Rent a Room on House I Won't Live In For 8 - 12 Months

Captainsatnav

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

Claw Hammer

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

Is there a written lease in place?

Captainsatnav

No haven't even bought the house yet. But can I still live work in Dublin, own a house in Cork but rent out the 3 beds on rent - a - room for, say 12 months? I'll still be living in Ireland and paying tax etc...

(Thanks for the reply btw)

Claw Hammer

Captainsatnav wrote: »

No haven't even bought the house yet. But can I still live work in Dublin, own a house in Cork but rent out the 3 beds on rent - a - room for, say 12 months? I'll still be living in Ireland and paying tax etc...

(Thanks for the reply btw)

I am confused. You have a house rented out for 5 years that you haven't bought yet?

Captainsatnav

Claw Hammer wrote: »

I am confused. You have a house rented out for 5 years that you haven't bought yet?

Nope. That's the OP's scenario

Rothmans

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

If you're not living in the house as your principal private residence, you cannot avail of rent-a-room.

Graham

Mod Note

OP I have split your post into its own thread.

Rothmans

Rothmans wrote: »

If you're not living in the house as your principal private residence, you cannot avail of rent-a-room.

It doesn't have to be yours PPR just your main residence.

Bubbaclaus

Orion Incalculable Rambler wrote: »

It doesn't have to be yours PPR just your main residence.

And if he's not living there then it's not his main residence. This isn't difficult.

Rothmans

Orion Incalculable Rambler wrote: »

It doesn't have to be yours PPR just your main residence.

Apologies, PPR is a term is used more so in relation to the sale of a house. But are the two not one in the same thing in the situation described?

The definition of what qualifies for RAR is a residence which is occupied by the individual as his or her sole or main residence during the year of assessment, which is strikingly similar to PPR (i.e. PPR being one's sole or main residence).

Samuel T. Cogley

Start getting your mail sent there and go down a couple of weekend s a month. Don't just rent it out as separate rooms without being there yourself, you're potentially leaving yourself open to the licences becoming de facto tenants and claiming Part IV rights.

catrionanic

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

It’s supposed to be your principal primary residence. How can it be your PPR when you don’t even have a bedroom to sleep in there as you’ve rented them all out?!

4ensic15

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

How are you going to get 1k a month for a room in Cork?
Rent a room is per house not per room in any case.

Samuel T. Cogley

Incidentally OP bit of good news it's €14K

Caranica

Samuel T. Cogley wrote: »

Incidentally OP bit of good news it's €14K

Per house. OP's post suggests per room

Samuel T. Cogley

Caranica wrote: »

Per house. OP's post suggests per room

I think the OP has badly worded the OP but yes he's wrong on it being per room.

y0ssar1an22

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

its max of 14k per year in total. about 4.6k per room.

i wonder what constitutes your main home?

per revenue for RAR: Your main residence is your home for most of the year and where friends would expect to find you.

i'm gonna presume most of the year means 183 days, but it aint defined anywhere that i could find.

where your friends would expect to find you? is that not the biggest grey area of all time?

lawred2

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

you have to be living in the house

4ensic15

y0ssar1an22 wrote: »

its max of 14k per year in total. about 4.6k per room.

i wonder what constitutes your main home?

per revenue for RAR: Your main residence is your home for most of the year and where friends would expect to find you.

i'm gonna presume most of the year means 183 days, but it aint defined anywhere that i could find.

where your friends would expect to find you? is that not the biggest grey area of all time?

It is not a particularly big grey area. There may be some extreme situations of individuals flitting between different addresses but it is usually straightforward in most cases. If a person has other accommodation available elsewhere, if the person works far away from the property, if the tenants at the property don't see the owner reasonably often enough to conclude he is a flatmate rather than an occasional visitor if the owners relatives and friends ever call would be some of the indicia.

lawred2

y0ssar1an22 wrote: »

its max of 14k per year in total. about 4.6k per room.

i wonder what constitutes your main home?

per revenue for RAR: Your main residence is your home for most of the year and where friends would expect to find you.

i'm gonna presume most of the year means 183 days, but it aint defined anywhere that i could find.

where your friends would expect to find you? is that not the biggest grey area of all time?

not really - you'd expect your friends to know where you live no?

well unless you're Jason Bourne or some such

y0ssar1an22

lawred2 wrote: »

not really - you'd expect your friends to know where you live no?

well unless you're Jason Bourne or some such

who would make that judgement?

do you think revenue will call your friends...where would you expect to find XXXX. Eh, in the pub. no RAR so.

i dunno, its just too ambiguous to me. Should be simply where you spend 183 days/nights. But thats not defined anywhere.

