Landlord Rental Options

wongomaster

Hey there

I have spent the last few hours scrolling through Irish property legislation, landlord forums and citizens information sites and can still not find what I am looking for. I have a number of questions but I suppose they all relate to rental income tax avoidance of a family property.

My father is interested in renting a property but he wants nothing to do with it, he has agreed to give me a share if I sort everything out. Naturally I am trying to maximise the income, more for him, more for me. With his current job, the rental income will be liable for the higher rate of tax which will diminish the income considerably, however, I am unemployed so It would be much more advantageous to send the returns through me.

Does anyone have any knowledge as to how this can be done efficiently and legitimately?

The two approaches I have been researching (to no avail) are:

Can he lease the property to me at a lower rate (minimising the amount of money taxed at a higher rate) and then I can sub lease the property for profit that I will register under my own PPS number?

alternatively,

Can I register as a sole trader to manage the rental of the property? Is there an upper limit placed on the cost of housing management or could he literally send the whole rental income through my business as maintenance?

Sorry for the incredibly long post, I wanted to be as specific as I could. How you can help.

Cheers

MouseTail

2 factors which will impact on the answer:

Are you in receipt of a means tested Social Welfare payment?

Is there a mortgage on the property or is it a cash purchase?

wongomaster

I am not claiming social benefits, I am aware that this would be fraudulent and have no intention of doing anything illegal, I am currently studying but saw this as a legitimate opportunity to make some cash

The house is an inheritance that is entirely paid off so I assume that falls into the category of cash payments

Thanks for the reply, I would appreciate any further suggestions you have

The_Morrigan

OP this is a legal minefield - I would suggest yourself and father consult with a tax professional and a lawyer to ensure you have this done properly and above board.

wongomaster

Cheers for the response Morrigan. I believe that a tax professional and or lawyer would get to the conclusion of my little conundrum quicker but it is a lot to pay to get something done fast.

I am still scrolling through the "residential tanancies act 2004" but absolutely cannot find anything that would inhibit me enacting either of my proposed options, I am most disgusted at how bloody ridiculous it is to interpret anything in our statute though.

The_Morrigan

wongomaster wrote: »

Cheers for the response Morrigan. I believe that a tax professional and or lawyer would get to the conclusion of my little conundrum quicker but it is a lot to pay to get something done fast.

I am still scrolling through the "residential tanancies act 2004" but absolutely cannot find anything that would inhibit me enacting either of my proposed options, I am most disgusted at how bloody ridiculous it is to interpret anything in our statute though.

If your father leases to you, he is still a landlord and must comply with all the landlord obligations set out in the legislation - which includes registration of the tenancy and the payment of all taxes and charges associated with being a landlord.

The legislation is not to be interpreted to fit your options either, it is there to be followed. You really need to engage the services of a professional here. Also, to note that legal advice is not permitted on boards, so the replies from here will be limited to opinion.

djimi

If its the tax and income implications that you are looking for then I would have thought that its unlikely you will find your answers in the RTA2004.

I agree with Morrigan; you need to seek proper professional advice on this.

wongomaster

Okay cheers guys

I believe professional help is the best option alright, any credit due for original thought process though?

I have realised the gravity of the research needed djimi, RTA2004 is the tip of a jargon built iceberg

wongomaster

The_Morrigan wrote: »

If your father leases to you, he is still a landlord and must comply with all the landlord obligations set out in the legislation - which includes registration of the tenancy and the payment of all taxes and charges associated with being a landlord.

I am also aware of this Morrigan, I am looking for legitimate maximised income for both of us, I do not want to rock the boat

The_Morrigan

wongomaster wrote: »

Okay cheers guys

I believe professional help is the best option alright, any credit due for original thought process though?

I have realised the gravity of the research needed djimi, RTA2004 is the tip of a jargon built iceberg

Personally I think you're overthinking it, your Dad is caught for tax regardless as he owns the property.
You can of course act as his agent and do all the donkey work if needs be, but if he is the owner, then he is the landlord.

Get yourself to an accountant and lawyer - unfortunately, although this may be an expensive outlay at the start, it may save you a massive tax bill if you guys make an error in understanding.

Best of luck with it.

wongomaster

Cheers, I'll be back on to give my tuppence when I find out more

murphaph

I think the father could long term lease the property in such a way as to not make him subordinate to the RTA. This is an option offered by some councils as an alternative to RAS where the landlord wants nothing whatsoever to do with tenants.

Having said that, any moves to shuffle money around like this is IMO likely to involve tax evasion. It would be an easy loophole to exploit otherwise and I think any such loophole would be long since closed.

Leasing to son at below market rates means a gift is being made so the son would be liable to CAT on that gift if above the threshold.

MouseTail

The only way to do it I think, is to be paid by your dad to manage the property. Even then, he could only offset the market rate for property management. I think that's around 10-12.5% of gross rent.

D3PO

have to agree with the others. Talking to a tax professional really is the only way to go.

Just throwing it out there for the OP but one other option for them potentially is for their father to sign the house over to them, however that in itself has legal implications in regards to possible gift tax etc.

Its also likely to only have short term benefit as if the OP is a student the second they start working and hit the higher tax bracket any benefit of doing this is lost and possibly depending on the circumstances could cost more in the end.

Anyway its really a job for a tax professional no doubt about it.

Mrs OBumble

OP, it's an accountant with expertise in residential property letting that you need.

In researching the market rate for full-service property management, make sure you look for the extra costs for extra services that many PMs here don't offer or don't include in their base fee. Eg the full colour set of photographs that you take at the start of each tenancy, the handling fee for each and every tenant call out, the key-holder fee if you respond to a tenant lockout etc. Also the charge for your own time for any mantenance that you do.

You absolutely won't be able to put the whole income through as property management charges. But, especially if it's an older property that may need a lot of maintenance, the standard agency rate is well below the minimum for the level of service that you will be providing to your father.

OTOH, this will make you self-employed, and that could have implications for you if you cannot find a job when you graduate.