Rent-a-room relief and Utilities

share_bear

Hi,

Query about the rent-a-room exemption on rental income upto 12,000 per annum (increased from 10,00 for 2015).

I am about to rent out rooms in my residence and I am a bit concerned about the fact that the 12,000 limit includes so called "income" received by the "landlord" to pay for the extra utilities used by the others.

I am wondering if there is a way to make it such that the "landlord" is not considered to be in direct receipt of the cash which is actually used to cover utilities paid for by the others - for example if the utility accounts are held jointly in the name of all residents.

Also, as a PAYE worker - do I need to bother filing a Tax return?

Thanks

The_Conductor

Its a simple answer- yes you need to do a tax return- and no- there is no way around it- if you go down the route of putting people on utility bills etc you still need to account for the gross amount of income generated by the people sharing your home- and once it goes 1 penny over 12k- the whole lot, and not just the amount over the 12k, is taxable.

Its quite specific- the amount received is the gross amount including all contributions towards utilities etc. You do not get away with somehow separating the utilities out of the equation and dealing with them under the table. That would be tax evasion.

share_bear

I am not absolutely convinced of this...

The definition of a "chargeable person" is given here:

3wubbleus .revenue.ie/en/practitioner/tax-briefing/archive/62/tb05.htm

"Non-PAYE income less than €50,000 gross
An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of income from other non-PAYE sources will not be regarded as a "chargeable person" if the total gross income from all non-PAYE sources is less than €50,000 and the net assessable income is less than €3,174 and the income is coded against PAYE tax credits.

There is no change to the current practice in relation to individuals who fall within this category, provided they have assessable non-PAYE income of less than €3,174. These individuals can continue to have the liability on such income effectively assessed within PAYE by means of coding in the income against their tax credits. "


Surely under the exemption scheme the 12,000 the income equates to assessable income of Nil?

What leads me to this conclusion is the following revenue document "[7.1.32] Rent-A-Room Relief", which although it does not explicitly state it, has paragraphs worded to tacitly imply that some people will not have to file a return, for example...

"Although the relief applies automatically, an individual who is required to submit an
annual return of income must, nevertheless, enter the amount of exempt rental income
on the return (in the ‘Exempt Income’ section of the form). The usual return of
income is the Form 11. Revenue may also require certain individuals who are taxed
under the PAYE system and who also have non-PAYE income to submit an annual
return of income (Form 12).7"

Note 7 reads....
"Individuals who come within the definition of ‘chargeable person’ are required to submit a return of
income (sections 950/951 TCA 1997). "


Am I wrong? If so, why?

Also, if I am right about his, then surely if my utilitiy accounts are in joint names with three other people, I can only be deemed to receive 1/4 of the payment as my income (which is the quarter I pay myself anyway)?

ceekay74

Your definition of a chargeable person does not apply to this scheme, and having multiple names on the bills does not change the rules of the scheme. You'd probably have to read through the legislation around the rent a room scheme to prove to yourself that what is being said is true.

But in practical terms, if you avail of the scheme, you must charge no more than €12,000 a year (including all bills) & file a tax return (form 12 for paye workers) with the amount received stated in the section dealing with exempt income.

share_bear

ceekay74 wrote: »

Your definition of a chargeable person does not apply to this scheme, and having multiple names on the bills does not change the rules of the scheme. You'd probably have to read through the legislation around the rent a room scheme to prove to yourself that what is being said is true.

But in practical terms, if you avail of the scheme, you must charge no more than €12,000 a year (including all bills) & file a tax return with the amount received stated in the section dealing with exempt income.

but...revenues own document "[7.1.32] Rent-A-Room Relief" makes reference to the definition of a charegable person it defining who must file a return, so it must be relevant to the scheme. It also seems to imply that some people won't have to file.

share_bear

ceekay74 wrote: »

Your definition of a chargeable person does not apply to this scheme, and having multiple names on the bills does not change the rules of the scheme. You'd probably have to read through the legislation around the rent a room scheme to prove to yourself that what is being said is true.

