New Powers for Revenue to investigate Landlords

The_Conductor

http://www.sbpost.ie/post/pages/p/story.aspx-qqqt=NEWS-qqqs=news-qqqid=37606-qqqx=1.asp

The Revenue Commissioners are to receive major new powers to investigate the tax compliance of the country’s 120,000 landlords.

Legislation is being drafted to give the Revenue full access to the database of the Private Residential Tenancies Board (PRTB), which contains the names, addresses, PPS details and property interests of all registered landlords in the country.

The Revenue sought the new powers amid concerns that tens of thousands of landlords are renting out properties without paying tax on the income.

Until now, the tax authority had no means of tracking property assets and was reliant on random audits.

Once it has access to the PRTB database, the Revenue plans to cross-check details in the database with declared rental income. The move is expected to lead to an escalation in the number of revenue audits, tax penalties and settlements.

The Revenue had formally asked the finance minister Brian Lenihan to include the new legislation in the Finance Bill, which is being published this week.

However, after discussion and consultation, it has been decided to include the legislation in the Housing (Miscellaneous Provisions) Bill, which is being brought forward by environment minister John Gormley.

Up to now, Revenue officials could formally petition the PRTB for information on a case-by-case basis. However, it has sought information just ten times in five years.

A 2006 examination of rental income tax compliance by the Comptroller & Auditor General described efforts by authorities to verify that landlords were properly declaring rental income for tax as ‘‘haphazard and ineffective’’.

Last month, the Dail Public Accounts Committee blamed a lack of information sharing between state agencies for the potential non-payment of taxes.

SimpleSam06

About time they met the iron fist of the taxman.

gurramok

As i stated here last year i think it was, i reported about 12 of these 70s built 2nd hand houses in a row of about a given 100 houses.
If this was replicated countrywide to include boom properties, we are looking at tens of thousands of BTL's avoiding tax.

blast05

we are looking at tens of thousands of BTL's avoiding tax.

Presuming of course that the interest on their mortgages is less than the rent .... and in the case of a lot of investors, they would have released equity during the boom which would minimise any tax liability they would have.
In any case, i would imagine that any landlord who registers on PRTB is a lot more likely to be tax compliant than the tens of thousands who are not.

The_Conductor

blast05 wrote: »

and in the case of a lot of investors, they would have released equity during the boom which would minimise any tax liability they would have.

Only the interest on the original mortgage is tax deductable, unless you can prove to Revenue's satisfaction (with proper documentation) that all equity released was re-invested in the property. I explored this option- as a possible way of getting away with releasing equity from my PPR and then renting it out- as I have to move for work reasons. Instead I've ended up with over 200 mile round trip daily..........

Feng Shui

In any case, i would imagine that any landlord who registers on PRTB is a lot more likely to be tax compliant than the tens of thousands who are not.[/QUOTE]

Does this mean that anyone rogue landlord not registered with PRTB won't be caught? Does the landlord have to register with the PRTB or are they automatically registered once they buy a property?

El Stuntman

surely they could have tracked the LLs based on tenants claiming rent relief?

Feng Shui

But what if the tenants aren't claiming rent relief? Revenue would have no record of this property or landlord?

gurramok

Feng Shui wrote: »

But what if the tenants aren't claiming rent relief? Revenue would have no record of this property or landlord?

Track the mortgage interest relief recipients on investor mortgages?

20goto10

Feng Shui wrote: »

But what if the tenants aren't claiming rent relief? Revenue would have no record of this property or landlord?

The onus is on the landlord to register the tenancy. If he doesn't the tenant should do it for him. They don't need his details, just fill in as much as you can and send it off. Other than that they have no way of telling. They're really not that sophisticated.

It seems the revenue are going after people who have lied on their form 11. Put down less rent than they are getting (sure who is ever going to know! Ha). It's a pity they don't focus on those who have not registered at all as these are the real rogues.

SimpleSam06

20goto10 wrote: »

It seems the revenue are going after people who have lied on their form 11. Put down less rent than they are getting (sure who is ever going to know! Ha). It's a pity they don't focus on those who have not registered at all as these are the real rogues.