Samuel T. Cogley

y0ssar1an22 wrote: »

who would make that judgement?

do you think revenue will call your friends...where would you expect to find XXXX. Eh, in the pub. no RAR so.

i dunno, its just too ambiguous to me. Should be simply where you spend 183 days/nights. But thats not defined anywhere.

It's vague to allow for different situations. The OP can claim PPR if he's down there each weekend IMHO. Making it 183 days would be unfair to people who commute for the week for work.

Also what is a day anyway? (That is defined )

y0ssar1an22

Samuel T. Cogley wrote: »

It's vague to allow for different situations. The OP can claim PPR if he's down there each weekend IMHO. Making it 183 days would be unfair to people who commute for the week for work.

Also what is a day anyway? (That is defined )

for residency, any time you are in the country, with the exception of airport terminals

4ensic15

y0ssar1an22 wrote: »

who would make that judgement?

do you think revenue will call your friends...where would you expect to find XXXX. Eh, in the pub. no RAR so.

i dunno, its just too ambiguous to me. Should be simply where you spend 183 days/nights. But thats not defined anywhere.

The 183 days is used for tax residency in another jurisdiction. Some people such as pilots are often away from home for days at a time. They may not manage 183 nights in the country but the house would still be their main residence. It is a question of fact in every case. Income from the scheme is self assessed and the revenue just give guidelines but it is up to the taxpayer to form their own judgement. If the Revenue do an audit they will probe the entire situation. The owner sleeping in a box room would set alarm bells ringing.

lawred2

y0ssar1an22 wrote: »

lawred2 wrote: »

not really - you'd expect your friends to know where you live no?

well unless you're Jason Bourne or some such

who would make that judgement?

do you think revenue will call your friends...where would you expect to find XXXX. Eh, in the pub. no RAR so.

i dunno, its just too ambiguous to me. Should be simply where you spend 183 days/nights. But thats not defined anywhere.

I'd be surprised if the technical description as used by the revenue is being communicated here.. I wonder is it some sort of 'de common people' speak

y0ssar1an22

Captainsatnav wrote: »

My scenario: About to buy a house in Cork but won't be moving there for 8 - 12 months. Can I use the 'rent - a - room' for the 3 bedrooms i.e. 3 guests @max rent of €12k a year per room or can I only rent out the entire house via lease arrangement?

to answer your question OP. you wont be able to claim RAR in 2018 IMO. 2019 should be fine

Wesser

Samuel T. Cogley wrote: »

Start getting your mail sent there and go down a couple of weekend s a month. Don't just rent it out as separate rooms without being there yourself, you're potentially leaving yourself open to the licences becoming de facto tenants and claiming Part IV rights.

You can't use the rent a room scheme to earn tax free money on a house that you don't live in yourself. Stop encouraging the OP to break the law and evade paying tax. He has to pay his tax just like the rest of us.

Samuel T. Cogley

Wesser wrote: »

You can't use the rent a room scheme to earn tax free money on a house that you don't live in yourself. Stop encouraging the OP to break the law and evade paying tax. He has to pay his tax just like the rest of us.

It needs to be his main residence. Not the residence he lives in most often. It's perfectly acceptable for people genuinely living at home at the weekends and renting a room during the week in Dublin etc. to avail of RAR. Hence why the definition doesn't say you have to be there X days.

Furthermore he's specifically looking to maintain a licensee arrangement so he's not stuck with tenants over holding when he's looking to live there full-time. That more than anything is reason to be there at weekends. If he wants to spend the odd weekend socialising in Dublin that's his business.

Bubbaclaus

"an individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him/her. The individual does not have to own the residence and it could, for example, be occupied as rented accommodation."

If you are working 5 days a week in Dublin and have accommodation there then that's where you are the greater part of the time and where people would expect to find you.

