High Court Rules NPPR IS Tax-Deductible

[Bronte]

That's an interesting point Odyssey. I would agree with that. That where the AC agrees with you and Revenue disagrees, and they are so so powerful with the best legal firms at their little fingertips, that the AC should be allowed to equally hire a legal firm to fight revenue on your behalf.

As I've no clue of this area, is it true to say that Collins would be hit for his own legal fees and those of revenue if he lost?

Also do we have any way of knowing how much Revenue have spent on this so far. Do we know if they are appealing it?

(Something else, you guys are practioners and your real names are on here, if you feel that constrains you in what you want to say about revenue, please PM me, I've no problem putting it out on here and you guys know me for many years and I'd never ever divulge who you are, I'm also abroad so I honestly have no fear of revenue - being tax compliant is also a biggie, so I've no fears of audit etc)

 

[Bronte]

Thanks Bronte. I will definitely be watching this space

Just want to point out something Meath Lady, I'm no expert on anything, so I'm just an ordinary taxpaying landlord like you. But I do know one thing, revenue guidence and briefings etc, they are not always the law. The law is what is in the legislation and what a court decides that legislation means, not what revenue thinks it means. Here we see that revenue's guidence, it's letter to the Irish Tax Institute was incorrect but accountants have to/must/would be foolish not to, advice clients as per the Revenue guidance. So for examply my accountant told me I couldn't deduct it. And he was absolutely correct.

Some of you don't remember, but Revenue rowed back on another deductable years ago - life insurance, as long as it was the cheap term time one on investment properties.

 

[Bronte]

I wonder whether it is too late for people to apply.

The four-year rule depends on the date on which a “valid claim” was submitted.

According to TCA 1997 s 865:

"For the purposes of subsection (3), a claim to repayment will be regarded as a valid claim where:

(1)(b) (i) a statement or return which the taxpayer is required to furnish under the Acts, contains all the information which Revenue would reasonably require to determine the amount, if any, of the repayment and the repayment arises out of an assessment made, or that would have been made, at the time the statement or return is delivered, on foot of the statement or return.

(ii) such a statement or return is either not required or it does not contain all the necessary information, when all that information is furnished, and

(iii) a correlative adjustment is concerned, when the amount of the adjustment is agreed by the two States."


Could it be argued that where Revenue had proof that NPPR was paid then that should be regarded as the date of a valid claim?

But what about this:

but all entitlements to repayment are made subject to the time limits contained in Section 865.

And further on it states:


Time limit for making a claim for repayment

Section 865(4) provides new time limits for the making of claims. In general, a valid claim to repayment must be made within 4 years after the end of the chargeable period to which the claim relates. All claims under the new general repayment provision, Section 865(2), must be made within this time limit.

 

[Bronte]

TIME LIMITS

Another interesting point Sophrosyne from that briefing is this:


The reference to tax which is not due is to be taken as including tax that has been charged in an assessment which has become final and conclusive but which is later
found to have been charged incorrectly. This may arise where, for instance, the Appeal Commissioners or the Higher Courts find in another case, with similar facts, that the tax is not chargeable and the Revenue Commissioners decide not to appeal against that decision. It may also arise where the Revenue Commissioners accept, in a case with similar facts, without going to appeal, that a different interpretation of the law than that adopted in other cases is correct.

Revenue knew about the mega decision from the AC, and it was mega, but they decided to appeal it. Did they do so deliberately knowing it would delay things until the four year time limit was up I wonder.

 

[T McGibney]

So for example my accountant told me I couldn't deduct it. And he was absolutely correct.

He wasn't actually. He chose to substitute an illogical Revenue opinion for his own professional judgment. Anyone who followed his advice lost out. A properly professional approach would have been to explain to his customers what Revenue were saying (while noting out that Revenue don't make the law but merely interpret and implement it), what his own opinion was, and invite them to make up their own minds on it.

 

[T McGibney]

(Tommy how did you get to hear of the court case?)

A members' update from Chartered Accountants Ireland, yesterday.

 

[Sophrosyne]

Bronte,

Usually, the 4-year rule stands.

The only point I was making was that in this case, Revenue's published view was that NPPR was inadmissible as a deduction against rental income, a view that was found to be mistaken by the High Court.

The date of the valid claim would have been the date the rental returns were submitted.

If people claimed a deduction for NPPR, assessments should be amended.

However, even if they did not, I believe they should still receive the deduction for the years concerned as failure to claim was due to an adherence to Revenue's incorrect interpretation of the TCA 1997 rather than an omission by landlords and/or their accountants.

You are right in that Revenue is in a unique position of power and not everyone has the inclination nor indeed the resources to go to the High Court.

Hopefully, common sense will prevail.

 

[Bronte]

He wasn't actually. He chose to substitute an illogical Revenue opinion for his own professional judgment. Anyone who followed his advice lost out. A properly professional approach would have been to explain to his customers what Revenue were saying (while noting out that Revenue don't make the law but merely interpret and implement it), what his own opinion was, and invite them to make up their own minds on it.

No way can you say that. Because accountants aren't legal professionals. The point of Revenue guidance and Tax briefings is to help professionals like you in how you apply tax law.

