# Rental income tax assessment, du=ifferent treatment of capital allowances this year.



## Andarma (5 Nov 2013)

I have rental income that I declare each year on a Form 12 (income is less than €3174). I received my notice of assessment for 2012 yesterday, and it differs from previous years with regard to how capital allowances are shown. They are shown as a deduction (in the same box as flat rate expenses and permanent health insurance). In previous years, they have been deducted from the rental income and not shown separately. 

To illustrate with sample figures, in 2012 the rental income (minus allowable expenses such as interest, repairs, other) was €2800, and this is shown in the 'income' box. Capital allowances of €500 are then shown in the 'deductions' box. In previous years, these figures would simply have been shown as income of €2300 in the 'income' box (ie 2800-500), with nothing in the 'deductions' box. The net effect is obviously the same no matter which method is used.

Any one know why it is beong done this way? My worry is that in future years, the rental income before capital allowances are deducted will be greater than €3174, and push me into self-assessment Form 11 territory, even though the actual taxable income when capital allowances are taken into account might be less than €3174. 

I also had to pay USC on the rental income for the first time, which I had been vaguely aware was happening, but I had forgotten about.


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## Clarkey (5 Nov 2013)

Andarma said:


> I have rental income that I declare each year on a Form 12 (income is less than €3174). I received my notice of assessment for 2012 yesterday, and it differs from previous years with regard to how capital allowances are shown. They are shown as a deduction (in the same box as flat rate expenses and permanent health insurance). In previous years, they have been deducted from the rental income and not shown separately.
> 
> To illustrate with sample figures, in 2012 the rental income (minus allowable expenses such as interest, repairs, other) was €2800, and this is shown in the 'income' box. Capital allowances of €500 are then shown in the 'deductions' box. In previous years, these figures would simply have been shown as income of €2300 in the 'income' box (ie 2800-500), with nothing in the 'deductions' box. The net effect is obviously the same no matter which method is used.
> 
> ...



The tax office has issued a notice of assessment this year which differs from the P21s you would have received in previous years. Are you certain you are under the €3,174 limit?


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## Andarma (5 Nov 2013)

Thanks for the reply. The actual rental income before any deductions for interest etc. is €4800 (and has been this amount for a number of years). The taxable income in 2012, when all deductions are taken into account is €2300. I was always of the impression that this taxable figure was what determined whether you filled in Form 11 or 12. 

I don't have the papers in front of me, but I think you're right in that this year I got a notice of assessment, rather than a P21. The underpayment is being dealt with through tax credits though as usual.


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## Clarkey (5 Nov 2013)

Andarma said:


> Thanks for the reply. The actual rental income before any deductions for interest etc. is €4800 (and has been this amount for a number of years). The taxable income in 2012, when all deductions are taken into account is €2300. I was always of the impression that this taxable figure was what determined whether you filled in Form 11 or 12.
> 
> I don't have the papers in front of me, but I think you're right in that this year I got a notice of assessment, rather than a P21. The underpayment is being dealt with through tax credits though as usual.



Nearly sure the €3,174 limit refers to income after expenses but before capital allowances. Would this bring you above the limit?


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## Andarma (5 Nov 2013)

The income after expenses but before capital allowances is €2800, so well within the €3174 limit. I find it strange that this year's process is different, despite there not being major differences from previous years. 

My husband's assessment was done the same way (we split the rental income and expenses 50/50 and each declare on separate Form 12s; we are separately assessed for tax).

I wonder if the USC has a bearing on this?


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## Andarma (5 Nov 2013)

Ok, so I've looked at this again, it is a P21 that I received. On the USC part, I have been charged the USC on the rental income after expenses but before capital allowances are deducted. I don't understand why it is done this way, surely capital allowances are an expense too and shouldn't be subject to the USC?


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## mandelbrot (5 Nov 2013)

http://www.askaboutmoney.com/showthread.php?t=167255


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## Andarma (6 Nov 2013)

Thanks for that - it clears up the USC part. Do you know if the €3174 limit for Form 12 is before or after capital allowances? I always thought it was after, but this different way of showing  the capital allowances on my P21 leaads to believe otherwise now. If that's the case, then I'll probably exceed the limit next year (we've had very few expenses associated with the rental property this year compared with previous years).


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## mandelbrot (6 Nov 2013)

Andarma said:


> Thanks for that - it clears up the USC part. Do you know if the €3174 limit for Form 12 is before or after capital allowances? I always thought it was after, but this different way of showing the capital allowances on my P21 leaads to believe otherwise now. If that's the case, then I'll probably exceed the limit next year (we've had very few expenses associated with the rental property this year compared with previous years).


 
3,174 refers to net assessable income -so it's the amount after capital allowances.


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