# PAYE worker looking for efficient way to pay tax on rental income



## agwa (12 Nov 2013)

Hi,

I've just paid rental income for 2012 via a form12 and a cheque.
It's quite a cumbersome process.

I've been advised that to be able to do this online (where calculations are done automatically) I need to set myself up as a sole trader.

Can anyone on here advise as to whether this is true, how this can be done and what, if any, pitfalls there are to such an undertaking?

I had a look revenue.ie but wasn't able to see how I could do this.

Cheers,
agwa


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## dublin66 (12 Nov 2013)

If your rental income is small (below €3,100 or so) you may be able to declare it through PAYE anytime.  This is only a suggestion as I haven't done this myself.


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## agwa (13 Nov 2013)

Thanks for the reply dublin66.  My rental income is 6K per year so it looks like I'm above the PAYE anytime limit.

Cheers,
agwa


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## Andarma (13 Nov 2013)

It's the taxable income that counts for deciding whether it's Form 11 or Form 12 that you fill in. If the taxable income is less than €3174, then you can file a Form 12 as you have done. 

If the taxable income is above this, then you use Form 11. This can be done on-line, unlike Form 12, which has to be submitted on paper. However, you will be liable to pay preliminary tax each year if you use Form 11. 

My situation is similar, and personally I want to keep using Form 12 for as long as I can. it's fairly easy to work out your liability, using your P21 as a guide.


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## agwa (13 Nov 2013)

Thanks Andarma.

I get 6K rental income, all of which I assume is taxable as I'm working full-time (41% band).
Does this mean I should be filling out a form 11?

Personally, I would see the online submission being much easier and more efficient - but I haven't tried it online yet so I can't be too presumptuous!

Cheers,
agwa


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## T McGibney (13 Nov 2013)

agwa said:


> I get 6K rental income, all of which I assume is taxable as I'm working full-time (41% band).
> Does this mean I should be filling out a form 11?



Have you no expenses or deductions against this income?


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## Andarma (13 Nov 2013)

agwa said:


> Thanks Andarma.
> 
> I get 6K rental income, all of which I assume is taxable as I'm working full-time (41% band).
> Does this mean I should be filling out a form 11?
> ...


 
You are allowed deduct expenses, such as 75% of the mortgage interest if you are registered with the PRTB, repairs, insurance, wear and tear on furniture etc. For example, in my case the total income is €4800, but the taxable income after all deducations such as those outlined above, is about €2500. This is taxable at 41%, plus the USC.


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## agwa (13 Nov 2013)

Sorry - my fault.  I'm new to this.
The taxable amount on the 6K was €2,477 of which I paid €1,263 in tax

Another question arises.. could I simply pump that €1,263 each year into improving the apartment and avoid the tax altogether?
Seems too good to be true..


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## T McGibney (13 Nov 2013)

agwa said:


> Another question arises.. could I simply pump that €1,263 each year into improving the apartment and avoid the tax altogether?
> Seems too good to be true..


No, unfortunately you can't.

If you don't really know the in's and out's of all this, you should seriously consider getting professional assistance. Fees paid for preparation of tax returns are fully tax-deductible as well so the cost shouldn't be high.


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## Andarma (13 Nov 2013)

agwa said:


> Sorry - my fault. I'm new to this.
> The taxable amount on the 6K was €2,477 of which I paid €1,263 in tax
> 
> Another question arises.. could I simply pump that €1,263 each year into improving the apartment and avoid the tax altogether?
> Seems too good to be true..


 
In your example, if you put €1263 into improving the property, then your taxable income would be 2477-1263= 1214. 

It is possible to pay no tax at all, or even have a loss which can be carried forward, if your allowable expenses exceed your income.


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## T McGibney (13 Nov 2013)

Andarma said:


> In your example, if you put €1263 into improving the property, then your taxable income would be 2477-1263= 1214.



Sorry, this is totally wrong. Only genuine repairs & maintenance are directly tax-deductible. Furniture & fittings capital additions attract capital allowances, additions to the building itself generally don't count at all for Income Tax purposes


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## Andarma (13 Nov 2013)

T McGibney said:


> Sorry, this is totally wrong. Only genuine repairs & maintenance are directly tax-deductible. Furniture & fittings capital additions attract capital allowances, additions to the building itself generally don't count at all for Income Tax purposes


 
Surely it depends what you mean by 'improving' the property? If I paint the entire place, and it costs me €2k to do it, then can't I deduct that as expense?


