Income tax on property abroad

Faith

Hi guys,

Just a couple of quick questions for you. My Dad owns a property in the UK that will be rented out next year by the local University, who are acting as a management company. They said that tax will be deducted at source when the bank account is outside of the UK - does this mean that the income tax my dad will be paying will go to the UK government? And if so, he'll still be getting a monthly income into an irish account that he's not paying income tax in Ireland on - will there be extra taxes in Ireland?

Secondly, say I was living in the property rent-free. My Dad is getting no income from it. If I decided to move, and sublet the apartment or let if, whatever, would he or I be subject to paying income tax on that rent?

Cheers!

Mr. Incognito

Okay firstly I've no qualification or knowledge of UK tax but in Ireland if you are paying rent to a non resident landlord the tenant is oblidged to withhold tax and pay it over to Revenue- this can be avoided by using a local agent who will be responsible for rent- I gather that is what's happening here. If he employes a local management company the withholding tax can be by passed.

If he is receiving foreign rents this should be declared here. He will get a credit for UK taxes paid under the double taxation treaties.

As regards if you are living in the apartment rent free technically under Irish law you would be receiving a tax free benefit that would normally be subject to Irish CAT, however your group thresholds would negate this. As the property is in the UK I'm sure the UK approach may be similar.

If you are receiving rents from a sublet you will be oblidged to declare this income and pay tax on it.

It's not terribly complicated but the cross border element means that you may fall to both Irish and UK tax and there are provisions for claiming credits regarding which one has primary taxing rights.

I'd approach your fathers tax consultant as if he is receiving foreign rents he should be declaring this and filing annual returns.

Past30Now

Just a quick addition to the above.

If your father submits an NRL1 form available on the HMRC.GOV.UK website he may be able to receive his UK source rental income gross (i.e. without the imposition of withholding tax). The rental income is taxable, firstly in the UK, and then in Ireland. Any tax paid in the UK is available as a credit in Ireland.

He therefore has to submit a UK and Irish income tax return.

Regards,

Past30

Faith

Thanks for the replies! It's a bit confusing, but what I'm getting is that he pays the income tax in the UK and tells the Irish government about this, so doesn't have to pay extra tax in Ireland?

And if I were to sublet the place myself, I'd be responsible for paying income tax on it, not the owner? This part is all hypothetical, because my Dad told me he'd still have to pay income tax even if it was me, not him, getting the income.

Past30Now

A person with only one rental property in the UK will pay quite a small amount of UK tax. The current personal allowance for 08/09 is STG£5225. A person with Net Rental Income of less than that would have no UK liability. However, if that person was paying the higher rate of income tax in this country, then they would be liable to income tax, levies and PRSI on the euro equivalent of the net rental income.

e.g

UK Tax Return

Net Rental Income STG £5200
UK Tax - Nil

Irish Tax Return

Case III Foreign source income €6,000

Tax/Levies/PRSI 50% - €3,000


Past30

silverrope

Hi i noticed this thread and have a question that i'm having a hard time finding the answer to in relation to a property in England. Any advice appreciated!!

I have a property in my name in England that is being rented out from Sept 1st. I'm working in Ireland and have Irish residency.

Does anyone know if I'm able to open an account in England and can I have the rent lodged to that account??

Any advice on this greatly appreciated..

Thanking you..

Beasty

silverrope wrote: »

Hi i noticed this thread and have a question that i'm having a hard time finding the answer to in relation to a property in England. Any advice appreciated!!

I have a property in my name in England that is being rented out from Sept 1st. I'm working in Ireland and have Irish residency.

Does anyone know if I'm able to open an account in England and can I have the rent lodged to that account??

Any advice on this greatly appreciated..

Thanking you..

Nothing to stop you opening a UK account (and lodging the rent in it), although there will be identity checks undertaken (best to open an account with a UK affiliate of your Irish bank if possible, to try and minimise red tape).
However this does not affect your tax position - income (both rent and any interest earned on the UK bank account) needs to be declared in Ireland if you are domiciled in Ireland.