Rent a Room Tax Limit

[liteweight]

I wouldn't assume that anything has been cleared up to be honest.

It appears that you can charge rent in excess of €7,620 and not be liable for Stamp Duty clawback, bit that is only an interpretation on my part.

The OASIS info I linked/quoted before seems confusing/incomplete to me, but the Revenue briefing clarifies matters wrt to the income tax treatment of rent in excess of €7,620 (but I think I was the only one confused on that score).

I sometimes find Oasis confusing too and always double check on the Revenue site. If you think it appears that you can charge rent in excess of the threshold, without incurring a clawback, and I, independently think the same thing, then chances are we are correct!

However, when it comes to Revenue, I ask once, check it out myself at least twice, and then ring an accountant! Even they seem to have differing opinions when it comes to Revenue. As I said before, I can't see it being feasible to look for stamp duty clawback when renting a room in one's house. This would mean that taking in a lodger denies one the right to call it one's PPR!

 

[ClubMan]

As I said before, I can't see it being feasible to look for stamp duty clawback when renting a room in one's house. This would mean that taking in a lodger denies one the right to call it one's PPR!

I don't see how it might not be feasible (in part or full) where an individual lives in the house and collects more rent than allowed under the RaRS. However I suspect that a non RaRS live-in landlord is not liable for the clawback but I don't know either. For some reason this image keeps coming to mind:

 

[Newby]

Sorry Guys, just after reading this one recently and thought i'd ressurect it to add in my few cents. From what I can see there are 3 main considerations in the OP original statement (and in most of the "I'm renting a room in my house" queries)

1. Income Tax - Does the Landlord have to pay tax on the income it receives from the tenant?
2. Stamp Duty - Does the Landlord have to clawback any relief previously claimed on the purchase of the property?
3. Capital Gains Tax - Does the Landlord have to pay CGT on ultimate disposal of the property?

In relation to the points my take on it (and it is just an opinion) is as follows:

1 - If you reside in the house as your main or only residence (be it sofa, or spare room) and you derive rent of less than €7,620 from the letting then you will not pay income tax on the rent derived. If breach either or those conditions then you are liable to income tax.

2 - If you reside in the house as your only or principal place of residence (again, sofa or spare room) then you do not trigger a clawback to Stamp Duty. There is no monetary limit mentioned in the clawback section of the Stamp Acts.

3 - If you live in your own house and rent out a room in that house the situation is not so clear. The PPR section of the Acts tells us that where a house is used for a business or trade then any gain on the sale of such a property will be apportioned between the propertion of the house that was used for the business or trade. Such a proportion will be taxable and the remainder exempt. Whether or not a person letting out a room under the Rent a Room Scheme is carrying on a business or trade is debateable (but very plausible) however it would seem very harsh if Revenue deemed the letting of 1 room to be a trade. Where someone is living in and managing a B&B or hostel type house then it appears pretty obvious that there is a trade and an apportionment of the gain on a PPR used for such purposes would be appropriate.

If it were thought that renting a room or rooms in a house is a business or trade then the apportionment must be done. This is an incredibly difficult thing to do (what portion of a house is a room, how do you determine what proportion of the kitchen /sitting room related to the business). Usually you make a best guess and inform Revenue of what you think the relevant gain should be (maybe even ticking an expression of doubt on the tax return).

My thoughts are that if you rent 1 room in a large house I think it is not a trade/business. If you rent out all rooms and live on the sofa I think it is a trade/business. In between you call Revenue and see what they think.

 

[Clarkey]

The Rent a Room scheme allows for €7,620 to be obtained in rent tax free and no more. The Rent a Room scheme also allows for CGT and Stamp Duty exemptions to remain intact while receiving rent up to €7,620. If rent exceeds €7,620 the Rent a Room scheme does not apply. Therefore CGT & Stamp Duty exemptions do not apply. If you rent out a room or rooms in your house and the rent exceeds rent a room limits then you must pay stamp duty clawback and will be liable for cgt on a portion of the gain. Quote below from revenue website:

Clawback

A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years from the date of the conveyance or transfer, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property. A clawback will not arise where the property is sold to an unrelated third party during the 5-year period

 

[Satanta]

If rent exceeds €7,620 the Rent a Room scheme does not apply

Not suggesting for a second you're wrong, but where is this information coming from?

Any of the revenue documents, that I have seen at least, state that if you go over the €7,620 threshold that the income tax exemption no longer applies, but I've never seen it mentioned that the RaRS does not apply [and the associated benefits for CGT/SD] (nor have I seen it mentioned that it does apply).

I had always thought it was a grey area, but if you can make it a little more black and white that'd be great.

 

[Clarkey]

Not suggesting for a second you're wrong, but where is this information coming from?

Any of the revenue documents, that I have seen at least, state that if you go over the €7,620 threshold that the income tax exemption no longer applies, but I've never seen it mentioned that the RaRS does not apply [and the associated benefits for CGT/SD] (nor have I seen it mentioned that it does apply).

I had always thought it was a grey area, but if you can make it a little more black and white that'd be great.

Rent-a-Room Relief
Where a room (or rooms) in a person’s sole or main residence is (are) let as residential accommodation, gross annual rental income of up to €7,620 is exempt from tax. Relief in respect of mortgage interest relief is not affected. The relevant Capital Gains Tax/Stamp Duty provisions are also not affected. For more information see Leaflet IT 70.


From Revenue website

Clawback

A clawback arises if rent is obtained from the letting of the house or apartment for a period of 5 years from the date of the conveyance or transfer, other than under the rent-a-room scheme. The clawback amounts to the difference between the higher stamp duty rates and the duty paid and it becomes payable on the date that rent is first received from the property. A clawback will not arise where the property is sold to an unrelated third party during the 5-year period

From Revenue website

The Rent a Room scheme and the income tax emption you mention above are one and the same. If the rent exceeds the relevant limit (€7,620) then the scheme does not apply and normal rules apply as an investor. I was on to local tax office here this morning to confirm this

 

[ubiquitous]

It can be dangerous to rely on Revenue guides and website content for specific guidance where an issue is unclear or open to interpretation. By their very nature, these guides can be simplistic and sometimes their contents are mutually contradictory. Its generally best to get proper professional advice in all cases where there any level of doubt, unless the potential tax exposure is very small.

 

[alfabeta]

The following would be my thoughts, any comments welcome…

Section 216A (RaR scheme) was introduced as in Finance Act 2001. Within this section it referred that exemption and relief would still apply from Section 244 (Mortgage Interest) & 604 (PPR relief) of the Principle Act. It is however clear that the exemption can only be claimed within the limits specified of €7620.

Within the same Finance Act, Section 91/92 of the Stamp Act was amended to allow no clawback of stamp duty where rent is derived from PPR where owner is in occupation. It did not specify the RaR scheme with the actual text nor did it specify an amount. The Section of the Finance Act however was classified as Rent a Room, etc. Totally open for argument and a good argument with the Revenue is always interesting. The Revenue, if their booklets are anything to go by, and I tend to use leglisation rather than Revenue material, have taken the opinion that Stamp Duty is subject to clawback if rent derived outside the RaR scheme albeit not in a statement of practice.

Section 604 Principle Private Residency relief additionally does not refer to RaR however Sec 7 possibly implies a get out clause for them, which states “there have been changes as regards the use of part of the dwelling house for the purpose of a trade, business or profession or for any other purpose” then agreement would have to be obtained from an Inspector.