How do I calculate how much tax I owe on rental property ?

Hi, I rented my house out from 2001 to 2007 inclusive. I lived at home with my parents while I was renting my house. I have already paid the tax on the rental income for 2007 and 2006. I am going to do a submission to the revenue for 2005 to 2001. I am just wondering how I can calculate what I owe for those years? I know the total rental income I collected, the mortgage interest that I paid, and all the expenses that I had related to the property. Do I simply subtract one from the other and calculate the tax at the higher rate ? Is there any allowance available as well ? Another point to make is that I never registered with the PRTB for this property

DoingMyBest said:

Hi, I rented my house out from 2001 to 2007 inclusive. I lived at home with my parents while I was renting my house. I have already paid the tax on the rental income for 2007 and 2006. I am going to do a submission to the revenue for 2005 to 2001. I am just wondering how I can calculate what I owe for those years? I know the total rental income I collected, the mortgage interest that I paid, and all the expenses that I had related to the property. Do I simply subtract one from the other and calculate the tax at the higher rate ? Is there any allowance available as well ? Another point to make is that I never registered with the PRTB for this property

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Oh dear.

I don't want to cause further alarm, but have you considered the possibility of a Stamp Duty liability (if you claimed first time buyers exemption).

Also if you claimed tax relief (which became tax relief at source around 2002 against your mortgage interest, then you will be liable to repay that as well.

And unless you are registered with the PRTB you are not entitled to deduct the interest on the mortgage as a cost against your rental income. You can register retrospectively, and it will cost you €140 per tenancy (I think), and strictly speaking you should have registered each individual tenancy...

Thanks Mandelbrot. There was only one tenant in the house for the whole term. I purchased the house in 2000. I lived in it for the first year before I rented it out. Does this make any difference to whether I have to give back the first time buyers grant or not ?

DoingMyBest said:

I purchased the house in 2000. I lived in it for the first year before I rented it out. Does this make any difference to whether I have to give back the first time buyers grant or not ?

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If memory serves me,you had to live in the property for 5 years as an owner occupier,if you rented it out before that time had elapsed you were liable to pay the full amt of stamp duty,penalties,etc.

In Revenues eyes you misrepresented yourself as a ftb owner occupier,when in fact you were an investor...you may have a different view/story on this but thats their position I would imagine.

The rules governing clawback of SD if a property was rented out were changed in a later budget but not retrospectively.

Nor can you retrospectively register a tenancy that ended in 2007,that would be bizarre in hte extreme if you could do that.

You need the advise and assistance of a tax accountant.

Do you mind me asking what triggered your need to confess all to the Revenue?

Knuttell said:

Nor can you retrospectively register a tenancy that ended in 2007,that would be bizarre in hte extreme if you could do that.

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Bizarre as it seems, that is my understanding of the position... from my reading of the following excerpt from the PRTB website, the enforcement procedure begins with the non-registered landlord being given a Notice inviting them to register the tenancy immediately! Kinda makes a joke of the non-deductibility of the interest, seeing as you can always just go back and register if Revenue are challenging your claim...

What is the PRTB doing about unregistered landlords? TOP The steps being taken by the PRTB to pursue compliance with the registration requirement are in accordance with the provisions of the Residential Tenancies Act 2004.
They include the issue of notices to landlords and/or occupiers of the dwellings in question, and the prosecution of offenders for non-compliance with the registration requirement. Non compliance with the terms of such Notices and the non registration of a tenancy may result in a criminal conviction.
What do I do if I receive a Notice from the Registrations Enforcement section ? TOP Contact the Registration Enforcement section quoting the reference number on the notice you received, the reference will begin with an 'E/EA/EW' and can be found at the top right hand corner of the notice.
When submitting an application to register a tenancy you must quote the reference number. If you are submitting an applications to register this must be done immediately on receipt of a Registration Enforcement notice.
Where prosecution proceedings have been instituted and on conviction the PRTB will at least seek reimbursment of costs.

The information there doesn't distinguish between a current and an expired tenancy - if it doesn't apply to expired tenancies then the OP is in even worse trouble, as they could potentially be liable to a conviction and a fine for non-compliance, as well as the loss of any interest deduction from 2004(?) - 2007...

mandelbrot said:

The information there doesn't distinguish between a current and an expired tenancy - if it doesn't apply to expired tenancies then the OP is in even worse trouble, as they could potentially be liable to a conviction and a fine for non-compliance, as well as the loss of any interest deduction from 2004(?) - 2007...

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Isnt that like being able to insure your car after the accident?the PRTB form has to be signed by the tenant,it also requires their RSI number,if I as a tenant was approached by an ex Landlord asking me to sign up for a (lapsed) tenancy in a property I was no longer living in,nor had lived in for 4 years,I would be inclined to tell him where to go.

