Rent a room relief

patobanton

Quick question
I rented two rooms in my house last year that i also live in. Under the rent a room relief , I am entitled to €10k a year revenue. However if i go over this threshold i will be taxed to the hills on the entire amount. To avoid this last xmas i decided to give a refund of €1,000 to one of the lads in the house to make sure I am under the €10K allowance..

Would this be deemed as tax avoidance ? And how much proof would the revenue require if they were to ionvestigate?

It was my first year to own a house hence i rented the two rooms out and when i saw that there was a cut off point of €10K i decided rather than pay €5k to the revenue it would be better to refund the guy that wa sstill in the house so as a "xmas" present" gave €1k cash back....

Any advice would be greatly appreciated as the revenue website is not much use,, Cheers

eden_my_ass

Well as its under the rent a room scheme, you're not obliged to keep rent books, or provide an agreed lease, so basically its a personal agreement who pays what...if you decided at the end of the year that you didn't really want that much rent from a person, I can't see the issue in handing back his money which was "resting" in your account...or under the bed. As you provide no receipts and are not obliged to file monthly earnings it sounds like all you've done is reduce your income for the year to satisfy the limits, I would love to see how there could be any issue with that, remember you've gained nothing in theory, in fact its cost you to stay under the threshold...my opinion

patobanton

thanks for that Eden.. expect/hope they have bigger fish to fry

Tim Robbins

patobanton wrote: »

Quick question
I rented two rooms in my house last year that i also live in. Under the rent a room relief , I am entitled to €10k a year revenue. However if i go over this threshold i will be taxed to the hills on the entire amount. To avoid this last xmas i decided to give a refund of €1,000 to one of the lads in the house to make sure I am under the €10K allowance..

Would this be deemed as tax avoidance ? And how much proof would the revenue require if they were to ionvestigate?

It was my first year to own a house hence i rented the two rooms out and when i saw that there was a cut off point of €10K i decided rather than pay €5k to the revenue it would be better to refund the guy that wa sstill in the house so as a "xmas" present" gave €1k cash back....

Any advice would be greatly appreciated as the revenue website is not much use,, Cheers

Where you'd be caught is if because your tennant has to tell the tax man how much rent they are paying each month so that they get rent relief. They only get rent relief if their rent exceeds 2K a year. So the tax man has to do, number of months in apartment * amount of rent to ensure it's over 2K.

Then, the tax man could easily see that you're over the limit. Note: you're supposed to pay bills as well out of that 10K. So say if you were at 11K, but you said Mr. Tax man 1K went to the ESB, that won't count.

I seriously doubt the tax man will go anywhere near you though as in all reality you probably owe them about 2K. The hassel in chasing you up would cost more than that. So what's the point?

What's more likely is if a number tennants make claims against a landlord who hasn't declared any of their properties as either rent a room or as a private tenancy.

That's a bigger cash fall for the tax man.

eden_my_ass

Well look at it from another point of view, the scheme is very loose in what it terms as rent paid, i.e. bills, extra charges separate from the actual agreed rent, and you'll never know for certain what your tenants current or past will estimate or exaggerate as "rent paid", in the hope of a bigger payback (even though the actual limit is low enough, theres plenty of greed and naivety out there). So if you think the revenue ever manage to match tenants claim to your income claim....they're be pulling their hair out if they cared "that" much

Tim Robbins

patobanton wrote: »

thanks for that Eden.. expect/hope they have bigger fish to fry

Yeah but everyone should pay your fair share also. I'd drop the rent to max 8K.

patobanton

Well as a fuller picture there was 3 different people in one of the rooms through out the whole year, i.e. literally was a short term basis of 4 months spans. I know two of those will claim and have no quams about that the other girl was literally a foreigner that was looking for a room for a few months in dublin as a base.

I know the guy that i gave the €1k back to is not even claiming rent relief of me and is still in the house.. his own choice as he'd rather have nothing to do with the revenue so was delighted to get a refund without asking for one... if needs be i could write a receipt

I know i could say i gave " a refund" if the revenue ask but in my opinion down the line the safer option wa sto really give a refund despite this person not claiming as their rent DD appears in my account so if they were to investigate it would be visible..

I could be jumping teh gun especially since the person is not claiming rent relief but for peace of mind want to make sure its above board as for this year i would be better of leaving a room empty than to pay tax on the entire amount i.e. not just the amount above the 10K

eden_my_ass

patobanton wrote: »

I could be jumping teh gun especially since the person is not claiming rent relief but for peace of mind want to make sure its above board as for this year i would be better of leaving a room empty than to pay tax on the entire amount i.e. not just the amount above the 10K

I've done this in the past to avoid breaking the limit, its sometimes not reasonable to set a low rent all year as an alternative, because as much as it may seem like a bargain it also looks odd to be way under local averages and often attracts real costcutters, which in my experience have turned out to be the sort who'll gripe about buying a roll of bin bags for the place, or washing up liquid...noone wants to live with a scrooge

patobanton

Very true nobody want to share with someone that uses the same tea bag all week Thanks a mill

patobanton

Also previously when i rang the revenue this year about the rent a room scheme, is it true that you have three years to submit what rent you have received from the scheme as was informed this which I'd imagine means i can submit last years rent anytime this or next year... thanks

eden_my_ass

patobanton wrote: »

Also previously when i rang the revenue this year about the rent a room scheme, is it true that you have three years to submit what rent you have received from the scheme as was informed this which I'd imagine means i can submit last years rent anytime this or next year... thanks

I always ASSUMED it was like any income, due before the October of the following year in your returns (I didn't fancy tackling that document so just added it as an extra income through ros, simple as....)

Tim Robbins

eden_my_ass wrote: »

...attracts real costcutters, which in my experience have turned out to be the sort who'll gripe about buying a roll of bin bags for the place, or washing up liquid...noone wants to live with a scrooge

Ha Ha! With you there. I hate scabs.