Illogical Rent a Room scheme

filbert the fox

Is there anyone out there who can explain how €12,000 can be earned tax free under this scheme whereas a landlord who purchased a property to subsidise his retirement pays 52% tax on every euro (profit).

Not to mention the fact that the Residential Investment Property was bought with unsubsidised after tax earnings, has incurred multiple punitive direct and indirect taxes in the form of household charge, reduced reliefs, NPPR, PRTB, Property tax and rent restrictions?


Your average principal primary residence has been part funded by government schemes including mortgage relief, first time buyers grant, etc.
It leaves a very sour taste to think that one has given solicitors, bankers, builders, tax employees, estate agents and tom cobbley et al employment in the process of buying a second property only to discover that the real reward is given to those who happen to have a spare room.

Can someone advise if this is discriminatory or even unconstitutional.

Why does this rent a room scheme exist?

srsly78

To encourage efficient use of property I guess, better than having empty rooms. Think of the opposite situation, if this didn't exist then noone would rent out their spare room.

Many rules in taxation are there to influence peoples behaviour, not just to raise money.

filbert the fox

if influencing peoples behaviour is the goal why are private rented dwellings so punitively taxed when they're providing accommodation for families who would be otherwise on the housing list?

surpy

Because if you decide to give up being a landlord the house won't dissappear.

You have an asset that you can do nothing with other than rent it out so it's like taxing petrol.

Also no-one has any sympathy for landlords or people who can afford two houses so you're an all round easy target.

filbert the fox

was hoping someone could explain why the tax anomaly exists between the two types of accommodation provision.

surpy

because its not illegal or unconsitutional the govt can implement it.
for the reasons posted already they have chosen to.

cooperguy

The other reason its there is to help people pay their mortgage. If you have a second house the theory would be that you are not struggling (and if you are you can sell it).

kandoola

I heard from a little birdie that with water charges going to collapse that the next item in the bullseye is to tax rent a room money.
There is nowhere for these people to go to avoid the tax. Easy targets.

john.han

There's a big difference between choosing to rent out an entire house you own and renting out a room in your own home to a stranger, if it was taxed very few people would do it. Which would drive rents even higher when they're already very close to unsustainable levels (in Dublin anyway).

hfallada

kandoola wrote: »

I heard from a little birdie that with water charges going to collapse that the next item in the bullseye is to tax rent a room money.
There is nowhere for these people to go to avoid the tax. Easy targets.

Well the fact that government increased the tax free allowance from about 11k to 12k. I think you have heard wrong. Abolishing this scheme will not significantlyincrease tax. Very few people live in rent a room scheme accommodation

Arbiter of Good Taste

kandoola wrote: »

I heard from a little birdie that with water charges going to collapse that the next item in the bullseye is to tax rent a room money.
There is nowhere for these people to go to avoid the tax. Easy targets.

Of course there is, they can just stop providing accommodation. Once tax and admin comes into play, it becomes much less attractive

cerastes

kandoola wrote: »

I heard from a little birdie that with water charges going to collapse that the next item in the bullseye is to tax rent a room money.
There is nowhere for these people to go to avoid the tax. Easy targets.

I doubt it and I hope not, as mentioned above, they are trying to encourage it, due to pressure on housing. There have been two recent articles in a national rag about how great it is, trying to encourage homeowners to take in students, at figures which including board and utilities weren't very believable to consider making it worth someones while, so I still think they are behind it. If it becomes more hassle or taxable, people will just withdraw the service, I think that kind of interference would have a significantly worse outcome.

Owners/licensees would probably come to an agreement to avoid the govt as the renter would see the demand and cost associated with renting and the benefit of paying only for what they might need, rather than an entire property and the owner would still get paid.

hfallada wrote: »

Well the fact that government increased the tax free allowance from about 11k to 12k. I think you have heard wrong. Abolishing this scheme will not significantlyincrease tax. Very few people live in rent a room scheme accommodation

I thought it was 10k, didnt know it was raised to 11k before, but now its up to 12?

kandoola

hfallada wrote: »

Well the fact that government increased the tax free allowance from about 11k to 12k. I think you have heard wrong. Abolishing this scheme will not significantlyincrease tax. Very few people live in rent a room scheme accommodation

Well it was from a friend who works somewhere with access to certain knowledge that I heard it.
I dont know the ins and outs of it, but she was telling me its low hanging fruit.
Prelude to rates. Property tax isnt really working out. They are looking at tweaking it to be more like the system in the uk. Each person pays whether they own the property or not.

