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NPPR hits the news as Landlord takes Revenue to Court. And Wins.

NPPR-charge-court-caseWe’re fielding a lot of questions from interested landlords about a recent high court case which has garnered a lot of coverage in the media, regarding the tax treatment of the now abolished NPPR Charge on second properties.

See an example of that coverage here

So what does all this mean to the typical landlord?  Let’s dabble in the detail!

As the years 2009-2012 are over the 4 year limit, landlords will be unable to claim the extra NPPR expenses for these years.

Overview

NPPR (Non Principal Private Residence) is a charge on second and subsequent properties that was in place from 2009-2013 (replaced by household charge, then LPT)
NPPR was not allowable as a deduction for Landlords against their tax bill.
Recent court case taken by a landlord resulted in a ruling that the NPPR should be allowed as a deduction against your tax bill. Revenue are contesting this in the Court of Appeals, so no change in treatment implemented presently.

What’s the Impact?

As the years 2009-2012 are over the 4 year limit, landlords will be unable to claim the extra NPPR expenses for these years.
Recommend that Landlords put on file their wish to claim expense for 2013 before the end of this year, but judgement from court of appeals not expected until 2018.
With the charge at 200e per property, the impact is limited for most landlords, reducing income tax bills by roughly 40e for standard rate tax payers per property and 82e per property for higher rate taxpayers.

The Ruling – in more detail

The NPPR Charge

This charge was an annual charge in respect of residential property that was not the owners only or main residence in the years 2009 to 2013. The Non Principal Private Residence charge was introduced by the Local Governments Act 2009 to go towards funding local authority services.
If you owned residential property on the liability date in any of the years 2009 to 2013, and it was not your only or main residence on that date, you were liable to pay the charge of €200. The first liability date was the 31st of July 2009. For each year from 2010 – 2013, the liability date was the 31st of March.
The NPPR charge was abolished in 2013 and was not payable in 2014 or any future year. However outstanding payments are still being collected by local authorities which are subject to sizeable interest and penalties. If no payment is made, a charge is held against the property and this will have to be settled before a transfer or sale can be completed.

The Court Case

In 2013 a Tax Appeal Commissioner found that landlord Thomas Collins could claim tax relief on the NPPR in relation to six Rental properties where the charge applied. That meant Mr Collins could claim relief on the €1,200 annual NPPR charge he faced.
Revenue appealed this decision. Revenue’s case at its core was that a national charge collected locally was distinct from a local authority rate. This would mean that the NPPR was distinguishable from rates which apply to commercial premises.
However Ms Juctice Reynolds delivered a judgement in the High Court that found that the legislation underpinning the NPPR is designed to ensure that the Revenue allowed collected funds be paid in their entirity to the local authority. Collected funds “are steered in one direction only – locally and away from central government”. Central government is “deliberately bypasses to allow local authorities to be the collectors of the generated proceeds and are empowered to prosecute defaulters”.
Revenue have now appealed this decision to the Court of Appeal. It is not clear how long it will take the Court of Appeal to make a decision on this matter

 

The Refund

The NPPR charge was €200 per relevant property per year for the years 2009 to 2013. If this appeal is overturned it could result in refunds due to thousands of landlords. After it was abolished in 2014 then Minister Phil Holgan stated that some 360,000 properties had been registered with more than €400,000,000 collected. Compliance with the charge had been positive.

 

Example 1

A Non-Resident landlord with one property that paid the 2013 NPPR charge of €200 subject to the lower rate of Income Tax and below the threshold at which they would pay USC.

example 1

Example 2

An Irish resident landlord with one property that paid the 2013 NPPR charge of €200 with PAYE Income of €28,000 subject to the lower rate of Income Tax and subject to the higher rate of USC.

