Can a landlord pay a tenant's utilities as an allowable expense?

elWizard

Like a lot of people, I've recently become both a landlord and a tenant (original house to small, negative equity so unwilling to sell, now renting a bigger house) so I'm new to all this, please excuse me if I've got the wrong end of the stick here.

I've been going over it70, particularly the What Expenditure Can Be Deducted? section (http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3), particularly this piece:

"The following are examples of expenditure you may deduct when calculating your rental income or losses...
...the cost of any service or goods you provide and for which you do not receive separate payment from your tenant, e.g. gas, electricity, central heating, telephone rental, cable television, water and refuse collection,"

Am I correct in taking this to mean that a landlord can pay a tenant's utilities and then subtract that cost from their own final tax bill?
So in exchange for a tenant agreeing to pay a higher rent, the landlord pays e.g. the tenant's heating and electricity bills for the year?
Seems to me that provided a landlord's tax liability is going to be high anyway, then they might be willing to agree to that. Obviously there are potential abuse pitfalls to consider as well.

But anyway, assuming my reading of this is correct, does anyone know if this is a common practice, or even why this is considered an allowable expense by Revenue?

CIARAN_BOYLE

Because its tax neutral
Assume marginal rate 51%

Scenario 1
Rent 10000
Tax 5100

Scenario 2
Rent 11000
Utilities 1000
Taxable rent 10000
Tax 5100

elWizard

Thanks Ciaran, that makes sense, mathematically anyway.
I still don't really understand WHY they say it's allowable. It makes little difference to the tenant - unless they, say, go crazy with leaving the heat on, and that risk is exactly why no landlord is likely to agree to it. So who's it for?
I guess I'm just idly curious about some of the stranger aspects of our tax laws that I'm slowly learning about.

CIARAN_BOYLE

elWizard wrote: »

Thanks Ciaran, that makes sense, mathematically anyway.
I still don't really understand WHY they say it's allowable. It makes little difference to the tenant - unless they, say, go crazy with leaving the heat on, and that risk is exactly why no landlord is likely to agree to it. So who's it for?
I guess I'm just idly curious about some of the stranger aspects of our tax laws that I'm slowly learning about.

If tennants don't pay their ESB bills then the connection can be cut off leaving the land lord a few hundred euro as a reconnection fee. Some landlords would prefer to handle the utilities themselves for this reason.

elWizard

CIARAN_BOYLE wrote: »

If tennants don't pay their ESB bills then the connection can be cut off leaving the land lord a few hundred euro as a reconnection fee. Some landlords would prefer to handle the utilities themselves for this reason.

that also makes sense - thanks for the explanation Ciaran.