Tax implications for father letting home (PPR).

del4646

My father is living in a 4 bed home with attached 2 granny flat let at rent a room rate of 14,000 per annum.

He is single retired (69) and receives full state pension of 265.30 pw. He wants to spend his winters with grankids

in australia (expensive) and retain a place in ireland.

What is the most tax efficient means of using this property to generate a rental income.

He has capital to do a conversion or split but wants to retain the PPR status for rent a room relief.

Your suggestions/what would you do.

Regards,

Del.

Claw Hammer

He is already getting the full rent a room relief. What more does he want?

ted1

Short term let’s of less than 6 months is the key.

ideally he should rent it to people who are renovating their own house.

no fear of overholding and he can charge a small premium.

his pension is 13k a year. So he still has tax credits he is not using that would amount to more than 14k allowance.

DubCount

OP. I'm not going to get into the application of Rent A Room relief to Granny Flats. As you note in your post, Rent a Room relief only relates to your PPR. If your father rents out the property, is no his PPR at that time, and any income from the granny flats would lose their Rent a Room Relief. Some incidental short term letting might be the answer, but thats quite limited. Speak to an accountant before coming up with a plan for this one.

o1s1n

https://www.boards.ie/discussion/comment/120663051#Comment_120663051

He cant get that relief if he leaves the country and it's no longer his PPR.

del4646

Dear All,

Thank you for replies.

To clarify. He wants to spend winter in Oz as grankids are off school - 3/4 months.

DSP says 4 months abroad does not affect pension status. According to revenue

you have to be abroad for 183 days to affect resident/domicile status? He does

not want to overburden the family by staying longer than 3/4 months.

Property - he does not need a 4 bed home so suggestion was to convert 4 bed into 2

apartments and live in granny flat. Rent a room relief and possible accomondation

recognition payment (14 + 9.6) which hopefully does not affected state pension.

Addtional income is for his time with gankids and for them.

Ultatimely he wants to arrange his assets and time within Revenue/DSP obligations.

Does this sound viable or is he missing something?

Regards,

Del.

I assume th

3DataModem

It seems that your father will maintain Ireland as his tax residence, with occasional vacations to Australia so it seems that he will be entitled to have his house as his PPR.

If that remains the case, then he can continue to do rent-a-room. However he

• can't charge more
• can't ALSO rent out his house, and retain rent a room
• can't rent the whole house as rent-a-room
• could theoretically do some short-term holiday letting of his house while away without impacting rent-a-room, but this is shaky ground, and short-term holiday lets have their own requirements (e.g. planning) that might invalidate the rent-a-room.

If the house is very big and could generate a substantial income, he could consider renting the whole house out and keeping the "granny flat" for himself. No rent-a-room, but with such tiny other income the tax burden of this rent would probably justify it. Then he could have a nice pile of loot to pay for Airbnb or hotels in Australia.

doc22

https://www.boards.ie/discussion/comment/120669570#Comment_120669570

It could affect this tax status abroad and they may want a piece of the income too. (you can be taxable by two states)

pc7

Standard visa for Oz is 100 days too, just something to consider. Too risky to rent it out, he has the pension and 14k tax free, better to leave it empty! Imagine he comes back and someone wont leave.

Claw Hammer

Converting the house to 2 apartments will ned planning permission, which may be refused because of the granny flat, will be expensive as each unit will have to meet up to date regulations for fire safety and insulation, electrical installation, will devalue the property as the new owners will factor in the cost of removing the conversion and will result in the tenants of the units gaining part 4 rights. The income from the tow units will be fully taxable as he won't be able to avail of rent a room.

All in all, the plan is madness.

Mrs OBumble

Move into the granny flat.

Rent out the 4brm. Pay the small amount of tax that is due. It won't be much, due to the low other income.

mrslancaster

https://www.boards.ie/discussion/comment/120670810#Comment_120670810

Iirc, there something in the RTA that says when a part of a property that is self contained is let, it doesnt need to be rtb registered as long as its still connected to the original property and the owner informs the renter at the outset that its not a tenancy. Does anyone know what RTA section?

There are options with a 4 bed house if the owner lives there. If the above is correct, the house could be split up/down with the downstairs plus the granny flat one space, a second space upstairs with entrance via the staircase. Live in the downstairs part, let the granny flat and the upstairs. No PP required as it's not a commercial B&B or Airbnb, or a complete division of the property into two separate apartments that could be sold separatly, it's still one property. No RTB registration as both renters are lodgers/ licensees living with the owner. House is father's ppr even if he only occupies part of it or visits family in Australia or goes away on holiday for 3/4 months in the year as he wants. Also, RaR only applies if the rent is less than 14k pa and any higher just needs to submit an annual tax return.

