landlord self assessment

paddles

Hi,

What is the form I need to complete first off? Cursory glance at revenue.ie- none the wiser...

How do I calculate the depreciation expenses? Says up to 8 yrs. Does that mean each expense can be claimed up to 8 years e.g. the sofa I bought in 2008 can be claimed back anytime between then and 2016? If I had my house for 10 years and just let it out, can I claim for all set up costs e.g. beds, appliances bought in 2004 only up until 2012? If I bought a new fridge in 2009, I can claim it up til 2017??? Is the claim on each individual item a one-off e.g. I claim on a heap of things bought in 2008 this year as it is the cut-off (8yrs) then never claim on those items again???

How do I calculate the USC? Is this on the net income after expenses etc or gross???

Thanks.

barneystinson

paddles wrote: »

Hi,

What is the form I need to complete first off? Cursory glance at revenue.ie- none the wiser...

How do I calculate the depreciation expenses? Says up to 8 yrs. Does that mean each expense can be claimed up to 8 years e.g. the sofa I bought in 2008 can be claimed back anytime between then and 2016? If I had my house for 10 years and just let it out, can I claim for all set up costs e.g. beds, appliances bought in 2004 only up until 2012? If I bought a new fridge in 2009, I can claim it up til 2017??? Is the claim on each individual item a one-off e.g. I claim on a heap of things bought in 2008 this year as it is the cut-off (8yrs) then never claim on those items again???

How do I calculate the USC? Is this on the net income after expenses etc or gross???

Thanks.

Google IT70. Read it, fully. Then come back if you still have questions.

Ally Dick

My approach to claiming depreciation costs would be simply to put a value on the item, divide the figure by 8 and then claim that amount for eight years

paddles

Ally Dick wrote: »

My approach to claiming depreciation costs would be simply to put a value on the item, divide the figure by 8 and then claim that amount for

If I spent 10K on my furniture and appliances etc in 2006 can I only submit that claim once cos next year is 9 th year.
Sorry can't get head round it. Thanks.

paddles

From IT70

Wear and Tear

Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc) provided by a lessor for the purposes of furnishing rented residential accommodation. The allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms on the open market. The rate of wear and tear depends on when the capital expenditure was incurred. For expenditure incurred on or after 4 December 2002 the allowance is 12.5% of the expenditure per annum for eight years.

Ok. This is what revenue says but I am no clearer. If I spent 5K in 2006, 1k in 2007, 500 in '08, 900 in 2010, 300 in 2012 and I let my house out in 2013 for which I now need to self assess, how do I calculate the depreciation, thanks. ( It was my home so I spent good money over the years on furniture and fittings and left everything in it for rental as had nowhere to put my furniture etc, moving into a fully kitted home).

barneystinson

paddles wrote: »

From IT70

Wear and Tear

Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings (for example, furniture, kitchen appliances, etc) provided by a lessor for the purposes of furnishing rented residential accommodation. The allowances are available only where the expenditure is incurred wholly and exclusively in respect of a house used solely as a dwelling which is, or is to be, let as a furnished house on bona fide commercial terms on the open market. The rate of wear and tear depends on when the capital expenditure was incurred. For expenditure incurred on or after 4 December 2002 the allowance is 12.5% of the expenditure per annum for eight years.

Ok. This is what revenue says but I am no clearer. If I spent 5K in 2006, 1k in 2007, 500 in '08, 900 in 2010, 300 in 2012 and I let my house out in 2013 for which I now need to self assess, how do I calculate the depreciation, thanks. ( It was my home so I spent good money over the years on furniture and fittings and left everything in it for rental as had nowhere to put my furniture etc, moving into a fully kitted home).

Capital items have a life of 8 years from when you buy them, for the purposes of depreciating them for tax.

So the stuff bought in 2006 is at nil value for tax purposes by the end of 2013, the stuff bought in 2007 has 1/8 of its value left to be expensed in 2014, etc... you can't lump figures for different years in together.

That is the legally correct way to account for things.

