Tax on renting property in Ireland, but I'm resident in Northern Ireland

haventaclue14

Hi all,

First post for me.

I'm looking for some advice. I own a house in Ireland and I'm paying a mortgage, I have recently moved into Northern Ireland and I'm a resident in there now (on the registrar). If I rent my house in Ireland, what are the tax implications, I'm sure if I was still resident in Ireland I would have to pay tax on the income, is this still the case now that I'm resident in Northern Ireland?

Thanks in advance

ABajaninCork

Yup! Can't escape the taxman...

The tenant has to deduct 20% of the gross rent and send on to Revenue if the landlord lives abroad.

haventaclue14

Thanks for the reply!

Was hoping that I wouldn't have to pay tax as I was a non-resident but feared the worst. Is there an amount that you can earn before any tax implications? If I was resident in Ireland would that help in any way?!

ABajaninCork

It'd probably be cheaper to pay tax here! Just stay in the property and pay the Household Charge

Seriously - you'd be better off talking to either Revenue or the Citizen's Advice for better advice.

haventaclue14

yeah I'll probably do both.

thanks for your posts

Pawwed Rig

haventaclue14 wrote: »

Is there an amount that you can earn before any tax implications? If I was resident in Ireland would that help in any way?!

Nope.

You may also be taxable in the UK. Hire a tax adviser.

shruikan2553

Might be worth looking into an agent to take over. No idea if it would make the tax issue easier but its worth a try.

Pawwed Rig

shruikan2553 wrote: »

Might be worth looking into an agent to take over. No idea if it would make the tax issue easier but its worth a try.

The only difference it would make is that the agent would need to withhold the 20% rather than the tenant. Liability would still be exactly the same.

3DataModem

Pawwed Rig wrote: »

The only difference it would make is that the agent would need to withhold the 20% rather than the tenant. Liability would still be exactly the same.

Yes, but the agent can be a family member / friend etc, making things "simpler".

OP you should contact a tax advisor.

Grandpa Hassan

The tenant is liable to pay the 20% tax.

So following on from that, if the LL wants to be honest and write a cheque to the taxman himself, then there is a risk of double payment. The LL can rightly sit overseas and do nothing, expecting that the tenant will sort out the tax in line with the rules

You could argue that the LL should tell the tenants he has paid, and ask that the tenants do nothing, to ensure no double payment. But I am sure that every overseas LL would say that, whether they had paid or not. So a law abiding and cautious tenant would continue to withhold 20% of the rent for the taxman irrespective of what the LL says.

Therefore there is an incentive for the overseas LL to not write a cheque to the Irish revenue.

But if the tenant doesn't pay, then no-one has paid. And I would like to see the authorities try to go after a tenant on this, given that most of them don't know about it. There would be an uproar.

So it is hardly surpsing then is there are instances where nothing is paid. So who do the tax authorities go after? I doubt the tenant, though they can in theory. I guess ultimately they can put a block on the sale of the house until arrears are paid, or maybe even repossess?

Just to declare my interest, I am an overseas LL, but my girlfriend lives in my house and doesn't pay rent. And I am often there at weekends. So I've nothing to declare (though pay the property tax and the NPPR). Just wondered how that theoretical mess would get sorted out

Pawwed Rig

Grandpa Hassan wrote: »

But if the tenant doesn't pay, then no-one has paid. And I would like to see the authorities try to go after a tenant on this, given that most of them don't know about it. There would be an uproar.

There is a recognition of this by Revenue which is why generally they do not chase the tenants. The LL is still liable even if he does not pay for 1,2 or 20 years but at the end of the day we have a self assessment system. It works well but some people will evade and get away with it.

murphaph

The tenant is liable for 20% of the gross rent but is not a chargeable person. The chargeable person remains the LL.

The process is:
Tenant deducts 20% and forwards to Revenue
Tenant furnishes LL with completed Form R185
LL indicates on his tax return that he has an R185 from tenant and the amount of withheld tax is a credit

If tenant does not cooperate, the LL must inform Revenue of tenants' details so revenue can chase them for the missing tax.

All in all a ridiculous system that needs changing.

To the OP:
You pay tax on RoI rental income (regardless of where you live) to Revenue in the first instance. You quite probably have a UK tax liability as well but you receive credit against that liability for tax already paid in RoI. You should seek expert help for your first tax return(s) at least so you have an idea how to proceed.

One small thing that many non-resident LLs are not aware of: You can as an EU citizen living in another EU state claim a portion of your Irish tax credits due. The portion is calculated thus:

(Irish Rental Income/Worldwide Income) * Available Tax Credits

You cannot claim the PAYE Tax Credit anymore though as you are no longer in the PAYE (RoI) system. You can at least claim the Single Tax Credit, possibly more depending on circumstances.

ABajaninCork

OP - Are you claiming your Irish house as your primary residence or the UK one? That's important.

murphaph

He can't claim a rented out property as his primary residence.

Pawwed Rig

murphaph wrote: »

One small thing that many non-resident LLs are not aware of: You can as an EU citizen living in another EU state claim a portion of your Irish tax credits due. The portion is calculated thus:

(Irish Rental Income/Worldwide Income) * Available Tax Credits

Would you have a source for this? Never heard of this one

murphaph

Pawwed Rig wrote: »

Would you have a source for this? Never heard of this one

This is the legislation.

Pawwed Rig

murphaph wrote: »

This is the legislation.