Samuel T. Cogley

Tax and Duty Manual:

4. Qualifying Residence

4.1 Sole or main residence The room or rooms must be in a residential premises that is situated in the State and that is occupied by an individual as his/her sole or main residence during the particular tax year. An individual may live in more than one residence but can only avail of rent-a-room relief in respect of his/her sole or main residence. In general, an individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him/her. The individual does not have to own the residence and it could, for example, be occupied as rented accommodation.

That's the Guidance on the matter the act does not require it:

32.—(1) The Principal Act is amended in Chapter 1 of Part 7 by the insertion of the following after section 216:


“216A.—(1) In this section—

‘qualifying residence’, in relation to an individual for a year of assessment, means a residential premises situated in the State which is occupied by the individual as his or her sole or main residence during the year of assessment;

‘relevant sums’ means all sums arising in respect of the use for the purposes of residential accommodation, of a room or rooms in a qualifying residence and includes sums arising in respect of meals, cleaning, laundry and other similar goods and services which are incidentally supplied in connection with that use;

‘residential premises’ means a building or part of a building used as a dwelling.

(2) (a) This subsection applies if—

(i) relevant sums, chargeable to income tax under Case IV or Case V of Schedule D, arise to an individual (regardless of whether the relevant sums are chargeable to income tax under Case IV or Case V or under both Case IV and Case V), and

(ii) the amount of the relevant sums does not exceed the individual's limit for the year of assessment.

(b) In ascertaining the amount of relevant sums for the purposes of this subsection no deduction shall be made in respect of expenses or any other matter.

(c) Where this subsection applies the following shall be treated as nil for the purposes of the Income Tax Acts—

(i) the profits or gains of the year of assessment, and

(ii) the losses of any such year of assessment, in respect of relevant sums arising to an individual.

(d) Where an individual has relevant sums chargeable to income tax under Case V of Schedule D and an election under subsection (3)(a) has not been made, an allowance under section 284, which would on due claim being made be granted, shall be deemed to have been granted.

(3) (a) Subsection (2) shall not apply for a year of assessment if an individual so elects by notice in writing to the inspector on or before the specified return date for the chargeable period (within the meaning of section 950).

(b) An election under this subsection shall have effect only for the year of assessment for which it is made.

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

(5) Subject to subsections (6) and (7), the limit of an individual referred to in subsection (2) is £6,000.

(6) As respects the year of assessment 2001 the limit referred to in subsection (5) is £4,440.

(7) Where relevant sums arise to more than one individual in respect of a qualifying residence the limits referred to in subsections (5) and (6) shall be divided by the number of such individuals.

(8) Where subsection (2) applies, the receipt of relevant sums shall not operate so as to restrict or reduce any entitlement to relief under section 244 or 604.”.

(2) Section 216A (inserted by subsection (1)) of the Principal Act is amended as respects the year of assessment 2002 and subsequent years of assessment—

(a) in subsection (5) by the substitution of “€7,620” for “£6,000”, and

(b) by the deletion of subsection (6).

Bubbaclaus

And where sole or main residence is undefined Revenue are going to revert to their own guidance on the matter. Unless you are going to bring it all the way to the Tax Appeals Commissioners and/or High Court and argue your case then the guidance may as well be seen as the legislative definition.

Claw Hammer

If the Revenue notice that a person is claiming rent a room relief in circumstances where they work a long way from the property, they will carry out enquiries. If it turns out that there is evidence that the person only visited the house sporadically, they will charge the tax on the income and add interest an penalties. It will then be up to the taxpayer to appeal. The onus will be on the taxpayer to refute the assertion that it was their main residence.

Franz Von Peppercorn

lawred2 wrote: »

I'd be surprised if the technical description as used by the revenue is being communicated here.. I wonder is it some sort of 'de common people' speak

No they are trying to avoid specifics (ie where your post goes because you can change that).

Captainsatnav

Ok - so thanks for contributions folks - I'm not trying to evade tax here at all!

So if I were to buy the gaf (as a first time buyer), my only option really is to rent it out as a landlord and try to get a rent that covers the mortgage (as will be paying bl00dy mental rent in Dublin as well!)

Fian

Captainsatnav wrote: »

Ok - so thanks for contributions folks - I'm not trying to evade tax here at all!

So if I were to buy the gaf (as a first time buyer), my only option really is to rent it out as a landlord and try to get a rent that covers the mortgage (as will be paying bl00dy mental rent in Dublin as well!)

