Why Ivor Callely will be swotting the Revenue manuals on the Dublin-Cork train…
This morning, Senator Ivor Callely met with the Seanad Eireann Committee on Members’ Interests, who are investigating his expense claims.
The Dubliner has been dogged by controversy, following recent reports that he claimed expenses of up to €80,000 for travel from his Co. Cork holiday home to the capital. The Committee held a rare public hearing today, to inquire into the matter.
Senator Callely claimed today that his house at Kilcrohane in West Cork was now his “Principal Private Residence”, that he divides his time between Dublin and Cork, and that he is often seen in the vicinity of his Cork address.
Mr. Callely’s case has brought into sharp focus the often obscure concept of “Principal Private Residence”, or PPR. In the Irish tax code, this is the technical term for one’s normal residence or home.
Whether or not a property is a ‘Principal Private Residence’ can make an enormous difference to one’s tax position. For example, Capital Gains Tax is normally charged on gains arising from asset disposals. However gains on disposal of a PPR are normally tax-free. The sale of a €1m property can generate huge Capital Gains Tax bills, but if it is the PPR of the seller, the tax will normally be zero.
Similarly, the inheritance of one’s family home is normally exempt from Capital Acquisitions Tax. On a more basic level, PPR’s are exempt from the annual NPPR levy on second homes.
In general I find that people take the concept of “Principal Private Residence” for granted, eg “my home is my home”.
Yet there are plenty of grey areas, and these can give rise to anomalies and complications:
- If you are working in Dublin and return “home” to Kerry every weekend, is your PPR in Dublin (where you live for 4-5 days per week), or in Kerry where your family lives and where you keep the majority of your possessions?
- If you own your own home in Galway and spend 12 months backpacking in Asia, is your PPR still in Galway, even though you sleep and base yourself in backpacker hostels on the other side of the globe?
- If you are retired, live most of the year at your home in Ireland, and spend a few months each winter living in sunnier climes, where is your PPR during those winter months?
- If a separated parent temporarily leaves the family home due to marital difficulties, their spouse and children continue to live there, and they contribute to the upkeep and maintenance of the family home, is this still their PPR, even though they are living elsewhere?
The Revenue Tax and Duty Manuals (published under Freedom of Information legislation) contain some very useful and extensive notes on the concept of PPR’s and how it applies in practice to Capital Gains Tax. Although not exactly ideal bedtime reading, these notes are well-written and generally easy to read, considering their technical content.
As the Senator Callely “expenses” story unfolds, I expect that we will all learn a little bit more about PPR rules and how they apply in practice.
In the meantime, Ivor will be busily swotting the Revenue manuals. At least it will help him while away the endless hours on the Dublin-Cork train…
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