tax implications

I’d like some advice from some of you guru’s!
I have owned a 3 bed house in Swords since 2000. I lived there until January 2007 when I moved in with my girlfriend into her house. Since then the house has been rented, the first set of tenants have just left.
I was in the process of renting it out when my Parents said they would like to live there for a few years.
They live in a 2 bed apartment in Malahide which they bought new 3 years ago, they were suggesting that we simply ‘swap’ and that I rent out their apartment. I’m sure this is not possible without transferring the deeds over.
What are the tax implications of this?
I reckon the two properties are worth about the same, similarly the going rent for the two properties is approx the same.
I am presuming I will be effectively renting to my parents and paying income tax on this rent, just like I have been over the last 1.5 years.
But what are the tax implications for them, will they have to pay tax on the rental income for their house? and will they get done for having to pay a clawback on the stamp duty exemption they got 3 years ago as they purchased a new apartment.
Advice welcome!

Some short thoughts:

  • I believe the stamp duty clawback has been reduced to two years.
  • You may have a CGT liability as you have been renting your house for more than a year, but it is unlikely that the value has increased since Jan '07!
  • even if the properties are not worth the same, the gift tax allowance (for the difference) is generous between parent and child

As regards the swap, a solicitor is your only option - you will need to have something water-tight to keep the revenue happy. An accountant should also probably be brought on board, as there will be forms to fill out even if there is no gain/tax due. It is also worth talking to the revenue.

thanks for the reply. Althought the limit has been reduced from 5 to 2 years for stamp duty, this only applies to property purchased post December 2007 - so I can’t avail of that.
I don’t intend to live in the Swords house again but will keep it as an investment, I will probably have to pay CGT eventually. the property is worth about €40k less then when I decided to rent it out, but is still worth considerably more then what I paid for it!
thanks again.

You only pay CGT on it from the time you rent it out, so you will probably be okay there for a while!

Ah, thanks for the correction on stamp duty.

You mean “somebody will pay considerably more for it than I did back in 2000”. Are you talking real or nominal terms? And are you sure? Don’t underestimate just how far things will dip.

I believe you could avoid the claw back.

Suggest you pay an accountant for some advice on the proposal.

CGT on a property is apportioned over the time it is owned. So if owned for 7 years, 6 as a princple primary and rented for one, then CGT will be the gain x 1/7 x 20%.

No indexation and no rollover. Thank Charlie Mc Creevey for that. In effect CGT becam a deffered wealth tax applied at the rate of 20% of asset inflation.