Stamp duty for first time buyers who get help from parents

BrianD3

I am in the process of buying my first house and am worried that I may have to pay stamp duty due to the recent change in policy by the revenue re: first time buyer exemptions. My situation is a bit different to other peoples in that I am not taking out a mortgage. I am funding the purchase through savings. My savings include substantial cash gifts from my parents.

Everything is above board with the gifts. I am not liable for gift tax as I am below the threshold for it. But I'm wondering about the stamp duty.

The house will be completely mine. My parents will have no financial interest in or connection to the property. The only link they have with is is they will have provided a lot of the money which will be used to buy it.

Does anyone know where I stand?

seamus

You should be fine:
http://www.revenue.ie/wnew/first_time_buyers.htm
I think this line is the most helpful to you:

What is the position in the case of a gift of part of the purchase monies?

Where a first time buyer receives an unconditional gift of monies which are used to purchase a house, he/she will not be precluded from claiming first time buyer relief.

You're a lucky man. Most of us would give our right and left arms to be able to buy a home outright on the first go.

BrianD3

seamus wrote:

You should be fine:
http://www.revenue.ie/wnew/first_time_buyers.htm
I think this line is the most helpful to you:

In yesterday's Sunday Times they refer to this - if you get a gift and use it towards a house it won't leave you liable for stamp duty.

But then in the next paragraph they state:
"however if the (gift) money is specifically earmarked to pay for the down payment on a house then the buyer will not qualify for first time buyer relief as he will not be providing the finance on his own"

I'm just wondering what exactly this "specific earkmarking" is about. How do the revenue decide whether the money was earmarked or not?

You're a lucky man. Most of us would give our right and left arms to be able to buy a home outright on the first go.

Yep, I know. I can't thank my parents enough for these gifts. But I will be extremely pissed off if the revenue hit me with stamp duty because of the generosity of my parents. My parents are in a position to give me gifts beause of hard work and careful saving over 40 years. Like a lot of others of their generation, they were crucifed with tax when tax rates were a lot higher than they are now and they never evaded a penny tax.

seamus

BrianD3 wrote:

"however if the (gift) money is specifically earmarked to pay for the down payment on a house then the buyer will not qualify for first time buyer relief as he will not be providing the finance on his own"

I'm just wondering what exactly this "specific earkmarking" is about. How do the revenue decide whether the money was earmarked or not?

Notwithstanding this treatment, to take account of particular situations, Revenue is prepared to accept that a child, who is a first time buyer, will not be precluded from claiming first time buyer relief where a parent acts as a co-mortgagor in the following circumstances:

* The transfer of the house is taken in the name of the child.
* It is the intention of both the child and the parent that the parent is not to take a beneficial interest in the house.
* The parent has been joined into the mortgage solely at the request of the lending institution for the purpose of providing additional security for the monies being advanced for the purchase.
* It is not intended that the parent will be contributing to the repayment of the mortgage in the normal course.

It would sound like what was in the paper refers to the situation where the person is loaned the money for a downpayment, as opposed to given it. It's fair to say that if the money is a gift to you, it's yours, and therefore you are the one providign the finance. On the other hand, if your Dad, for example, writes a cheque to the solicitors for €10k for a deposit for the house, then he's providing the deposit, not you.

From the bit I quoted above, it would seem your situation isn't rare, and the Revenue recognise it. I'm no property solicitor though.

Victor

BrianD3 wrote:

But then in the next paragraph they state:
"however if the (gift) money is specifically earmarked to pay for the down payment on a house then the buyer will not qualify for first time buyer relief as he will not be providing the finance on his own"

I suspect this refer to a situation where a mortgage is involved and the buyer isn't contributing a substantial amount up front.

BrianD3 wrote:

I'm just wondering what exactly this "specific earkmarking" is about. How do the revenue decide whether the money was earmarked or not?

I think I you lodge a cheque from your parents this week and write a cheque for a similar amount next week for the house, that you would need to prove an element of separation. You probably aren't in this case as presumably you are putting down the "down payment" (which probably has no legal basis).

You should probably take professional advice (in writing) on the point.

is_that_so

BrianD3 wrote:

I am in the process of buying my first house and am worried that I may have to pay stamp duty due to the recent change in policy by the revenue re: first time buyer exemptions. My situation is a bit different to other peoples in that I am not taking out a mortgage. I am funding the purchase through savings. My savings include substantial cash gifts from my parents.

Everything is above board with the gifts. I am not liable for gift tax as I am below the threshold for it. But I'm wondering about the stamp duty.

The house will be completely mine. My parents will have no financial interest in or connection to the property. The only link they have with is is they will have provided a lot of the money which will be used to buy it.

This was my understanding of what Revenue were saying. They clarified it later. If you are the buyer then you will be OK and there will be no stamp duty. As regards gifts, the allowance within families is very substantial. In excess of 400K in any tax year I believe.

Victor

is_that_so wrote:

This was my understanding of what Revenue were saying. They clarified it later. If you are the buyer then you will be OK and there will be no stamp duty. As regards gifts, the allowance within families is very substantial. In excess of 400K in any tax year I believe.

No its per lifetime.

MorningStar

Victor wrote:

No its per lifetime.

It is also deducted from your inheritence tax limit too!! So I guess it goes past lifetime unless you are talking about the parent I guess

Victor

is_that_so wrote:

This was my understanding of what Revenue were saying. They clarified it later. If you are the buyer then you will be OK and there will be no stamp duty. As regards gifts, the allowance within families is very substantial. In excess of 400K in any tax year I believe.

http://www.oasis.gov.ie/death/taxation_issues/capital_aquisit_tax.html?search=capital+acquisition+tax

ck1

You will be ok regarding Stamp Duty providing that the persons named for the purchase are acutally first time buyers. In the event that the bank require a guarantor and that person is a second time buyer this excludes the property being treated as First Time Buyer for Stamp Duty purposes.

In this country both gifts and inheritance are lumped together when calculating whether Capital Acquisiton Tax is payable. The exemption for lifetime gift/Inheritance from parent to child is currently in the region of €454k and there is generally a cut off date at to what gifts are calculated. For example, if your parents gave you a gift of say €300k in 1980 and they give you a further gift of €300k now then you will not be subject to CAT as I beleive the last cut off date was around 1987 (not really sure of the actual date). If your parents gave you a gift in 2000 say of €300k and you today receive either a gift or inheritance from them of say €300k then you would be subject to CAT on aproximately €150k amounting to aproximately €30k.

magpie

What are the tax implications of Denis Desmond giving you a fat wad of money to go and buy a house?

Victor

magpie wrote:

What are the tax implications of Denis Desmond giving you a fat wad of money to go and buy a house?

The first few tens of thousands are tax free, the balance you pay CAT on at 20%.