No "Case V" deduction for NPPR and the Household Charge.

[Bronte]

Hopefully this time Revenue will actually publish their decision, and their reasoning, instead of letting it leak out through the minutes of a TALC meeting, which have no statutory legislative effect.

The reason they have not is that they are not sure, they are on shaky ground.

 

[Bronte]

I'm currently in dispute with the Revenue for a sum of €2.85.

.

I think you're great to pursue this.

I wish the Irish Taxation Institute/Body etc would expend more time putting pressure on revenue on this cost of the NPPR/property tax.

Oldnick I take it you actually claim it as a cost?

 

[DB74]

I wish the Irish Taxation Institute/Body etc would expend more time putting pressure on revenue on this cost of the NPPR/property tax.

Why?

In the greater scheme of things it's minor stuff. At the most it can cost a landlord roughly an extra €150 in tax, per property.

The 75% mortgage interest restriction is far more punitive and landlords would be better served attempting to get this provision reversed. A landlord who pays interest of maybe €800 per month will pay a total of €9,600 in interest in the year. 25% of this (€2,400) is disallowed so would cost the same landlord roughly €1,200 in extra tax per annum.

I know which provision I would be more concerned with sorting out.

 

[mandelbrot]

The reason they have not is that they are not sure, they are on shaky ground.

I wouldn't be so sure that that's their reason - it may be more likely that it's been overlooked or not deemed high enough priority for anyone to get around to issuing the briefing - they've probably got less staff trying to deal with more issues...

So I wouldn't conflate that delay in issuing a briefing with a fear on their part of being wrong. There's a long history of Revenue interpretations being overturned, and upheld, by the Appeal Commissioners and/or the courts, so it's nothing new, and I'm sure the people who make these decisions have fine sturdy necks by now!

Why?

In the greater scheme of things it's minor stuff. At the most it can cost a landlord roughly an extra €150 in tax, per property.

The 75% mortgage interest restriction is far more punitive and landlords would be better served attempting to get this provision reversed. A landlord who pays interest of maybe €800 per month will pay a total of €9,600 in interest in the year. 25% of this (€2,400) is disallowed so would cost the same landlord roughly €1,200 in extra tax per annum.

I know which provision I would be more concerned with sorting out.

To be fair I think they're 2 different types of issue - Bronte and others believe that the legislation doesn't actually disallow NPPR/HC deductibility, it's merely a matter of Revenue interpretation of existing statute, whereas "fixing" the interest issue would require a change in legislation.

 

[Bronte]

. At the most it can cost a landlord roughly an extra €150 in tax, per property.

I cannot fathom out this thinking at all. €150 is a lot of money to be giving the taxman. All these costs add up. The costs have gone up dramically in the last couple of years, why do you think that you cannot give away investment properties?

Mandlebrot, here's the other post where we all debated this.

[URL="http://www.askaboutmoney.com/forumdisplay.php?f=36"]Property investment and tenants' rights > Any definite answer on whether NPPR fee is tax deductible?[/URL]

 

[oldnick]

Many Thanks for your detailed reponse Mandelbrot.

I know that each of my points can be succesfully disputed, but collectively I believe that they represent a reasonable/arguable case. The lack of official advice from revenue would adds to my belief.

I didn't add one other point - the unsustainabity of imposing ever incresing charges on landlords who have to pay income tax on what may in fact be no income.
(That is, a landlords taxable profit is,say, 500 euros - pays tax of 250. Oh, and there's another 500 in property charges -pay that as well, please. For those "reluctant landlords" making no profit because of high interest it may be the last straw).

Yes, it does make me happier that you'll be writing to the Revenue. Whilst you're at it could you drop a line to the rather meek Insitute of Taxation ?
I'm flying off to Florida on Tuesday for six weeks and by the time I get back I expect you -with TMcGibney's aid, as I do see you as some sort of perverse partnership - to have secured victory in this matter.
And I wish to share some of the glory.