But in practical terms, if you avail of the scheme, you must charge no more than €12,000 a year (including all bills) & file a tax return with the amount received stated in the section dealing with exempt income.

but...revenues own document "[7.1.32] Rent-A-Room Relief" makes reference to the definition of a charegable person in defining who must file a return, so it must be relevant to the scheme. It also seems to imply that some people won't have to file.

angeldelight

You definitely have to file a return even though it's exempt income

share_bear

angeldelight wrote: »

You definitely have to file a return even though it's exempt income

Then why do they raise the definition of a chargeable person liable to file a return in there document about the relief scheme?
I can't resolve these two contradictory facts...

angeldelight

I don't know why they do that, only way to find out would be to ask them. However it doesn't change the fact that part of the rules of the scheme are that the income must be declared by filing a tax return

ceekay74

share_bear wrote: »

but...revenues own document "[7.1.32] Rent-A-Room Relief" makes reference to the definition of a charegable person in defining who must file a return, so it must be relevant to the scheme. It also seems to imply that some people won't have to file.

All people with rental income have to file a return. Some will file form 11 (self employed/self assessed), the others (those availing of the rent a room scheme) file a form 12.

ceekay74

share_bear wrote: »

Then why do they raise the definition of a chargeable person liable to file a return in there document about the relief scheme?
I can't resolve these two contradictory facts...

"the definition of a chargeable person liable to file a return"

this probably refers to those who have to file a form 11, this is a form that everyone registered for income tax must complete. Landlords must file this return.

share_bear

angeldelight wrote: »

I don't know why they do that, only way to find out would be to ask them. However it doesn't change the fact that part of the rules of the scheme are that the income must be declared by filing a tax return

Please - can you link to a source that actually states that in writing?

It even states elsewhere in that document that you can get the relief automatically without applying for it.
It really looks to me like you would only fill out that relief section of Form 11 if some other income source compelled you to file a return and you also needed to apply for the exemption in the course of that.

barneystinson

share_bear wrote: »

but...revenues own document "[7.1.32] Rent-A-Room Relief" makes reference to the definition of a charegable person it defining who must file a return, so it must be relevant to the scheme. It also seems to imply that some people won't have to file.

There's a lot of incorrect assertions being made here: there is no obligation to file a return simply by virtue of receiving income under rent a room relief, you're correct on this front. At the same time, to avoid any potential enquiries due to one's visible means (PAYE employment income) not equating with one's lifestyle, due to there being c.12k of additional cash flow, it'd surely be simpler to declare the exempt source (on a Form 12)?

Re: the utilities, I'd suspect Revenue's view would be that the utilities for a single residence are the responsibility of the owner living there (since the owner must be living there for the scheme to apply in the first place).

Regardless of whose names are on the utilities, they are an ancillary service provided along with the accommodation to the lodger, and any contribution by them to the cost of provision, will be treated the same as rent.

There's no free lunch here - if you want the tax exemption to validly apply, you have to receive less than 12k in contributions, by whatever name, towards the household.

ceekay74

share_bear wrote: »

Please - can you link to a source that actually states that in writing?

It even states elsewhere in that document that you can get the relief automatically without applying for it.
It really looks to me like you would only fill out that relief section of Form 11 if some other income source compelled you to file a return and you also needed to apply for the exemption in the course of that.

Sorry, I don't know where you would find that in writing.

You do get the relief automatically, but you still file the form 12 return including the exempt income section. The form 11 is for self employed people, or people with full rental income (when rent a room doesn't apply).

I know its confusing, but there is no way around having to file either a form 12 or a form 11 if you have rental income.

angeldelight

share_bear wrote: »

Please - can you link to a source that actually states that in writing?

It even states elsewhere in that document that you can get the relief automatically without applying for it.
It really looks to me like you would only fill out that relief section of Form 11 if some other income source compelled you to file a return and you also needed to apply for the exemption in the course of that.

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section11

...If you claim relief you must provide details of the relevant sums on your annual tax return, notwithstanding that the profits or losses are disregarded for income tax purposes.

under the section on rent a room relief

dudara

Talk to the Revenue - their's is the only opinion that matters here. They can explain the terminology and requirements to you.

barneystinson

angeldelight wrote: »

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section11

under the section on rent a room relief

Yes, IF you are someone who files an annual tax return - it doesn't impose a filing obligation on anyone not already obliged to file I.e. a chargeable person.

barneystinson

ceekay74 wrote: »

Sorry, I don't know where you would find that in writing.

