High Court Rules NPPR IS Tax-Deductible

[Gordon Gekko]

The vast majority of people won't be motivated to make a retrospective claim for deduction until they know for certain that it will be honoured. Many people have a deep-seated fear of Revenue and won't want to make speculative claims.

Agreed.

People should never believe that Revenue are there to help them. This is an organisation that's primary function is to maximise the State's tax-take by whatever means possible, all with an unhealthy and sinister anti-wealth leaning.

 

[torblednam]

Agreed.

People should never believe that Revenue are there to help them. This is an organisation that's primary function is to maximise the State's tax-take by whatever means possible, all with an unhealthy and sinister anti-wealth leaning.

Really?! Do tell more...?

 

[Sophrosyne]

The vast majority of people won't be motivated to make a retrospective claim for deduction until they know for certain that it will be honoured. Many people have a deep-seated fear of Revenue and won't want to make speculative claims.

???

People regularly make speculative claims.

 

[T McGibney]

???

People regularly make speculative claims.

That doesn't contradict my point that many people shy away from doing so.

 

[T McGibney]

Really?! Do tell more...?

Any basic comparison of how the Irish & UK tax systems treat business taxpayers really exposes the anti-business and anti-wealth ideology behind the Irish system.

 

[cremeegg]

As a practical matter how would a taxpayer go about claiming nppr as an expense for 2013 at this stage. In the hope that eventually Revenue will accept it.

 

[DB74]

As a practical matter how would a taxpayer go about claiming nppr as an expense for 2013 at this stage. In the hope that eventually Revenue will accept it.

Just amend the figures on your Income Tax computation. Write to Revenue and say that you overstated the Rental Profit by €200 (or whatever) and wish to amend your return and ask them to issue an amended Notice of Assessment

 

[SeanieG]

Hi,

Forgive me if this had already been addressed in this thread, I have read right through it but can't seem to find an answer to my particular query. Just wondering if anyone can help me out with the following:

1) If NPPR charges were paid late -i.e. in installments over the last four years 2013-2016 - are they deductible against rental income earned in the same years or can they only be deducted against rental income earned in the years they were due?

2) are the penalties tax deductible or just the charges?

Thanks in advance

 

[torblednam]

Hi,

Forgive me if this had already been addressed in this thread, I have read right through it but can't seem to find an answer to my particular query. Just wondering if anyone can help me out with the following:

1) If NPPR charges were paid late -i.e. in installments over the last four years 2013-2016 - are they deductible against rental income earned in the same years or can they only be deducted against rental income earned in the years they were due?

2) are the penalties tax deductible or just the charges?

Thanks in advance

I'm going to answer your questions in reverse order because the answer to 2 makes the answer to 1 less important.

Penalties are not tax deductible generally, as they're not a cost incurred as part of a business but because of someone's individual mistake.

The NPPR itself (if ultimately confirmed to be deductible), will be deductible against each referable year.

 

[Bronte]

Penalties are not tax deductible generally, as they're not a cost incurred as part of a business but because of someone's individual mistake.

The NPPR itself (if ultimately confirmed to be deductible), will be deductible against each referable year.

I find that response about the penalties not being deductible a big vague. Because you used the word 'generally'.

Also right now legally the NPPR is deductible is it not? It is current law is it not?

Finally can you claim back a deduction if it's more than four years. Are you suggesting that if the appeal is won, that landlords will be able to back date claims beyond four years?

 

[torblednam]

I find that response about the penalties not being deductible a big vague. Because you used the word 'generally'.

Well I used the word "generally" because deductibility is a question of law ("wholly and exclusively") and is subject to interpretation by the courts. A leading "recent" case is this one (I'm copying and pasting from a HMRC manual):

Lord Hoffman, in the case of McKnight v Sheppard [1999] 71TC419, noted that the Court of Appeal in the von Glehn case was:

‘curiously inarticulate about why the fine was not money expended for the purposes of the trade.’

He went on to note that, in his opinion, the reason related to the character of a fine or a penalty:

‘Its purpose is to punish the taxpayer and a court may easily conclude that the legislative policy would be diluted if the taxpayer were allowed to share the burden with the rest of the community by a deduction for the purposes of tax.’

However, this does not apply to damages that are compensatory, rather than punitive, in character. For example, damages for defamation payable by a newspaper company, where such claims are ‘a regular and almost unavoidable incident of publishing it’.

Where an employer pays fines that are the liability of an employee, so that the employee is taxable on the payment as employment income, the cost to the employer of paying the fines is allowable in computing his trading profits.

 

[torblednam]

Also right now legally the NPPR is deductible is it not? It is current law is it not?

It isn't specifically written into statute as being deductible, so the only person whose tax assessment is subject to the decision is the taxpayer in question. Revenue have their own interpretation and the courts have, thus far, held a different interpretation.

Theoretically, even after an unfavourable Court of Appeal decision, Revenue could continue to hold their line and refuse to allow a deduction, and force every person who wants it to go to appeal in order to have their assessment determined by the appeal commissioners.

In practice obviously this wouldn't happen, and Revenue would have to accept to be bound by the ruling of the highest court in the State, and would have to change their application of the legislation at that point. But as long as they are continuing their appeal onwards they have to continue to apply their interpretation of the legislation, as otherwise they'd be making allowing amended assessments and repayments of tax that they do not agree are proper in law.