Other option is to apply for PP to divide house into two apartments, spend megabucks on architects, pp fees, building conversion, fit-out, and accommodation during building works. When its finished, live in the apartment with the granny flat and do rent-a-room, and become a registered landlord with an RTB tenant for the other apartment. IMO thats a lot of work, hassle and stress, before during and after.

Claw Hammer

https://www.boards.ie/discussion/comment/120680260#Comment_120680260

There is no such section. There is a section which reduces the notice period in the case of a property which was once a single residence, has been converted to two residences and the landlord lives in the other. The granny flat if currently let should be registered with the RTB, even though it qualifies for rent a room relief.

Ronney

One important thing to note is once you receive over the €14,000 you loose the relief in full. Its not a case of the first €14k is tax free

So if he gets say €14100 (ignoring credits) he would pay at least 20% tax so only get €11,280 net

mrslancaster

https://www.boards.ie/discussion/comment/120681631#Comment_120681631

Why does a granny flat that is part of a house need to be RTB registered if the owner is also living in the property?

It is the same as a resident owner letting separate bedrooms - it is not unusual that people who house-share and occupy their own en-suite bedroom have kettles or microwave, possibly even an area with a sofa and tv, and they would have a lock or keypad on their door. They may share kitchen facilities, living areas or garden space but they do not have exclusive possession of the property which is necessary to be a tenant. Afaics, if the owner is living in the property, even in a separate area, then anyone residing there with their permission is a guest/lodger/licensee.

I remember reading somewhere that if the space is connected, and remains part of the house, and is accessible by the owner from within the house (eg, a granny flat, a converted garage, a converted loft) that does not need to be RTB registered and the occupier is not a tenant. I will try to find it.

I think the key bit here is Exclusive Possession.

Claw Hammer

Movimg in to the granny flat and renting the main house would result in tax being paid on the entire, assuming the main house lets for more than 14k. The net benefit might not be very much given that there will likely be more repair needed in the main house.

DFB-D

https://www.boards.ie/discussion/comment/120682126#Comment_120682126

Non-application of Part.

25.—(1) This Part does not apply to a tenancy of a dwelling where the conditions specified in subsection (2) are satisfied if the landlord of the dwelling opts, in accordance with subsection (3), for this Part not to apply to it.

(2) Those conditions are—

(a) the dwelling concerned is one of 2 dwellings within a building,

(b) that building, as originally constructed, comprised a single dwelling, and

(c) the landlord resides in the other dwelling.

So security of tenure (part 4) does not apply where the above is relevant.

Claw Hammer

https://www.boards.ie/discussion/comment/120682126#Comment_120682126

A granny flat is a separate dwelling. House sharing is people in the same dwelling. The landlord is not living in the same dwelling so it is not the same as a resident owner letting bedrooms.

mrslancaster

https://www.boards.ie/discussion/comment/120681631#Comment_120681631

https://www.boards.ie/discussion/comment/120682889#Comment_120682889

Thanks for both replies.

So am I understanding this correctly here - if a single property is divided into two separate dwellings and the owner lives in one unit and the second unit is let, it must be rtb registered but the tenant in that registered unit does not get part4 rights because the property was originally all one?

mrslancaster

https://www.boards.ie/discussion/comment/120683087#Comment_120683087

OK but does that apply even if a granny flat is not physically separated from the main house? Most granny flats I've seen are actually attached either at the back or the side of the main house.

Do you mean the RTB have decided that any granny-flat is treated as a separate dwelling even if it is not in fact separate?

Also, if that is the case, how does that section 25 above work? RTB require registration but for what purpose if there is no part4 rights accrued? I'm a bit confused tbh.

DFB-D

https://www.boards.ie/discussion/comment/120683090#Comment_120683090

As I understand it, granny flats of the kind permitted by the corporations/councils are not seperate dwellings, they are connected by at least one entrance through the main dwelling. They may or may not have a seperate entrance as well.

You would probably need to look at each circumstance to decide if the flat meets the RTA wording for a dwelling and whether that it is considered within the original dwelling.

Something best left to a solicitor unless you find any cases where it is explained better.