 

example 2

Example 3

An Irish resident landlord with one property that paid the 2013 NPPR charge of €200 with PAYE Income of €50,000 subject to the marginal rate of Income Tax and subject to the higher rate of USC.

example 3

 

The Interest and Penalties

The question on everyone’s mind, will the Interest and penalties applied for late payment be claimable also? As mentioned earlier often substantial interest and penalties were applied to outstanding payments.
Revenue are not answering this question yet but it is highly unlikely. For instance late registration fees paid to the PRTB are not allowable expenses against Rental Income.

 

The Four Year Catch

Many landlords are asking the question, why only claim for 2013 when the charge was paid in the years 2009 to 2012 also. Unfortunately it is a case of statute. Minister Noonan confirmed that there is a “statutory limit of four years from the end of the chargeable period to which the claim relates”
In a recent case the Tax Appeals Commission ruled that refunds due to two taxpayers dating back more than four years cannot be issued even though Revenue confirmed that tax was overpaid by the taxpayers. The commission found that it did not have the power to get Revenue to make the relevant repayments.
The appeals commission stated that the wording of the relevant 2007 tax legislation stated that a claim for repayment shall not be allowed unless it is made within 4 years. The use of the word “shall” does not allow discretion in the application of this directive.

 

If you are a landlord wishing to make Rental Income Returns, contact myself, Breda.  You can find by email at rentalincome@redoak.ie, or phone 05991 29812

Tax Relief for Landlords renting to Social Housing Tenants

Tax Relief for Landlords renting to Social Housing Tenants

From the 1st of January 2016 the government have introduced a 100% interest deduction allowable in respect of Rental property which is let for a period of 3 years to tenants in receipt of certain social housing payments.

The new scheme will allow property owners who rent to tenants in receipt of Rent supplement or the housing assistance payment (HAP) to claim 100% relief on their mortgage interest as an expense against Rental Income. It will also be available to landlords who participate in the rental accommodation scheme(RAS). The new rate compares with 75% relief available up to now.

To qualify, the accommodation must be available to social housing tenants for a minimum of three years and must be registered with the Private Residential Tenancy Board (PRTB). The increased relief will be provided to the landlord retrospectively at the end of the three year period. In some cases it may be necessary for the landlord to apply for certification confirming they have met the terms of the scheme.

Below is an example of the benefit it could provide to Landlords:

Taking an average landlord who has a mortgage of €200,00 at a rate of 5% interest per year under the current guideline:

€200,000                     Mortgage Amount
@ 5%                          Annual Interest Rate
€ 10,000                      Interest Paid per year
€   7,500                      75% of Mortgage Interest allowed as an expense against Rental Income currently

With the new scheme where a landlord does qualify and the landlord receives the benefit it could really affect the landlords tax bill:

€2,500                        Addition Interest allowable
@51%                        Tax Charges-Income Tax 40%, USC 7% & PRSI 4%
€1,250                        The average landlord could expect to save

The new initiative is in place to encourage landlords to let to Social tenants who generally in high demand areas find it impossible to find landlords who will accept rent allowance or HAP.

The entitlement will work on a retrospective basis and therefore below is how it will be awarded:
2016 €10,000 @ 75%
2017 €10,000 @ 75%
2018 €10,000 @ 75%
2019 €10,000 @ 75% + 2016 €10,000 @ 25% + 2017 €10,000 @ 25% + 2018 €10,000 @ 25%

Although the measure was included in the Finance Act and has been in effect since January 1st, the Revenue have just begun implementing it.

 

Breda Lyster,

Rental Income Manager

5 Top Tips for Irish Landlords in 2016

2016 Landlord Rental Income Top Tips

Now that the Summer has finally arrived it’s time to get ahead of the September tax deadline rush.  We asked Breda, our Landlord tax returns expert for some tips to remember in 2016.

Top Tips for Irish Landlords 2016

1. Register for the PRTB

You are required to register each residential tenancy that you have with the Private Residential Tenancies Board. It currently costs €90 for each registration and you should register within one month of the tenancy commencing. This fee is fully deductible from your Rental Income as an expense – but it is especially important if you have a mortgage – Mortgage Interest (more on that later) cannot be claimed as a deduction if your PRTB is not up to date.