Cheers man

Grandpa Hassan

murphaph wrote: »

He can't claim a rented out property as his primary residence.

Unless he just rents a room

murphaph

Grandpa Hassan wrote: »

Unless he just rents a room

If he rents a room out but lives somewhere else 90% of the time then it's still not his primary residence. There are exceptions for people like offshore oil workers and seamen but if the OP just lives and works in NI then his primary residence cannot be the house in the RoI where he spends a few days a year. Anything else is tax evasion.

Mrs OBumble

Pawwed Rig wrote: »

Would you have a source for this? Never heard of this one

I *think* I saw something about it on the Revenue site the other week ... no linky now, it was for another thread.

Pawwed Rig

Mrs OBumble wrote: »

I *think* I saw something about it on the Revenue site the other week ... no linky now, it was for another thread.

It's ok thx murphaph posted a link below

Marcusm

Pawwed Rig wrote: »

Nope.

You may also be taxable in the UK. Hire a tax adviser.

That should be "will" not "May".

Pawwed Rig wrote: »

The only difference it would make is that the agent would need to withhold the 20% rather than the tenant. Liability would still be exactly the same.

The tenant needs to withhold 20% of the gross; using an agent (excl costs) will improve cash flow as the agent will only pay tax on the assessable income after deducting relevant costs (incl 75% of qualifying interest) plus capital allowances.

marathonic

http://www.askaboutmoney.com/showthread.php?t=186187

marmurr1916

Marcusm wrote: »

That should be "will" not "May".

It's 'may', not 'will'.

It depends on whether the amount of tax paid in Ireland on the rental income gained in Ireland is less than the UK tax that would have been paid if the income had been gained in the UK.

If it is, the difference will be payable to the UK tax authorities (HMRC). If it's not, there will be no tax liability in the UK for this rental income gained in Ireland.

Marcusm wrote: »

The tenant needs to withhold 20% of the gross; using an agent (excl costs) will improve cash flow as the agent will only pay tax on the assessable income after deducting relevant costs (incl 75% of qualifying interest) plus capital allowances.

The UK has a system for non-resident landlords which enables them to receive their gross rental income without any deductions, subject to approval by the UK tax authorities.

http://www.hmrc.gov.uk/cnr/nrl_guide_notes.pdf (Chapter 11 gives details of "APPROVAL TO RECEIVE RENTAL INCOME WITH NO TAX DEDUCTED").

If approved (usually very straightforward) the landlord must pay tax with their annual tax return. The tax due is calculated on gross rental income minus expenses/other allowances minus personal tax free allowance. The standard personal tax free allowance for the 2014/2015 tax year is £10,000:

http://www.hmrc.gov.uk/rates/it.htm

If your gross rental income from UK property was £20,000 pa, with allowable expenses of £3,000, you'd pay income tax on £7,000 (£20,000 - £3,000 = £17,000 - £10,000 tax free allowance = £7,000 taxable income).

At that level of taxable income, your tax liability would be 20% of £7,000 = £1,400.

It's not really relevant to the OP's circumstance, but it shows that it is possible for landlords living outside of a state (the UK in this case) to get their rental income before tax is applied.

Perhaps a bit of pressure could be applied to get the Revenue Commissioners in Ireland to adopt a similar system?

Marcusm

marmurr1916 wrote: »

It's 'may', not 'will'.

It depends on whether the amount of tax paid in Ireland on the rental income gained in Ireland is less than the UK tax that would have been paid if the income had been gained in the UK.

If it is, the difference will be payable to the UK tax authorities (HMRC). If it's not, there will be no tax liability in the UK for this rental income gained in Ireland.

It is most definitely "taxable" ie brought into account for the purpose of taxation - whether there is any tax payable is a matter of personal allowances, credits etc.

The UK has a system for non-resident landlords which enables them to receive their gross rental income without any deductions, subject to approval by the UK tax authorities.

http://www.hmrc.gov.uk/cnr/nrl_guide_notes.pdf (Chapter 11 gives details of "APPROVAL TO RECEIVE RENTAL INCOME WITH NO TAX DEDUCTED").

If approved (usually very straightforward) the landlord must pay tax with their annual tax return. The tax due is calculated on gross rental income minus expenses/other allowances minus personal tax free allowance. The standard personal tax free allowance for the 2014/2015 tax year is £10,000:

http://www.hmrc.gov.uk/rates/it.htm

If your gross rental income from UK property was £20,000 pa, with allowable expenses of £3,000, you'd pay income tax on £7,000 (£20,000 - £3,000 = £17,000 - £10,000 tax free allowance = £7,000 taxable income).

At that level of taxable income, your tax liability would be 20% of £7,000 = £1,400.

It's not really relevant to the OP's circumstance, but it shows that it is possible for landlords living outside of a state (the UK in this case) to get their rental income before tax is applied.

Perhaps a bit of pressure could be applied to get the Revenue Commissioners in Ireland to adopt a similar system?

The UK Non Resident Landlords Scheme is of no relevance to the OP. The OP should appoint a family member to receive the rent and obtain the cash flow benefits.

carpejugulum

haventaclue14 wrote: »

Was hoping that I wouldn't have to pay tax as I was a non-resident

:rolleyes:

murphaph

carpejugulum wrote: »

:rolleyes:

Some taxes are not applicable to non-residents. I don't have to pay stamp duty on my Irish credit card, for example, because I am non-resident. The OP came to find out their obligations, which is the right & proper thing to do.