Tax Treatment of Landlords has to be Revisited

[triggs]

Budget 2012 tweaked CGT regime to encourage landlords to purchase housing stock in downturn.This purely a budgetary decision,nothing to do with fairness ot Tax system.Minister could do something similar again to keep Landlords in rental business.He could for instance,without interfering with income tax rates,reduce or eliminate CGT on rentals if rented continuously for a specified no of years.The 2012 adjustment was contingent on property not being sold for specified period- why not again?.LPT could be an allowable expense.An allowance could be given for travel similar to any other business.Theas measures of course do not other issues such as regulation and ownership

 

[Mocame]

Folks rent controls or what we call rent pressure zones in Ireland are heart of the problem not taxes. The problem is that the government can't address either - it is politically impossible for them to do so.

 

[PebbleBeach2020]

Folks rent controls or what we call rent pressure zones in Ireland are heart of the problem not taxes. The problem is that the government can't address either - it is politically impossible for them to do so.

The RPZ are an absolute disaster
The government knew that these don't work, they haven't worked the world over. Landlords now increase rent annually without fail, thus costing tenants more and more each year. And new landlords and rentals are charging astronomical rents initially as they are forever tied into 2% increases thereafter.

 

[Mocame]

Agree 100% PebbleBeach2020. RPZs have been a disaster in Ireland and if you look at estate agents reports on where landlords are selling up it is overwhelmingly in cities that are subject to RPZs.

Rent controls have proved disastrous everywhere they have been introduced. A friend recently moved to Sweden with his young family. He bought a house but has been advised to put his nine year old son's name on a waiting list to rent a private flat in Stockholm so he will have one by the time he starts university. Yes folks there is a ten year waiting list for private rented dwellings in Stockholm. There is also a massive black market in private rentals to rent controls are ignored in in this case. Classic insider/ outsider system.

 

[Greenbook]

Agree 100% PebbleBeach2020. RPZs have been a disaster in Ireland and if you look at estate agents reports on where landlords are selling up it is overwhelmingly in cities that are subject to RPZs.

Rent controls have proved disastrous everywhere they have been introduced. A friend recently moved to Sweden with his young family. He bought a house but has been advised to put his nine year old son's name on a waiting list to rent a private flat in Stockholm so he will have one by the time he starts university. Yes folks there is a ten year waiting list for private rented dwellings in Stockholm. There is also a massive black market in private rentals to rent controls are ignored in in this case. Classic insider/ outsider system.

Yes, rent controls always seem to create far more problems than they solve. The primary problem they create is lack of supply - landlords sell up and are not replaced.

 

[Boyddbookman]

Just curious if a tenant who is significantly benefitting from an RPZ rent amount locked into a rate far below the average market rate for the same property, is effectively in receipt of a benefit in kind resulting in a revenue obligation?

For example, if a tenant has an existing tenancy agreement with a historically low rent amount (€900) set prior to the introduction of the RPZ, but where the market rent for the same property is significantly higher (€1,600), is the tenant in receipt of an accommodation subsidy and does this benefit attract PAYE, USC and PRSI, as would the landlord’s obligation where full market rent is charged?

 

[Greenbook]

Just curious if a tenant who is significantly benefitting from an RPZ rent amount locked into a rate far below the average market rate for the same property, is effectively in receipt of a benefit in kind resulting in a revenue obligation?

For example, if a tenant has an existing tenancy agreement with a historically low rent amount (€900) set prior to the introduction of the RPZ, but where the market rent for the same property is significantly higher (€1,600), is the tenant in receipt of an accommodation subsidy and does this benefit attract PAYE, USC and PRSI, as B

Benefit in kind is only relevant if you are an employee ie. if an employer provided cheap accommodation to an employee, that would be subject to BIK. BIK doesn't exist outside of the employee/employer relationship

The only thing I can think that it might be is subject to gift tax eventually ie. after the annual tax free amount and the group c class threshold have been used up

 

[NoRegretsCoyote]

The truth is much simpler - maintaining old houses is a money pit and a task totally unsuited to bureaucratic councils. They literally couldn't afford to keep maintaining them.

This is a very true.

Councils have no sustainable revenue streams and have always been reliant in lobbying central government for grants to build or repair. It's not well appreciated but an investment fund will manage housing stock much more efficiently as they project cash flows over 30 years in a way that no Irish council ever will.

It's also a point totally missed in the debate about HAP/RAS vs traditional local authority tenancies. For sure there is a big ongoing cash cost to the government with HAP/RAS but it almost totally de-risks social housing provision. If the property is no longer suitable or the tenant's needs change the public sector is no longer stuck with the property.

 

[valery]

Just curious if a tenant who is significantly benefitting from an RPZ rent amount locked into a rate far below the average market rate for the same property, is effectively in receipt of a benefit in kind resulting in a revenue obligation?

Greenbook has clarified that the tenant is not in receipt of a benefit in kind, but what about tenants who stop paying rent and the arrears amount to €,000s. Two recent cases of tenants owing €70,000 and €40,000. Would revenue take an interest in these cases?
lots of queries on here from parents concerned about letting at reduced rates to their children and tax implication. I can see the annual gift allowance coming into the equation in that scenario but not for a tenant who owes substantial arrears.