Claw Hammer

https://www.boards.ie/discussion/comment/120683185#Comment_120683185

The cases on this point are all over the place. In some case the RTB have said that a bedroom is not a dwelling and in others they have said the opposite. The main issue that the councils have is that they don't want a planning unit sub divided so they insist that granny flats are created such that they can be re-integrated back into the original house and are only allowed as long as there is a family need i.e. an actual resident granny.

Section 25 only applies to a very small number of tenancies. The landlord has to Section 25 deals with a very limited class of cases. It is a requirement that the landlord inform the prospective tenant that he intends to avail of it. Despite not coming under part 4, other provisions of the act apply for the tenants benefit such as the right to a notice of termination, dispute resolution etc. The landlord is obliged to provide a heating system which the tenant can control individually, must supply a 4 ring cooker, fridge and freezer.

In a house share scenario the tenant and landlord share the same kitchen facilities, the landlord controls the heating system etc. The landlord can also regulate visitors as well. It is a question of fact in each case as to whther a separate dwelling is involved. The Housing ACt states that a bedroom cannot be a dwelling. Planning permission will not be given to create a bedroom as a dwelling unless it meets the minimum size requirements for apartments which is most unlikely in any typical house.

The reason for the non application of part 4 is to allow buildings originally built as a single dwelling to be reinstated as such, so tenants with rights to remain don't keep buildings in flats which would otherwise be in single dwelling use.

It can be a trap for the landlord of a granny flat who thinks because he gets rent a room relief that tenancy ldon't apply and fails to notify t he tenanaws t in advance of Section 25. He can find himself with a tenant for life, devaluing his house.

mrslancaster

https://www.boards.ie/discussion/comment/120685703#Comment_120685703

Thanks for the info. Basically, if the council gives PP for an attached granny flat that is connected to the house, that would not be considered a separate dwelling under building or planning rules. Then if the resident owner later wanted to let it, eg say the granny moves to a nursing home, the council requirement that it was for family use means that anyone else would be a licensee because it's not a separate dwelling. So that would be the same if a house was used upstairs/downstairs provided there was no actual building work done to convert the house into two separate units, also a licensee. Not sure that rent a room is an issue if an owner is also resident but a lot of variables where licensees are concerned. RTB should provide more information as this can affect a lot of people.

DownByTheGarden

I converted a house into a house with a granny flat, very easily, with a new patio door in the side wall and a stud wall with a new locked door in a hall and then a few appliances and drain pipes.

Total wasnt even €5k. Took myself and brother 3 weeks working just evenings and weekends. Was all very easy in the end though one of the rooms of the granny flat was already an enusite bedroom, so no bathroom plumbing required for a bathroom. Put the kitchenette on the outside wall.

Thats effectively 2 properties now, but still just one property overall.

Get someone to look at the layout of the house for you and its possible to arrange it in many different ways depending on what you require.

If I want I can rent out any combination of rooms in the house as long as I dont go over €14k. Once I am finished with my job I can go higher anyway if needed without much of a tax issue. I can also do AirBnb with either the "granny flat" or the main part of the house if it suits me.

All checked and double checked before, during and after, through a solicitor relative whos own practice handles a lot of RTB cases. Thats important so you can maintain whatever configuration to your advantage.

mrslancaster

https://www.boards.ie/discussion/comment/120692512#Comment_120692512

Thanks for all that information, much appreciated.

del4646

Dear Responders,

Thank you all for your help on this. Very informative and plenty to consider.

The granny flat (2 bed) was a former garage but was been incoporated into to family home

via a hallway- by blocking off each end of the side entrance and converting side window into

a doorway it provided a doorway to each property either side of the hallway.

He did have a further question regarding electric......

Can he split the electric to the granny flat without affecting the single RCB to the family home?

Currently it is all on the one RCB mains meter. I know this is quite common in the UK using a

coin/card meter for single units where a large house was split into units.

Your comments/experience is most appreciated.

Regards,

Del

DownByTheGarden

https://www.boards.ie/discussion/comment/120704670#Comment_120704670

We havent done that, but Ive been told it is an easy job for an electrician.

Legally though I dont know how you stand iof you have a seperate meter in the granny flat for rent a room.

Claw Hammer

https://www.boards.ie/discussion/comment/120692340#Comment_120692340

The council ususally insist that the granny flat be re-integrated into the main dwelling when the granny goes. To get planning for a separte dwelling you jave to sub divide the planning unit. You could have the granny flat as an illegal second dwelling and the occupant would be a tenant not a licencee. Just because you have no planning for a dwelling doesn't mean that the RTB won't find it is a dwelling.

