# Can a Landlord deduct the LPT as an expense for tax purposes?



## oldnick (7 Apr 2013)

_ Moderator's note: I have copied these posts from another thread to try to clear up this very specfic issue. Again, this is a factual thread. Any comments on fairness, will be deleted - Brendan _


A question for accountants:-

I state in my last post that I am charging just what the tax is.

But should LLs charge *more* -to take into account the fact that this is a non-deductible cost ?


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## BudgetBrenda (10 Apr 2013)

I am a small landlord - one property. My tenant has agreed to pay the LPT because (a) it is for local services (in theory anyway!) - she uses local services, not me and (b) her rent is below the going rate anyway and she know she has a good deal. She will give me a cheque for the LPT which i will forward to revenue - i don't need to charge double to allow for tax as i wont receive it as rental income.


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## mandelbrot (10 Apr 2013)

It doesn't work like that.

The cheque she writes, notwithstanding that it's for the amount of the LPT would be viewed as a payment in the nature of rent - it would be the same if the ESB account / bill was in your name and she gave you a cheque to cover it every 2 months.


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## T McGibney (11 Apr 2013)

mandelbrot said:


> It doesn't work like that.
> 
> The cheque she writes, notwithstanding that it's for the amount of the LPT would be viewed as a payment in the nature of rent  .



That point is highly debatable in a context where the amount of the rent is recorded in lease contract, and registered accordingly with the PRTB. I cannot see how the landlord and tenant can conspire to vary the agreed rent without altering the terms of the tenancy,and I don't see how Revenue can pretend that such a variation exists when it clearly hasn't - the tenant has merely voluntarily agreed to pay a cost attaching to thr property.

The same principle would apply if the tenant breaks something in the property and volunteers  or agrees to pay the cost of repair. It would be a nonsense to count this as additional rent.


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## mandelbrot (11 Apr 2013)

T McGibney said:


> That point is highly debatable in a context where the amount of the rent is recorded in lease contract, and registered accordingly with the PRTB. I cannot see how the landlord and tenant can conspire to vary the agreed rent without altering the terms of the tenancy,and I don't see how Revenue can pretend that such a variation exists when it clearly hasn't - the tenant has merely voluntarily agreed to pay a cost attaching to thr property.
> 
> The same principle would apply if the tenant breaks something in the property and volunteers or agrees to pay the cost of repair. It would be a nonsense to count this as additional rent.


 
If a tenant breaks something they either are obliged to pay the cost of repair/replacement - not a payment in the nature of rent, or they aren't obliged to - a payment in the nature of rent.

See para (b) of the definition of rent in the TCA:
"rent" includes-
(a) any rentcharge, fee farm rent and any payment in the nature of rent, notwithstanding that the payment may relate partly to premises and partly to goods or services, and
(b) any payment made by the lessee to defray the cost of work of maintenance of or repairs to the premises, not being work required by the lease to be carried out by the lessee.


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## Brendan Burgess (29 Apr 2013)

In January, the Minister said that Landlords would be allowed deduct LPT 

Investors to be allowed to file property tax as an expense



> But Finance Minister Michael Noonan has confirmed the property tax  may be treated differently. He said he intends to amend the new  legislation to allow the tax to be treated as an expense for landlords.
> 
> 
> "The Thornhill Group recommended that the local property tax paid in  respect of a rented property should be deductible for income tax or  corporation tax purposes, in a similar manner to commercial rates.
> ...



Has this been implemented? 

I can't find anything on the Revenue LPT page.


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## Bronte (29 Apr 2013)

The two accountants on here have differing views.  I agree with Mandelbrot and not with Tommy.  So in effect Brenda should treat the LPT cheque she got from the tenant as income.


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## Brendan Burgess (29 Apr 2013)

While I have great respect for both Mandlebrot and Tommy and, indeed, the Minister, I would prefer to see a clarification from the Revenue.


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## Knuttell (29 Apr 2013)

Brendan Burgess said:


> I would prefer to see a clarification from the Revenue.