 

[T McGibney]

Greenbook has clarified that the tenant is not in receipt of a benefit in kind, but what about tenants who stop paying rent and the arrears amount to €,000s. Two recent cases of tenants owing €70,000 and €40,000. Would revenue take an interest in these cases?

What basis would they have for doing so?

It's clearly neither income nor a gift.

 

[T McGibney]

The only thing I can think that it might be is subject to gift tax eventually ie. after the annual tax free amount and the group c class threshold have been used up

Obviously not a gift though.

The letting is at market value, albeit one that has been frozen by legislation.

 

[Greenbook]

Obviously not a gift though.

The letting is at market value, albeit one that has been frozen by legislation.

It is a bit tenuous, but if Revenue were to argue this point, I think that it is a 'gift' would be the only avenue open to them ie. a government imposed gift is still a gift. S.40 CATCA 2003 is the relevant section and while 'gifts' of this type (annual use of a property at below market rent) are invariably voluntary, the section does not specify that they must be.

That said, Revenue arguing this would be unlikely in the extreme from a policy perspective - impose RPZs on landlords and then tax tenants on the benefit!

 

[triggs]

Tax is very much an issue,see thread'What would keep you in the market'.

 

[T McGibney]

It is a bit tenuous, but if Revenue were to argue this point, I think that it is a 'gift' would be the only avenue open to them ie. a government imposed gift is still a gift. S.40 CATCA 2003 is the relevant section and while 'gifts' of this type (annual use of a property at below market rent) are invariably voluntary, the section does not specify that they must be.

It's more than a bit tenuous, in fairness.

gift
noun
1.
a thing given willingly to someone without payment; a present.
"wedding gifts"

 

[Greenbook]

It's more than a bit tenuous, in fairness.

Unfortunately, words in tax law often do not mean what they mean in real life ie. they take on a tax law meaning. 'Gift', 'annual benefit' etc. have their own definitions in the CATCA 2003 and also from case law. So in my view this is a possible argument or if I was Revenue it the one I would take on the basis that it is the only one which has any chance of success. That is all that I am saying here. Can't see it happening anyway, as it would make no sense from a policy perspective.

 

[T McGibney]

Unfortunately, words in tax law often do not mean what they mean in real life ie. they take on a tax law meaning. 'Gift', 'annual benefit' etc. have their own definitions in the CATCA 2003 and also from case law. So in my view this is a possible argument or if I was Revenue it the one I would take on the basis that it is the only one which has any chance of success. That is all that I am saying here. Can't see it happening anyway, as it would make no sense from a policy perspective.

If you can't see it happening, why are you raising it here as if it were a possibility?

 

[Towger]

If you can't see it happening, why are you raising it here as if it were a possibility?

It is an interesting observation and is how Revenue think/operate. I have seen it several times before, Revenue realize there is a interaction between laws and suddenly have a rulling which change how tax is applied.

 

[T McGibney]

It is an interesting observation and is how Revenue think/operate. I have seen it several times before, Revenue realize there is a interaction between laws and suddenly have a rulling which change how tax is applied.

No, it's pure scaremongering. @Greenbook needs to either cite the definition of a gift that he claims is included in CATCA or withdraw his claims.

 

[Always Learning]

I didn't see it as scaremongering to be fair.

The guy above, boyddbookman asked what seemed to be a purely theoretical / academic question....

Just curious if a tenant who is significantly benefitting from an RPZ rent amount locked into a rate far below the average market rate for the same property, is effectively in receipt of a benefit in kind resulting in a revenue obligation?

For example, if a tenant has an existing tenancy agreement with a historically low rent amount (€900) set prior to the introduction of the RPZ, but where the market rent for the same property is significantly higher (€1,600), is the tenant in receipt of an accommodation subsidy and does this benefit attract PAYE, USC and PRSI, as would the landlord’s obligation where full market rent is charged?

Greenbok answered what he felt could be the case if one were to treat the question purely academically and follow the letter of the law. He then put the caveat in that he doesn't see it as a likely scenario, but a possibility by the letter of the law. That's how I read the situation anyway.

 

[Greenbook]

If you can't see it happening, why are you raising it here as if it were a possibility?

It was simply a comment I made. A poster said that the RPZ benefit could be subject to BIK. I explained that clearly it couldn't as BIK only applies to employees. I then made the comment that the only possibility is gift tax, that it is a rather tenuous argument and that it made no sense anyway from a policy perspective. I never said 100% there is a gift tax liability here.

and here is the relevant provision - note it is a 'deeming' provision.

(2) A person is deemed to take a gift in each relevant period during the whole or part of which that person is allowed to have the use, occupation or enjoyment of any property (to which property that person is not beneficially entitled in possession) otherwise than for full consideration in money or money's worth.
	(3) A gift referred to in subsection (2) is deemed to consist of a sum equal to the difference between the amount of any consideration in money or money's worth, given by the person referred to in subsection (2) for such use, occupation or enjoyment, and the best price obtainable in the open market for such use, occupation or enjoyment.