Holiday Cottages

Jimmy Bottles

While rental income is usually regarded as Case V, should income from holiday cottages be treated as Case I.

The argument I'm making is that the running of a Holiday Cottage should be treated as a business and that income derived from the holiday cottage should be treated as Case I. This of course would mean that the 75% restriction would not apply to interest being used as a deduction.

However, would this then mean that the property should be rated instead of being put forward for LPT. Anyone else have a client with a holiday cottage ?

Mr. Incognito

Is this income their primary source of income. It would be difficult otherwise to raise this argument as it would clearly be investment income otherwise

Jimmy Bottles

Mr. Incognito wrote: »

Is this income their primary source of income. It would be difficult otherwise to raise this argument as it would clearly be investment income otherwise

It wouldn't be their primary source of income. I've noted an English case though where the running of a holiday home can be treated as a business for inheritance tax purposes. Sadly there seems to be very little Revenue guidance in the area.

Now that I think of it, if it could be treated as a business, I presume you'd be entitled to claim indust building allowances on the house itself.

Mr. Incognito

There's plenty of guidance and caselaw on what constitutes a trade

http://www.revenue.ie/en/practitioner/tech-guide/trade.d

Tax professionals should know the badges of trade off by heart.

I cant see it flying.

Alan Shore

I always understood that the operation of a holiday cottage enterprise was a Case I trade.

Although any I have ever dealt with were let to management companies on a long lease (for VAT purposes) & to qualify for capital allowances and the annual rent classed as Case V!

Marcusm

The simple rental of a holiday cottage would be unlikely to result in anything other than income from Irish real property. In order for it to be Sch D Case I, the activity would need to involve a greater service element as happens with hotels or guest houses. The UK has specific rules treating the provision of furnished holiday accommodation as giving rise to a Sch D Case I activity (as opposed to what was Sch A income there until recently).