2. Cancel TRS on your mortgage if not living in the property

Did you know that once you leave the property it is no longer deemed your principle private residence and therefore you are no longer eligible to claim Tax relief on your mortgage?  This get’s forgotten a lot!

If you do not cancel the TRS and continue to receive this relief after the date of first rental you will be required to repay this amount to Revenue once it is discovered that you no longer reside at the property.

3. Claiming the correct percentage of Mortgage Interest as an expense.

Mortgage interest relief is an allowable expense that can be claimed against your Rental income. You can only claim 75% of your mortgage interest against your Rental Income, a common mistake that many landlords make is claiming 100 % of the mortgage interest paid. It’s so important, we’ll say it twice – you must also be registered with the PRTB to be able to claim it as an expense.

4. Hold receipts for all repairs

Many forget the importance of holding onto receipts when purchasing items for their Rental property. It may sound simple but a shoebox in the corner can save a lot of hassle in the long run. Most expenses are allowable and reduce your overall Rental Income profit. Don’t spend time worrying if it is eligible or not – let us check them for you!

Revenue can ask to see a copy of your receipts at any time and if you cannot provide them then they will amend your Rental Income return and this will lead to a liability owing to Revenue.

5. Accountancy Fees

When completing your Rental Income return we would advise that you get an expert to complete the return for you to ensure that your Rental Income return is prepared and submitted to Revenue correctly. This will also result in accurate filing and no scary surprises when Revenue do a review of your return and discover incorrect calculations which could lead to a hefty tax bill. This is also deemed a tax deductible item and is fully claimable against your Rental income.

Breda Lyster,

Rental Income Client Manager

 

Government proposals on Water Charges could impact Landlords

Water Charges Impact on Landlords

Landlords could now be considered debt collectors for Irish Water if planned proposals go ahead regarding the collection of unpaid water charges.

Last night, Cabinet approved proposals to deduct outstanding water charges from the wages or social welfare payments of non-payers. But, this also included a proposal obliging landlords to withhold deposits from renters, until proof of payment to Irish Water is provided.

Understandably, the head of the Residential Landlords Association, Fintan McNamara, has spoken out against the move, labelling it an “outrageous imposition” to put on landlords. He went on to say that realistically the deposit would have to change to a three month deposit – rather than one month – in order to make allowances for items like rent arrears.

The government, however, has stressed this is a “temporary role for landlords” until the PRTB takes over deposit protection.

As well as the deposit measure, TheJournal.ie reported this also means:

  • The liability of the water charges will transfer automatically to an owner of a property if the owner has not provided Irish Water with the necessary details for a tenant.
  • There will be an obligation in all new tenancy agreements for the person who lives there to pay water charges, other than short-term lets where the landlord can retain this liability.
  • There will be an obligation to confirm that water charges are paid before the completion of the sale of a property to include a requirement to discharge arrears of water charges.

Post Written by Nerilie Watson

Nerilie WatsonI’m the Marketing Manager at Red Oak and although I’m no tax expert, I LOVE getting money back from taxman. My job is to translate all the complicated and confusing ‘tax speak’ that is bandied about our office into something that is understandable for all us ‘average Joe soaps’.

Tips for Landlords: When Renting to Students

Getting the most out of Renting to Students.

Renting to Students Brings it own problems, so we asked Lorna Sixsmith of Garrendenny Lane Interiors for her Top Tips for Landlords renting to Students.  We asked her how to make the property:

Tips for landlords renting to students

 

“Easy to Maintain,

 Hard to Destroy & Good Value”

 

As a landlord, you are responsible for decorating the property for your tenants. When renting to students who are going to be there from late September to May each year, it does happen that student landlords find themselves repainting the house each summer. How do you make your property look presentable, clean, fresh, inviting and welcoming for students and their parents and yet, keep your expenses as low as you can? Follow our tips on how to decorate your property for student tenants:

