Can Landlords claim the "Household Charge" as an expense in the 2012 tax returns

[Dermot]

I am wondering if Landlords can claim the household charge in their 2012 tax returns and if not why not. I understand that the new Local Property Tax is being allowed as an expense. I notice that there are differing views on askaboutmoney about claiming the NPPR charge. My own view at the moment is that the LPT and the Household charge are for the so called same purpose. I would appreciate other posters comments and any official material to back up the comments where possible.

 

[mandelbrot]

Revenue have indicated that they don't consider either the HC or the NPPR would qualify as a deduction.

[broken link removed]

 

[Dermot]

Thanks mandelbrot. You are as helpful as ever. I was just thinking that as the LPT is a replacement and nothing more than a name change as far as its objectives are and that there was an arguable case for a claim in view of the LPT being allowed. I accept your advice.

The Household charge has been described in Dept of Finance literature as follows: "A household charge of €100, to fund vital local services, in line
with the requirement in the EU/IMF Programme of Financial
Support for Ireland, is being introduced in 2012. The charge
which will raise some €160m per annum is an interim measure
pending design and implementation of a full property tax,
which will apply in 2014."

 

[STEINER]

Dermot,

I imagine that the HC and LPC don't qualify as deductions as the expense is not incurred in the business of letting the property. If you lived in the house yourself the expense would still be incurred.

 

[T McGibney]

Dermot,

I imagine that the HC and LPC don't qualify as deductions as the expense is not incurred in the business of letting the property. If you lived in the house yourself the expense would still be incurred.

That is a faulty argument which, if implemented, would disqualify buildings insurance, management fees and a range of other deductions from being allowed against rental income.

 

[mandelbrot]

Thanks mandelbrot. You are as helpful as ever. I was just thinking that as the LPT is a replacement and nothing more than a name change as far as its objectives are and that there was an arguable case for a claim in view of the LPT being allowed. I accept your advice.

The Household charge has been described in Dept of Finance literature as follows: "A household charge of €100, to fund vital local services, in line
with the requirement in the EU/IMF Programme of Financial
Support for Ireland, is being introduced in 2012. The charge
which will raise some €160m per annum is an interim measure
pending design and implementation of a full property tax,
which will apply in 2014."

AFAIK Revenue took the position in relation to the NPPR and the HC that these were taxes rather than rates - the legislative provision dictating the deductions that can be allowed refers to rates.

I'd guess they're adopting the view that the fact the LPT % can be varied by the local authority, notwithstanding that Revenue will collect it, tips the balance in favour of it being classified as a rate.

 

[T McGibney]

AFAIK Revenue took the position in relation to the NPPR and the HC that these were taxes rather than rates - the legislative provision dictating the deductions that can be allowed refers to rates.

If that were the yardstick, then road taxes (and irrecoverable VAT) would be disallowable as deductions for a business.

 

[mandelbrot]

If that were the yardstick, then road taxes (and irrecoverable VAT) would be disallowable as deductions for a business.

I don't see how - the rules for deductions against Case V are specific, and laid out in S.97. The general rules for Case I or II trade deductions don't apply.

 

[T McGibney]

I don't see how - the rules for deductions against Case V are specific, and laid out in S.97. The general rules for Case I or II trade deductions don't apply.

I'm addressing the notion that "taxes" can't be allowable deductions.

That said the scope of deductions allowable against rental income under s.97(d) TCA 1997 is quite wide:

(d) the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

The separate provision for deductibility of Rates "any rate levied by a local authority" is a red herring - Ireland hasn't had domestic property rates since 1977.

 

[mandelbrot]

I'm addressing the notion that "taxes" can't be allowable deductions.

That said the scope of deductions allowable against rental income under s.97(d) TCA 1997 is quite wide:

(d) the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

How wide that is depends on the interpretation of what constitutes an expense of the transaction under which the rents are received. Are the NPPR/HC an expense of management of a property? Arguably not, at least the ITI didn't seem to believe so (see below).

The separate provision for deductibility of Rates "any rate levied by a local authority" is a red herring - Ireland hasn't had domestic property rates since 1977.

I agree but the reason I refer to it is because this was the line the ITI took when arguing for a deduction - that the NPPR and HC were effectively rates, and a deduction should be allowed under S.97(2)(b).

 

[T McGibney]

I believe that Revenue wrong-footed the ITI on this one. That said the ITI hold no statutory function and their representations to Revenue on this topic were presumably treated no less or more importantly than those of any other parallel representative body or lobby group.

 

[Bronte]

There is no logic in my opinion in revenue deciding that these two charges/rates/levies are not deductable.

I tried last evening to find the letter that revenue sent back to the ITI on this but I cannot find it. I'd always thought I might take it up with revenue myself, but don't want to particularly draw attention to myself.