What would you say if the case had gone differently. None of us could have predicted it with 100% accuracy. And if it was so obvious why didn't the accuontants body take test case long ago. And why did the Irish Tax just accept the letter from revenue which said it wasn't allowable? And how come they still have it as 'fact' on their website.

If you were my accountant and you told me against revenue guidance that revenue were wrong and I should just claim it, then if I were audited and penalised I'd be mightly pissed off with you. Instead I was given the best advice and it was the correct advice and I myself choose to go against it. That it was on my head.

 

[Sarenco]

The only point I was making was that in this case, Revenue's published view was that NPPR was inadmissible as a deduction against rental income, a view that was found to be mistaken by the High Court.

Did Revenue ever actually publish their view that NPPR was inadmissible as a deduction against rental income?

My memory was that the Tax Institute published a note to practitioners to the effect that Revenue had indicated that this was their view but (and I'm certainly open to correction on this point) Revenue never actually went into writing on the point.

In any event, my sense is that the majority of impacted taxpayers did in fact (quite correctly) claim NPPR as a deduction.

 

[Bronte]

.

Hopefully, common sense will prevail.

That I agree with. And the right thing is that pepole are allowed claim it. The fact revenue went all the way to the HC against their own Appeal Commissioner and against a single taxpayer wouldn't make me think that will happen though. Heck they haven't even notified the professionals that it can now be claimed !! And more importantly they didn't notifice them in 2013 when the AC made the decision, nor last year when the HC decision was made.

 

[Bronte]

Did Revenue ever actually publish their view that NPPR was inadmissible as a deduction against rental income?

My memory was that the Tax Institute published a note to practitioners to the effect that Revenue had indicated that this was their view but (and I'm certainly open to correction on this point) Revenue never actually went into writing on the point.

In any event, my sense is that the majority of impacted taxpayers did in fact (quite correctly) claim NPPR as a deduction.

Revenue wrote a letter. To the Tax institute if I remember rightly Tommy or one of the others might have a copy of that letter. I filed it somewhere years ago. It used to be online.

Revenue also promised they would do a tax briefing on the matter and they never did.

 

[Bronte]

http://www.askaboutmoney.com/threads/is-the-€200-nppr-local-authority-charge-a-tax-deductible-expense.136219/

http://www.askaboutmoney.com/thread...-property-tax-as-expense.176115/#post-1312096

Next one is more interesting:

http://www.askaboutmoney.com/threads/no-case-v-deduction-for-nppr-and-the-household-charge.165348/

Poster Oldnick, a landlord, was great. And Tommy, you there said you would be foolish to go against revenue advice. And there in black and white is OldNick totally right about it being a rate.

 

[Sarenco]

Revenue wrote a letter. To the Tax institute if I remember rightly Tommy or one of the others might have a copy of that letter. I filed it somewhere years ago. It used to be online.

Indeed but did Revenue ever publish their position?

From the thread that you linked to, Oldnick posted as follows:

After all, the aforementioned Irish taxation Institute firmly believes that the NPRR should be an allowable expence -as per letter form the director of ITI to Revenue on 23 Sept 2010
" we consider that the NPRR charge should be deductible as a rental expence "

Whilst Revenue may hold a dissenting a view (as expressed by Eugene Creighton, Asst sec Income and Capiotal Taxation,Revenue) in his reply to ITI on 18 Oct 2010, it is not a view that has been made public by Revenue.

It would seem unreasonable for private landlords to have to refer to correspondence or meetings (e.g TALC)between Revenue and accountants.

Until Revenue makes the position clear and public then landlords can decide for themselves whether to declare NPPR as an expence.
If they do get it wrong what's the worse that can happen ? Revenue will just disallow it.

That certainly accords with my memory of events and my sense was that the majority of impacted taxpayers did in fact (quite correctly) claim NPPR as a deduction.

 

[Sophrosyne]

Did Revenue ever actually publish their view that NPPR was inadmissible as a deduction against rental income?

Extract from Revenue Leaflet IT 70:

"What Expenditure Cannot Be Deducted?
The following are examples of expenditure you may not deduct when computing your rental income or losses:

• Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer’s letting fees, advertising fees and legal expenses incurred on first lettings,

• Expenditure incurred between lettings in certain circumstances,

• Interest in the period following the purchase of the property up to the time a tenant enters into a lease and after the final letting,

• Post-letting expenses, i.e. expenses incurred after the final letting,

• Capital expenditure incurred on additions, alterations or improvements to the premises unless allowable under an incentive scheme or incurred on fixtures and fittings,

• Expenses incurred in the letting of premises on an uneconomic basis,

• Expenses incurred on lettings that are exempt under the Rent-a-Room provisions,

• The charge on residential property (sometimes referred to as the second home charge) introduced by the Local Government (Charges) Act 2009."

 

[T McGibney]

No way can you say that. Because accountants aren't legal professionals. The point of Revenue guidance and Tax briefings is to help professionals like you in how you apply tax law.

The point of any professional adviser is to present the facts of a situation to a paying customer, along with the professional's own opinion if that is relevant and/or requested. It's up to the customer to form their own opinion on that basis. The customer is free to disregard the professional's opinion if they see fit.