Painting:

It may be tempting to paint the whole house with cheap magnolia paint but this just means that it will look pale and cold, plus it will be marked easily. Choose a paint that is of a reasonable quality (ask at a reputable decorating store such as Johnstone’s which supply Leylands paint) and it is of reasonable cost if you get a ten gallon bucket of mixed paint. Choose colours that have some depth to them such as mushrooms, stones or warm greys. To make it easier for repainting and cheaper in terms of purchasing the paint, choose three main colours. Paint all the bedrooms in one colour, the living room and hall in another and then choose a vinyl kitchen/bathroom paint for those rooms. Keep a note of the colours and they may just require one coat of paint each summer if repainted in the same colours.

Flooring:

Hardwood flooring is much more hygienic and easier to maintain than carpets. Don’t skimp too much on the quality of the flooring initially as cheaper laminate floors will swell and reduce if liquid is spilt on them or this may even happen with changes in temperature. Students can supply their own rugs for their rooms and will be quite happy to bring their own personalities to their rooms with some accessories. Hardwood flooring will require an occasional sand and revarnish but should last a number of years. Tile the kitchen and bathroom floors – for ease of cleaning and for being hardwearing and withstanding spillages.

Furniture:

Don’t buy cheap flat pack furniture as it just won’t withstand a house full of robust young people and their friends. For their bedrooms, you have to provide a bed, locker, desk, chair, wardrobe and shelving as a minimum. Remember the students’ parents will also be viewing the houses so do replace the mattresses reasonably regularly as there is nothing more off putting than a stained mattress. Consider purchasing good quality second hand furniture – it can be more cost effective and will last longer. If the bed and locker are of different woods, then consider getting them spray painted and then they can be wiped clean too. Don’t purchase divan beds as they are missing valuable storage space – opt for beds with space underneath where they can store their storage containers or the captain beds with drawers underneath. Ensure that the shelves you purchase are strong – you don’t want them sagging under the weight of heavy tomes or cans of beer! The same goes for the living room and kitchen furniture – buy good quality second hand furniture and it should last the test of time if it still looks fresh.

Bathroom:

Opt for a shower rather than a bathroom. Ensure that it is well sealed and there aren’t any leaks. Opt for a shower door rather than a shower curtain to ensure that water spillages are kept to a minimum. Remember that although students will be living there, it will be their parents that are most likely to be paying the rent and they will be looking for clean, presentable properties for their children so it does pay to have a property looking well for each viewing period.

About the Author

Lorna Sixsmith is one of Ireland’s leading interior design commentators and runs Garrendenny lane, Ireland’s leading website for chic and fabulous interior design products. Lorna has appeared on Ireland’s RTE 1 on “Not Enough Hours” and has been published and featured in some of Britain & Ireland’s leading publications & websites including Home & Home, Irish Country Living, Munster Interiors and the RTE Guide.  As well as newspapers including the Irish Independent, the Irish Examiner & the Sunday Times .

Irish person with foreign property

“I have a property in Lanzarote, which I rent out privately. I am not sure what I am supposed to do as regards my taxes. What can I claim? I’ve paid a lot of expenses – can these be claimed?”

This was recently asked and reflects a more recent situation in Ireland. In the last 10-15 years, a greater number of Irish purchased foreign properties as holiday homes and long term investments.

As you receive rent from the foreign property (whether cash or lodged into foreign bank account), you are subject to Irish tax on this income. You may also be taxable in the country where the property is located also, and one should seek local tax advice in that country regarding their tax obligations.

The NPPR charge is not subject to foreign properties.

You can claim expenses (same as landlord in Ireland) and you are required to keep these receipts for a period of 6 years. E.g. Plumbing, letting agent fees, management fees, some travel costs (solely relating to the property, not as holiday), interest paid on property’s mortgage.

The “rule of thumb” is that if the expense is incurred for purpose of renting out the property or managing the property, then these costs are allowable.