Are landlords really the root of all evil

[Bronte]

There is also a separate argument that LPT is a form of "rates levied by a public authority." The fact that local councils now enjoy the power to set the LPT rate for a particular area within a certain band, and also enjoy the proceeds thereof, strengthens the argument that LPT is allowable on this basis.

That's very good Tommy, another to add to my justification. See sometimes AAM is worth it just for gems like this.

(as it's the time of year and tax returns were on my mind, I was looking back to see this LPT thing, and my goodness all the different dates is a minefield. Very confusing)

 

[T McGibney]

Well who else can make the final determination? I'm not saying a taxpayer would have to initiate proceedings to seek a declaratory order.

We are certainly both entitled to our opinions but I would be very surprised if the High Court interpreted the legislation in line with your views.

At the end of the day, should an individual take the risk that Revenue's interpretation in this regard is wrong? Is it worth the risk given the potential downside?

It's rare that a disagreement over the interpretation of a tax issue goes all the way to the High Court. Most are settled informally, a tiny minority to go to the Appeal Commissioners, a few will go further to the Circuit Court and so on.

Which downside do you mean - the risk of underpaying or the risk of overpaying?

 

[Sarenco]

There is no realistic chance, in my opinion, that Revenue would agree to a different interpretation on an informal basis when they have taken such a public position on this issue. Similarly, the Revenue would be highly likely to appeal any decision of the Appeals Commisioners or Circuit Court that arrived at a different interpretation.

The downside risks would be the costs of unsuccessfully arguing this case and the potential interest and penalties associated with having been determined to have under paid any income tax due.

 

[T McGibney]

There is no realistic chance, in my opinion, that Revenue would agree to a different interpretation on an informal basis when they have taken such a public position on this issue. Similarly, the Revenue would be highly likely to appeal any decision of the Appeals Commisioners or Circuit Court that arrived at a different interpretation.

No realistic chance? So you're saying Revenue would definitely force a resort to appeal in all such situations, and would definitely appeal to the courts, every case it loses at Appeal? I respectfully disagree on both counts.

The downside risks would be the costs of unsuccessfully arguing this case and the potential interest and penalties associated with having been determined to have under paid any income tax due.

The additional cost of arguing a case is hardly likely to be outrageous. The key arguments could literally fit on the back of an envelope.

I'm not at all sure that penalties would be an issue in a case of genuine technical disagreement. Are you?

And interest is hardly going to amount to much of a hill of beans in any normal case of this kind.

 

[Sarenco]

No, I'm not saying Revenue would definitely do anything.

What I am saying is that, in my opinion, there is no realistic chance that Revenue would informally accept an interpretation that is contrary to their public position and it is highly likely, again in my opinion, that Revenue would exercise any avenue of appeal available to it, up to and including the High Court, in the (unlikely) event that a decision on this point goes against it.

The additional costs of unsuccessfully arguing this case may not be outrageous but they would certainly be material and would vastly out way any possible benefit from claiming LPT as a deduction.

I'm not so sure that you could argue that this is a case of genuine technical disagreement. Revenue's position is absolutely clear on this point. You may disagree with their position but there is no ambiguity on where they stand (which I happen to agree conforms with the legislation).

I certainly take the point that any interest is unlikely to amount to a significant figure.

 

[T McGibney]

What I am saying is that, in my opinion, there is no realistic chance that Revenue would informally accept an interpretation that is contrary to their public position and it is highly likely, again in my opinion, that Revenue would exercise any avenue of appeal available to it, up to and including the High Court, in the (unlikely) event that a decision on this point goes against it.

That's merely a repetition of what you said earlier. It puzzles me and I'm interested in finding what, if any, basis you have for it. It's very rarely that we see Revenue going all the way to the High Court on run-of-the-mill technical disagreement issues that they lose at appeal - and they do lose some big ones, the case that effectively outlawed grossing up of disallowed directors' travel expenses is a pertinent example.

So why do you think they would abandon this reticence now and go all the way incurring huge expense on an issue that's not even covered by legislation?

t.

The additional costs of unsuccessfully arguing this case may not be outrageous but they would certainly be material and would vastly out way any possible benefit from claiming LPT as a deduction.

Material? How? Most of the grounds one would cite are included in this discussion. How much does a letter cost?

I'm not so sure that you could argue that this is a case of genuine technical disagreement. Revenue's position is absolutely clear on this point. You may disagree with their position but there is no ambiguity on where they stand (which I happen to agree conforms with the legislation).

So you're saying that Revenue pronouncements in eBriefs etc now have the same status as legislation? It's always worth remembering that Revenue don't make the law, they implement it, and they are never judge, jury and executioner.

 

[Sarenco]

Yes, I repeated my opinions as expressed in an earlier post because you asked if I was saying something else.

I am of the opinion that Revenue would exercise every avenue of appeal available to it, up to and including the High Court, in the unlikely event that a decision goes against them on this point primarily because:- (a) they would be very confident of winning; and (b) the aggregate loss to the exchequer if their interpretation was found to be incorrect would be significant.

Revenue would point out that the scope of what is deductible for income tax purposes is already specified in the legislation. The fact that you have a different (and in my view incorrect) interpretation of that legislation is a different issue.

In response to a parliamentary question on 5 October 2014, the Minister for Finance stated that the reference to local authority rates in section 97(2) of the Taxes Consolidation Act 1997 is, following the removal of rates on domestic property in the late 1970's, a reference only to rates on commercial property payable to local authorities in accordance with the relevant local government legislation. Notwithstanding that local authorities can, with effect from 2015, vary the rate of LPT in accordance with section 20 of the LPT legislation, LPT is not a rate levied by a local authority and is, therefore, not deductible from gross rents under section 97(2).