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## T McGibney (13 Nov 2013)

The point is that "improvements" arent allowable, merely repairs & maintenance. Sorry for being pedantic but that's the sort of thing that Revenue have a field day with when they audit unsuspecting landlords.


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## Andarma (13 Nov 2013)

T McGibney said:


> The point is that "improvements" arent allowable, merely repairs & maintenance. Sorry for being pedantic but that's the sort of thing that Revenue have a field day with when they audit unsuspecting landlords.


 
Oh I know that, I was assuming  that the OP wasn't referring to anything other than what would be officially be classed as repairs and maintenance, especially for such a relatively small amount of money.


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## Bronte (14 Nov 2013)

Andarma said:


> Oh I know that, I was assuming that the OP wasn't referring to anything other than what would be officially be classed as repairs and maintenance, especially for such a relatively small amount of money.


 
Not sure OP was referring to that as she mentioned 'each' year.  And yes painting is an expense and fully deductable.  But you can't be painting every year.


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## Bronte (14 Nov 2013)

agwa said:


> Sorry - my fault. I'm new to this.
> The taxable amount on the 6K was €2,477 of which I paid €1,263 in tax


 
Because you're new to this, any chance you'd list your expenses.  I too second the advice on getting an accountant.   Really it's money well spent.  And fully tax deductable.


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## gearoidc (14 Nov 2013)

This is from the UK Govt Revenue site-




 "Problems can arise with old assets over where is the dividing line between a repair and an improvement. 

A repair or replacement of a part of the asset using modern materials    may look like an improvement because of the greater durability, superior    qualities, etc of the new material. If the new materials are broadly    equivalent to the old materials then the cost is normally an allowable    expense.

EXAMPLE:
Kate has the windows of her offices replaced. The old windows were    singled glazed. She just wants to replace the old units. Building    standards have improved and the types of replacement windows available    from retailers have changed. The replacement windows are double-glazed.    This shows the effect of changes in technology. At one time replacing    single-glazed windows with double-glazed windows was regarded as an    improvement and therefore capital expenditure. But times have changed.    Double-glazing is now standard and is the modern equivalent.* Replacing single-glazed windows by double-glazed equivalents counts as allowable expenditure on repairs*."




Any opinions on this particular viewpoint?


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## T McGibney (14 Nov 2013)

gearoidc said:


> Any opinions on this particular viewpoint?



Yes. 

This is an Irish site.


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## gearoidc (14 Nov 2013)

T McGibney said:


> Yes.
> 
> This is an Irish site.



Hence the sharp wit.
Is there an Irish link that is similarly definitive?


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## T McGibney (14 Nov 2013)

If you Google the Revenue Income Tax FOI Manuals they should yield something similar.


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## Bronte (15 Nov 2013)

gearoidc said:


> Any opinions on this particular viewpoint?


 

Yes I have an opinion on this for what it's worth. 

I think that replacing old damaged windows with modern double glazing is a repair and replacement and not capital expenditure. I know it was a debatable point 20 years ago in Ireland, not sure if it is any more, don't recall ever reading anything definitive on it. Revenue have never made a full list of everything that could possible be a repair and replacement versus capital expenditure. But I know I charged it as an expense myself. I have no idea how one would go about buying anything other than 'standard' double glazing when replacing old and damaged windows.

And thanks for the link, should I ever have to argue the point with revenue, that link is perfect.  Accountants take note.  What do you think Tommy?  Actually I'll print out the link and put it in my file of 'what to argue' with revenue if audited.


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## T McGibney (15 Nov 2013)

What do I think? I see your logic but the bottom line is that your logic and the HMRC guidance (eminently sensible as it is) is totally at odds with all Revenue's pronouncements on the matter and I couldn't recommend to anyone that they deviate from this, unless they are prepared to fight their case the whole way up to and including the Appeal Commissioners and the Courts, which would each entail serious expense.


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