Tax Treatment of Landlords has to be Revisited

[Greenbook]

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

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



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.

That is correct, that is exactly what I was saying. I don't think the Revenue have a strong technical argument, but it is their best bet if the Min for Finance insisted they try to tax the RPZ benefit. From a policy perspective, it won't happen, so it is academic.

 

[NoRegretsCoyote]

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.

RPZs are the central plank of government policy toward renters for over half a decade, benefitting perhaps 100,000 tenants by now.

I would be absolutely astonished if another arm of government turned around and told these tenants that they had a tax liability as a result.

 

[NoRegretsCoyote]

I don't think the Revenue have a strong technical argument, but it is their best bet if the Min for Finance insisted they try to tax the RPZ benefit.

There is precisely ZERO chance of any Finance minister instructing Revenue to tax away the benefit that the Housing minister has worked very hard to provide to renters.

Even if Revenue autonomously took a view that a gift tax liability for renters existed you would find a legislative amendment clarifying it adopted in jig time.

I'm sorry but some comments display absolutely zero idea of how politics and public policy work.

 

[Greenbook]

There is precisely ZERO chance of any Finance minister instructing Revenue to tax away the benefit that the Housing minister has worked very hard to provide to renters.

Even if Revenue autonomously took a view that a gift tax liability for renters existed you would find a legislative amendment clarifying it adopted in jig time.

I'm sorry but some comments display absolutely zero idea of how politics and public policy work.

See the second part of my comment

"From a policy perspective, it won't happen, so it is academic."

 

[T McGibney]

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.

There's nothing in that provision that even hints that the delivery of a service or good in an open market transaction and at a market price can constitute a gift - especially, as in the case of rents in RPZs, the quantum market price is constrained by law.

 

[T McGibney]

See the second part of my comment

"From a policy perspective, it won't happen, so it is academic."

Which is why you're clearly scaremongering in claiming elsewhere that it's a possibility.

 

[Boyddbookman]

To give some context to my original question concerning taxation :

I have a BTL property which had a long term tenant in situ. As a result of deciding to sell this property we issued the relevant notice of termination and the tenant subsequently left. We performed a cosmetic refurb and put the property on the market for sale, but the bids received are substantially short of the sales agent’s estimated valuation.

I do not wish to re-let this property (for reasons outlined previously) but was considering licensing occupation to my niece who is a student looking for suitable accommodation (stayed with us for the past two years, but now wishes to have her own independence).

The benefit is that the property would be occupied and will ensure the building insurance policy remains valid (property cannot be vacant for a 30 day period in any 12 month period). The license amount would be nominal, i.e. €10 per month, but I was concerned that this benefit may give rise to an unintended tax obligation for her/me.

This scenario then made me question how tenants who are benefiting from significant reductions in rent due to RPZs are treated.

 

[T McGibney]

To give some context to my original question concerning taxation :

I have a BTL property which had a long term tenant in situ. As a result of deciding to sell this property we issued the relevant notice of termination and the tenant subsequently left. We performed a cosmetic refurb and put the property on the market for sale, but the bids received are substantially short of the sales agent’s estimated valuation.

I do not wish to re-let this property (for reasons outlined previously) but was considering licensing occupation to my niece who is a student looking for suitable accommodation (stayed with us for the past two years, but now wishes to have her own independence).

The benefit is that the property would be occupied and will ensure the building insurance policy remains valid (property cannot be vacant for a 30 day period in any 12 month period). The license amount would be nominal, i.e. €10 per month, but I was concerned that this benefit may give rise to an unintended tax obligation for her/me.

This scenario then made me question how tenants who are benefiting from significant reductions in rent due to RPZs are treated.

The issue there is the unusually low licence rent of €10 pet month. Fix that higher and you're grand.

 

[NoRegretsCoyote]

I have a BTL property which had a long term tenant in situ. As a result of deciding to sell this property we issued the relevant notice of termination and the tenant subsequently left. We performed a cosmetic refurb and put the property on the market for sale, but the bids received are substantially short of the sales agent’s estimated valuation.