You do get the relief automatically, but you still file the form 12 return including the exempt income section. The form 11 is for self employed people, or people with full rental income (when rent a room doesn't apply).

I know its confusing, but there is no way around having to file either a form 12 or a form 11 if you have rental income.

This is incorrect. What are you basing that assertion on?

ceekay74

barneystinson wrote: »

there is no obligation to file a return simply by virtue of receiving income under rent a room relief

I was told there is an obligation by a revenue staff member who works in a PAYE section.

angeldelight

I've just passed the tax institute tax technician exams and accounting technician tax exams, both explicitly state one of the rules of the scheme is that a tax return MUST be filed

share_bear

angeldelight wrote: »

.revenue.ie/en/tax/it/leaflets/it70.html#section11

under the section on rent a room relief

Yet...when you follow that link, it does seem to say that you must file.
Until... you look closer and find a link to 7.1.32 which makes reference to that chargeable person definition that implies you don't have to file!

I am just wondering if there is a small print in the Tax institute materials confirming this as well?

Pawwed Rig

You must file a tax return even though you have a nil liability. There is even a separate section on the Form 11/12 specifically for rent a room relief. It is not a big deal really and doesn't require too much effort. This is covered under section 216A (4) of the Taxes Consolidation Act

With regard the other utility bills I would tend to agree with you and believe that Citizens Information have misinterpreted the legislation. That said Conductor is an expert of all things property so if he has a better source I am open to be proven wrong.

ceekay74 wrote: »

I was told there is an obligation by a revenue staff member who works in a PAYE section.

Revenue staff are ironically not the miost reliable of sources

ceekay74

Pawwed Rig wrote: »

Revenue staff are ironically not the miost reliable of sources

:pac:

Well if they don't know, who will?

barneystinson

Pawwed Rig wrote: »

You must file a tax return even though you have a nil liability. There is even a separate section on the Form 11/12 specifically for rent a room relief. It is not a big deal really and doesn't require too much effort. This is covered under section 216A (4) of the Taxes Consolidation Act

With regard the other utility bills I would tend to agree with you and believe that Citizens Information have misinterpreted the legislation. That said Conductor is an expert of all things property so if he has a better source I am open to be proven wrong.


Revenue staff are ironically not the miost reliable of sources

What section 216A says about returns, is that the rent a room provisions do not affect the obligation to file. Therefore if you don't otherwise have a filing obligation, the application of rent a room won't create one.

However, IF you do file a return, for example to claim other credits or declare other non-PAYE income, then you must declare the rent a room scheme.

Pawwed Rig

ceekay74 wrote: »

:pac:

Well if they don't know, who will?

People who have qualifications in tax. I contact Revenue pretty regularly and the amount of times I get contradictory information is scary

share_bear

Pawwed Rig wrote: »

You must file a tax return even though you have a nil liability. There is even a separate section on the Form 11/12 specifically for rent a room relief. It is not a big deal really and doesn't require too much effort. This is covered under section 216A (4) of the Taxes Consolidation Act

With regard the other utility bills I would tend to agree with you and believe that Citizens Information have misinterpreted the legislation. That said Conductor is an expert of all things property so if he has a better source I am open to be proven wrong.


Revenue staff are ironically not the miost reliable of sources

Link to the legislation on utilities you refer to would be very helpful - not sure where to look.

One of the questions I was going to add was, say a tenant must have internet services to house, but gets it entirely in his own name. What then?

It really does read to me as those rent a room relief sections are on the forms only for those people who have to file a return for some other reason...

ceekay74

Pawwed Rig wrote: »

People who have qualifications in tax. I contact Revenue pretty regularly and the amount of times I get contradictory information is scary

Fair enough, but the guy i got that info from is an executive office with 15+ years experience in PAYE, and Angeldelight has "passed the tax institute tax technician exams and accounting technician tax exams, both explicitly state one of the rules of the scheme is that a tax return MUST be filed"


OP you should contact revenue yourself.

relax carry on

Rent a room relief. The clue is in the name. In order to avail of the relief you need to claim the relief otherwise until you do its standard rental income. Revenue are not omniscient. They will not know the source of the income until you tell them. At end of the day if you wish to avoid questions from or contact with Revenue, just file a tax return. It's pretty straightforward.

share_bear

relax carry on wrote: »

Rent a room relief. The clue is un the name. In order to avail of the relief you need to claim the relief otherwise until you do its standard rental income. Revenue are not omniscient. They will not know the source of the income until you tell them. At end of the day if you wish to avoid questions from or contact with Revenue, just file a tax return. It's pretty straightforward.

