# Rent-A-Room Scheme (child living at home with parents)



## Horseman (27 Feb 2007)

Hello, 

I apologise in advance as I think that this subject might have been discussed here before but I need your advice concerning the Rent-A-Room scheme. Firstly, is the scheme still in place (I heard a rumour that it was discontinued from 1 January 2007).

My own situation is that I'm 27 and I'm living at home paying €350-a-month (€4200-a-year) rent. 

I'd like to know if I'm entitled to reclaim this money and if so, how should I go about doing this?


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## ClubMan (27 Feb 2007)

*Re: Rent-A-Room Scheme*



Horseman said:


> I apologise in advance as I think that this subject might have been discussed here before but I need your advice concerning the Rent-A-Room scheme. Firstly, is the scheme still in place (I heard a rumour that it was discontinued from 1 January 2007).


Yes.


> My own situation is that I'm 27 and I'm living at home paying €350-a-month (€4200-a-year) rent.
> 
> I'd like to know if I'm entitled to reclaim this money and if so, how should I go about doing this?


You mean can you claim rent relief while your parents (?) avail of tax free income under the rent a room scheme? It seems to be a bit of a grey area. See here for example (there may be other threads on the same topic):

Tax relief for paying parents weekly


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## Horseman (27 Feb 2007)

Thanks ClubMan. I reckon it's a bit of a lost cause though. I'm yet to meet someone who has claimed from this scheme.


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## ClubMan (27 Feb 2007)

Looks like some people did in the past but there are (at least) anecdotal reports of _Revenue _changing tack on this. Probably best to get independent, professional advice if you think it's worth it.


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## eiregal (27 Feb 2007)

I sent my form off last Friday so will let you know how I get on.


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## alfabeta (27 Feb 2007)

From January 2007 any rent received by parents is taxable in their hands as they cannot claim the RaR relief.  In finance bill but still to be enacted. 
Previous to this, the Revenue made a statement saying that children could not claim Rent Tax Credits as such rent was not considered rent for the purpose of this credit but many offices of the revenue were granting this credit hence their reason for the review.   They have not come back with any statement stating that such rent can have this credit however if rent credit is obtained the parents will be flagged and will have to declare the rent for tax purposes.


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## Newby (27 Feb 2007)

Horseman said:


> Thanks ClubMan. I reckon it's a bit of a lost cause though. I'm yet to meet someone who has claimed from this scheme.


Do you mean that you've yet to meet someone that used the Rent a Room Scheme?? I know plenty of people who have. 

If you mean where a child is renting from a parent (or vice versa) and availing of the Rent a Room scheme then that is a different matter.


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## ClubMan (27 Feb 2007)

Thanks _alfabeta_. The _Finance Bill 2007 _is here and the specific item that you mention is here:


> *17. Rent a Room Scheme
> 
> *From 1 January 2007, it is proposed to close off use of the Rent-a-Room Scheme where the rent
> received is from connected persons (children) who in turn are claiming rent relief.


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## alfabeta (27 Feb 2007)

Hi Clubman, if you go by preceedent then they can but their last statement on this was stating that this rent is not considered rent for the purpose of the Rent Credit, it really was at the discretion of the individual tax office.  But it will definatelly flag the parents for receipt of taxable income.  The revenue are making lists of all landlords from the Rent1's received.


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## ClubMan (27 Feb 2007)

Sorry - I edited my post before you posted. I was asking if a child can still claim rent relief but then read the snippet above which suggests that it is possible.


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## liteweight (27 Feb 2007)

ClubMan said:


> Thanks _alfabeta_. The _Finance Bill 2007 _is here and the specific item that you mention is here:



I still think this has to be unconstitutional in some way! I could understand it if 'children' related to those under 18 but to say that young adults can pay money to a stranger under the RaRs and not to their own parents, is simply ridiculous.

Can they claim up to 2006? Are Revenue going to demonise all the parents out there who take money from children for rent? Maybe we should all swap children e.g. my neighbours child can live in my house...no tax liability and mine can live in theirs?


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## ubiquitous (27 Feb 2007)

liteweight said:


> I still think this has to be unconstitutional in some way!



So? It doesn't matter a hoot whether or not this law is constitutional - at least until some citizen decides to spend tens of thousands of euro challenging it formally in the courts. I doubt if anyone is going to risk a legal bill of €50k or €100k to claim a €500 p.a. tax credit. 

Willie O'Dea (yes the same Willie O'Dea) wrote an extensive and compelling article in the Sunday Press in 1986 stating his opinion that DIRT tax was unconstitutional. However DIRT is still on the statute books because its not worthwhile for anyone to spend a large sum in bringing a court case to get rid of it.




liteweight said:


> Maybe we should all swap children e.g. my neighbours child can live in my house...no tax liability and mine can live in theirs?


Artificial tax avoidance schemes such as the above have already been effectively illegal for many years.


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## liteweight (27 Feb 2007)

ubiquitous said:


> So? It doesn't matter a hoot whether or not this law is constitutional - at least until some citizen decides to spend tens of thousands of euro challenging it formally in the courts. I doubt if anyone is going to risk a legal bill of €50k or €100k to claim a €500 p.a. tax credit.
> 
> Willie O'Dea (yes the same Willie O'Dea) wrote an extensive and compelling article in the Sunday Press in 1986 stating his opinion that DIRT tax was unconstitutional. However DIRT is still on the statute books because its not worthwhile for anyone to spend a large sum in bringing a court case to get rid of it.