HOWEVER, it seems that in general, when a person starts letting a property, if they simply put a REASONABLE value on the furniture & fittings, at that time (so in your example how much is your 7-year old suite of furniture worth?), and write that off over 8 years, Revenue generally don't quibble with it. Not because it's the right way to calculate it, but because it's unlikely to be material enough to argue over, unless the amount claimed is off the wall.

paddles

barneystinson wrote: »

Capital items have a life of 8 years from when you buy them, for the purposes of depreciating them for tax.

So the stuff bought in 2006 is at nil value for tax purposes by the end of 2013, the stuff bought in 2007 has 1/8 of its value left to be expensed in 2014, etc... you can't lump figures for different years in together.

That is the legally correct way to account for things.

HOWEVER, it seems that in general, when a person starts letting a property, if they simply put a REASONABLE value on the furniture & fittings, at that time (so in your example how much is your 7-year old suite of furniture worth?), and write that off over 8 years, Revenue generally don't quibble with it. Not because it's the right way to calculate it, but because it's unlikely to be material enough to argue over, unless the amount claimed is off the wall.

Ok so do I claim 1/8th the value of each item over the following 8 years? Or does each item only get claimed for once? If I have claimed 1/8 of all the 2007 items but there is another year left on them, do i claim 1/8 again next year as the last of the 8years? Is it 1/8th of what I consider the CURRENT value of all items in the year of assessment? Seems like such a guessing game!

Jonathan222

Can anyone explain the new 'Full Self Assessment' requirement?

Is it a case you fill in all the normal blanks (I'm populating the Form 11 for rental income) similar to previous years and the Revenue system calculates the total liability and they you match it in the Self Assessment column if you agree?

Also, will the Revenue calculations include the Prelim payment you would have made for 2013 at the end of 2012?

I don't see the point of it, I mean if you are completeing the form 11 anyway, is that not a self assessment in itself, as previously you did confirm that the information was correct etc....

barneystinson

Jonathan222 wrote: »

Can anyone explain the new 'Full Self Assessment' requirement?

Is it a case you fill in all the normal blanks (I'm populating the Form 11 for rental income) similar to previous years and the Revenue system calculates the total liability and they you match it in the Self Assessment column if you agree?

Also, will the Revenue calculations include the Prelim payment you would have made for 2013 at the end of 2012?

I don't see the point of it, I mean if you are completeing the form 11 anyway, is that not a self assessment in itself, as previously you did confirm that the information was correct etc....

The point of full self assessment is that you are actually assessing yourself to tax, whereas previously it was a Revenue assessment (meaning the term self-assessment to describe the system was technically a misnomer!) - it's a legal distinction. In virtually 100% of cases the taxpayer is obviously not going to disagree with the figure Revenue calculate, but the point is that they have the option to do so, in assessing themselves.

Mr. Incognito

Read the guide to rental income in the stickies

Jonathan222

barneystinson wrote: »

The point of full self assessment is that you are actually assessing yourself to tax, whereas previously it was a Revenue assessment (meaning the term self-assessment to describe the system was technically a misnomer!) - it's a legal distinction. In virtually 100% of cases the taxpayer is obviously not going to disagree with the figure Revenue calculate, but the point is that they have the option to do so, in assessing themselves.[/QUOTE

Great, thanks. Any idea if the prelim payment (2013 in this case) is covered in the Revenue final calulations?

Jonathan222

Mr. Incognito wrote: »

Read the guide to rental income in the stickies

Excuse my ignorance but "in the stickies"?

Marcusm

barneystinson wrote: »

Capital items have a life of 8 years from when you buy them, for the purposes of depreciating them for tax.

So the stuff bought in 2006 is at nil value for tax purposes by the end of 2013, the stuff bought in 2007 has 1/8 of its value left to be expensed in 2014, etc... you can't lump figures for different years in together.

That is the legally correct way to account for things.

HOWEVER, it seems that in general, when a person starts letting a property, if they simply put a REASONABLE value on the furniture & fittings, at that time (so in your example how much is your 7-year old suite of furniture worth?), and write that off over 8 years, Revenue generally don't quibble with it. Not because it's the right way to calculate it, but because it's unlikely to be material enough to argue over, unless the amount claimed is off the wall.