They actually say that it can apply automatically without even having to apply for it, in that document I keep referring to above.

relax carry on

share_bear wrote: »

They actually say that it can apply automatically without even having to apply for it, in that document I keep referring to above.

How can something apply automatically without Revenue knowing about it? Who writes these instructions leaflets? It's not someone who has spent any significant time in a paye, compliance or audit section wondering at the source of additional income for a taxpayer which generates unnecessary work for any of those areas. File a return and remove all doubt about the source of income.

The_Morrigan

Putting this into practical terms, I have availed of this scheme for six years.
I was not obliged to do a tax return as up to last year I was a PAYE worker (currently unemployed). Every year I input the amount of rent I receive as exempt income via PAYE Anytime.
In order to make life easy on myself regarding this tax return I opted to received a set amount every month from my lodger - rent + bills in one fixed amount transferred to my account monthly.
This required me to standardise my bills, so I pay a fixed amount per month to my providers and this is included in the rental amount.
It also means that if I am audited I only have to provide bank statements showing the standing order amount from my lodger as no other monies are received.

There is no faffing about with keeping bills/receipts on file, I don't have to be chasing anyone for monies owed for bills and I don't have to wait for the next billing period in order to deduct bills from the deposit received.

This is not complicated at all, it just requires a bit of organisation.

Pawwed Rig

share_bear wrote: »

Link to the legislation on utilities you refer to would be very helpful - not sure where to look.

I am reading the book here. I have an online copy but you would need a login. You can try www.irishstatutebook.ie

ceekay74 wrote: »

both explicitly state one of the rules of the scheme is that a tax return MUST be filed"

That is what I am saying aswell

share_bear

Pawwed Rig wrote: »

I am reading the book here. I have an online copy but you would need a login. You can try


That is what I am saying aswell

If you could please tell me the Act/Section, I could search...thanks.

share_bear

Just out of interest anyone doing joint names on utility accounts, or dealing with bills in cash?

barneystinson

My last post seems to have been ignored so I'll repeat it:

barneystinson wrote: »

What section 216A says about returns, is that the rent a room provisions do not affect the obligation to file. Therefore if you don't otherwise have a filing obligation, the application of rent a room won't create one.

However, IF you do file a return, for example to claim other credits or declare other non-PAYE income, then you must declare the rent a room scheme.

The legislation ultimately is all that matters.

The only people obliged to file a return are chargeable persons, or anyone whom Revenue notify that they want a return from.

S.216A makes it quite clear that it does NOT create a filing obligation.

From a practical point of view, people are well advised to file a return declaring the exempt income, but there is no legal requirement to do so.

I'd welcome any alternative view, based on legislation??

share_bear

barneystinson wrote: »

My last post seems to have been ignored so I'll repeat it:


The legislation ultimately is all that matters.

The only people obliged to file a return are chargeable persons, or anyone whom Revenue notify that they want a return from.

S.216A makes it quite clear that it does NOT create a filing obligation.

From a practical point of view, people are well advised to file a return declaring the exempt income, but there is no legal requirement to do so.

I'd welcome any alternative view, based on legislation??

+1 !

Pawwed Rig

barneystinson wrote: »

S.216A makes it quite clear that it does NOT create a filing obligation.

Not sure how you came to that conclusion
216A (4)

The provisions of the Income Tax Acts relating to the making of returns shall apply as if this section had not been enacted.

Therefore if this section did not exist would he need to file a return?? Of course he would.

share_bear wrote: »

If you could please tell me the Act/Section, I could search...thanks.

Taxes Consolidation Act

Pawwed Rig

barneystinson wrote: »

The legislation ultimately is all that matters.