If it is the case that you can in fact retrospectively register the tenancy years after the tenancy ended,happy days,I will no longer bother with it until I am caught...it will save me no end of money.

Why are you going back 10 years (to 2001)? The Revenue normally are only allowed to go back 6 years over your tax affairs, unless in cases of serious fraud, though I am ready to be corrected on this.

Are you brining your tax affairs up to date to avail of some tax amnesty or something?

Greta, failure to declare rental income for a six year period would constitute "serious fraud" in Revenue's opinion.

OP, you should really get professional advice on this, you would benefit from having someone approach Revenue with you when you make your disclosure with a view to negotiating mitigation of penalties and interest.

Sybil

Thanks for all the advice. My accountant did our tax returns for 2007 and 2006 and the rental income came up in the figures. He was insistent on a full disclosure by me. However, he has been far from clear about how much money I am on the peg for to the revenue as a result of this full disclosure. Thanks for all the advice on here. I am going to get another accountant on the case - someone who talks straight

Greta said:

Why are you going back 10 years (to 2001)? The Revenue normally are only allowed to go back 6 years over your tax affairs, unless in cases of serious fraud, though I am ready to be corrected on this.

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Not true. Revenue have powers to go back any number of years if there is an underpayment of tax - doesnt have to be 'serious fraud'. The 6 years rule is that you are obliged to keep accounts and relevent documentation in good order and in your possession for the previous 6 tax years.

In most cases, if Revenue investigate for more than 6 years, they can obtain information on tax owed from sources other than the persons official accounts.

their right to go back more than six years only applies in the case of "fraud or neglect". However, neglect has a very wide meaning and so, if they have reason to believe you underdeclared income, they can go back more than six years.

Knuttell said:

Isnt that like being able to insure your car after the accident?the PRTB form has to be signed by the tenant,it also requires their RSI number,if I as a tenant was approached by an ex Landlord asking me to sign up for a (lapsed) tenancy in a property I was no longer living in,nor had lived in for 4 years,I would be inclined to tell him where to go.

If it is the case that you can in fact retrospectively register the tenancy years after the tenancy ended,happy days,I will no longer bother with it until I am caught...it will save me no end of money.

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Well you might save in the short term, but you'd surely be prosecuted (and fined 3k) if you had completely ignored the rules for several years...

Given that the different bodies concerned, ie Revenue, PRTB, and Co Councils are sharing info, you probably won't escape attention for too long, if you are paying NPPR but don't have a tenancy registered, or are declaring Case V income but not PRTB registered etc...

mandelbrot said:

Well you might save in the short term, but you'd surely be prosecuted (and fined 3k) if you had completely ignored the rules for several years...

Given that the different bodies concerned, ie Revenue, PRTB, and Co Councils are sharing info, you probably won't escape attention for too long, if you are paying NPPR but don't have a tenancy registered, or are declaring Case V income but not PRTB registered etc...

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Was just highlighting the craziness of a system that you said allowed one to possibly register a tenancy retrospectively.

I am compliant with every bit of legislation,even the patently revenue generating rubbish like BER.Its not worth your while trying to dodge Revenue,when they catch up and they generally do,they will run a coach and four through you...proper order too.

Don't understand why you would do the tax returns for 2006/7 before the previous years? If I understand you correctly your accountant only discovered the rental income then and has advised you to do ' a full disclosure.' This presumable is the revenue procedure whereby you now tell the full truth and they won't throw the full book at you. Sounds like a good accountant to me. Why would you change.

There is no time limit as to when revenue goes back on prior years. It gets confused with the 6 year limit for keeping records.

PRTB

You can register a tenant as late as you want, even years, but what you cannot do is register a tenant that is no longer there. OP will not be able to register the tenants if they are gone and will not be able to claim mortgage interest relief. (this area of the revenue rules is actually a lot more ticky than that)

The enforcment of registrations must mean that you have the register the current tenant not tenans who have left.

Thanks Bronte. I am changing accountant because of other issues. There is no current tenant. I only had one tenant who left in 2007. He didn't have a problem with the "hush hush" approach. He never asked me for my RSI number. I kept the rent low because of this. Now that my rental income has been dragged into the cold light of day, I may have to come clean and hope for the best.
As I never registered with the PRTB, am I allowed to make any deductions to the rental income before the tax ?

I only had one tenant who left in 2007. He didn't have a problem with the "hush hush" approach. He never asked me for my RSI number. I kept the rent low because of this. Now that my rental income has been dragged into the cold light of day, I may have to come clean and hope for the best.

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Sorry, but you are guilty of tax evasion and knowingly doing so. Coming clean now is no excuse but I suppose a bit better than not (only slightly).