UK property rental income liability question

C

coineach

Guest
Hi,
Can anyone tell me what my tax liability is for rental income of my property in Scotland?

Background: I bought a property in Scotland 4 years ago that I originally intended to move back into but to cut a long story short, i'm still here! I havent declared this either in Ireland or Scotland because my mortgage far exceeds the rental income so I didnt consider myself as having net income.

Do I need to declare this to the Irish or UK revenue or both, and who would i be liable to pay the tax to if there was anything to be paid?

I presume the fact that my mortgage is £670 and my rental income after agents 10% is £470 that I would not be liable for income tax?
 
How much of your mortgage is interest and how much is capital repayment for each of the last four years?
 
budapest said:
How much of your mortgage is interest and how much is capital repayment for each of the last four years?
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I dont have this information to hand but as its a mortgage early in its term I think the majority would be interest.
 
I would guess that it also depends on which country the mortgage is in, the UK or IRL?

I know in other foreign countries you can't claim mortgage interest if the mortgage is based overseas.
IRL's tax law are an evolution of Anglo tax laws (just like our Justice laws), so there is probably a lot of give and take in this particular case.
 
paddyd said:
I would guess that it also depends on which country the mortgage is in, the UK or IRL?
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I always wonder why people post guesses. In any case, your guess is a bad guess. It makes no difference where the finance to buy the house was raised.

paddyd said:
IRL's tax law are an evolution of Anglo tax laws (just like our Justice laws), so there is probably a lot of give and take in this particular case.
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Probably a lot of give and take ? What do you mean by this ? Are you having a laugh ? Also our tax laws are not an evolution of Anglo tax laws. Irelands tax laws are completely independent to UK tax laws.



The OP won't have a tax liability anywhere, assuming the costs exceed the rental income. You never pay tax on a loss.



You are an Irish Tax resident (because you have lived in Ireland for a few years).
You must pay tax in Ireland on your worldwide income.

If you did make a profit on your UK property, you would have to pay tax in the UK. You would also be liable to pay tax in Ireland on the profit of the UK property (however, any tax paid in the UK would be subtracted from your Irish tax liability). This would mean you would pay very little if any tax in Ireland.

In summary, you would be liable for tax in UK and Ireland. But because of the double taxation agreement, any tax paid in UK is subracted from what you have pay in Ireland.

Do you have to submit a return when you make a loss ?
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I don't know and I won't guess. Someone must know, and I hope another poster answers this.
However, there is a benefit to declaring a loss on your return. The loss can be carried forward to the next years. This means that if you make a profit in the future, you can write it off with the loss made in a previous year.
 
Kellypk said:
I always wonder why people post guesses. In any case, your guess is a bad guess. It makes no difference where the finance to buy the house was raised.
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wow mate, way to lay on the arrogence :)

of course it does. If the mortgage is in the UK, and there is no profit from renting (after mortgage interest/costs), then there is no tax due in the UK. But there could still be Irish liability.

However, if the mortgage is in Ireland, then clearly there is rental profit, and tax is to be paid (and none in ireland if the tax when subtracted from the liability here is less).
My 'guess', as you so arrogently pointed out, was merely to tell the OP that Ireland and the UK have very cosy agreements for pretty much everthing, incl tax. Our relationship with the UK differs from other countries, so the OP should do more investigation.
One question: Does the UK system accept foreign mortgage interest as a cost? Most countries don't.

heck, UK Rental Income even has its own SECTION on the Irish Tax return form (check on revenue.ie for a Form 12).

Kellypk said:
Probably a lot of give and take ? What do you mean by this ? Are you having a laugh ? Also our tax laws are not an evolution of Anglo tax laws. Irelands tax laws are completely independent to UK tax laws. Irish tax laws are as similar to German tax laws as to UK tax laws.
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this is a million miles off topic, but it screams for a response.

In lay-mans terms, do you really think we made it all up in 1922!? A whole new legal system?

if we remove most of the "800 years" of english rule, and start in the 1600's, Penal law was enforced after the battle of the boyne. This evolved under british rule to became Brehon law. In the early 1800's we had the Act of Union, which stayed in place until the Irish Free state in 1922. Note the word 'act'. They were merely added to the existing British Law system we already had.

our Law's (tax law is a massive part) are derived wholely and entirely from English Common Law.

