Can mortgage interest be offset against foreign rental income?

True.

Are you aware of any cases that made it to appeal on this point? I've only seen one and it was settled. I've come across quite a few advisors (Big Four included) who've adopted "Case III/single source" treatment, with some caveating their advice and some not bothering at all.
Look at S.70 re Case III, and S.75 re Case V.

They both state explicitly that income or profits "shall, for the purposes of ascertaining liability to income tax, be deemed to issue from a single source".

In the absence of an express provision allowing for a deduction of losses, it is only the profits or gains that are to be aggregated. I don't see how one could logically argue otherwise, based on the wording of S.70.

For the purposes of Case V, the computational rule to allow for deducting losses is provided for at S.97(1)(b) & (c) - "the amount of the profits or gains arising in any year shall be the aggregate of the surpluses... reduced by the deficiencies..."

There is no such provision to allow for Case III losses.

In fact if you take what you've suggested to its logical conclusion, a loss on a foreign rental property would arguably qualify both for a current year Case III deduction and for carry forward against future Case III rental profits.
 
They informed me that I owed tax for the previous 4 years and gave me the right of appeal.

I appealed and re-sumbitted my accounts for these 4 years displaying the foreign property on a seperate sheet and apportioned the relevant top ups correctly to be offset against it.

I lost the appeal..

Can you outline the wording of the letter that says you have the right of appeal.

Also was their guidance on the appeal process (something I'm not familar with).
 
It was a PAYE balancing statement and it stated:

"If you disagree with this statement, you may appeal it to the Appeal Commissioners by giving notice in writing to me within 30 days of the date of this statement".
 
So then you wrote back saying you wished to appeal (putting back in your grounds of complaint)but did this constitute an appeal or a notice you were going to appeal, sounds so far like the latter?

Did you wrote to the Appeal Commissioners or receive correspondance from them? This must be some kind of formal process.
 
You don't have to write to the Appeal Commissioners (at the start). You send a letter appealing the assessment to your district and then they kick off the appeal process.

It sounds very light to be going to the ACs on.
 
This is exactly why the OP needs a professional - starting a tax appeal without an advisor is akin to getting into a civil action at District Court without a solicitor.

The fact that after a couple of rounds of correspondence it's not even clear whether or not they have actually notified an appeal to the Inspector illustrates exactly the kind of problems you face when getting into this sort of thing without understanding the system or the process.
 
You don't have to write to the Appeal Commissioners (at the start). You send a letter appealing the assessment to your district and then they kick off the appeal process.

It sounds very light to be going to the ACs on.


I've looked up the Appeal Commissioners role and I take it from your post here what you are saying is that Capricorn if far off this route of Appeal Commissioners yet as he should exhaust the case with revenue itself before going this far. Plus going to the AC's is according to you more on a point of law/or something more seroius and according to Manlebrot to go this far you should really hire a professional.
 
This is exactly why the OP needs a professional - starting a tax appeal without an advisor is akin to getting into a civil action at District Court without a solicitor.

The fact that after a couple of rounds of correspondence it's not even clear whether or not they have actually notified an appeal to the Inspector illustrates exactly the kind of problems you face when getting into this sort of thing without understanding the system or the process.

Not saying I'm disagreeing with you but in relation to the first point we have had people on AAM who have managed to go to court without legal representions, we had one such case recently in relation to a judgement mortgage. Even though you are advising the hiring of a professional it doesn't say on the revenue website that one must.

In relation to our second point, it appears to me the appeals process should have been pointed out to Capricron and indeed that is why he's come to AAM so in an effort to help him I've found the appeals process on their website under the complaints section.
 
What happens if I do not agree with my notice of assessment?
If the assessment is in accordance with your tax return and you have made a correct return then you have no grounds to appeal it. If the assessment is not in accordance with your tax return and you disagree with the assessment, you may appeal against it in writing to your local Revenue office, within 30 days after the date of the notice of assessment.



When making your appeal you must:
  • identify the specific matter with which you do not agree,
  • specify in detail the grounds of your appeal, and
  • pay, or have already paid, the amount of tax not in dispute.
If you and your local Revenue office fail to resolve the issue which you are appealing, you have the right to have your appeal heard by the Appeal Commissioners and, if necessary, by the courts.

CS4 document which outlines the 'chain' of appeal

http://www.revenue.ie/en/about/custservice/cs4.pdf

and inside that document is this which helpfully tells us that the Appeals commissioners are a separate body to revenue


http://www.revenue.ie/en/about/custservice/how-complain-revenue.html


Capricorn could you confirm that you are at Stage 1 of what is outlined in the CS4 document, that you've 'complained' the finding and they've written to you rejecting your complaint but you hve not asked for Stage 2 process which is the local review process?

 
Not to put too fine a point on it, the issue here seems to be an incompetent Revenue official who doesn't know his/her backside from his/her elbow.

His/her superiors will be embarrassed (and rightly so) when sense breaks out further up the chain.