(ps I didn't call Mr Creighton a liar-wouldn't dare on AAM. Just said his promise of a tax briefing soon was incorrect which placed doubt on other statements. )

 

[DB74]

I cannot fathom out this thinking at all. €150 is a lot of money to be giving the taxman. All these costs add up. The costs have gone up dramically in the last couple of years, why do you think that you cannot give away investment properties?

I meant in comparison to the 75% interest restriction which is costing landlords far far more money. Yet people seem to be more annoyed about the NPPR charge not being allowed.

BTW I have it on good authority that the government had planned to reduce this 75% to 60% in the last budget but for some submission they received setting out exactly the effect it is having on landlords and their cash-flow (or lack of it)

If you want the Institute of Tax or anyone else to concentrate on one aspect of the unfairness of the tax laws in relation to landlords and letting property, then it should be the 75% restriction and not the NPPR or household charge.

 

[mandelbrot]

Yes, it does make me happier that you'll be writing to the Revenue. Whilst you're at it could you drop a line to the rather meek Insitute of Taxation ?
I'm flying off to Florida on Tuesday for six weeks and by the time I get back I expect you -with TMcGibney's aid, as I do see you as some sort of perverse partnership - to have secured victory in this matter.
And I wish to share some of the glory.

As I'm neither a member of the Institute nor a LL affected by the issue at hand, it wouldn't really be proper for me to write to the Institute!

I also think the only victory likely to be forthcoming is that an ebrief may issue, but barring a major change of heart at high level in Revenue it'll only tell you what you don't want to hear - in which case your original argument for the judge is wrecked, because you'd have claimed something you were specifically told not to.

If that's the case, any final victory would be a long way away - someone would have to take a case to Appeal or beyond in order to have Revenue's interpretation overturned. (I suggest getting umop3p!dn on the case, if he'll fight over €2.85 he'll surely fight over €150... )

You're really enjoying rubbing it in about Florida - I wonder how many more mentions of it there'll be between now and Tuesday!

 

[T McGibney]

I also think the only victory likely to be forthcoming is that an ebrief may issue, but barring a major change of heart at high level in Revenue it'll only tell you what you don't want to hear - in which case your original argument for the judge is wrecked, because you'd have claimed something you were specifically told not to.

At least that would provide certainty to accountants who have to field questions from clients on this sort of thing on a routine basis and who have been waiting for the best part of 2 years for proper clarification which they can then pass on to their clients. The present uncertainty only adds to certain people's cynicism towards Revenue and tax compliance in general, and makes everyone's job harder.

If that's the case, any final victory would be a long way away - someone would have to take a case to Appeal or beyond in order to have Revenue's interpretation overturned. (I suggest getting umop3p!dn on the case, if he'll fight over €2.85 he'll surely fight over €150... )

You may laugh, and I don't want to unnecessarily overdo the poor mouth, but €150 is a lot of money for some people these days, especially if they have no job and a property that they can neither finance nor sell.

 

[oldnick]

DB75 -The worry about various property charges is the certainty of increases.

The loan interest that many (not all) landlords are paying will gradually decrease as they pay off their loans, whereas the property charges will certainly increase for all landlords. In a few years one could pay several hundred euros on a three bedroom house -more in Dublin . That's besides NPPR. (And this is still less than in U.K.).
For someone to pay 500 -1.000 euros on each rental property -without being able to claim a penny deduction - will be a disaster.
(And I wonder how the proposed household charge for TV/computer will be regarded? It won't be based on whetehr someone actually has tv/computer. It'll be another property charge for the owner I reckon.)

But, of course, you're right to point out the hardship caused by decreasing interest relief. We should fight both causes.

 

[mandelbrot]

You may laugh, and I don't want to unnecessarily overdo the poor mouth, but €150 is a lot of money for some people these days, especially if they have no job and a property that they can neither finance nor sell.

I have no doubt that it is, I'm sure we all know people who are in that boat. You can be sure I'm not laughing, €150 is a huge amount to me!

My previous glib comment aside, the problem about something like this is that somebody (has to - edit: ) may have to incur substantial cost to go through the due process necessary to challenge a Revenue interpretation.