The Minister went on to state that the Government has agreed in principle to accept the recommendation of the Thornhill Report that the local property tax should be a deductible expense in calculating a landlord's taxable rental income. However, as you know, the Government has yet to implement this recommendation.

The time and costs involved with any court process are always material - it is a lot more involved than simply writing a letter.

No, I am not saying that Revenue pronouncements have the same status as legislation. Revenue certainly do not make the law and cannot conclusively interpret the law - I have never suggested otherwise.

 

[T McGibney]

Court process? All very dramatic. That's not how tax administration works generally.

 

[Sarenco]

What's dramatic about it? You are proposing to challenge Revenue's (very public and entirely plausible) interpretation of a piece of legislation that would have a significant knock-on effect for a large number of taxpayers - how do you expect them to react?

This is hardly a simple matter of tax administration.

 

[T McGibney]

This is boring. I've worked for almost all of the last 27 years in tax and haven't seen the inside of a courtroom yet. That's all I have to say.

 

[Sarenco]

Charming.

I simply expressed my opinion as to how I thought Revenue would be likely to react to a challenge to their interpretation of the legislation on this point and how the Court would be likely to interpret the legislation. You don't have to agree with me but there's really no need to be rude about it.

 

[T McGibney]

I haven't been rude. This has just got boring. I'm saying no more.

 

[Sarenco]

Well, declaring that you don't want to participate in a conversation any more because you find it boring is rude in my book. You may, of course, take a different view.

 

[Sarenco]

Sorry Bronte I missed your earlier post.

There's no doubt that Revenue can change their interpretation of the law over time - I just wouldn't expect them to do so on this point.

Yes, I am obviously aware that there are avenues of appeal from Revenue decisions that do not involve going directly to the High Court.

Maybe you're right and the Appeals Commissioners will agree with your interpretation and the Revenue would leave it at that. I just don't think that's very likely.

Yes, I recall the previous discussion as to whether the NPPR constituted rates. I didn't agree that it did but there was certainly some uncertainty around the Revenue's position on the point. There is no similar uncertainty regarding Revenue's position regarding the LPT.

It also doesn't help your argument that the Minister for Finance has advised the Dail that LPT is not a deductible expense and no legislation has been passed to change this position. In these circumstances, it is very difficult to maintain an argument that the Oireachtas ever intended LPT to be a deductible expense.

Ultimately, I take the approach that discretion is the better part of valour in all my dealings with Revenue. You are obviously free to take a different approach.

 

[Dermot]

Dermot what's the bit about a BTL panel of solicitor for buying. Is that a new requirement?

When purchasing a property as an investor you will as normal hire your own solicitor but if you are drawing down a mortgage the Bank will insist that you pay them a fee (not by any means cut price) to employ a solicitor drawn from their own panel of solicitors (investor though paying not given much choice).
If you were buying the same house with the same amount of a mortgage and you using the same solicitor but going to use it as your PPR the bank will not require you to pay for a second solicitor. Bizarre?.
It is a requirement for the past 4 or 5 years at least.
I understand that it is a Law Society diktat because of Insurance issues and the Banks are quite happy to let it run and effectively enforcing it.
From my point of view it seems that the Law Society does not have enough confidence in enough of their members to do their job correctly without incurring big claims.
It normally does not take two qualified carpenters in the real world to hang a standard door.

 

[Bronte]

That's very odd Dermot, havenn't heard of that at all. As it happens it was the way it used to be many moons ago. There were 3 solicitors if I remember for our first home. Ours, the vendors and the one for the bank.

I think it was reduced due to costs and I imagine the step backwards is because of the abuse by some solicitors of the undertakings not being reliable. (Undertaking to make sure the legals are ok and that the mortgage is properly attached to the property)

Can you get around it I wonder by just hiring a panal solicitor as your solicitor.

I'm not understanding the insurance issues?

 

[Bronte]

.
There's no doubt that Revenue can change their interpretation of the law over time - I just wouldn't expect them to do so on this point.

Maybe you're right and the Appeals Commissioners will agree with your interpretation and the Revenue would leave it at that. I just don't think that's very likely.

It also doesn't help your argument that the Minister for Finance has advised the Dail that LPT is not a deductible expense and no legislation has been passed to change this position. In these circumstances, it is very difficult to maintain an argument that the Oireachtas ever intended LPT to be a deductible expense.

Ultimately, I take the approach that discretion is the better part of valour in all my dealings with Revenue. You are obviously free to take a different approach.

I think it highly unlikely revenue would even let it go to the Appeals Commissioner, they are practical people and they might just capitulate with one thick landlord, ie me Bronte, as I'm willing to go all the way. Noonan can state whatever he likes in the Dail, doesn't mean he's right legally. Anyway thanks to accountant Tommy McGibney I have another argument in my favour (the fact LPT can be reduced by each local authority and is to be used in the local area ie rates and rates have always been allowable)

 

[Sarenco]

Fair enough - I can see you're not for turning!

 

[T McGibney]

Well, declaring that you don't want to participate in a conversation any more because you find it boring is rude in my book. You may, of course, take a different view.

Perhaps it is, but still not half as rude as hectoring someone to continue in a conversation against their wishes.

 

[Sarenco]

I'm not hectoring anybody! If you don't want to continue a discussion that's obviously fine.