I do not wish to re-let this property (for reasons outlined previously) but was considering licensing occupation to my niece who is a student looking for suitable accommodation (stayed with us for the past two years, but now wishes to have her own independence).

IANAL but per RTB, it may not be that simple:

Landlords must offer the property back to the tenant that vacated on foot of a valid Notice of Termination if the property becomes available to rent again. The time period that a landlord must offer the property back to the tenant is 12 months from the expiry of the notice period.

The RTA is a bit tighter defining it as "the dwelling becomes available for reletting within...12 months". Arguably you would be letting it do your niece therefore obliged to offer it back to the original tenant first.

Of course the chance of the tenant wanting it back is pretty low if they've moved on with their life. And if you don't offer the tenancy back there is a very low chance that previous tenant will petition the RTB to get you to offer the property back to you for rent.

 

[Greenbook]

Which is why you're clearly scaremongering in claiming elsewhere that it's a possibility.

and when I said that, I also said that it would make no policy sense for Revenue to pursue this ie. an academic or technical issue, nothing more

 

[Boyddbookman]

IANAL but per RTB, it may not be that simple:



The RTA is a bit tighter defining it as "the dwelling becomes available for reletting within...12 months". Arguably you would be letting it do your niece therefore obliged to offer it back to the original tenant first.

Of course the chance of the tenant wanting it back is pretty low if they've moved on with their life. And if you don't offer the tenancy back there is a very low chance that previous tenant will petition the RTB to get you to offer the property back to you for rent.

Agreed, thank you for your reply.

Its an awkward position. The insurance company is refusing to renew the existing buildings insurance policy as the property is empty, so I have an exposure there. I do not wish to re-let the property due to the onerous and ever changing regulations which is why I am selling with vacant possession while this is still allowed. I need to have someone to stay in the property in order to allow me to insure it, until it is sold, that is why I am looking at a short term license rather than a letting agreement. As she is a student, it should only be a nominal amount.

Perhaps best if I speak with the previous tenant (on very good terms, thankfully) and explain the predicament that while I could offer it back to him, I would simply immediately have to serve him with notice to vacate for reason of sale.

I am also aware that under RTB regulations, I have to enter into a sale ageement within 9 months otherwise I need to offer the property back to the orignal tenant. This makes little sense to me, as again i would have to immediately serve a notice to vacate in the event that he did decide to take up the offer and move back in.... this is making me dizzy.

 

[Greenbook]

There's nothing in that provision that even hints that the delivery of a service or good in an open market transaction and at a market price can constitute a gift - especially, as in the case of rents in RPZs, the quantum market price is constrained by law.

Read sub(2) again
(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.

ie. a person takes a gift if they are allowed to have use of a property otherwise than for full consideration ie. full value.

If you grant an RPZ capped lease to a tenant, you are allowing the tenant to have full use of the property otherwise than for full consideration.
The landlord's motivation in doing so is irrelevant.

See also sub(3)
(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.

It is the open market not the government imposed market.

These are also deeming provisions ie. a provision stating how something is to be treated even if what is actually happening in real life is different.

Again, before I'm accused of scaremongering or worse, due to policy considerations, I can't see this approach being taken by Revenue, so we are discussing an academic issue.

 

[Boyddbookman]

IANAL but per RTB, it may not be that simple:



The RTA is a bit tighter defining it as "the dwelling becomes available for reletting within...12 months". Arguably you would be letting it do your niece therefore obliged to offer it back to the original tenant first.

Of course the chance of the tenant wanting it back is pretty low if they've moved on with their life. And if you don't offer the tenancy back there is a very low chance that previous tenant will petition the RTB to get you to offer the property back to you for rent.

Thank you NoRegretsCoyote... the RTA explicitly extends the act to licences... so no added protection for me going that particular route.

"Application of Act extended to licences and licence agreements (15.07.2019) by Residential Tenancies (Amendment) Act 2019 (14/2019), s. 37, S.I. No. 355 of 2019. "

 

[NoRegretsCoyote]

The insurance company is refusing to renew the existing buildings insurance policy as the property is empty, so I have an exposure there.

