Property Letting Company - Trading Income Vs Rental Income

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Hi there,

Does anyone have any definitive supporting legislation from Revenue which confirms that the trading profit earned by a company who rents multiple properties and then rents these back out is Trading income rather than rental income. This company of course incurs related costs in the course of their business as any other trading business would eg office rental, wage, maintenance, general expenses etc

Cheers
 
I think the key question is what is the nature of the trade. Is the company a property management company or an investment company.

Are these short term lets where it is clear that the company is managing multiple tenants in a property per annum or just one per year?

What is the nature of the arrangement with the landlord, the company agrees to pay rent of say €12,000 per annum and can keep any surplus that it gets for managing the property?

Is the company licenced as a letting agent? Does the company record the rent it receives as income. Does the company charge VAT on its services?
 
The company rents out multiple apartments/houses out directly from the owners on a annual basis at the market rate and then re-rents these out on a short and long term basis. The short term rentals are charged at the 9% rate for VAT while the long-term rentals are VAT exempt. All income is then recorded as income while the direct costs (rental payments/maintenance/cleaning) and operating costs ( wages/office rent etc) are accounted for accordingly.

Any info would be great
 
if you drop your company out of it the the owners are renting.
So transposing your lot in the middle in an attempt to convert rental income into trading income could smack of tax avoidance so .....my view is it fails the badges of trade test.
 
But the owners would not be in a position to short term/long term let as they do not have the supplementary resources that enable this trade (lol). I would have. I would have envisaged that the the sheer frequency of the transactions and the volume, accompanied by the supplementary work in connection with the business, would determine this to be a trading company
 
I also wonder if the fact that the annual rental payments made to the existing owners will be taxed as rental income would affect any determination.
 
But I still think it comes back to separating the short term and long term.

The short term I think is a trade.

The long term what is this how much margin are you getting in this? If you have a lease with a tenant for say €1,500 per month and you pay the landlord €1,200 per month then I think it's Case V.
You could claim a deduction for your management costs.

If you are charging a placement and management fee of €300 per month then it's a trade subject to VAT @23%.
 
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