Rent-A-Room Scheme (child living at home with parents)

H

Horseman

Guest
Hello,

I apologise in advance as I think that this subject might have been discussed here before but I need your advice concerning the Rent-A-Room scheme. Firstly, is the scheme still in place (I heard a rumour that it was discontinued from 1 January 2007).

My own situation is that I'm 27 and I'm living at home paying €350-a-month (€4200-a-year) rent.

I'd like to know if I'm entitled to reclaim this money and if so, how should I go about doing this?
 
Re: Rent-A-Room Scheme

Horseman said:
I apologise in advance as I think that this subject might have been discussed here before but I need your advice concerning the Rent-A-Room scheme. Firstly, is the scheme still in place (I heard a rumour that it was discontinued from 1 January 2007).
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Yes.
My own situation is that I'm 27 and I'm living at home paying €350-a-month (€4200-a-year) rent.

I'd like to know if I'm entitled to reclaim this money and if so, how should I go about doing this?
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You mean can you claim rent relief while your parents (?) avail of tax free income under the rent a room scheme? It seems to be a bit of a grey area. See here for example (there may be other threads on the same topic):

Tax relief for paying parents weekly
 
Thanks ClubMan. I reckon it's a bit of a lost cause though. I'm yet to meet someone who has claimed from this scheme.
 
Looks like some people did in the past but there are (at least) anecdotal reports of Revenue changing tack on this. Probably best to get independent, professional advice if you think it's worth it.
 
From January 2007 any rent received by parents is taxable in their hands as they cannot claim the RaR relief. In finance bill but still to be enacted.
Previous to this, the Revenue made a statement saying that children could not claim Rent Tax Credits as such rent was not considered rent for the purpose of this credit but many offices of the revenue were granting this credit hence their reason for the review. They have not come back with any statement stating that such rent can have this credit however if rent credit is obtained the parents will be flagged and will have to declare the rent for tax purposes.
 
Horseman said:
Thanks ClubMan. I reckon it's a bit of a lost cause though. I'm yet to meet someone who has claimed from this scheme.
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Do you mean that you've yet to meet someone that used the Rent a Room Scheme?? I know plenty of people who have.

If you mean where a child is renting from a parent (or vice versa) and availing of the Rent a Room scheme then that is a different matter.
 
Thanks alfabeta. The Finance Bill 2007 is here and the specific item that you mention is here:
17. Rent a Room Scheme

From 1 January 2007, it is proposed to close off use of the Rent-a-Room Scheme where the rent
received is from connected persons (children) who in turn are claiming rent relief.
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Hi Clubman, if you go by preceedent then they can but their last statement on this was stating that this rent is not considered rent for the purpose of the Rent Credit, it really was at the discretion of the individual tax office. But it will definatelly flag the parents for receipt of taxable income. The revenue are making lists of all landlords from the Rent1's received.
 
Sorry - I edited my post before you posted. I was asking if a child can still claim rent relief but then read the snippet above which suggests that it is possible.
 
ClubMan said:
Thanks alfabeta. The Finance Bill 2007 is here and the specific item that you mention is here:
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I still think this has to be unconstitutional in some way!:mad: I could understand it if 'children' related to those under 18 but to say that young adults can pay money to a stranger under the RaRs and not to their own parents, is simply ridiculous.

Can they claim up to 2006? Are Revenue going to demonise all the parents out there who take money from children for rent? Maybe we should all swap children e.g. my neighbours child can live in my house...no tax liability and mine can live in theirs?
 
liteweight said:
I still think this has to be unconstitutional in some way!
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So? It doesn't matter a hoot whether or not this law is constitutional - at least until some citizen decides to spend tens of thousands of euro challenging it formally in the courts. I doubt if anyone is going to risk a legal bill of €50k or €100k to claim a €500 p.a. tax credit.