AFAIK there are brokers who specialise in this, it might be worth asking on the insurance forum. Unoccupied buildings are very common.

that is why I am looking at a short term license rather than a letting agreement. As she is a student, it should only be a nominal amount.

If you trust your niece enough to live with you then you don't need a license agreement at all and you probably don't need the €10 a week either. She would just then be a caretaker while the house is on the market and there is no possibility to argue that the house is available for re-letting.

(2) for such use, occupation or enjoyment, and the best price obtainable in the open market for such use, occupation or enjoyment.

It is the open market not the government imposed market.

The RPZ price is the open market price for that tenancy. There is no better price obtainable because the landlord cannot remove said tenant on a whim and offer it to a third party at a higher price.

 

[Greenbook]

AFAIK there are brokers who specialise in this, it might be worth asking on the insurance forum. Unoccupied buildings are very common.


If you trust your niece enough to live with you then you don't need a license agreement at all and you probably don't need the €10 a week either. She would just then be a caretaker while the house is on the market and there is no possibility to argue that the house is available for re-letting.




The RPZ price is the open market price for that tenancy. There is no better price obtainable because the landlord cannot remove said tenant on a whim and offer it to a third party at a higher price.

No, open market means 'open market'. It is also a deeming provision so it is not the rent you actually get but the 'open market' rent. That is what Revenue would be arguing here.

 

[NoRegretsCoyote]

It is also a deeming provision so it is not the rent you actually get but the 'open market' rent. That is what Revenue would be arguing here.

A landlord adhering to RPZ rules cannot evict a tenant and let it to another tenant at a higher price. If the tenant benefitting from a regulated leaves voluntarily the landlord has to re-let at the same regulated rent to a new tenant. The landlord can in no circumstances let it to anyone at a price it would fetch if it was coming on the market for the first time.

Therefore in our increasingly hypothetical example the regulated rent is the open market rent

 

[Greenbook]

A landlord adhering to RPZ rules cannot evict a tenant and let it to another tenant at a higher price. If the tenant benefitting from a regulated leaves voluntarily the landlord has to re-let at the same regulated rent to a new tenant. The landlord can in no circumstances let it to anyone at a price it would fetch if it was coming on the market for the first time.

Therefore in our increasingly hypothetical example the regulated rent is the open market rent

There is an open market, new properties rented for the first time. This is a deeming provision, so you are looking at the open market, not what is happening in reality.

 

[NoRegretsCoyote]

so you are looking at the open market

But there is no open market for the property in question and cannot be!

Every vehicle has an open market value as anyone can sell a vehicle to anyone else. So if I have a car worth €20k on open market and sell it to you for €10k you are receiving a consideration of €10k.

But for a given property in an RPZ subject to tenancy there is no open market as it cannot be let to anyone else at a higher price in any circumstance.

My last word on this I promise!

 

[Greenbook]

But there is no open market for the property in question and cannot be!

Every vehicle has an open market value as anyone can sell a vehicle to anyone else. So if I have a car worth €20k on open market and sell it to you for €10k you are receiving a consideration of €10k.

But for a given property in an RPZ subject to tenancy there is no open market as it cannot be let to anyone else at a higher price in any circumstance.

My last word on this I promise!

But it is a deeming provision, so it is a deemed comparison between the open market rent and the actual rent. You can find the open market rent ie. a new property.

The real point on this is that this is, in my opinion, as somebody who works in the this area, the only possible way the Revenue could come at taxing this. Would they succeed? It is a possibility. Will this argument ever hit the courts? No, because it would make no sense at all from a policy perspective to attempt this. Thus the question is academic.

I never entered this discussion arguing that this is a 100% cert and tenants in RPZs are 100% subject to gift tax. It was merely to provide an answer to another poster's question on whether BIK was a possibility. It is not, but this might be, were the government ever to go mad and pursue the tax route.

 

[azerty]

While "hoping " that the government sees that some policies need to change to keep private LL. I think they should clarify quickly what is their stance on the eviction ban and its extension. Over the past decade, only a couple of rented apartments were sold in the tiny block near me with about 20 apartments. 3 were sold last year and I know of 3 that are planned for sale this year (it's January!)