Claw Hammer

https://www.boards.ie/discussion/comment/120692512#Comment_120692512

If you did any of that without planning, you are operating illegally. If you have created a second dwelling the occupant is a tenant. If you are in an RPZ you may well be restricted with AirBnb. I hope your solicitor relative has professional indemnity insurance.

DownByTheGarden

https://www.boards.ie/discussion/comment/120704877#Comment_120704877

No im not operating illegally. It is part of my house. There is a door between them. I have checked and double checked before during and after with a real live solicitor (ie not a random person on the internet) who is well versed in these things. And the OP should also get professional advise and not take what people say on the internet as gospel.

del4646

Down by the Garden etc

,

Thanks for your knowledge as evident by your personal experience. This forum is good for a greater perspective and options.

My father's first response is to engage revelant authorities .. revenue, PTRB, Council, etc. before spending any money.

A simple solution is to let the house under rent a room relief RAR (the granny flat is not a granny flat per see but an incoprorated part of the main residence and does not fall foul of being a seperate building - according to the nice man at revenue. He stated originally such acccomondation garage/outbuildings/granny flat only had to be within the curtiladge of the existing property to qualify for RAR, hence the term.

Splitting electric meter is so that my father would not be burdening the house occoupier. But does not know how to go about this (yet).

If your see more favourable options then feel free to comment.

Regards,

Del.

Dial Hard

This house is around the corner from me and perhaps the rules have changed since 2014 (the RAR threshold has, anyway) but this lady's husband was pretty much the second most senior person in Revenue so would have been aware of all the tax implications. Seems to fly directly in the face of a lot of the advice being given here.

But as I said, perhaps the rules have changed.

As an aside, I've actually been in that side unit and it's FAB.

https://m.independent.ie/life/home-garden/homes/a-magic-mirror-to-earning-potential-rent-a-room-scheme/30296793.html

DownByTheGarden

https://www.boards.ie/discussion/comment/120708551#Comment_120708551

Much the same as what I have done except that mine wasnt a garage when we moved in, but it was before. When we moved in it was a couple of rooms that we partitioned off at the hall and knocked a patio door for it in the side wall of the house. We partitioned off the side of the garden for it too. Its effectively a garden granny flat with a door inside to the main house that is never used. But legally its just another couple of rooms in the house with kitchenette and an en-suite in them. At the moment its one granny flat with a living room and separate bedroom with an en suite. I was tinkering around with plans to put in another ensuite and another kitchenette and make it 2 granny flats as they are both very large rooms in it, but I havent got the energy and its fine now as the in laws are living in it for now.

The plan was that when we go on our travels in a few weeks the inlaws were going to move into the main house and we will rent-a-room the granny flat, but they have decided now that they want to stay in the granny flat and we will rent-a-room a couple of rooms in the main house. We will be back every few weeks for a few days anyway.

Ive been told by an estate agent I had up valuing it for a potential remortgage that what we did for less than €5k in about 3 weeks has added over €120k to the value of the house.

del4646

Die Hard/DBTG,

Thank you for that.

A bit old but the article expresses what my father is trying to achieve. Also consistent with what the man from revenue was saying.

Nice job on the conversion DBTG and great to hear you got a 120k uplift for your hard work.

All things considered I believe my father will let out the main house (14k RAR) and retain the 'granny flat' (2 bed) for himself.

DH the article makes sense as converting the 4 bed into 2 apartments would undermine the integerity of a family home.

It also means having to re-convert if it is eventually sold - possibly devaluing what is a good family home.

Keeping it simple appears to be the best option.

Many thanks to all for your comments.

Del.

Claw Hammer

https://www.boards.ie/discussion/comment/120706093#Comment_120706093

You have created 2 dwellings where there was 1. No planning. Did you bring a Section 5 application to your local counscil?

Claw Hammer

https://www.boards.ie/discussion/comment/120706616#Comment_120706616

The revenue definition of a granny flat differs from the planners which differs again from the RTB. The revenue will give tax relief for a dwelling under rent a room which the RTB will say is a separate dwelling and therefore a tenancy and not a licence and the planners will say that it is a sub division of a planning unit and requires planning permission to be legal. people do all kinds of things and sometimes nothing happens and other times there is a nightmare.