That is definitely not true. Revenue interpratation and subsequent guidance documents are also relevant unless the OP wants to go to the High Court. you also need to analyse any case law.
You seem to be claiming to speak from a position of authority here. I assume you are a tax professional?

share_bear

Pawwed Rig wrote: »

Not sure how you came to that conclusion
216A (4)

The provisions of the Income Tax Acts relating to the making of returns shall apply as if this section had not been enacted.

Therefore if this section did not exist would he need to file a return?? Of course he would.



Taxes Consolidation Act

I had a look at that already, didn't think I saw anything that affected the definition of a chargeable person being used to decide whether or not there is an obligation to file, as described in the document from revenue near the start of my OP. Did you have some specific point in mind?

Pawwed Rig

share_bear wrote: »

I had a look at that already, didn't think I saw anything that affected the definition of a chargeable person being used to decide whether or not there is an obligation to file, as described in the document from revenue near the start of my OP. Did you have some specific point in mind?

In the absence of this section the income would be treated as Case V rental income which is covered by sections 18, 75, 96, 97 and 98. Case V rental income needs to be declared in a return.

barneystinson

Pawwed Rig wrote: »

Not sure how you came to that conclusion
216A (4)

The provisions of the Income Tax Acts relating to the making of returns shall apply as if this section had not been enacted.

Therefore if this section did not exist would he need to file a return?? Of course he would.

I think you're misunderstanding what s.216A(4) means. It simply means, when considering if a return is required, s.216A can be ignored, and if you are filing a return you must include the exempt income on it.

However, the provisions relating to the making of returns are not the provisions that determine the amount of income within the charge to tax, those are set out in the various charging provisions.

The income is exempt if it meets the requirements of s.216A, it is therefore not part of total income (see s.216A(2)). Thus when one considers the return filing requirements (as if s.216A didn't exist) the person is still not a chargeable person, because in determining their assessable non-PAYE income, the rent a room income is nil.

This isn't a pedantic point either, because it would otherwise mean that everyone in receipt of rent a room income would have to do a second calculation, of how much their Case V income would be if s.216A did not exist, and if this amount exceeded 3,174 then they'd be a chargeable person, and exposed to late filing surcharges, prelim tax obligations etc... (Notwithstanding that the income bringing them within the self-assessment net is actually exempt)

From a practical point of view however, I would stress anyone availing of the scheme would be best off filing a Form 12 (via PAYE anytime) and declaring the exempt income.

barneystinson

Pawwed Rig wrote: »

In the absence of this section the income would be treated as Case V rental income which is covered by sections 18, 75, 96, 97 and 98. Case V rental income needs to be declared in a return.

Those are not the provisions dealing with the making of a return.

S.216A(2) takes it out of charge of any of the charging provisions above that would otherwise have applied.

I'll win you over to my way of thinking yet!

share_bear

BarneyS - are you a lawyer or accountant out of interest?

Anyway back to the other issue of Utilities.

If there is a utility in the name of a tenant (or jointly held between all tenants), then surely payments made by the tenants are legally a direct transaction between tenant and utility provider, not received by me?

I agree the legislation applies to payments made to me on my account, but how can it apply to something where I am not in the flow of cash - for example pre-pay meters or where a tenants takes out a service in his own name for himself, such as broadband or cable tv?

Pawwed Rig

Those are the provisions relating to Case V income which is what rent a room income is in the absence of the relieving sections. Now noone would argue about whether one would need to make a return were this to be Case V income so I do not see why a return would not be due in this case.
Revenue specifically have it on the Form 11/12 so they can see how much the relief is costing the State and to determine whether it is worth keeping or not in that the government can see if more rental accommodation is being provided by virtue of the relief. Therefore not reporting it would skew these figures hence the obligation.

barneystinson wrote: »

I'll win you over to my way of thinking yet!

Never:pac:

Pawwed Rig

share_bear wrote: »

If there is a utility in the name of a tenant (or jointly held between all tenants), then surely payments made by the tenants are legally a direct transaction between tenant and utility provider, not received by me?

I agree the legislation applies to payments made to me on my account, but how can it apply to something where I am not in the flow of cash - for example pre-pay meters or where a tenants takes out a service in his own name for himself, such as broadband or cable tv?

