Can a Landlord deduct the LPT as an expense for tax purposes?

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oldnick

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Moderator's note: I have copied these posts from another thread to try to clear up this very specfic issue. Again, this is a factual thread. Any comments on fairness, will be deleted - Brendan


A question for accountants:-

I state in my last post that I am charging just what the tax is.

But should LLs charge more -to take into account the fact that this is a non-deductible cost ?
 
I am a small landlord - one property. My tenant has agreed to pay the LPT because (a) it is for local services (in theory anyway!) - she uses local services, not me and (b) her rent is below the going rate anyway and she know she has a good deal. She will give me a cheque for the LPT which i will forward to revenue - i don't need to charge double to allow for tax as i wont receive it as rental income.
 
It doesn't work like that.

The cheque she writes, notwithstanding that it's for the amount of the LPT would be viewed as a payment in the nature of rent - it would be the same if the ESB account / bill was in your name and she gave you a cheque to cover it every 2 months.
 
mandelbrot said:
It doesn't work like that.

The cheque she writes, notwithstanding that it's for the amount of the LPT would be viewed as a payment in the nature of rent .
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That point is highly debatable in a context where the amount of the rent is recorded in lease contract, and registered accordingly with the PRTB. I cannot see how the landlord and tenant can conspire to vary the agreed rent without altering the terms of the tenancy,and I don't see how Revenue can pretend that such a variation exists when it clearly hasn't - the tenant has merely voluntarily agreed to pay a cost attaching to thr property.

The same principle would apply if the tenant breaks something in the property and volunteers or agrees to pay the cost of repair. It would be a nonsense to count this as additional rent.
 
T McGibney said:
That point is highly debatable in a context where the amount of the rent is recorded in lease contract, and registered accordingly with the PRTB. I cannot see how the landlord and tenant can conspire to vary the agreed rent without altering the terms of the tenancy,and I don't see how Revenue can pretend that such a variation exists when it clearly hasn't - the tenant has merely voluntarily agreed to pay a cost attaching to thr property.

The same principle would apply if the tenant breaks something in the property and volunteers or agrees to pay the cost of repair. It would be a nonsense to count this as additional rent.
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If a tenant breaks something they either are obliged to pay the cost of repair/replacement - not a payment in the nature of rent, or they aren't obliged to - a payment in the nature of rent.

See para (b) of the definition of rent in the TCA:
"rent" includes-
(a) any rentcharge, fee farm rent and any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services, and
(b) any payment made by the lessee to defray the cost of work of maintenance of or repairs to the premises, not being work required by the lease to be carried out by the lessee.
 
In January, the Minister said that Landlords would be allowed deduct LPT

Investors to be allowed to file property tax as an expense

But Finance Minister Michael Noonan has confirmed the property tax may be treated differently. He said he intends to amend the new legislation to allow the tax to be treated as an expense for landlords.


"The Thornhill Group recommended that the local property tax paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates.


"This is not provided for in the Finance (Local Property Tax) Act 2012 but it is the intention of the Government to introduce such a provision on a phased basis."
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Has this been implemented?

I can't find anything on the Revenue LPT page.
 
The two accountants on here have differing views. I agree with Mandelbrot and not with Tommy. So in effect Brenda should treat the LPT cheque she got from the tenant as income.
 
While I have great respect for both Mandlebrot and Tommy and, indeed, the Minister, I would prefer to see a clarification from the Revenue.
 
Brendan Burgess said:
I would prefer to see a clarification from the Revenue.
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The Revenue were in no rush whatsoever to clarify whether or not the NPPR was or wasn't a deductible expense leading many LLs to write it off anyway only to find a few years later that this was not allowable when Revenue finally got off the fence on this matter.

Personally I will follow the IPOA on this matter rather than wait on Revenue do do their job.

Property Tax deductible from rental income
Following strong representations and extensive lobbying by the IPOA, including meeting the Thornhill Group, Ministers, TD's, Senators, and Government Departments, we finally got a break (albeit a small one!) - the new Local Property Tax, which will apply from July 2013, will be allowable as an expense against rental income. However, clarity is required from the Minister who is reported as saying that it will be "phased in". We do not accept that and are arguing strenuously that it should apply from the beginning. Members should raise this with their own local TD's and Senators.
http://www.ipoa.ie/
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Brendan Burgess said:
While I have great respect for both Mandlebrot and Tommy and, indeed, the Minister, I would prefer to see a clarification from the Revenue.
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The tax legislation is clear, Brendan. The key point is the inclusion in the LPT legislation of provisions enabling individuals local authorities to vary LPT rates upwards & downwards in future years as they see fit. This clearly fits the TCA 1997 specification that "rates levied by a local authority" are tax deductible against rental income.