 

[torblednam]

Finally can you claim back a deduction if it's more than four years. Are you suggesting that if the appeal is won, that landlords will be able to back date claims beyond four years?

No, you cannot claim a deduction back more than the statutory four year time limit. And no I'm not suggesting that.

The question I was answering was in relation to a person who had paid his NPPR years late and with substantial penalties. The answer to his question is that (for example) his 2011 NPPR will be deductible against his 2011 rental income - however it is now too late to claim any repayment that might result from such a deduction.

 

[Bronte]

It isn't specifically written into statute as being deductible, so the only person whose tax assessment is subject to the decision is the taxpayer in question. Revenue have their own interpretation and the courts have, thus far, held a different interpretation.

Theoretically, even after an unfavourable Court of Appeal decision, Revenue could continue to hold their line and refuse to allow a deduction, and force every person who wants it to go to appeal in order to have their assessment determined by the appeal commissioners.

In practice obviously this wouldn't happen, and Revenue would have to accept to be bound by the ruling of the highest court in the State, and would have to change their application of the legislation at that point. But as long as they are continuing their appeal onwards they have to continue to apply their interpretation of the legislation, as otherwise they'd be making allowing amended assessments and repayments of tax that they do not agree are proper in law.

Well it's heartening to hear that Revenue would abide by the Irish courts.

It's rather an odd statement to make to say that after a court decision Revenue could continue to refuse to allow the deduction and make everybody appeal.

Statute has nothing whatsoever to do with this. Right now the law is that NPPR is deductable. Is that not the case ? A court decision is the law, not statute. Revenue's 'interpretation' now legally is wrong.

Would you agree that right now a taxpayer can put in the deduction for 2013? And revenue would have no grounds to refuse.

 

[torblednam]

It's rather an odd statement to make to say that after a court decision Revenue could continue to refuse to allow the deduction and make everybody appeal.

It's a statement used to illustrate the point. In practice such a thing would never happen - Niall Cody would be hauled in front of the PAC faster than you could say Fall On Your Sword!!

Statute has nothing whatsoever to do with this. Right now the law is that NPPR is deductable. Is that not the case ? A court decision is the law, not statute. Revenue's 'interpretation' now legally is wrong.

Statute has everything to do with it. It's the function of the Revenue Commissioners to apply taxes legislation as set out in the Tax Acts. In so doing, they have to apply that legislation to the facts of each case, and this requires an amount of interpretation on their part. In the SPECIFIC CASE of the individual that was before the High Court, the judge had to consider the relevant statutory provisions (section 97 of the TCA) and apply it to the facts of that case. THAT case. Not necessarily every case. The High Court didn't rewrite the relevant section or subsection of legislation, that's not their function (the Oireachtas writes and amends legislation).

Would you agree that right now a taxpayer can put in the deduction for 2013? And revenue would have no grounds to refuse.

A taxpayer can do whatever they feel is correct (indeed, they can even do things they know aren't correct, it being a free country! ). Revenue of course have grounds to refuse their deduction, as it is their function to determine what is the correct tax assessment. As they are currently appealing the High Court decision onwards to the Court of Appeal (and wouldn't be doing so unless they believed their interpretation will yet be found to be correct), they cannot deliberately allow deductions / repayments that are inconsistent with their interpretation.

 

[cremeegg]

they cannot deliberately allow deductions / repayments that are inconsistent with their interpretation.

But their interpretation has been found to be incorrect by the courts, and unless and until Revenue's appeal is successful, that is the law.

 

[torblednam]

But their interpretation has been found to be incorrect by the courts, and unless and until Revenue's appeal is successful, that is the law.

It is the law, as it has been found to apply to the subject of that case, one Thomas Collins.

If Revenue were to allow deductions and repayments every time they lost a case at the Appeal Commissioners, or even at the Circuit Court or High Court, there'd be big ructions every time they subsequently successfully overturned a decision... the papers and public commentary would be full of bile about the fact that Revenue had given people back money that they (Revenue) knew they'd be coming back to take off them again.

IMHO until such time as they exhaust the appeals process or decide to accept a particular decision, they are absolutely correct not to change their interpretation and their administration of taxes...

 

[Nordkapp]

This a mess, I normally do a return of income in March each year. Now I have to await the outcome of an appeal by Revenue on the NPPR. I like many other landlords paid that charge and the Household Charge but never sought to seek a reduction in income by submitting it as an expense. It is frankly a disgrace that Revenue cannot provide clarity on whether a landlord can claim for the NPPR, the Household Charge or the LPT.
Why is the Tax Institute or the CAI not putting pressure on Revenue to park this and close off the ambiguity?
If I were saucy I would seek to claim all those years I paid the NPPR, Household Charge and LPT and let them sort out the mess.

 

[Sarenco]

To be fair, there is no ambiguity in Revenue's position - they currently take the position that none of these charges are deductible.

You can certainly seek to argue otherwise if you take a different view.

FWIW, I don't expect Revenue to win their appeal re the deductibility of the NPPR - the Household Charge and LPT are a different matter.

 

[JoeRoberts]

If I were saucy I would seek to claim all those years I paid the NPPR, Household Charge and LPT and let them sort out the mess.

Presumably you could do this and note is as an expression of doubt in your return.
Revenue will likely ignore your claim and it will be up to you to make an appeal.