What would you say if the case had gone differently.

I would have said "the court got it wrong".

And if it was so obvious why didn't the accountants body take test case long ago.

You'll need to ask them that. They'll probably tell you it's not their job to take cases on behalf of their members.

And why did the Irish Tax just accept the letter from revenue which said it wasn't allowable?

Ditto.

And how come they still have it as 'fact' on their website.

Ditto again. (Do remember though that Revenue are in the tax collection business, not the tax advisory business.)

If you were my accountant and you told me against revenue guidance that revenue were wrong and I should just claim it, then if I were audited and penalised I'd be mightly pissed off with you.

Except I never said that. (Do please read back what I did say).

And I think you should withdraw any suggestion that I did.

Instead I was given the best advice and it was the correct advice

No. It was the wrong advice. Had you followed it, you'd now be out of pocket.

 

[T McGibney]

my sense was that the majority of impacted taxpayers did in fact (quite correctly) claim NPPR as a deduction.

Mine too - except for obvious reasons we couldn't disclose this publicly at the time.

 

[Bronte]

Mine too - except for obvious reasons we couldn't disclose this publicly at the time.

You said this:

Me? No. Non-deduction makes no logical sense to me. That said, Revenue have stated otherwise, albeit unofficially, and it would be foolhardy of me, as a general tax practitioner, to tell everyone that Revenue, and their specialist experts, are wrong and my own reasoning is correct. People can make up their own minds as to whether they want to deduct these costs. I'll keep an open mind on it.

Jan 25, 2012 Report

And this poster, GEKKO an accountant said this:

Correct - Costs cannot be awarded.

I've represented clients at a couple of Appeal Hearing and although it's effectively a less formal version of a Court, it'd be nuts for a taxpayer to represent himself/herself.

Interesting and all as this discussion is, my own view is that a landlord would lose at such an appeal. The key point as others have suggested is the term "levied". My understanding is that the NPPR charge and household charge are levied centrally by legislation (i.e. they're provided for and their rates are set by legislation arising at a national level) whereas (say) rates are set by local authorities. On this basis, my own view is that they're not specifically provided for in Section 97 and they're therefore not deductible.

As an aside in relation to the purpose of the NPPR charge, surely the intention at government level is for it NOT to be deductible? I would have thought the aim is to raise €200 times X number of properties, rather than something approaching half that amount if it's tax deductible?

Jan 26, 2012 Report

----------------

I've never seen a client claiming a deduction for the NPPR charge.

Every accountant I know is aware of Revenue's position (i.e. that the charge is not deductible). I've never seen a return where the charge has been claimed as a deduction. If a client insisted on claiming a deduction for the charge, their return's cover letter would have to be caveated appropriately.

Any AAM contributor with an interest in this topic knows the position and knows of the Institute's discussions with Revenue and Revenue's position as advanced during those discussions.

A year ago, if you Googled "NPPR+deductible+Revenue", top of the list were AAM threads like this and a link to the ITI's Q&A on the subject where Revenue's position is clearly stated.

I find it odd that contributors have been claiming a deduction for the charge when they've been well aware of the position. The "until I see an eBrief" argument doesn't cut the mustard in my view.

When the Big 4, the ITI, Revenue and every tax consultant on AAM have been advising people that the charge is not deductible, it's a bit rich to have to listen to posters still claiming that the position isn't clear.

Will these taxpayers now make a qualifying disclosure or technical adjustment in relation to any underpayments of tax which have arisen?

Jan 27, 2012 Report

 

[Bronte]

Mine too - except for obvious reasons we couldn't disclose this publicly at the time.

Why could you not be public about it?

By the way on that link one of the accountants mention that KMPG said it wasn't deductable.

Did all your clients deduct it?

 

[T McGibney]

T McGibney said: ↑
Mine too - except for obvious reasons we couldn't disclose this publicly at the time.

You said this:

That statement falls far short of confirming my private perception at the time that most people were claiming NPPR as a deduction.

The other accountant you quote was clearly talking through his behind. It's quite normal for taxes levied by the State to be allowable deductions for income tax or corporation tax purposes.

 

[Bronte]

Extract from Revenue Leaflet IT 70:

"What Expenditure Cannot Be Deducted?
The following are examples of expenditure you may not deduct when computing your rental income or losses:

• Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer’s letting fees, advertising fees and legal expenses incurred on first lettings,

• Expenditure incurred between lettings in certain circumstances,

• Interest in the period following the purchase of the property up to the time a tenant enters into a lease and after the final letting,

• Post-letting expenses, i.e. expenses incurred after the final letting,

• Capital expenditure incurred on additions, alterations or improvements to the premises unless allowable under an incentive scheme or incurred on fixtures and fittings,

• Expenses incurred in the letting of premises on an uneconomic basis,

• Expenses incurred on lettings that are exempt under the Rent-a-Room provisions,

• The charge on residential property (sometimes referred to as the second home charge) introduced by the Local Government (Charges) Act 2009."

That's still on the revenue website today.

And it's incorrect. Since 2013 when the AC said they were wrong. As confirmed by the HC last year.