Renting Accommodation and tax

jack_pearse

My girlfriend and I want to rent our apartment out but wan to avoid the taxman. We have someone lined up who is returning as a mature student to college and is getting educational assistance for accomodation. If we were not paying tax renting out the property would this cause problems?
Thanks
Jack

Time Magazine

These threads tend to get better coverage on the Accomodation & Property forum, so I'm moving it there.

BC

Its tax evasion pure and simple. Will you get caught? Maybe.

The person renting can claim rent relief. They can do this without telling you and they can also wait until they move out and then back claim the tax.

antoinolachtnai

It wouldn't cause a particular problem. You won't be tax compliant and you will get caught for paying the back tax sooner or later, whatever way you play it.

Glenbhoy

The revenue are going to start clamping down on landlord tax evasion and stamp duty clawbacks shortly. It's unlikely you'd have much to tax pay anyway, although you may have a stamp duty clawback to pay regardless.
When did you purchase the property?
How much rent will you receive?
How much mortage interest do you pay?

Victor

If you still live there, you could consider the Rent-a-Room Scheme. Up to €7,620 tax free per year.

colsku

Victor wrote: »

If you still live there, you could consider the Rent-a-Room Scheme. Up to €7,620 tax free per year.

I am thinking of buying a one bed apartment, and would like the option of renting it out legit under the Rent-a-Room scheme.

The problem is, in order to be tax free, you still have to live there. I will live there, but will be renting the other side of my bed out to my student girlfriend.

So the question really is, is it possible to rent out a room in your apartment with this scheme and still live there?

Cheers!!

The_Conductor

Two seperate queries- firstly to the OP- you will get caught, its only a matter of time, and the interest and penalties on the tax due will far exceed any tax you would originally have had to pay. Don't do it- you won't get away with it. Yes- not paying tax on the rental income will cause problems......

Re: rent-a-room scheme in a single bedroom flat- you are no longer entitled to claim the relief in respect of a close family member or a partner (the fact that its a one-bedroom flat would be like waving a red flag to a Revenue Official on this one.......)

S.

colsku

smccarrick wrote: »

Re: rent-a-room scheme in a single bedroom flat- you are no longer entitled to claim the relief in respect of a close family member or a partner (the fact that its a one-bedroom flat would be like waving a red flag to a Revenue Official on this one.......)

S.

Thanks smccarrick...

You say that it is no longer possible to claim relief from a close family member or partner - do you mean rent relief for the rentor or rent-a-room tax relief for the landlord?

2 things I have taken from your advice:

a) If I was to rent out my one bedroom apartment to my girlfriend and live there myself, should it come under the rent a room scheme? Or could I just ignore the whole rental tax issue and let her buy me dinner every night.

b) Is it possible to avail of the rent a room scheme with a normal tenant who I have no links to, despite the fact it's only a one bedroom apartment? The reason I ask is that I will be sent abroad by work for 18 months next year and wish to rent it out legit, but not break the €635 per month limit.

Thanks!

The_Conductor

Vis-a-vis your girlfriend- I think your best bet is to allow her to buy you dinner and help with the bills on an informal basis. You could charge her rent and declare the income- but she would not get rent-relief and you would not get your rent-a-room relief.

b) as for renting out your house while you are abroad- thats fine, but you will not be entitled to claim rent-a-room scheme relief on it (as you have to be normally resident there to do so, and as you are abroad, you will not be). There is an exemption when you are being sent abroad for work purposes, but as far as I know its only for 6 months (you would be charged tax on the entirety of the income thereafter, but as you have no other Irish income for the year, and have both tax credits and also allowable costs to shield the income- your tax exposure may be less than you imagine.

S.

colsku

smccarrick wrote: »

as for renting out your house while you are abroad- thats fine, but you will not be entitled to claim rent-a-room scheme relief on it (as you have to be normally resident there to do so, and as you are abroad, you will not be). There is an exemption when you are being sent abroad for work purposes, but as far as I know its only for 6 months

S.

As far as I know, there is no limit to the amount of time you can keep the apartment as your PPR while working abroad.

I know that the maximum time spent living in another part of Ireland due to work is 4 years.

If indeed there was no cap on the amount of time spent working abroad it would be very nice if one could rent out his or her one bed under the rent a room scheme. - Technically, as you're living abroad you're renting out your whole apartment, but still keeping it as your PPR!

What do you think Mac!?

Victor

I'm not sure if the Revenue are overly interested in rent paid by a partner, provided it isn't an exorbitant amount. You need to agree you the other half that it is rent, not payment towards a mortgage.

Persius

smccarrick wrote: »

Vis-a-vis your girlfriend- I think your best bet is to allow her to buy you dinner and help with the bills on an informal basis. You could charge her rent and declare the income- but she would not get rent-relief and you would not get your rent-a-room relief.

I don't think that's quite true. In the case of a close relative renting a room, if the tenant claims rent relief, the landlord can NOT claim tax exemption under the rent a room scheme. If the tenant does NOT claim rent relief, then the landlord can claim tax exemption on rent received unter the rent a room scheme. Only one party has to forgo their relief/exemption.

Two caveats
1) I don't know if a GF is considered close relative according to the changes in the last budget
2) I don't know if rent a room is allowed in 1-bed appartments

And of course the standard caveat about taking everything you read on the Internet with a large pinch of salt.