That is where there is disagreement. Citizens Info have interpreted the legislation to include utilities. However these are not mentioned in the act. The only mention is of 'meals, cleaning, laundry and other similar goods'.
I would interpret this to meant that someone who is receiving more than the allowable amount but allocates a certain proportion to other tasks not related to rent thereby pushing them under the threshold. I would think that if Revenue intended utilities to be included here then they would have explicitly said it like they do in other sections of legislation.
It is a matter of interpretation though and I have argued at length with other users on this point.

The_Morrigan

Pawwed Rig wrote: »

That is where there is disagreement. Citizens Info have interpreted the legislation to include utilities. However these are not mentioned in the act. The only mention is of 'meals, cleaning, laundry and other similar goods'.
I would interpret this to meant that someone who is receiving more than the allowable amount but allocates a certain proportion to other tasks not related to rent thereby pushing them under the threshold. I would think that if Revenue intended utilities to be included here then they would have explicitly said it like they do in other sections of legislation.
It is a matter of interpretation though and I have argued at length with other users on this point.

That would be me! :cool:

To be honest Paw, I know we have thrashed this out plenty of times and as you say it's all down to interpretation, but being realistic, would someone who is renting out one room to help them stave off the cost of home ownership have the means to pay out to correct a mistake here? We all know that revenue can be quite steep with their penalties and anyone that I've spoken to who has availed of the scheme would rather include the utilities to be on the safe side and make things easier on themselves with regards to the return and any possible audits down the line.

Pawwed Rig

The_Morrigan wrote: »

That would be me! :cool:

Indeed :pac: and it is a fair point. That said a person can file an expression of doubt in a 'safe year' (where they are well below the limits) and get a Revenue ruling in writing. This would protect them from penalties and could be used from there on

share_bear

Oh I just thought of something. This is what Revenue say in that document...

5.2 Income taken into account
The income that is taken into account in determining whether the relief applies is the
amount arising to an individual for the use of a room or rooms in the qualifying
residence in respect of their use as residential accommodation. Any amounts arising
27.1.32]
for meals, cleaning, laundry or other similar goods and services that are incidentally
provided in connection with the residential use are also taken into account.

"meal, cleaning,laundry..." and all things produced by the "landlord".

I don't make electricity or gas (hahahah) though. So this suggests services consumed by the tenants from third parties can be safely ignored?

The_Morrigan

Pawwed Rig wrote: »

Indeed :pac: and it is a fair point. That said a person can file an expression of doubt in a 'safe year' (where they are well below the limits) and get a Revenue ruling in writing. This would protect them from penalties and could be used from there on

It's also worth noting that those that avail of the scheme are not professional landlords and may not have the means to hire a tax consultant or accountant to give advice or do a tax return for them. They do often rely on the guidance from citizens advice, boards.ie and mates who have done it before.
There is no need to over complicate the process if there is an easy way to do it - which, as you know I believe the fixed amount inclusive of rent/bills is the best way to go!

share_bear

share_bear wrote: »

Oh I just thought of something. This is what Revenue say in that document...

5.2 Income taken into account
The income that is taken into account in determining whether the relief applies is the
amount arising to an individual for the use of a room or rooms in the qualifying
residence in respect of their use as residential accommodation. Any amounts arising
27.1.32]
for meals, cleaning, laundry or other similar goods and services that are incidentally
provided in connection with the residential use are also taken into account.

"meal, cleaning,laundry..." and all things produced by the "landlord".

I don't make electricity or gas (hahahah) though. So this suggests services consumed by the tenants from third parties can be safely ignored?

P.S. because its not arising *to* me. (I can't edit my posts on Linux)

Pawwed Rig

The_Morrigan wrote: »

It's also worth noting that those that avail of the scheme are not professional landlords and may not have the means to hire a tax consultant or accountant to give advice or do a tax return for them. They do often rely on the guidance from citizens advice, boards.ie and mates who have done it before.
There is no need to over complicate the process if there is an easy way to do it - which, as you know I believe the fixed amount inclusive of rent/bills is the best way to go!

Anyone can file an expression of doubt. You don't need a tax consultant. There is a space for it on the Form 11 anyway (not sure on the Form 12). Just explain the situation and you will get a determination

Edit - not on Form 12.