The Revenue were in no rush whatsoever to clarify whether or not the NPPR was or wasn't a deductible expense leading many LLs to write it off anyway only to find a few years later that this was not allowable when Revenue finally got off the fence on this matter.

Personally I will follow the IPOA on this matter rather than wait on Revenue do do their job.



> Property Tax deductible from rental income
> Following strong representations and extensive lobbying by the IPOA, including meeting the Thornhill Group, Ministers, TD's, Senators, and Government Departments, we finally got a break (albeit a small one!) - the new Local Property Tax, which will apply from July 2013, will be allowable as an expense against rental income.  However, clarity is required from the Minister who is reported as saying that it will be "phased in".  We do not accept that and are arguing strenuously that it should apply from the beginning.  Members should raise this with their own local TD's and Senators.
> http://www.ipoa.ie/


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## T McGibney (29 Apr 2013)

Brendan Burgess said:


> While I have great respect for both Mandlebrot and Tommy and, indeed, the Minister, I would prefer to see a clarification from the Revenue.



The tax legislation is clear, Brendan. The key point is the inclusion in the LPT legislation of provisions enabling individuals local authorities to vary LPT rates upwards & downwards in future years as they see fit. This clearly fits the TCA 1997 specification that "rates levied by a local authority" are tax deductible against rental income.

Note separately that Revenue never publicly clarified their precise stance of tax deduction of NPPR & household charge, apart from in private correspondence with the Irish Tax Institute, so I wouldn't be holding my breath waiting for an opinion here either.


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## TRS30 (30 Apr 2013)

It does not become an issue till October 2014 when 2013 returns are due. That give 18 months for the issue to be resolved.


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## Bronte (30 Apr 2013)

T McGibney said:


> Note separately that Revenue never publicly clarified their precise stance of tax deduction of NPPR & household charge, apart from in private correspondence with the Irish Tax Institute, so I wouldn't be holding my breath waiting for an opinion here either.


 
That private correspondance was once attached on here and I've a copy of it, I actually think it's still on AAM, in addition I was supplied it by an accountant. That letter stated that revenue would do a tax briefing on the issue and unless you know different I believe they never did clarify. 

I've 'heard' that most landlords actually claim the NPPR as a legitimate expense and will wait until revenue actually make an actual 'decision' to appeal it if revenue decides to do so. 

As discussed with you and others on here before I think revenue are on shaky ground on this.  My own accountant told me not to claim it and another accountant told me all his clients were claiming it.


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## T McGibney (30 Apr 2013)

Bronte said:


> That letter stated that revenue would do a tax briefing on the issue and unless you know different I believe they never did clarify.


Indeed, there was never a follow-up tax briefing or eBrief on this point.


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## oldnick (30 Apr 2013)

TRS30  It is an issue now -indeed months ago - because LLs should calculate the true cost of absorbing or passing on the cost to tenants.

The true cost for a LL on the higher tax bracket is TWICE the amount of LPT. 
Therefore LLs must charge tenants twice the amount of LPT just to break even -not a cent extra income. I'm only passing on the actual LPT charge .
Therefore both I and the tenants are losing the same amount.

The sooner we know Revenue's ruling on this ,the better. If they come after me  for deducting it, I'll quote Tommy McGibney.....


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## TRS30 (1 May 2013)

oldnick said:


> TRS30  It is an issue now -indeed months ago - because LLs should calculate the true cost of absorbing or passing on the cost to tenants.
> 
> The true cost for a LL on the higher tax bracket is TWICE the amount of LPT.
> Therefore LLs must charge tenants twice the amount of LPT just to break even -not a cent extra income. I'm only passing on the actual LPT charge .
> ...



If you are able to be deduct it then it only costs you half the amount. Assuming you are making a profit. 

For the half amount I have to pay this year I will absorb it and see about 2014 payment when guidance becomes clear.


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## Brendan Burgess (1 May 2013)

TRS30 said:


> If you are able to be deduct it then it only costs you half the amount. Assuming you are making a profit.