I'm sure you're right but that doesn't mean people should lie down and accept it either. Maybe a large group of wealthy people will join forces and act out of principle rather than monetary gain?





> Artificial tax avoidance schemes such as the above have already been effectively illegal for many years.



Actually this was a joke but if the aforementioned children lived in the other person's house, how can that be deemed artificial tax avoidance?


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## Newby (27 Feb 2007)

liteweight said:


> Actually this was a joke but if the aforementioned children lived in the other person's house, how can that be deemed artificial tax avoidance?


Because of a glorious section in the taxes act called Section 811. Long and the short is that a transaction cannot be undertaken solely for the purposes of avoiding tax. There has to be some other reason for doing the transaction. Therefore if you were children swapping solely for the purposes of getting this credit it would fall under the section. Obviously the section is written in much more gibberish than that.

There is also a big debate over whether or not this is unconstitutional...


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## liteweight (27 Feb 2007)

Do I want to read Section 811? Actually, I feel sorry for the ordinary men and women working in the tax office. They sometimes take dog's abuse over some bright spark's idea which has really annoyed the public. Maybe their union will object and we'll all get a break?

My children don't claim rent relief at the moment, although if was allowed, and legal, I'd encourage them to! I genuinely don't see why they can't.


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## ClubMan (27 Feb 2007)

liteweight said:


> My children don't claim rent relief at the moment, although if was allowed, and legal, I'd encourage them to! I genuinely don't see why they can't.


But as far as I can see they can. It's just that the parent can't avail of the _RaRS _on the income received. Isn't it?



liteweight said:


> I'm sure you're right but that doesn't mean people should lie down and accept it either. Maybe a large group of wealthy people will join forces and act out of principle rather than monetary gain?


Maybe they will. I suspect that they won't though.


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## liteweight (27 Feb 2007)

ClubMan said:


> But as far as I can see they can. It's just that the parent can't avail of the _RaRS _on the income received. Isn't it?



That's my take on it too which makes the situation even more ludicrous. You'll have children who pay their parents 50 euro a week claiming rent relief, while the parents pay all the bills, mortgage, etc. not to even mention the communal toothpaste, washing powder, soaps, shampoos etc. and then they are expected to pay tax on the measly 50 euro!! I'm sure someone will say that the above expenses can be deducted, but really!

I think this is extremely unfair on those families who have low/medium incomes. At a time when their children might be able to make life a little easier, Revenue steps in to take it away.



> Maybe they will. I suspect that they won't though.



I suspect you're right.


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## ClubMan (27 Feb 2007)

So the child doesn't claim rent relief, they live rent free and the gift money to their parents to avoid unnecessary tax issues?


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## ubiquitous (27 Feb 2007)

liteweight said:


> You'll have children who pay their parents 50 euro a week claiming rent relief, while the parents pay all the bills, mortgage, etc. not to even mention the communal toothpaste, washing powder, soaps, shampoos etc. and then they are expected to pay tax on the measly 50 euro!!



Who said that? There is no suggestion anywhere that genuine domestic bill-sharing arrangements within families are liable to tax. 

However if an individual confirms to the Revenue that money paid to their parents is commercial open-market rent, and claims a tax relief on that basis, then the Revenue are well entitled to tax the parents on that rent.


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## Newby (27 Feb 2007)

liteweight said:


> Do I want to read Section 811?



None of us do!!!


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## liteweight (27 Feb 2007)

ubiquitous said:


> There is no suggestion anywhere that genuine domestic bill-sharing arrangements within families are liable to tax.



I never said there was. The point is that most young people who live at home and hand up a pittance consider themselves to be paying rent. However, if you ask them who buys the toilet rolls, the reply will usually be, Mother/Father. The last thread on this subject seemed to be full of young people, some of whom claimed rent relief, without considering the implications for their parents. I'm working from memory here so correct me if I'm wrong. Up to January they were entitled to do so. Now the new proposal(?) means that they are no longer entitled to claim. They're still paying the money, so do parents have to justify these small amounts to Revenue? I would have thought it would cost them more to police it than it would to pay the small amount of rent relief to which these people were entitled.

Basically I don't understand the logic which states if your child lives with a stranger, then that stranger is entitled to benefit financially, but you, as a parent are not.



> However if an individual confirms to the Revenue that money paid to their parents is commercial open-market rent, and claims a tax relief on that basis, then the Revenue are well entitled to tax the parents on that rent.



For me, the question is not whether Revenue are entitled. The question is as I stated above with regard to the RaRs....making fish of one and flesh of another.


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## liteweight (27 Feb 2007)

Newby said:


> None of us do!!!



Yeah. On another thread a while ago Ubiqitous made the point with regard to Revenue Law and the employees of the tax office simply not being able to get through it all, never mind knowing it all. I tried to read it but lost the will to live half way through....well maybe quarter way!


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## ClubMan (30 Dec 2007)

Also...

*[broken link removed]*




> *14 Amendment of section 216A   (Rent-a-room relief) of the Principal Act.*
> 
> *Summary*
> 
> ...


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