I definitely recall reading that the Revenue was going after them as well, there may be 60,000 or more of them operating in Ireland, that's a hell of a lot of undeclared tax.

antoinolachtnai

The revenue always gets its money, or most of it, in the end from BTL's. Sooner or later, the tax will have to be paid. It is really not realistic to expect to stay outside the tax net. There are just too many ways to be caught.

PRTB registration is a right nuisance at the moment. They are currently opening mail from 14 October down there, and it is taking them six weeks to register tenancies. It is a bit of an administrative mess, and it's easy to see why they aren't chasing down people to get them to register. (Of course that is no excuse not to register.)

mikemac

I'm not sure what rent relief for tenants is exactly. It was around 330 euro per year last time I checked. A mere fraction of the tax relief that mortgage holders get.

It always seemed to me rent relief was less about giving credits to renters and more about a cheapish way for the Revenue to tenants to give information about landlords where there is a lot of possibly of collecting lots of tax if there is fraud going on.

Dunno, maybe that's just me

Are we going to see an amnesty declared in a year or two like we saw for Ansbacher accounts?

The_Conductor

micmclo wrote: »

I'm not sure what rent relief for tenants is exactly. It was around 330 euro per year last time I checked. A mere fraction of the tax relief that mortgage holders get.

It always seemed to me rent relief was less about giving credits to renters and more about a cheapish way for the Revenue to tenants to give information about landlords where there is a lot of possibly of collecting lots of tax if there is fraud going on.

Dunno, maybe that's just me

Are we going to see an amnesty declared in a year or two like we saw for Ansbacher accounts?

They are already allowing mortgage interest payments as fully tax deductable expenses for BTL landlords. If they bumped up the tax relief for the renters too- it might simply be cheaper to buy the house outright and allow tenants to live there rent-free....... They have given full relief on one side of the equation- they can't afford to give it on the other as well.

Proposals are to abolish mortgage interest relief for landlords, and rent-relief for tenants. In the current climate its entirely possible that it may come to pass........

antoinolachtnai

I think the social-policy rationale to for tenants relief was to provide some parallel to the relief that owner-occupiers get. Owner-occupier mortgage relief is basically a middle class relief, it doesn't provide any benefit to the least well off. Owner occupier relief has been reduced considerably over the years.

Mortgage interest relief was abolished for a time in the past, following the first Bacon report. The reason it was stopped was because it gave investors such an edge over people buying to owner-occupy. It was eventually restored, and I think the rationale was that there was a shortage of rental accommodation.

I think it is fair to say that mortgage interest relief was the biggest single contributor to the housing boom.

My view is that it is very unlikely that mortgage interest relief will be abolished in the current circumstances. It would make investing in property unattractive, at almost any price and would result in the property price drop becoming much deeper.

As for renter relief, I really can't see that one being removed for the social policy reason and the evasion-detection benefits, but it's possible, I suppose.

El Stuntman

smccarrick wrote: »

Proposals are to abolish mortgage interest relief for landlords, and rent-relief for tenants. In the current climate its entirely possible that it may come to pass........

ALL property-related tax breaks\subsidies should be scrapped. Mortgage interest relief, first time buyer grants, you name it - they just distort the market and reduce the government's tax take.

also, we need to come in line with the rest of the world and introduce annual property taxes to allow local authorities to properly fund themselves....

of course anyone who ran for office on this platform would get maybe 10 votes :eek:

astrofool

El Stuntman wrote: »

ALL property-related tax breaks\subsidies should be scrapped. Mortgage interest relief, first time buyer grants, you name it - they just distort the market and reduce the government's tax take.

also, we need to come in line with the rest of the world and introduce annual property taxes to allow local authorities to properly fund themselves....

of course anyone who ran for office on this platform would get maybe 10 votes :eek:

Those measures won't make any difference to the affordability of a house to people though, and just cause hardship to those that bought during those times.

It would get maybe 10 votes for a reason

antoinolachtnai

Do you think the capital gains break on personal private residences should be abolished too?