I understand what you mean, but it could be a misleading way of looking at it. Do repairs only cost you half the amount as well? 

But maybe, you only get half the rent? 

It's better to look at the rental unit as a profit centre. Put in the income. Deduct the costs and work out the profit or loss. Then calculate the tax separately.


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## T McGibney (1 May 2013)

TRS30 said:


> It does not become an issue till October 2014 when 2013 returns are due. That give 18 months for the issue to be resolved.



Note also that self-assessment landlords should now be budgeting for their 2013  Preliminary Tax liability, the due date for payment of which is 31 October next. Budgeting is a nonsense in the absence of clarity surrounding deduction rules.


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## TRS30 (1 May 2013)

Brendan Burgess said:


> I understand what you mean, but it could be a misleading way of looking at it. Do repairs only cost you half the amount as well?
> 
> But maybe, you only get half the rent?
> 
> It's better to look at the rental unit as a profit centre. Put in the income. Deduct the costs and work out the profit or loss. Then calculate the tax separately.



In a nutshell, yes. 

Don't follow about the rent I'm afraid. 

I look at the LPT (until clarified) the same as my Management Fee. I pay it and then deduct it as an expense so it reduces my tax bill so only costs me 48% of what I paid.


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## T McGibney (1 May 2013)

oldnick said:


> The sooner we know Revenue's ruling on this ,the better. If they come after me  for deducting it, I'll quote Tommy McGibney.....



Thanks  

On a more serious note, everything and anything I say on AAM and/or elsewhere on the web is not intended as advice and should never be construed as such. 

Just in case, like.


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## TRS30 (1 May 2013)

T McGibney said:


> Thanks
> 
> On a more serious note, everything and anything I say on AAM and/or elsewhere on the web is not intended as advice and should never be construed as such.
> 
> Just in case, like.



The money was just resting in my account


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## oldnick (12 Jun 2013)

six weeks later -  can any of the wise and knowledgeable tax accountants on AAM  tell us what are they advising landlord clients as regards claiming LPT as an expense?

Separate from opinions that it "should" be allowable I can't find a definitive ruling on this.

What are your contacts in Revenue saying ?


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## T McGibney (12 Jun 2013)

oldnick said:


> six weeks later -  can any of the wise and knowledgeable tax accountants on AAM  tell us what are they advising landlord clients as regards claiming LPT as an expense?
> 
> Separate from opinions that it "should" be allowable I can't find a definitive ruling on this.
> 
> What are your contacts in Revenue saying ?



Dunno about others but my position is as set out above. That said, the final decision is always up to the client.

I see no reason to refer to "contacts in Revenue" on issues such as this, in fact the entire concept seems rather creepy to me. My role is to represent and serve my client, Revenue's role is to serve the State. If I uncritically substitute my own opinions for theirs I am neither serving nor representing my client.


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## oldnick (12 Jun 2013)

Thanks Tommy. Pretty well as I expected .
I just thought/hoped that by now there would be no need for opinions and that one could point to a rule that is in no way ambivalent.


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## willalex (6 May 2014)

Has there been any clarification on the issue of deducting the LPT as a cost against gross rents since the last post on here?  I need to file return soon for student grant purposes and I'm unsure what to do.


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## Fredmck (5 Nov 2015)

I'll ask the question again. Is there any clarification on this..? it is not mentioned on the Revenue website. Is this a local rate or a government tax..?  Can this be included as an expense when submitting yearly returns on a rented property. Please help..


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## Bronte (5 Nov 2015)

I'm claiming it, as I did the NPPR.  I've discussed with my accountant, debated with accountants on here, have also been in contact with an accountant in Dublin.  But it's on your own head, I'm prepared for that. 

It is no different to rates and it's as simple as that.