So it's a pyrrhic victory for the individual who achieves it, but great news for everyone else - hence it would require someone who's willing to expend more time and money than they expect to benefit (which inspired my comment about the tenacious Mr Upsidedown!)

 

[T McGibney]

My previous glib comment aside, the problem about something like this is that somebody has to incur substantial cost to go through the due process necessary to challenge a Revenue interpretation.

Last time I checked, it cost nothing to bring a case to the Appeal Commissioners, unless the individual is paying for professional representation.

I don't know how a court victory over Revenue could be seen as 'pyrrhic' as the winner of the case would presumably normally stand to be awarded their costs?

I hope it isn't normal practice for Revenue staff to warn taxpayers that challenging their decisions at Appeal or in the Courts 'will incur substantial cost'. Sounds uncomfortably reminiscent of what the Dept of Health said to the dying Brigid McCole.

 

[oldnick]

As a vaguley on topic aside I'm paying on my Florida house 5.000 dollars every year property tax. It varies from state to state to generally 1 -2% of the estimated value of the house is levied (!) on a persons property. Fortunately it's deductible against income tax if one is renting.
Nearly every western state has property tax -the latest to introduce being greece where my relations are having fits on receieving their bills.

My previous future estimate of 500-1.000 euros per property may be a low estimate

( Hopefully, i won't have a USA home in a couple of months . I'm off to sell it, as the bank won't extend my interest-only loan . So six weeks spent decorating and trying to to sell direct and avoid the crazy 6% auctioneer commission. No Caribbean cruise I regret- just joy if I get even 75% of the price I paid during exuberant times six years ago.)

 

[mandelbrot]

Last time I checked, it cost nothing to bring a case to the Appeal Commissioners, unless the individual is paying for professional representation.

Well unless they're well equipped to argue what would be a fairly technical issue (i.e. what is a rate, and what does levied mean in the context) then it's a bit of a David vs Goliath and fairly unlikely to have a happy ending without professional representation. Some people might be happy to do that, on principle, just to tie up the system, but if they've got got gainful employment / self-employment it's bound to cost them time if nothing else.

I don't know how a court victory over Revenue could be seen as 'pyrrhic' as the winner of the case would presumably normally stand to be awarded their costs?

I think you might presume too much there; I don't think they automatically get their costs, or all of their costs, even if they win - maybe they generally will, but not always.

And first they must win - I know you're taking issue with my pyrrhic victory reference, but it could just as easily be a loss, in which case they are certain to be out of pocket. (Again I'm not certain, but I'd imagine if the case was deemed frivolous the Judge could even find the plaintiff liable for Revenue's costs too? Not that I'm saying Oldnick's hypothetical case would be frivolous.)

I hope it isn't normal practice for Revenue staff to warn taxpayers that challenging their decisions at Appeal or in the Courts 'will incur substantial cost'. Sounds uncomfortably reminiscent of what the Dept of Health said to the dying Brigid McCole.

I've never heard tell of any Revenue official, in their official capacity, saying that to a taxpayer. You've probably got more experience of dealing with tax auditors than I do, have you ever heard it? (I've certainly seen instances where people sitting around a table trying to reach a settlement have said, I don't think anyone on either side wants to incur the time and cost of an appeal...etc... but that's a different type of scenario.)

Anyway, I presume that it would be the responsibility of the solicitor etc. to advise the client at the outset how things might pan out, cost-wise.

So, in light of the above I'm going to edit my previous post to say may have to instead of has to, if that's OK...

 

[mandelbrot]

Last time I checked, it cost nothing to bring a case to the Appeal Commissioners, unless the individual is paying for professional representation.

I have to say, I think it's a bit disingenuous for you to say the above, given that I'm pretty sure you'd never advise someone other than a suitably qualified professional, to represent themselves at an Appeal hearing?

AFAIK the vast majority of Appeals are heard with the taxpayer having representation, and there is no facility for them to be awarded this cost.

 

[Gekko]

Correct - Costs cannot be awarded.

I've represented clients at a couple of Appeal Hearing and although it's effectively a less formal version of a Court, it'd be nuts for a taxpayer to represent himself/herself.

