Already owned rental property and daughter going to University

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Treaty12

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We own a six bed rental property in university area which is currently let to foreign students.
The monthly rent is 6 x 780. This tenancy is registered with the RTB.

We have mortgage with monthly interest of about 900/month that we expense against the rental income.
Now our daughter is at college and is looking to move into a house with friends.

I am trying to work out if it makes sense to give her use of the house.

The RTB has the following exemption listed on their website but its difficult to know exactly what it means: Instances where a tenant lives with the spouse, civil partner, parent or child of the landlord and there is no written letting agreement in place.

If we give her use of the house and rent the rooms to her friends, does it fall under the RTB exemption?
If that's the case, is the mortgage interest and house repairs etc. still allowable expenses?

Or if it doesn't fall under the exemption, how do I set the rent, bearing in mind its in a RPZ?

Any ideas here would be great as our accountant isn't really sure.
 
Treaty12 said:
If we give her use of the house and rent the rooms to her friends, does it fall under the RTB exemption?
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If your daughter takes up residence, and the property becomes her PPR and the other students pay the rent to your daughter, then they are licensees and not subject to RTB registration. She could avail of tax-free income up to €14k under the rent a room scheme, go 1c above this and she'd be liable for income tax on the lot.
 
For it to be the child's ppr it would have to be gifted to her?
And that would have tax implications?

And she wouldn't have first time buyer rights if she ever went to buy a house for herself?
 
Revenue website

Principal Private Residence (PPR) Relief

This is an explanation of what relief on cgt is available for a Principal Private Residence (PPR)
www.revenue.ie www.revenue.ie

"Principal Private Residence (PPR) Relief
A Principal Private Residence (PPR) is a house or apartment which you own and occupy as your only, or main, residence".
 
moneymakeover said:
Revenue website

Principal Private Residence (PPR) Relief

This is an explanation of what relief on cgt is available for a Principal Private Residence (PPR)
www.revenue.ie www.revenue.ie

"Principal Private Residence (PPR) Relief
A Principal Private Residence (PPR) is a house or apartment which you own and occupy as your only, or main, residence".
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That's the definition for the purpose of a specific exemption from CGT on sale of property, not relevant to the discussion at hand.

The relevant guidance, from Revenue's Tax and Duty Manual 07-01-32 is as follows:

Qualifying residence

4.1 Sole or main residence

The room or rooms must be in a residential premises situated in the State that is occupied by an individual as her or his sole or main residence during the particular tax year.

An individual may live in more than one residence but can only avail of
rent-a-room relief in respect of her or his sole or main residence. In general, an
individual’s sole or main residence is that individual’s home for the greater part of the time and where friends and correspondents would expect to find him or her.

The individual does not have to own the residence and it could, for example, be
occupied as rented accommodation.
 
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It seems weird to me that the daughter can receive income from an asset that's not hers
Just because she's living in the house

The income from 5 bedrooms say 46,800
Minus 14k rent a room :
32,800
Is her income?
She pays tax on that?
She doesn't get interest relief because she's not paying the mortgage?
 
moneymakeover said:
It seems weird to me that the daughter can receive income from an asset that's not hers
Just because she's living in the house
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Maybe weird but it’s the law.

moneymakeover said:
The income from 5 bedrooms say 46,800
Minus 14k rent a room :
32,800
Is her income?
She pays tax on that?
She doesn't get interest relief because she's not paying the mortgage?
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No. She may receive €14k from all rooms tax free. At €14,000.01 or above the landlord becomes liable for tax on the full amount.

It is designed so as not to drag people with lodgers into the tax net, you won’t get rich from it.
 
It only really works if the student is in full time education and under 25, otherwise the use of the house would be considered a gift and tax would apply. Plus the parent still has to pay the mortgage with no offsets. Though I am sure there are circumstances where this total income after tax from a rental property is less than the 14k your child could earn under rent a room if you were to rent the house, claim the deductions and give your student 14k cash.


Free Use of House by Child attending UniversityThe provision of the use of a house owned by a parent rent-free, to a child not more that25 years of age who is attending university, to help support and maintain the child while inuniversity, is a normal and reasonable provision and is, accordingly, exempt from tax underSection 82 CATCA 2003.

For me the waters are a bit murky as to whether revenue would allow for support to take the form of a four bed house, in theory would you rent a four bed house for your kid if you didn't already have one?. Or if there was no real need for the child to be in another property ie they could in theory live at home if within reasonable commuting distance. I would love to speak with someone who is operating this kind of structure as I have never come across anyone.
 
misemoi said:
For me the waters are a bit murky as to whether revenue would allow for support to take the form of a four bed house, in theory would you rent a four bed house for your kid if you didn't already have one?. Or if there was no real need for the child to be in another property ie they could in theory live at home if within reasonable commuting distance. I would love to speak with someone who is operating this kind of structure as I have never come across anyone.
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+1

The waters are always a bit murky when it comes to cases like this. I think that in relation to the rent a room scheme there is a world of difference between a student sharing say a small apartment with a lodger and and sharing a what was previously a 6-bed investment property.

Caveat emptor.
 
I agree its a bit murky, It certainly is an investment property up to now.
On the other hand, it would be our daughter's PPR, she is 19 and our own home is well outside commuting distance. Our only alternative would be to pay rent a share of a different house for her and continue renting out as an investment property

I'm not thinking of this to avoid tax.
The bigger issue for us is, if we decide this exemption doesn't apply to us and we continue to register it through the RTB, how will it affect our ability to set rent in terms of RPZ?