(Personally I think the break should be abolished, and stamp duty should be reduced or removed at the same time.)

Getting rid of stamp duty would make some difference to affordability.

The_Conductor

How about reintroducing property taxes on PPRs over a set value (say 350k) at a rate of perhaps 1% per annum?

Robinhood never had it so good.......

SimpleSam06

smccarrick wrote: »

How about reintroducing property taxes on PPRs over a set value (say 350k) at a rate of perhaps 1% per annum?

Or alternately tax non-PPR properties on a sliding scale, increasing with the number of them you have. That should kill a few birds with the one stone.

astrofool

SimpleSam06 wrote: »

Or alternately tax non-PPR properties on a sliding scale, increasing with the number of them you have. That should kill a few birds with the one stone.

Would this not push the price of renting up longer term? I don't see the problem with one landlord managing multiple properties, most of the speculation has been with people buying one extra property and then having to rent it out when capital gains reduced, surely a sliding scale will only encourage more once off landlords, rather than less.

So you either have:
many amateur landlords, and all the ills that go with them
Landlord "companies" who would have the experience, multiple staff etc. to manage properties (at the risk of creating monopolies, and presuming that on average these guys would be better than once off landlords.)

Should it also be down to local councils to set the tax levels based on what it costs to keep the infrastructure up to scratch, rather than have a leafy suburb (>350k) end up paying for slums elsewhere. It also leaves the system open to determining the real value of a property (impossible in Ireland), and a drop in prices negatively affecting tax take (which is what stamp duty has done).

Getting rid of stamp duty will only help second time buyers who have a home, not first timers (they will be negatively hit).

antoinolachtnai

The problem isn't between leafy suburbs and slums (and there are very few or no slums left in Ireland, in the sense of the slums there used to be in the inner city).

It's more between city and country. A property tax with a minimum property value is effectively a tax on Dubliners, and that is not likely to be an acceptable idea.

Putting a value on properties is certainly possible. They do it for rates.

The demand for investor property was generally tax led in my opinion. It made enormous sense for people with existing BTL properties to buy more, in order to use them as a tax shelter. As astrofool says though, I don't see any particular reason why owning multiple units should be discouraged, any more than owning multiple petrol stations or multiple bookie shops.

gurramok

Tax the 250,000+ empties for being vacant, that will bring in alot of dosh and bring rents along with sale prices down to where they should be.

It will also help prevent property becoming derelict.

The_Conductor

gurramok wrote: »

Tax the 250,000+ empties for being vacant, that will bring in alot of dosh and bring rents along with sale prices down to where they should be.

It will also help prevent property becoming derelict.

An actual tax, on a foregone income?
It would get really interesting if they applied a similar concept to commercial property.......

SimpleSam06

astrofool wrote:

Would this not push the price of renting up longer term? I don't see the problem with one landlord managing multiple properties, most of the speculation has been with people buying one extra property and then having to rent it out when capital gains reduced, surely a sliding scale will only encourage more once off landlords, rather than less.

It will have the welcome side effect of moving along all those vacant properties throughout the country, even the ones not for sale. It would be a case of make use of your property or pay a price. Makes sense to me. As for pushing up rental rates, it would take a long, long time for that to happen, given the massive oversupply of houses and/or undersupply of humans.

astrofool wrote:

many amateur landlords, and all the ills that go with them
Landlord "companies" who would have the experience, multiple staff etc. to manage properties (at the risk of creating monopolies, and presuming that on average these guys would be better than once off landlords.)

That pretty much describes the situation exactly as it is now.

smccarrick wrote: »

It would get really interesting if they applied a similar concept to commercial property.......

Are not rates charged whether or not a property is vacant?

gurramok

smccarrick wrote: »

An actual tax, on a foregone income?
It would get really interesting if they applied a similar concept to commercial property.......

Probably quicker to be an actual tax as it might be a nightmare to figure out which ones are PPR/ocupied rentals or not!.

Commercial has rates i thought whether its occupied or not?

dny123456

Would that not be against the data protection rules... information gathered for a specific purpose, cannot be reused for another purpose?