Note separately that Revenue never publicly clarified their precise stance of tax deduction of NPPR & household charge, apart from in private correspondence with the Irish Tax Institute, so I wouldn't be holding my breath waiting for an opinion here either.
 
It does not become an issue till October 2014 when 2013 returns are due. That give 18 months for the issue to be resolved.
 
T McGibney said:
Note separately that Revenue never publicly clarified their precise stance of tax deduction of NPPR & household charge, apart from in private correspondence with the Irish Tax Institute, so I wouldn't be holding my breath waiting for an opinion here either.
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That private correspondance was once attached on here and I've a copy of it, I actually think it's still on AAM, in addition I was supplied it by an accountant. That letter stated that revenue would do a tax briefing on the issue and unless you know different I believe they never did clarify.

I've 'heard' that most landlords actually claim the NPPR as a legitimate expense and will wait until revenue actually make an actual 'decision' to appeal it if revenue decides to do so.

As discussed with you and others on here before I think revenue are on shaky ground on this. My own accountant told me not to claim it and another accountant told me all his clients were claiming it.
 
TRS30 It is an issue now -indeed months ago - because LLs should calculate the true cost of absorbing or passing on the cost to tenants.

The true cost for a LL on the higher tax bracket is TWICE the amount of LPT.
Therefore LLs must charge tenants twice the amount of LPT just to break even -not a cent extra income. I'm only passing on the actual LPT charge .
Therefore both I and the tenants are losing the same amount.

The sooner we know Revenue's ruling on this ,the better. If they come after me for deducting it, I'll quote Tommy McGibney.....
 
oldnick said:
TRS30 It is an issue now -indeed months ago - because LLs should calculate the true cost of absorbing or passing on the cost to tenants.

The true cost for a LL on the higher tax bracket is TWICE the amount of LPT.
Therefore LLs must charge tenants twice the amount of LPT just to break even -not a cent extra income. I'm only passing on the actual LPT charge .
Therefore both I and the tenants are losing the same amount.

The sooner we know Revenue's ruling on this ,the better. If they come after me for deducting it, I'll quote Tommy McGibney.....
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If you are able to be deduct it then it only costs you half the amount. Assuming you are making a profit.

For the half amount I have to pay this year I will absorb it and see about 2014 payment when guidance becomes clear.
 
TRS30 said:
If you are able to be deduct it then it only costs you half the amount. Assuming you are making a profit.
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I understand what you mean, but it could be a misleading way of looking at it. Do repairs only cost you half the amount as well?

But maybe, you only get half the rent?

It's better to look at the rental unit as a profit centre. Put in the income. Deduct the costs and work out the profit or loss. Then calculate the tax separately.
 
TRS30 said:
It does not become an issue till October 2014 when 2013 returns are due. That give 18 months for the issue to be resolved.
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Note also that self-assessment landlords should now be budgeting for their 2013 Preliminary Tax liability, the due date for payment of which is 31 October next. Budgeting is a nonsense in the absence of clarity surrounding deduction rules.
 
Brendan Burgess said:
I understand what you mean, but it could be a misleading way of looking at it. Do repairs only cost you half the amount as well?

But maybe, you only get half the rent?

It's better to look at the rental unit as a profit centre. Put in the income. Deduct the costs and work out the profit or loss. Then calculate the tax separately.
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In a nutshell, yes.

Don't follow about the rent I'm afraid.

I look at the LPT (until clarified) the same as my Management Fee. I pay it and then deduct it as an expense so it reduces my tax bill so only costs me 48% of what I paid.
 
oldnick said:
The sooner we know Revenue's ruling on this ,the better. If they come after me for deducting it, I'll quote Tommy McGibney.....
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Thanks ;)

On a more serious note, everything and anything I say on AAM and/or elsewhere on the web is not intended as advice and should never be construed as such.

Just in case, like.
 
T McGibney said:
Thanks ;)

On a more serious note, everything and anything I say on AAM and/or elsewhere on the web is not intended as advice and should never be construed as such.

Just in case, like.
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The money was just resting in my account ;)
 
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