News & Events

Stamp Duty rates for first time buyers

There was some welcome news in 2005 for first time buyers of second hand residential properties with the introduction of an increase in the threshold exempt from stamp duty.  First time buyers are now exempted from stamp duty on the purchase of a secondhand residential property up to the value of €317,500.  The previous exempt threshold was €190,500.  The rates for non first time buyers remain unchanged. 

It is important to bear in mind the definition of first time buyer for stamp duty purposes.  A first time buyer is a person who has not previously, either individually or jointly,  purchased or built a house or apartment anywhere in the world and  the property will be occupied by the purchaser, or a person on his/her behalf,  for use as their principal private residence.  If there is more than one buyer, each of the buyers must be a first time buyer to benefit from the reduced rates of stamp duty.  This is something which must be given careful consideration as nowadays many parents want to assist their children in purchasing their first home. The Revenue have issued a statement advising that in order to qualify for first time buyer relief, the entirety of the purchase monies, including any borrowings must be provided by the first time buyer.  This would mean that any parent who assists their child whether by way of providing the deposit or joining in the borrowing would result in the loss of first time buyer relief.       This statement caused consternation amongst both first time buyers, lending institutions and practitioners alike.   As a result the Revenue was compelled to issue a further statement clarifying their treatment of purchasers in such circumstances.

The Revenue has now stated as follows:

“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 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 in 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.

Where all four conditions above are satisfied, the Revenue will treat the parent as effectively acting in the role of guarantor for the loan.”

Where parents provide assistance by paying the deposit on behalf of the child, provided this is an unconditional gift of monies which are used to purchase a house, the first time buyer will not be precluded from claiming first time buyer relief.

Purchasers should also be aware that anyone who has previously purchased a house abroad cannot avail of first time buyer relief.

Caution should also be exercised by a first time buyer, purchasing a house using the proceeds of sale of a house owned by their spouse or partner who is not a first time buyer.  In such a case, first time buyer relief would not be available because the spouse or partner would be providing all or part of the purchase monies.    

In addition to the above, no rent may be derived from the property for a period of five years after the purchase of the property apart from rent under the rent a room scheme.   If rent is derived from a letting of the property within the five year period, a clawback of the stamp duty which should have been paid at the time will arise. The clawback will amount to the difference between the full/higher rate of stamp duty and the rate of stamp duty paid and becomes payable from the date rent is first received.   Under the rent a room scheme you can obtain relief from this clawback if you are letting furnished accommodation in part only of a house or apartment. 

The table below sets out the current rates of stamp duty applicable for residential property.

Gráinne Macdougald

gmacdougald@hayes-solicitors.ie