nor there - if Revenue want to place a limit on how frequently someone can move home (their making capital gain or not is a side issue) whilst still being exempt from CGT then they would be free to include that in the guidelines. They can’t introduce it on an ad hoc basis.
I mean, what if you like moving house a lot?
I checked with Revenue myself and there is no minimum occupancy required before moving on from your PPR and holding on to any captial gain.
The one thing you obviously couldn’t do is move from PPR A into PPR B and then move to PPR C before selling PPR A. Two PPR’s for a year is okay but not three…
Me neither. But you don’t have to be, the language is clear in the guidelines on what you have to satisfy in order to qualify for full relief on the income you gained from capital appreciation.
yes they do.
I must have been thinking of spread betting (and absence of Stamp Duty on CFDs); **usually **tax free but not if carried on as a trade, which was my more general point on liability.
If you’re a fussy freddy who moves houses a lot and has been lucky enough to make a profit on each then I don’t disagree; but if you’re a professional flipper then don’t confuse the Revenue FAQs with the more specific rules
revenue.ie/en/about/foi/s16/ … -07-03.pdf?
[19.7.3] Disposals of Principal private residence (S.604)
Part of this relates to say, a home office for which one could have been claiming relief for income tax, but it also makes me think that if you were "doing them up and selling on " then you’d have possible liability
An interesting twist but I don’t suppose even Revenue could twist the intent of that clause to include “professional flippers”. Leave alone the difficulty in impeding a persons right to move house whenever they like.
The PPR is an exemption from CGT not an exemption from tax. Any amounts taken into account for the purposes of income tax are excluded from CGT also. Income tax effectively takes primacy over CGT in determining taxability. The question is whether an activity is undertaken as a trade or an adventure in the nature of trade (to catch isolated or one off transactions) is a question of fact. In determining the facts, account is taken of the “badges of trade” which have been determined from caselaw over the centuries (yes I do mean centuries). In this case, the important ones will be intention, improvement work on the asset and the nature and frequency of transactions.
Taking a purely technical approach to the question proposed by the OP would weigh heavily towards it being an adventure int he nature of trade - the property is to be purchased for the purposes of improvement and resale int he short term and the residence aspect would appear to be incidental and fleeting.
However, on a practical level, Revenue rarely takes this position on isolated transactions as they turn up losses as regularly as profits and could lead to a serious wave of claims for relief. Remember that such profits and losses are taxed/relieved at the marginal income tax rates.