Rental Income tax and HAP Scheme

lg01

I have a small apartment in the country which is the bane of my life. Despite buying it well over 10 years ago it's still negative equity and in that time it has cost me hundreds every month to top up the mortgage and pay fees etc. I have not paid the rental income tax in several years.

My tenant just moved out and I now need to spend thousands to get it up to scratch. I also need to find a new tenant. My agent has suggested someone who is on the HAP scheme. I'm torn as to what to do here. I was told it's good to be on HAP as you can offset the tax, however I also heard you need to be tax compliant, and if you are not the council can just cut you off and stop paying the rent.

I do intend to become tax compliant but it's not possible right now, I hope to do it later in the year. What would my best course of action be here? Am I better of getting someone with a job who can pay the rent themselves, or is someone on hap better to lower the future tax burden?

gerrybbadd

There's no special incentive for having someone on HAP as a tenant over someone with a job, as far as i'm aware.

Are you sure you actually have a chargeable income from rents, after expenses etc?

Have you signed up with the PRTB in order to avail of Mortgage interest Relief deduction?

If you have not declared chargeable rental income for some years, you may find yourself in some trouble should it be uncovered, such as interest and penalties.

I'm not sure if a Tax Clearance Certificate is required as part of the HAP process, it may be.

Stratvs

gerrybbadd wrote: »

I'm not sure if a Tax Clearance Certificate is required as part of the HAP process, it may be.

It is.

lg01

Thanks. I now have an accountant working on it to see what my liability will be. Yes I am with PRTB I have done everything else properly, so hopefully when I avail of mortgage interest relief and other expenses maybe it won't be too bad. There will be penalties I'm sure but I'm told you can negotiate.

So if the tax clearance cert is needed - then I will definitely have to go with a normal paying tenant.

One other thing, I may soon be leaving Ireland to go live overseas. How does that affect the tax on rental income does anyone know?

Calahonda52

lg01 wrote: »

I have a small apartment in the country which is the bane of my life. Despite buying it well over 10 years ago it's still negative equity and in that time it has cost me hundreds every month to top up the mortgage and pay fees etc. I have not paid the rental income tax in several years.

My tenant just moved out and I now need to spend thousands to get it up to scratch. I also need to find a new tenant. My agent has suggested someone who is on the HAP scheme. I'm torn as to what to do here. I was told it's good to be on HAP as you can offset the tax, however I also heard you need to be tax compliant, and if you are not the council can just cut you off and stop paying the rent.

I do intend to become tax compliant but it's not possible right now, I hope to do it later in the year. What would my best course of action be here? Am I better of getting someone with a job who can pay the rent themselves, or is someone on hap better to lower the future tax burden?

Do the arrears of tax calculation first?
As noted by others you may not have an arrear problem i.e. if allowable interest and expenses are > than the rent.

have you not filed any return or just left it out of your return

wiggle16

I don't understand what you mean by "offset the tax". Offset it against what?

You do need a tax clearance cert to take on a HAP tenant, which you obviously will not get if you have not declared the rental income.

The HAP scheme allows you to claim 100% of the mortgage interest as an expense (as opposed to 85%, note that this is the interest, not the whole mortgage payment) against your gross rental income for tax purposes, which isn't a massive benefit. As an aside, the government should have done a lot more to make this scheme attractive to landlords.