I'd be shocked if this went anywhere near an Appeal Hearing.
 
Not to put too fine a point on it, the issue here seems to be an incompetent Revenue official who doesn't know his/her backside from his/her elbow.

.

Apart from the incompetent revenue official what kind of faith is one to have in Revenue itself if they are able to scare the living daylights out of ordinary taxpayers (I refer not only to Capricorn but to all the people viewing this thread who have mortgaged Irish property to fund a foreign property).

Also what is shocking is that the next appeals step has not been pointed out to Capricorn, and he's so desparate he's trying to sell the property and he could be out thousands. Civil servanats should not be able to make up their own interpretations of revenue practicies and procedures and send out documents that are factually incorrect. It's far to serious.
 
I wrote within the 30 day timeframe stating that I wished to appeal the decision to the Appeal commissioners and stated my reasons.
I received a letter back acknowledging receipt of "my recent letter" and still not allowing it.
I then wrote back quoting the relevant details from the tax manual and got a further reply as indicated earlier in this post.
None of the letters claimed to be an appeal decision, nor was I advised of the further process.
 
Rejection letter 1

I received a letter back acknowledging receipt of "my recent letter" and still not allowing it.

Rejection letter 2

I then wrote back quoting the relevant details from the tax manual and got a further reply as indicated earlier in this post.

You posted up to us the contents of letter 2? Is letter 1 the same text and is it signed by the same person - can you tell?

My understanding is that you are only still corresponding with the original revenue official (you said the signature said Inspector of Taxes - but I'm presuming this is how all officials sign letters).

Can you also confirm that revenue has not in either of those letters acknowled the fact that you 'requested' to appeal to the Appeal Commissioners. You mentionned that they are still not allowing it, I presume you mean here the tax deduction and that they have not written to you disallowing an appeal. Did they at all mention the fact that you asked for an appeal? Any chance you could post up in chronological order all letters?

I recommend a registered letter to them asking for the local review of your case and maybe that will trigger someone higher up dealing with it.
 
Not saying I'm disagreeing with you but in relation to the first point we have had people on AAM who have managed to go to court without legal representions, we had one such case recently in relation to a judgement mortgage. Even though you are advising the hiring of a professional it doesn't say on the revenue website that one must.
It doesn't say it because of course you don't have to - just like you don't *have to* go to the dentist if you need dental work done, but I'd rather not DIY that! I know experienced accountants who would feel ill equipped to head into that arena, no matter how simple the case.

In relation to our second point, it appears to me the appeals process should have been pointed out to Capricron and indeed that is why he's come to AAM so in an effort to help him I've found the appeals process on their website under the complaints section.
The appeals process was pointed out to Capricorn in the first instance, as their Balancing Statement informed them that they could Appeal by giving Notice in writing within 30 days.

The real problem here started subsequent to letter 1 by Capricorn, and as I've said previously and Bateman has said more recently, once this escalates to a certain point common sense / competence will break out.

The question is what is the fastest and easiest route to make that happen. Registered letters forcing internal reviews might not be the answer, as this fires up the bureaucratic machinery further and requires lots of box-ticking etc and the involvement of a succession of line managers (up to 4 depending on what grade the person writing these silly letters is)... whereas in fact what you need is someone who knows what they're at to simply spend ten minutes looking at the case and saying "For God's sake what are you playing at, of course they're entitled to the deduction".
 
TBH I’m a bit bamboozled by the whole thing.

Following submission of my tax returns last year, I received 4 balancing statements 2008 -2011 stating an amount of underpaid tax for each of these years. The reason stated was that Irish Rental income cannot be offset against Foreign rental income. I was given the right to appeal to the Appeal Commissioners within 30 days.

I have owned this foreign property since 2004 displayed all my properties on the same spreadsheet. I didn’t break out the relevant top ups and offset them against the foreign property. I offset them against the Irish properties that were topped up. I didn’t realise that I had to do this. However, at the end of each tax return I put and asterisk and wrote “Property A and Property B both topped up to finance Foreign property C”. I flagged this from day one and at no time was I told that this was not in order. I got the benefit of this for the first few years, but it did not amount to very much. During these years Revenue were able to advise me of certain other issues i.e that I couldn’t claim mileage and postage, but never mentioned the apportionment of top ups for the foreign rental income.

Within 30 days I lodged my appeal. I obtained a breakdown from the bank and re-did my accounts from 2008 – 2011 apportioning the top ups correctly and displaying irish and foreign properties on different sheets.

I received a reply from an Inspector of Taxes stating that I was entitled to a deduction on my rental income in respect of the interest paid on both of the top up mortgages, I took out on my irish investment properties. The letter said that unfortunately, the additional interest paid is only an allowable deduction against the income received from each of the properties in question.
At this stage I was confused, I wasn’t sure if it was the case that I was not being allowed “to change horses in mid- stream” or if it was not allowable to offset top ups against foreign property that they were used to finance.