Join courts.ie, I know they have a very good History of law section.

interesting aside: we also inherited Barristers and Hospital consultants from the English systems. Gentry couldn't be seen to be mere Doctors or Solicitors, so they had their own upper-class positions, hence both are still very hierarchial systems.
 
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Fair Play PaddyD, you have defended your position, and fought your corner.

I'll leave the tax debate to be clarified by some tax expert, the Champions League final is on, and I'm tired.

As for your history lesson, true, 90 years ago we started off with a tax system inherited from the UK. For the past 90 years the two tax systems have gone their separate ways.

Bear in mind that 90 years ago, there was no such thing as PAYE, no such thing as VAT, no such thing as CGT. The tax system 90 years ago was nothing like the tax system of today.

What tax laws have we inherited from the UK 90 years ago which are still relevant today ? Feck all methinks !

I'm hoping some people post to this thread to answer one question
Who has written the most nonesense on this thread, me or PaddyD ?
 
Kellypk said:
As for your history lesson, true, 90 years ago we started off with a tax system inherited from the UK. For the past 90 years the two tax systems have gone their separate ways.

Bear in mind that 90 years ago, there was no such thing as PAYE, no such thing as VAT, no such thing as CGT. The tax system 90 years ago was nothing like the tax system of today.

What tax laws have we inherited from the UK 90 years ago which are still relevant today ? Feck all methinks !
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If you think that Irish tax is so different from UK tax, then please tell my why such basic things are PAYE form names, such as P60s and P45s are the same in both countries? Have you ever been given your P45? If you have you will find that it is called the same and gives the same information in both countries!
 
Steve D said:
If you think that Irish tax is so different from UK tax, then please tell my why such basic things are PAYE form names, such as P60s and P45s are the same in both countries? Have you ever been given your P45? If you have you will find that it is called the same and gives the same information in both countries!
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Yeah, clearly we have indepedently adopted tax systems devised by our larger neighbours since separation 90 years ago.

I'm not trolling (this is a new word I learned today !). I was just having the craic to put in in the vernacular. When I saw PaddyDs statement which said that there was probably some give and take and he spoke of a cosy relationship, I wasn't really sure what he meant, and I still don't, but not to worry.

Hey, this thread has gone off topic. The OP couldn't care less about how the Irish tax system has evolved since independence.

There are a couple of unanswered questions.

1. Is a landlord legally obliged to make a tax return on a property when the landlord makes a loss. What's the position in the UK, what's the position in the Republic.

2. When an Irish tax resident is submitting a tax return in the UK for a rental property in Scotland, can s/he write off the mortgage interest against the rental income if the mortgage was raised in Ireland. PaddyD thinks not, I'm thinking you can, in fact I'd bet you can, but can someone please clarify
 
In answer to no 1
Yes he must make a return even if he makes a loss. Remember losses can be carried forward so he could benifit later from them and use them if he actually makes a profit in future years
In answer to no 2
Yes he can claim interest relief on a mortgauge raised in Ireland.
 
Galwayboy said:
In answer to no 1
Yes he must make a return even if he makes a loss. Remember losses can be carried forward so he could benifit later from them and use them if he actually makes a profit in future years
In answer to no 2
Yes he can claim interest relief on a mortgauge raised in Ireland.
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Cheers Galwayboy

You say a return must be made when there is a loss. Making a return costs money if one hires an accountant. It could cost maybe €500 which is a right kick in the teeth if the landlord is already making a loss. I appreciate the benefit of losses carrying forward.

What would happen if someone didn't bother to submit a return (where they make a loss, and would have no tax liability).

Would the tax authorities take a very dim view of this, as they are not being defrauded of tax ? I wonder has anybody ever been penalised for not submitting a tax return on a loss making property ?

I know the law is the law, and we can't break the law, because it's wrong to do so. And this site is very law abiding in it's advice (apart from people constantly saying they pay their builder in "cash" and they pay their roofer in "cash" to get a better price.

What would the likely impact of not submitting a tax return on a loss making property ? How big would the penalties be ?
 
Hi Kelly PK,

Just because you are paying more in repayments does not mean you are making a loss (capital repayments) - i am sure both the Irish and UK authorities would take a dim view of any omissions.

I sumitted a loss making return in the UK last year through an Irish firm last year (reasonable half the 500) and the UK authorities have said i dont need to submit one for the forseeable future so no more cost.
 
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