Calahonda52

https://www.boards.ie/discussion/comment/120714291#Comment_120714291

From a BER perspective, the connecting door makes it still one dwelling, with one MPRN

If the door was built up, 2 dwellings with a shared MPRN

If GF less than 50m2, then no BER required

DownByTheGarden

https://www.boards.ie/discussion/comment/120714310#Comment_120714310

Thats like someone on the internet telling me that there might really be a boogie man under my bed when my parents told me their wasnt.

I'll be sure and let the professionals who I've checked with know what you think. I wonder if they'll tell me that you are right and they are wrong.

Feel free to provide examples of where what you have posted above has happened though. I'll quote here to make sure you post examples of what you stated instead of going off and getting examples that only partially fit the situation so are not relevant. So go on. Back up your boogie man statement.

"The revenue will give tax relief for a dwelling under rent a room which the RTB will say is a separate dwelling and therefore a tenancy and not a licence and the planners will say that it is a sub division of a planning unit and requires planning permission to be legal."

Claw Hammer

So you didn't make a section 5 application then.

This if from an RTB report

8. It was evident the top floor was occupied by the Tenant as a residential unit. 9. There was a bedroom, shower/bathroom and sitting room within the top floor unit. 10. The Tenant had exclusive access to this unit, and it had its own locked door. 11. Within the unit there was a kettle, toaster, two ring hob and fresh water supply. 12. The Tenant had access to separate cooking and washing facilities on the floors below and to a roof garden above. 13. There was a dispute between the parties as to whether these areas were exclusively for the use of the Tenant or not. 14. The Tribunal finds the top floor unit was a self-contained residential unit for the purposes of the Residential Tenancies Acts and whether or not the Tenant had exclusive use of the facilities on the other floors does not alter its finding in this regard. 15. It was accepted the Landlord had no access to the top floor unit occupied by the Tenant. 16. He retained control over what he described as another part of the same building, comprising an office with living space. 17. He said he did not cook but confirmed he had access to separate kitchen facilities to that used by the Tenant and that he did not use the same kitchen facilities as the tenant. 18. Under the rent a room scheme the rented room or rooms can be a self-contained unit within the Landlord’s house. 19. Therefore, the Tribunal’s finding that the Tenant occupied a self-contained residential unit does not mean the Landlord could not let the unit under the rent a room scheme in circumstances different to those pertaining to the current tenancy. 20. The RTB remit does not extend to the Rent a Room scheme, where the Landlord and the Tenant share the same property. 21. The Tribunal finds that the Landlord and the Tenant did not share the same residential property. 

DFB-D

https://www.boards.ie/discussion/comment/120714552#Comment_120714552

Have you the link to this report please?

DownByTheGarden

https://www.boards.ie/discussion/comment/120714552#Comment_120714552

So that would be a no to you being able to backup your random musings then.

Why not post the full thin and compare it to what we are actually talking about here?

Because it doesnt fit is my guess so you selected a few points that make it suit your argument.

You are so full of waffle. You do it all the time.

Claw Hammer

https://www.boards.ie/discussion/comment/120720927#Comment_120720927

The decision is not on line so I can't post a link. Nothing to do with it being contradicted elsewhere.

DownByTheGarden

https://www.boards.ie/discussion/comment/120721328#Comment_120721328

Thats what I thought. About time you admitted it. You are just throwing mud to see what sticks to the wall for you. You're need to pretend you know something you dont over everyone else is high.

Claw Hammer

Not every decision is online. Just because something is not online doesn't mean it didn't happen. New claims to have checked everything out yet YOU didn't even make a Section 5 application. Abuse is not argument. Time you learned that.

DFB-D

https://www.boards.ie/discussion/comment/120722083#Comment_120722083

But what is your source for the text, can you post the case name/year?

Not doubting you btw, but I am interested in the case.

Claw Hammer

https://www.boards.ie/discussion/comment/120722540#Comment_120722540

I have a copy of the decision. It is not on the RTB site for some reason. Putting up the case name and year if the RTB have not put it up is potentially serious.

DFB-D

https://www.boards.ie/discussion/comment/120722595#Comment_120722595

Every tribunal case is public record, so no issue.

If not online, it is because of a tech glitch on the website which they are fixing anyway (cases pre 2016 are not currently searchable due to the archive link not working), so no harm in naming the case!

Claw Hammer

There is no point in giving the name of the case if it can't be found on a search. I don't know why it is not online and if it comes online at some point I will post the link.