Swapping home offices - benefit all round

Vince1974

I have no idea if this could work but I was thinking about two sole traders that work from home. In their current situation the home office expenses are very limited according to revenue. Obviously you can't rent from yourself and the bills can only be expensed relative to the size of the 'office' compared to the rest of the property.

Consider the following situation, sole traders A and B live near each other and both have a home office. What would happen if A rented out their home office to B and vice versa for an equal amount, say € 500 a month. In practice you allow the other person to work in the home office you rent in the other person's house.

Would this not result in both parties being able to subtract an additional € 6000 per year from their taxable income?

And under the rent a room relief this rental income would be untaxed if it's under 10 grand a year.

Am I missing something?

Peterdalkey

I Think you are
"If you rent out a room (or rooms) in your home to private tenants, the rental income you earn will be exempt from income tax, provided this income does not exceed €10,000 in a tax year. This is called the rent a room relief."

Vince1974

I thought a sole trader was for all purposes equal to a private person.

Peterdalkey

I think you will find they are a person registered to carry on a business. My guess is that revenue would view this as a contrived scheme designed to deprive them of the appropriate taxes payable and contend it to be tax evasion.

Of course they could rent a room in a personal capacity but such personal expenses are not an allowable business expense!

Vince1974

Ah, residential purposes only.

pedroeibar1

There also is an issue when you sell your house - AFAIK that part which is used as your 'office' is subject to CGT whereas a PPR is exempt. As the office occupier is a business I'd guess there also is a Rates liability.