I logged a call to Revenue and an official phoned me back. I asked him the exact reason for my not being allowed to re-submit my accounts – was it that irish top ups are not allowed to be offset against foreign property or was is that I was not being allowed to change horses in mid-stream? He said he didn’t know. He reckoned that I should be allowed to claim against the foreign property and seemed to think that it was a matter of serious concern that the mistake was not picked up by Revenue until now. He advised me to write to the same Inspector of Taxes again.
I did this and quoted the relevant paragraphs from the Tax manual which state that “it is not necessary that the security offered should be the premises that is let for the interest to be deductible”. I also referred to the fact that I did not apportion the mortgage interest correctly in my previous tax returns but that I had flagged the top ups. I said that if this had been pointed out to me I would have corrected it.

The Inspector of Taxes replied. Suddenly, all mention of the benefit I received for the first few years was no longer mentioned and the issue became that “Interest is not deductible where the loan is obtained on the security of the premises, but is used for purposes other than the purchase, improvement or repair of that premises (as mentioned in my previous post).
 
TBH I’m a bit bamboozled by the whole thing.

Following submission of my tax returns last year, I received 4 balancing statements 2008 -2011 stating an amount of underpaid tax for each of these years. The reason stated was that Irish Rental income cannot be offset against Foreign rental income. I was given the right to appeal to the Appeal Commissioners within 30 days.

I have owned this foreign property since 2004 displayed all my properties on the same spreadsheet. I didn’t break out the relevant top ups and offset them against the foreign property. I offset them against the Irish properties that were topped up. I didn’t realise that I had to do this. However, at the end of each tax return I put and asterisk and wrote “Property A and Property B both topped up to finance Foreign property C”. I flagged this from day one and at no time was I told that this was not in order. I got the benefit of this for the first few years, but it did not amount to very much. During these years Revenue were able to advise me of certain other issues i.e that I couldn’t claim mileage and postage, but never mentioned the apportionment of top ups for the foreign rental income.

Within 30 days I lodged my appeal. I obtained a breakdown from the bank and re-did my accounts from 2008 – 2011 apportioning the top ups correctly and displaying irish and foreign properties on different sheets.

I received a reply from an Inspector of Taxes stating that I was entitled to a deduction on my rental income in respect of the interest paid on both of the top up mortgages, I took out on my irish investment properties. The letter said that unfortunately, the additional interest paid is only an allowable deduction against the income received from each of the properties in question.
At this stage I was confused, I wasn’t sure if it was the case that I was not being allowed “to change horses in mid- stream” or if it was not allowable to offset top ups against foreign property that they were used to finance.

I logged a call to Revenue and an official phoned me back. I asked him the exact reason for my not being allowed to re-submit my accounts – was it that irish top ups are not allowed to be offset against foreign property or was is that I was not being allowed to change horses in mid-stream? He said he didn’t know. He reckoned that I should be allowed to claim against the foreign property and seemed to think that it was a matter of serious concern that the mistake was not picked up by Revenue until now. He advised me to write to the same Inspector of Taxes again.
I did this and quoted the relevant paragraphs from the Tax manual which state that “it is not necessary that the security offered should be the premises that is let for the interest to be deductible”. I also referred to the fact that I did not apportion the mortgage interest correctly in my previous tax returns but that I had flagged the top ups. I said that if this had been pointed out to me I would have corrected it.

The Inspector of Taxes replied. Suddenly, all mention of the benefit I received for the first few years was no longer mentioned and the issue became that “Interest is not deductible where the loan is obtained on the security of the premises, but is used for purposes other than the purchase, improvement or repair of that premises (as mentioned in my previous post).

Hold on, what exactly do you send in to Revenue every year? Do you complete a tax return form, and is it a Form 11 or Form 12?
 
I submit a Form 12 accompanied by a spreadsheet detailing my rental income

Your biggest problem is that you're probably dealing with Revenue staff in the PAYE section. In my experience, that's where you get the craziest advice and decisions.

My advice to any PAYE taxpayer would be not to believe the Lord's prayer from the Revenue staff that they're forced to deal with.
 
I submit a Form 12 accompanied by a spreadsheet detailing my rental income

OK so when you completed your Forms 12 for the years 2008 -2011 did you complete the panel for Foreign Rental Income (it's panel 28 on the 2011 Form)?

It doesn't really matter what you put on the spreadsheets attached to the Form 12 - if you've declared X as Irish rental income and Y as your net foreign Rental income then that's what goes on your balancing statement. This is how self-assessment works.

I'm bowing out of this thread now anyway as I've given you as much info as I can and it's just wrecking my head at this stage.
 
On the form 12 beside Irish Rental Income and Foreign Rental Income, I didn't write in any amount. I wrote see attached spreadsheet (which contained all the details).

Anyway, thanks for all your advice, it has been most helpful. I'll take this on to the next step.

'll let you know the outcome.
 
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