I would disagree with this and believe that this is the correct way to treat it. At the time that you commence to use the property and its contents as a letting business, there is a de facto appropriation of the chattels forming the plant and machinery. As this appropriation does not involve a purchase, the only means to effect it is at market value (or an approximation thereto). There is no concept of notional writing down allowances for determining teh capital allowances for individuals.

barneystinson

Marcusm wrote: »

I would disagree with this and believe that this is the correct way to treat it. At the time that you commence to use the property and its contents as a letting business, there is a de facto appropriation of the chattels forming the plant and machinery. As this appropriation does not involve a purchase, the only means to effect it is at market value (or an approximation thereto). There is no concept of notional writing down allowances for determining teh capital allowances for individuals.

Have you anything in the Act that supports what you're saying?

Could you explain how s284(2)(ad) and s287(3) can be read as providing for what you're saying rather than what I set out?

mozattack

^^ are ye not saying the same thing?

What I'd live to know is if anyone EVER do a balancing allowance / charge on the disposal of the fixtures and fittings, e.g. on sale of house or on disposal.

Have never seen that done but technically...

barneystinson

mozattack wrote: »

^^ are ye not saying the same thing?

What I'd live to know is if anyone EVER do a balancing allowance / charge on the disposal of the fixtures and fittings, e.g. on sale of house or on disposal.

Have never seen that done but technically...

No, I think we're all agreed on how people calculate W&T in practice, but Marcus reckons its technically correct whereas I'm saying the legislation doesn't actually support it.

Splitting hairs? Absolutely!

Marcusm

It's been brought to my attention by inappropriate private messages that I could contribute further to this thread.

Apologies if I have overlooked this but I have been busy, in real life, getting married and doing other things. I didn't recall this thread but hey ho. As it happens, I have no access to books so rip the following apart if you like.

Basics:

A landlord transferring a former residence to a rental property is arguably not entitled to any regular wear & tear allowances on the basis that he has not actually incurred expenditure on the provision of machinery & plant for the purposes of a letting business. Rather he has appropriated assets used for private purposes for the purposes of his letting business.

However, that is not to say that capital allowances would not ultimately become available as s294 should, in these circumstances, give rise to an entitlement to a balancing allowance when the machinery & plant is ultimately scrapped, sold or destroyed. In determining that balancing allowance, regard would have to be had to the entirety of the circumstances surrounding the "dual use" natue of the asset, ie for qualifying activities and non qualifying activities.

Based on that entitlement, it is only right and proper, taking account of its care and management duties, for the Revenue to permit wear & tear allowances to be claimed.

In determining the amount to be claimed, "regard shall be had to all the relevant circumstances and in particular to the extent of the use for those other purposes, and there shall be made to or on that person an allowance of such an amount or a charge on such an amount, as the case may be, as may be just and reasonable".

What is clear is that an assumption that the asset should be notionally written down at the prevailing rate of capital allowances would not be just and reasonable as it would not take any of the "relevant circumstances" into account but would in fact disregard them all. The rate of wear & tear allowances currently available 8 x 12.5% does not take into account any circumstances. The rate was previously 6 x 15% and 1x 10% since the early 90s. Prior to that varying rates of wear and tear allowances could be claimed based on the actual asset and the purpose for which it was sued (which would be reflected in the denudation of the asset). Since the introduction of statutory wear & tear rates, such rates do not reflect any circumstances of the asset.

Jurisidictions such as the UK put this on a statutory footing - see sections 13 & 13A CApital Allowances Act 2001 where the appropriation is deemed to occur at market value.

Particular points

The HIMYM fan raised the issue of section 287 which I believe cannot apply as the letting business was not carried on when the assets were the assets were acquired and when used for the letting business were not used for any private purpose. There was no essential duality of period or purpose or any need to restrict allowances, the expenditure and asset did not , for taxation purposes, exist. Contrast this with the classic example for s287 of a plumber who uses his van partly for business purposes and partly for private purposes. Even if I am wrong in this, I believe that s294 would still act to "correct" the allowances as described above and that thus it is appropriate for the allowances to be made available as described.