Rental Tax - Compliance Levels ?

I come across a lot of posts here regarding tax to be paid on rental incomes. A lot of people don't really seem to be doing their sums when it comes to making their decision on buying rental property.

They just think, 12k a year for rent, 10k a year for mortgage = 2k for me !!

I have quite a lot of friends who have rental properties but I am the only one paying tax and doing proper tax returns. (I'm not saying that to be a holy joe - it's just the truth!)

What percentage of people are actually declaring tax on rental incomes ?
When will revenue begin to clamp down on this ?

Has anyone else noticed this or do I just hang around with dodgy characters !!?

As you probably know Revenue are already clamping down on the SD issues so I would imagine that rental income could be next?

Revenue acts on abuse of stamp duty relief

If they do make a serious effort to clamp down on this I think it would force a lot of people to sell their "investment" properties in order to pay income tax / stamp duty owed.

Maybe there isn't the appetite at the moment to rock the boat when it comes to property ?

Hopefully as more and more tenants become aware of their entitlement to rent tax relief and claim it this will help uncover evasive landlords. Ditto for PRTB registration and so on.

infinity said:

Maybe there isn't the appetite at the moment to rock the boat when it comes to property ?

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If you think revenue are going to ignore people not declaring tax so as to allow the property market to stroll along nicely then you must be living on cloud cuckoo land.

The whole PRTB thing seems to be lost on lots of landlords too. I know of someone else who is paying his rental tax properly but who never heard of the PTRB.

I thought you could only do a proper tax return (claiming allowances for mortgage interest, furniture depreciation,etc) if you were registered with the PRTB ?

But obviously the PRTB doesn't talk to the Revenue and the Revenue doesn't talk to the PRTB.

Surely it wouldn't be too difficult a job to create a list of all the people with mortgages on more than one property and who aren't paying any rental income?

I know the stats from CSO tell us that there is a lot of empty property out there and that investors are just buying them hoping for capital appreciation.

Somehow I think this figure is greatly exaggerated, a lot of these "empty" properties have tenants that are paying cash.

Bluetonic said:

If you think revenue are going to ignore people not declaring tax so as to allow the property market to stroll along nicely then you must be living on cloud cuckoo land.

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No - I don't believe that at all - but it makes you wonder when so many people are getting away with it. It's not rocket science.

infinity said:

I thought you could only do a proper tax return (claiming allowances for mortgage interest, furniture depreciation,etc) if you were registered with the PRTB ?

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Yes - I thought that was the case too from some time last year. See for example.

Bluetonic said:

If you think revenue are going to ignore people not declaring tax so as to allow the property market to stroll along nicely then you must be living on cloud cuckoo land.

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This has happened before. In the 1980s & 1990s the Revenue wilfully decided to ignore the abuse of bogus non-resident accounts for tax evasion purposes. However this didn't stop them pursuring everyone when it suited them, earlier this decade. Had the Revenue acted earlier, their total take of tax, interest and penalties would have been a fraction of what they ultimately collected. The same thing could now happen all over again.

infinity said:

But obviously the PRTB doesn't talk to the Revenue and the Revenue doesn't talk to the PRTB.

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The PRTB doesn't have to "talk to the Revenue". Neither does the Revenue have to "talk to the PRTB". The PRTB publish details of all registrations with them. These details are therefore publicly accessible to everyone, including the Revenue. It is very easy for the Revenue to refer to this list when it suits them, for example while preparing for an audit of a taxpayer with rental income, or in any basic cross-check exercise.

infinity said:

I know the stats from CSO tell us that there is a lot of empty property out there and that investors are just buying them hoping for capital appreciation.

Somehow I think this figure is greatly exaggerated, a lot of these "empty" properties have tenants that are paying cash.

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Maybe, but the 2006 Census enumerators also reported hundreds of thousands of empty properties, which would support the CSO thesis.

ClubMan said:

Yes - I thought that was the case too from some time last year. See for example.

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Section 11 Finance Act 2006 inserted a new provision (Section 97(2I) TCA 1997) making entitlement to an interest deduction against rental income on money borrowed for the purchase, improvement or repair of a rented residential premises conditional on a chargeable person having complied with the requirements of Part 7 of the Residential Tenancies Act, 2004 (the RTA). The measure has effect from the year of assessment 2006 and for accounting periods beginning on or after 1 January 2006.

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The last return I did was for 2005 and there was no mention of the PRTB. Perhaps the forms for 2006 will mention it and you will have to supply Revenue with your PRTB number?

You don't have to supply Revenue with your PRTB number at least on the form 11 2006 online return. However if you claim mortgage interest against rental income in 2006 without being registered with the PRTB, you have no defence if the Revenue disallow it unilaterally following an enquiry or in the course of an audit.