Selling rented property. No tax paid on rent.

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fiftrix

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Hi all,

So I went to look into getting a mortgage today and all was going well until I mentioned I hadn't paid any tax on my rented property (the property i own and am renting out). I was basically told I wouldn't get a mortgage without the proof that I had.

So my question is....why is this any of the bank's concern? Sure, I should have done so, but shouldn't the bank be mostly concerned with my capacity to service my new mortgage?

I will obviously pay the tax ( I just REALLY couldn't afford to when I started renting it, then just forgot basically) but I'm wondering why the bank's need this to be done and if there is a way around this until I get fixed up with Revenue as I'm anxious to get the ball rolling.

I'm sure I'm not the first in this position but the assessor I spoke to reacted like I'd committed world atrocities lol.
 
fiftrix said:
all was going well until I mentioned I hadn't paid any tax on my rented property (the property i own and am renting out). I was basically told I wouldn't get a mortgage without the proof that I had.
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The bank will request proof of the rent you received. They will request tax clearance which you won't have. They take into consideration your full earnings so you need to prove that you received rent to the bank. And finally, if they feel you owe revenue money then there's a risk you may not be able to pay your mortgage, bit like you could afford to pay the tax on the rent ;)
 
Curious as to how this came up, I've gotten mortgages and remortgages quite a few times and never been asked for tax clearance cert.

I suppose now they are aware of it they know eventually revenue will catch up to you and land you with a tax bill incl interest and penalties which could mean you can't service the mortgage.

Tenants now get whatever 500 a year to offset rental costs, once they cross reference addresses Revenue will see the gap.

How much rent per year and how many undeclared years you talking about?
 
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Knuttell said:
Curious as to how this came up, I've gotten mortgages and remortgages quite a few times and never been asked for tax clearance cert.

I suppose now they are aware of it they know eventually revenue will catch up to you and land you with a tax bill incl interest and penalties which could mean you can't service the mortgage.

Tenants now get whatever 500 a year to offset rental costs, once they cross reference addresses Revenue will see the gap.

How much rent per year and how many undeclared years you talking about?
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Approx 5 years at €1000 per month. So €60k give or take. It only just covered the mortgage and I was also paying rent on another property so I didn't make a dime off of it. Not that that will make any difference I'm sure.
 
fiftrix said:
Approx 5 years at €1000 per month. So €60k give or take. It only just covered the mortgage and I was also paying rent on another property so I didn't make a dime off of it. Not that that will make any difference I'm sure.
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If you have a tax liability of 60k, I am really not surprised it could be an issue for the bank. Prices have now recovered and the mortgage on this property must be lower.
You made money by paying your investment and mortgage so increasing your equity.
 
fiftrix said:
Approx 5 years at €1000 per month. So €60k give or take. It only just covered the mortgage and I was also paying rent on another property so I didn't make a dime off of it. Not that that will make any difference I'm sure.
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Start pulling together expenses/receipts and interest certificates and do it year by year....might be better to engage an accountant to assist and have him act as intermediary with Revenue....won't be cheap mind.
 
Premos said:
If you have a tax liability of 60k, I am really not surprised it could be an issue for the bank. Prices have now recovered and the mortgage on this property must be lower.
You made money by paying your investment and mortgage so increasing your equity.
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I guess that's fair enough. I'm pretty fecked so as I'm afraid I'll have a big tax bill now.
 
Knuttell said:
Start pulling together expenses/receipts and interest certificates and do it year by year....might be better to engage an accountant to assist and have him act as intermediary with Revenue....won't be cheap mind.
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Thank you. Yes I'll start doing that.
 
The fact you are going to them as opposed to them finding you will count in your favour I think but have no inside track on this
 
Knuttell said:
Start pulling together expenses/receipts and interest certificates and do it year by year....might be better to engage an accountant to assist and have him act as intermediary with Revenue....won't be cheap mind.
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Do you know if they'll allow me to pay it off over the next few years? Like over the next 5 years. I guess like I should have done in the first place. I'm starting to freak out lol.
 
fiftrix said:
Do you know if they'll allow me to pay it off over the next few years? Like over the next 5 years. I guess like I should have done in the first place. I'm starting to freak out lol.
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They might but that will affect how much of a mortgage you will get based on your ability to pay with the additional outgoings to pay revenue back.

First thing to do is as @Knuttell suggested and try work out what you owe. Very rough calculation if you are on the high rate of tax you pay 50% of the rent less allowable expenses.

Then the interest is (8% I think ) per year then a possible penalty on top of that.
 
Accountants are used to dealing with this.

They will submit your returns.
They will pay the tax and the late payment fees.
And then wait to see if Revenue gets around to imposing penalties.

It might take some time to sort out, so forget about buying a house for the moment.

Brendan
 
Have you kept receipts and interest certs over last 5 years? The interest certificates will help a lot as it sounds like there was a hefty mortgage.

If you haven't got them get on to the bank and see if they will reissue (there will be a cost on this I'd imagine).

Don't get to wound up on this until you know exactly where your stand.

My old boss used to say an elephant is eaten one bite at a time and he was right.

I can PM you the number of an accountant in Bray who's very good....if you like.
 
There is a good summary here

kinore.com

Late Income Tax Return Ireland - Consequences Of Missed Deadline

Learn what to do if you are late filing the income tax return in Ireland, whether you're a first-time filer or you have missed the deadline.
kinore.com kinore.com

I am not a tax practitioner, but this is my understanding

Not sure if the €12k is the rent or the rental profit after interest and expenses.

If you were registered with the RTB then you get a deduction for the interest you paid. I assume you were.

1) The tax due
if you had €12k rental income and €4k interest, the profit would be €8k a year , the tax would be €4k

So 5 years = €20k

2) You will pay 10% of your liability for making the returns late.

So, so the penalty for late returns would be €400 x 5 years or €2,000

2) The interest is 10% a year, so roughly

€ 4k @10% = €400 for 5 years = €2,000
€400 for 4 years = €1,600
€400 for 3 years = €1,200
€400 for 2 years = €800
€400 for 1 year = €400.
Total interest: €6,000
 
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