In those circusmtances you need to pay tax on the income (not Profit!) you receive in rent. You can't set off the rent you pay in dublin or the mortgage repayments either. You can set off 80% of the interest you pay on your mortgage. To cover the mortgage payments without subsidising them from other income you probably need about twice the mortgage paymetns in rent.

By way of illustration I rent out two places for (almost) equal rent. One set of rent payments goes into my current account and helps pay for the mortgages that come out of that every month. One goes to a seperate account and sits there to cover expenses/management fees/repairs and tax paymetns in November. The rent on one place obviously doesn't cover the mortgage on two, my salary also feeds into that account and subsidises those payments. The rent on the other place is generally enough to just about cover the taxes and normal expenses, not things like replacing appliances though.

I'm not complaining btw, eventually, in a couple of decades, the mortgages will be paid off and I will have two valuable assets, so I expect to have to put my hand into my own pockets to pay for them rather than have my tenants buy them for me.

Captainsatnav

Fian wrote: »

In those circusmtances you need to pay tax on the income (not Profit!) you receive in rent. You can't set off the rent you pay in dublin or the mortgage repayments either. You can set off 80% of the interest you pay on your mortgage. To cover the mortgage payments without subsidising them from other income you probably need about twice the mortgage paymetns in rent.

By way of illustration I rent out two places for (almost) equal rent. One set of rent payments goes into my current account and helps pay for the mortgages that come out of that every month. One goes to a seperate account and sits there to cover expenses/management fees/repairs and tax paymetns in November. The rent on one place obviously doesn't cover the mortgage on two, my salary also feeds into that account and subsidises those payments. The rent on the other place is generally enough to just about cover the taxes and normal expenses, not things like replacing appliances though.

I'm not complaining btw, eventually, in a couple of decades, the mortgages will be paid off and I will have two valuable assets, so I expect to have to put my hand into my own pockets to pay for them rather than have my tenants buy them for me.

Right then so essentially there's no point buying a house in Cork until I'm ready to move into it.

4ensic15

Captainsatnav wrote: »

Right then so essentially there's no point buying a house in Cork until I'm ready to move into it.

House prices in Cork might be higher in 12-18 months time. You could end up with a higher mortgage, or an inferior house when you eventually move there.

Captainsatnav

Spoke with mortgage advisor today - dream's over. Apparently I'd need to be working & living in Cork before applying for a mortgage on a place there. FFS - means I'll need to move in with parents before applying as well as quitting job in Dublin, finding new one in Cork and waiting 6 months to pass probation.

Samuel T. Cogley

Captainsatnav wrote: »

Spoke with mortgage advisor today - dream's over. Apparently I'd need to be working & living in Cork before applying for a mortgage on a place there. FFS - means I'll need to move in with parents before applying as well as quitting job in Dublin, finding new one in Cork and waiting 6 months to pass probation.

This a broker or the bank directly? If the bank have you approached anyone else?

Captainsatnav

Samuel T. Cogley wrote: »

This a broker or the bank directly? If the bank have you approached anyone else?

Broker. Only option would be a buy to let mortgage but that's 70%ltv ratio.

Claw Hammer

Why bother moving to Cork at all then?

Captainsatnav

Claw Hammer wrote: »

Why bother moving to Cork at all then?

Is that a serious comment? I don't want to pay stupid money for a crap house in Dublin and I want a better quality of life out of the rat race sitting in traffic all day.

Claw Hammer

Captainsatnav wrote: »

Is that a serious comment? I don't want to pay stupid money for a crap house in Dublin and I want a better quality of life out of the rat race sitting in traffic all day.

Money isn't stupid. If you don't want to live in Dubin, there are lots of places besides Cork.

Samuel T. Cogley

LOL asking a Cork man (presumably) why he wants to live in Cork. Cork people love Cork unconditionally.

The_Conductor

Samuel T. Cogley wrote: »

LOL asking a Cork man (presumably) why he wants to live in Cork. Cork people love Cork unconditionally.

Depends- there is very little that is unconditional in life anymore........

I think the OP has satisfied themselves that their proposal is a non-runner- on financial grounds alone (never mind the mayhem of letting out separate bedrooms- possible Part IV tenancies etc etc).

Unless the OP would like discussion to continue- I am closing the thread.