She has always been right before, so i have no reason to doubt her that this is a serious possibility.

cerastes

I'm not convinced but I still hope you're wrong anyway,I dont think the UK has a similar shortage of a certain category of accommodation.the govt doing this would be a stupid unnecessary interference in the property market,many people simply will withdraw the service the govt can't provide,even after the bedsit market was shut down wrongly.they may as well invite everyone to see them off if they do this.

Mr. Incognito

This relief was 10K and has been phased out unless the person in situ was renting in 2010- 4 years ago to the present.

http://www.revenue.ie/en/tax/it/leaflets/it1.html#section11

It was there because the landlord was renting out rooms in his house.

If you buy an investment property you get investment costs.

If you cannot afford the investment, don't invest.

dbran

Rent a room relief is not being phased out or abolished. It is not restricted in this way from the point of view of the landlord. If the total gross income is less then the relevant threshold in the year, it is exempt from income tax. It does not need to have a tenant in situ from 2010 for it to be applicable.

What is being phased out and restricted in this way from 2010 is the rent tax credit for private rented accommodation that is claimed by the tennent. This is no longer available if you were not already in rented accomodation before 7 December 2010.

Regards


Dbran

cerastes

Mr. Incognito wrote: »

This relief was 10K and has been phased out unless the person in situ was renting in 2010- 4 years ago to the present.

http://www.revenue.ie/en/tax/it/leaflets/it1.html#section11

It was there because the landlord was renting out rooms in his house.

The relief still appears to be 10k, not 11 or 12 as previously mentioned, neither does it appear to be phased out.
I see now someone else has posted this reply,
In the context of letting rooms in their home, a person is not a landlord.

dbran wrote: »

Rent a room relief is not being phased out or abolished. It is not restricted in this way from the point of view of the landlord. If the total gross income is less then the relevant threshold in the year, it is exempt from income tax. It does not need to have a tenant in situ from 2010 for it to be applicable.

What is being phased out and restricted in this way from 2010 is the rent tax credit for private rented accommodation that is claimed by the tennent. This is no longer available if you were not already in rented accomodation before 7 December 2010.

Regards


Dbran

I noticed this before, when it came up first. I was suprised, but given that the vast majority of renters are existing tenants and many will remain so, most renters will be able to carry this benefit on, unless they have a break in their renting history. I've no understanding of how this will be checked? It seems to me that it removes the tax relief the tenant received on renting for new entrants to renting? or those that have had a break in renting and return? Its a pithy amount anyway, €800 at the marginal rate is, 20% of €800 is only worth €160. It would be possible to gain that benefit being a good tenant. Was it removed now because LPT is in place and there is no advantage to having a tenant get the relief benefit as an easy and cheap means for revenue to be informed of a rental property? In other words, they pass on one charge (in the form of LPT) and reduce another benefit.

cooperguy

cerastes wrote: »

The relief still appears to be 10k, not 11 or 12 as previously mentioned, neither does it appear to be phased out.
I see now someone else has posted this reply,
In the context of letting rooms in their home, a person is not a landlord.



I noticed this before, when it came up first. I was suprised, but given that the vast majority of renters are existing tenants and many will remain so, most renters will be able to carry this benefit on, unless they have a break in their renting history. I've no understanding of how this will be checked? It seems to me that it removes the tax relief the tenant received on renting for new entrants to renting? or those that have had a break in renting and return? Its a pithy amount anyway, €800 at the marginal rate is, 20% of €800 is only worth €160. It would be possible to gain that benefit being a good tenant. Was it removed now because LPT is in place and there is no advantage to having a tenant get the relief benefit as an easy and cheap means for revenue to be informed of a rental property? In other words, they pass on one charge (in the form of LPT) and reduce another benefit.

You are mixing up two schemes. There is a scheme to give tax relief to tenants which is being phased out. There is also a scheme to give tax relief to landlords who rent rooms in their own home. This was increased from 11k to 12k in the budget for 2015

dogsears

cerastes wrote: »

I noticed this before, when it came up first. I was suprised, but given that the vast majority of renters are existing tenants and many will remain so, most renters will be able to carry this benefit on, unless they have a break in their renting history. I've no understanding of how this will be checked? It seems to me that it removes the tax relief the tenant received on renting for new entrants to renting? or those that have had a break in renting and return? Its a pithy amount anyway, €800 at the marginal rate is, 20% of €800 is only worth €160. It would be possible to gain that benefit being a good tenant. Was it removed now because LPT is in place and there is no advantage to having a tenant get the relief benefit as an easy and cheap means for revenue to be informed of a rental property? In other words, they pass on one charge (in the form of LPT) and reduce another benefit.