Interesting and all as this discussion is, my own view is that a landlord would lose at such an appeal. The key point as others have suggested is the term "levied". My understanding is that the NPPR charge and household charge are levied centrally by legislation (i.e. they're provided for and their rates are set by legislation arising at a national level) whereas (say) rates are set by local authorities. On this basis, my own view is that they're not specifically provided for in Section 97 and they're therefore not deductible.

As an aside in relation to the purpose of the NPPR charge, surely the intention at government level is for it NOT to be deductible? I would have thought the aim is to raise €200 times X number of properties, rather than something approaching half that amount if it's tax deductible?

 

[Bronte]

Not everything that is deductable is outlined in the Act.

An ordinary person couldn't hope to appeal anything to the revenue appeal commissioners.

DB74 the reasons us landlrods get very cross about this is because we only see this as a cost of doing business and as such we think it should be deductable. I don't care what name they put on it and whether is is 'levied' 'charged' or whatever.

In relation to the 75% interest deduction, of course landlords are up in arms about this, and I had fully expected that tax write off to be reduced last budget. The only reason they didn't is that the property market would have completely collapsed if they didn't. I actually though was that the would reduce this and the market would have got flooded with all the recent first time landlords as they threw in the towel. But at least for the 75% interest deduction the law is clear on this and I wouldn't be surprised if it actually goes back up to 100%.

 

[callybags]

As an aside in relation to the purpose of the NPPR charge, surely the intention at government level is for it NOT to be deductible? I would have thought the aim is to raise €200 times X number of properties, rather than something approaching half that amount if it's tax deductible?

I think Gekko has it spot on.

If the government meant it to be tax deductible they would have set it at €400 to bring in the targeted amount.

 

[mandelbrot]

Not everything that is deductable is outlined in the Act.

Not everything that is deductable is outlined in the Act.

It actually is, if you look at Section 97, which TMcGibney has already posted up in its entirety, the categories of deductible items are set out. I'll briefly summarise the overall gist (not verbatim before anyone jumps down my throat, but the gist of the thing as is relevant for this discussion).

Section 97(2) outlines the deductions allowed to be made in computing rental income.

97(2)(a) - any rent payable by the chargeable person (eg. if the landlord is themselves a tenant who is sub-letting) - obviously NPPR/HC don't fall into this category

97(2)(b) - any sums borne by the chargeable person in respect of any rate levied by a local authority (this is the one the debate has centred on, and if one concedes that the NPPR / HC aren't rates / levied by local authority, then there is no entitlement to deduction arising out of this subsection)

97(2)(c) - the cost to the landlord of any services / goods (apart from R&M) which they are legally obliged to provide under the lease and don't receive separate reimbursement for. (bin collection?! - NPPR / HC don't fall in here anyway).

97(2)(d) - the cost of maintenance, repairs, insurance and management of the premises... being an expense of the transaction(s) under which the rents were received (this catches most of the "normal" expenses - but since the NPPR / HC don't arise as expenses of renting, they don't fall in here, and a deduction under this subsection would require a concession similar to that for term life assurance).

97(2)(e) - interest on borrowed money employed in the purchase, improvement or repair of the premises (the 75% limit is provided for elsewhere).

So, the bottom line is, if it doesn't fall into one of those categories, and in the absence of a Revenue concession to say they will treat it as if it does fall in (to 97(2)(d)), then there's no entitlement to a deduction.

 

[T McGibney]

I have to say, I think it's a bit disingenuous for you to say the above, given that I'm pretty sure you'd never advise someone other than a suitably qualified professional, to represent themselves at an Appeal hearing?

AFAIK the vast majority of Appeals are heard with the taxpayer having representation, and there is no facility for them to be awarded this cost.

Disingenuous? No. Any taxpayer can challenge a tax assessment, and the determination(s) underlying same, at an appeal hearing. If a taxpayer is doing so, of course I would recommend to them that they engage an appropriate professional to represent them and/or mount their case.

But on the other hand, if they don't have the financial resources to pay a professional, or if they can persuade a friend/colleague to represent them for free or at a nominal cost, I would never advise them not to proceed.