Willie O'Dea (yes the same Willie O'Dea) wrote an extensive and compelling article in the Sunday Press in 1986 stating his opinion that DIRT tax was unconstitutional. However DIRT is still on the statute books because its not worthwhile for anyone to spend a large sum in bringing a court case to get rid of it.


liteweight said:
Maybe we should all swap children e.g. my neighbours child can live in my house...no tax liability and mine can live in theirs?
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Artificial tax avoidance schemes such as the above have already been effectively illegal for many years.
 
ubiquitous said:
So? It doesn't matter a hoot whether or not this law is constitutional - at least until some citizen decides to spend tens of thousands of euro challenging it formally in the courts. I doubt if anyone is going to risk a legal bill of €50k or €100k to claim a €500 p.a. tax credit.

Willie O'Dea (yes the same Willie O'Dea) wrote an extensive and compelling article in the Sunday Press in 1986 stating his opinion that DIRT tax was unconstitutional. However DIRT is still on the statute books because its not worthwhile for anyone to spend a large sum in bringing a court case to get rid of it.
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I'm sure you're right but that doesn't mean people should lie down and accept it either. Maybe a large group of wealthy people will join forces and act out of principle rather than monetary gain?



Artificial tax avoidance schemes such as the above have already been effectively illegal for many years.
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Actually this was a joke but if the aforementioned children lived in the other person's house, how can that be deemed artificial tax avoidance?
 
liteweight said:
Actually this was a joke but if the aforementioned children lived in the other person's house, how can that be deemed artificial tax avoidance?
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Because of a glorious section in the taxes act called Section 811. Long and the short is that a transaction cannot be undertaken solely for the purposes of avoiding tax. There has to be some other reason for doing the transaction. Therefore if you were children swapping solely for the purposes of getting this credit it would fall under the section. Obviously the section is written in much more gibberish than that.

There is also a big debate over whether or not this is unconstitutional...
 
Do I want to read Section 811? Actually, I feel sorry for the ordinary men and women working in the tax office. They sometimes take dog's abuse over some bright spark's idea which has really annoyed the public. Maybe their union will object and we'll all get a break?;)

My children don't claim rent relief at the moment, although if was allowed, and legal, I'd encourage them to! I genuinely don't see why they can't.
 
liteweight said:
My children don't claim rent relief at the moment, although if was allowed, and legal, I'd encourage them to! I genuinely don't see why they can't.
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But as far as I can see they can. It's just that the parent can't avail of the RaRS on the income received. Isn't it?

liteweight said:
I'm sure you're right but that doesn't mean people should lie down and accept it either. Maybe a large group of wealthy people will join forces and act out of principle rather than monetary gain?
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Maybe they will. I suspect that they won't though.
 
ClubMan said:
But as far as I can see they can. It's just that the parent can't avail of the RaRS on the income received. Isn't it?
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That's my take on it too which makes the situation even more ludicrous. You'll have children who pay their parents 50 euro a week claiming rent relief, while the parents pay all the bills, mortgage, etc. not to even mention the communal toothpaste, washing powder, soaps, shampoos etc. and then they are expected to pay tax on the measly 50 euro!! I'm sure someone will say that the above expenses can be deducted, but really!:rolleyes:

I think this is extremely unfair on those families who have low/medium incomes. At a time when their children might be able to make life a little easier, Revenue steps in to take it away.

Maybe they will. I suspect that they won't though.
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I suspect you're right.
 
So the child doesn't claim rent relief, they live rent free and the gift money to their parents to avoid unnecessary tax issues?
 
liteweight said:
You'll have children who pay their parents 50 euro a week claiming rent relief, while the parents pay all the bills, mortgage, etc. not to even mention the communal toothpaste, washing powder, soaps, shampoos etc. and then they are expected to pay tax on the measly 50 euro!!
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Who said that? There is no suggestion anywhere that genuine domestic bill-sharing arrangements within families are liable to tax.

However if an individual confirms to the Revenue that money paid to their parents is commercial open-market rent, and claims a tax relief on that basis, then the Revenue are well entitled to tax the parents on that rent.
 
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