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## Sarenco (5 Nov 2015)

Here's Revenue's guidance on the point:

"_The Government has accepted in principle the recommendation in the Thornhill Report that LPT be a deductible expense in calculating a landlord’s taxable rental income and that the deduction be phased in over a number of years with the start date being determined by the economic and budgetary situation. However, the Government has not yet decided to bring the deduction into effect. *Until the necessary amendment is made to section 97 of the Taxes Consolidation Act 1997, LPT is not a deductible expense *and therefore should not be claimed as a deduction when submitting your Income Tax/Corporation Tax Return for 2013."_

http://www.revenue.ie/en/tax/lpt/faqs/general.html#section9

And here's what the Minister for Finance had to say last October in response to a PQ:

"_I am advised by the Revenue Commissioners that section 97(2) of the Taxes Consolidation Act 1997 specifies the expenses that a landlord is entitled to deduct from gross rent in computing rental profits for tax purposes. Paragraph (c) of subsection (2), which refers to services rendered, reads as follows:

"(c) the cost to the person chargeable of any services rendered or goods provided by such person, otherwise than as maintenance or repairs, being services or goods which -
_

_in the case of a rent under a lease, such person is legally bound under the lease to render or provide but in respect of which such person receives no separate consideration, and_
_in any other case, relate to and constitute an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;"._
_As the payment of Local Property Tax (LPT) under the Finance (Local Property Tax) Act 2012 (as amended) by the "person chargeable", i.e. the landlord, is not a service rendered by that person, *a deduction for LPT is not allowable* under section 97(2)(c). In the context of property rental, examples of such services would include garden maintenance, laundry or house cleaning. While it is not possible to be definitive as regards local charges which might apply in the future, it is difficult to envisage that their treatment under section 97(2)(c) would be any different to the treatment which applies to LPT under that provision.

I am also advised that LPT is an annual self-assessed tax on residential properties in the State and is administered by the Revenue Commissioners in accordance with the Finance (Local Property Tax) Act 2012 (as amended) and that the reference to local authority rates in section 97(2) 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).*

As regards the recommendation of the Thornhill Report that the local property tax should be a deductible expense in calculating a landlord's taxable rental income, the Government has agreed in principle to accept this recommendation. The Thornhill group recognised the considerable pressures on the public finances and the need to bridge the gap between expenditure and revenue, and, for this reason, suggested that consideration be given to phasing in deductibility over a period of years. The Thornhill group also considered that it was for Government, having regard to the prevailing budgetary situation, to decide on the time span for phasing-in deductibility and on what percentage of LPT to allow as a deduction from gross rents for tax purposes."_

To date, the Government has not introduced any legislation to change this position.

Obviously taxpayers are free to disagree with Revenue's guidance and the interpretation of the Minister for Finance.


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## Fredmck (5 Nov 2015)

Thanks for the reply Bronte and Sarenco


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## Bronte (5 Nov 2015)

Sarenco:

What is LPT used for?

Why was it brought in?

Can the amounts charged be changed?

By whom?

Is revenue guidance law?

Is the minister an expert on whether it is deductable?


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## Jon Snow (5 Nov 2015)

@Bronte:

What is LPT used for? - Irrelevant.

Why was it brought in? - Irrelevant.

Can the amounts charged be changed? - Irrelevant, but yes.

By whom? By legislation, or by the local authority.

Is revenue guidance law? - No, but it sets out Revenue's interpretation of the law. This is their position on the issue, so if you disagree with it, it's not Revrnue you need to convince (since they've already got their interpretation), but an appeal commissioner and/or a judge.

Is the minister an expert on whether it is deductable? - The Minister isn't the expert, what minister ever is, but the response to that PQ will have passed through several layers of subject matter experts to ensure the position set out is believed to be correct.


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## Sarenco (5 Nov 2015)

Duplicate post.


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## Sarenco (5 Nov 2015)

To be fair Bronte, Fredmck didn't ask whether others are planning to deduct LPT as an allowable expense - he asked whether there was any clarification on the point.

I simply posted, without comment, whatever guidance is available and specifically stated that others are free to disagree with Revenue's guidance and/or the Minister's remarks.

I really don't see that there is much point is re-hashing old arguments but, as you know, I think it's perfectly clear that LPT does not constitute "rates" within the meaning of Section 97(2) TCA.  Again, you are free to argue otherwise.


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