I think that its closed to new renters from Dec 2010 onwards, but a person who takes a break is still OK so long as they were renting in Dec 2010.

cerastes

cooperguy wrote: »

You are mixing up two schemes. There is a scheme to give tax relief to tenants which is being phased out. There is also a scheme to give tax relief to landlords who rent rooms in their own home. This was increased from 11k to 12k in the budget for 2015

I dont believe Im mixing up the two schemes, Im aware of the two schemes, I think you are mixing up what I was saying.

1, rent a room appears according to revenue website to still be tax free up to 10k, no apparent change there as suggested on this thread of it going up to 12k, unless the website just hasnt been updated completely, thats for an individual that wants to rent a room/s in their residence.

2, the other scheme is for private tenants, relief on rent, its being phased out for newcomers to that market from what I can see.

There is no such scheme that allows a landlord (specifically) rent rooms in their own home, you are mixing that up with a private individual being allowed to do so, which a landlord would fall into the category of private individual in that case if they so decided to rent rooms, in which case they or anyone else renting rooms in their own home that they live in is NOT a landlord.

nompere

cerastes wrote: »

I dont believe Im mixing up the two schemes, Im aware of the two schemes, I think you are mixing up what I was saying.

1, rent a room appears according to revenue website to still be tax free up to 10k, no apparent change there as suggested on this thread of it going up to 12k, unless the website just hasnt been updated completely, thats for an individual that wants to rent a room/s in their residence.

2, the other scheme is for private tenants, relief on rent, its being phased out for newcomers to that market from what I can see.

There is no such scheme that allows a landlord (specifically) rent rooms in their own home, you are mixing that up with a private individual being allowed to do so, which a landlord would fall into the category of private individual in that case if they so decided to rent rooms, in which case they or anyone else renting rooms in their own home that they live in is NOT a landlord.

The increase in the rent a room scheme to €12,000 is a Budget 2015 measure: http://www.revenue.ie/en/press/budget/2015/budget-summary-2015.pdf

So it will be in the Finance Act 2014 when passed, and effective from 1 January 2015.

david feely

Hey there!

My friend in a similar boat. He got chosen by revenue through 'random selection' and received a 'Form 12' in the post this week. He is worried sick over it as he didn't declare rent for the years 2013, 2014 and 2015. However his previous tenants will all stand over the claim that he lived there with him, thereby making it possible for him to avail of the 'rent a room' scheme and not have to pay tax. None of the tenants received a social welfare payment while in the 2 bedroom payment so no paper trail exists in that regard. He has no bills in his name or post sent to that apartment though except a water bill. However its common practice for people to have post sent to their parental address (where in fact he was living) so he doesn't think this should pose too much of a problem if his tenants are willing to vouch for the fact that as part of the agreement, the water and electricity bills were to be put in their name. The electricity is pay as you go cards so no actual bill is sent out. The landlord himself never claimed a means tested social welfare payment either so no fraud can be attributed in that regard,. My friend's neighbors would also vouch for him that he stayed in that address which is only 10 miles distant 4 or 5 nights a week. The post office charge a fee for changing address which is why many people opt to have their post sent to their parents house when they are still in their 20s and unmarried like he is. What would u advise him to do in this situation??? He seems to have all his angles covered. It doesn't seem possible that revenue can conclusively prove that he didn't sleep at that address 51% of the time or more. Is he really safe or is there more to it that has been overlooked?? The stress of the situation is damaging his health. Any help would be greatly appreciated. Thanks in advance.

dogsears

david feely wrote: »

However his previous tenants will all stand over the claim that he lived there with him, thereby making it possible for him to avail of the 'rent a room' scheme and not have to pay tax.

But is this true?

However its common practice for people to have post sent to their parental address (where in fact he was living)

It would appear not.

He, your friend, should pay his tax. In fact I hope he gets hit with interest and penalties because it reads as though he deliberately didn't declare it i.e. he was intending to evade his liability

All of this listing out how to answer all the questions in a way that might avoid being forced to admit the truth reads as a systematic and planned approach to deceive the Revenue if they ask those questions. Awful.

He can fix all his "stress" by deciding that he is not willing to lie to the Revenue any more, not willing to get his neighbours and former tenants to agree to lie on his behalf, and just pay his damn tax.

Lockedout2

The stress of the situation is damaging his health. Any help would be greatly appreciated.

The best way to deal with the stress is to deal with the issue. He it's appears has been claiming a relief which he is not entitled to. So he should compute the tax that he owes and file the tax returns then the stress is gone.

Otherwise he may be looking over his shoulder for years waiting for an other letter. Also you would be very surprised how many people say they will back up your story but when it comes time they are not as forth coming.