For example there'll now only be 5 rooms rented out. Her cousin will certainly be one of them and we'll have to offer a siginificantly reduced rent to her.
And we probably would have to discount the rent to her friends as 780-800 / person is the top rate in the area, only new to rental market properties being able to charge that due to RPZ rules.
So say the total rent is now 700/month by 4 plus 400/ month for cousin. The yearly rent is now down to 38,400 for whole house. Is that would should be entered on RTB site? What happens if circumstances change and we go back to renting out?
 
Treaty12 said:
On the other hand, it would be our daughter's PPR, she is 19 and our own home is well outside commuting distance. Our only alternative would be to pay rent a share
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I wouldn't take that for granted. I'd guess that for most students, their PPR during their time in college remains their family home rather than where they stay for the part of the year while they're in college.

If someone needed for some reason to claim that their PPR was eg a college halls of residence, I think they might struggle to do so.
 
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I would argue differently....when I moved out at 18 for college I never lived at my parents address again, and no-one would have expected to find me there normally, even during the holiday periods - I was long gone exploring Europe and the US in my free time!. If bills, revenue address is updated and your child is living in the rental then it would be hard to argue it was anything other than their PPR.

In this case, it looks like it is a moot point anyway as the OP would earn far more than after tax of 14k that his child could earn by accepting rental income and being able to offset the expenses against it.
 
T McGibney said:
I wouldn't take that for granted. I'd guess that for most students, their PPR during their time in college remains their family home rather than where they stay for the part of the year while they're in college.

If someone needed for some reason to claim that their PPR was eg a college halls of residence, I think they might struggle to do so.
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If that is the case, then the "Right" thing to do is register a tenancy with the RTB?
For 38.4k, i.e. lower than the market value of 48.9k ? Does this then become a rent cap under RPZ ?

or can I add a notional element for Daughter's rent to figure given to RTB without actually paying tax on it?
 
Treaty12 said:
If that is the case, then the "Right" thing to do is register a tenancy with the RTB?
For 38.4k, i.e. lower than the market value of 48.9k ? Does this then become a rent cap under RPZ ?

or can I add a notional element for Daughter's rent to figure given to RTB without actually paying tax on it?
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Sorry, my knowledge of the Residential Tenancies legislation wouldn't be sufficiently strong to enable me answer these questions without guessing.

Hopefully others can advise?
 
misemoi said:
It only really works if the student is in full time education and under 25, otherwise the use of the house would be considered a gift and tax would apply. Plus the parent still has to pay the mortgage with no offsets. Though I am sure there are circumstances where this total income after tax from a rental property is less than the 14k your child could earn under rent a room if you were to rent the house, claim the deductions and give your student 14k cash.


Free Use of House by Child attending UniversityThe provision of the use of a house owned by a parent rent-free, to a child not more that25 years of age who is attending university, to help support and maintain the child while inuniversity, is a normal and reasonable provision and is, accordingly, exempt from tax underSection 82 CATCA 2003.

For me the waters are a bit murky as to whether revenue would allow for support to take the form of a four bed house, in theory would you rent a four bed house for your kid if you didn't already have one?. Or if there was no real need for the child to be in another property ie they could in theory live at home if within reasonable commuting distance. I would love to speak with someone who is operating this kind of structure as I have never come across anyone.
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You've a few problems here. Firstly you seem to have the property already let, so you need to give notice to the existing tenants (I assume "family use" covers this).
Or one leaves and your daughter moves in?
Have you a "lead tenant" scenario or are they licensees?
Either way your daughter moving in should be ok, but if she wants to collect rent from other tenants (which she can technically do as a sub let), then her rent-a-roof relief is only up to 14k. If she goes over that then all of it is liable for tax, not just the portion under 14k.

There's practical issues here around having friends live with her. Given the circumstances she could be readily exploited. So perhaps give her a year to settle in on her own and then decide whether or not to let her sublet or to rent the other rooms separately yourselves. Its a good income you are losing so you might actually be better off just paying for her to stay in college accommodation if available for the first year and then decide what to do.
 
Treaty12 said:
We own a six bed rental property in university area which is currently let to foreign students.
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Is it a single entrance with one kitchen and six bedrooms? Or is it subdivided in any way?

Do you have individual tenancy agreements or a joint one? If individual agreements are they all registered with the RTB?

I ask as all of this has a bearing on rent limits if it’s in an RPZ - also whether it is possible for your daughter to occupy one part and tenants the other.
 
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lff12 said:
You've a few problems here. Firstly you seem to have the property already let, so you need to give notice to the existing tenants (I assume "family use" covers this).
Or one leaves and your daughter moves in?
Have you a "lead tenant" scenario or are they licensees?
Either way your daughter moving in should be ok, but if she wants to collect rent from other tenants (which she can technically do as a sub let), then her rent-a-roof relief is only up to 14k. If she goes over that then all of it is liable for tax, not just the portion under 14k.

There's practical issues here around having friends live with her. Given the circumstances she could be readily exploited. So perhaps give her a year to settle in on her own and then decide whether or not to let her sublet or to rent the other rooms separately yourselves. Its a good income you are losing so you might actually be better off just paying for her to stay in college accommodation if available for the first year and then decide what to do.
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They are erasmus students etc. and will all be leaving Ireland in the summer.
She's currently in college accommodation as a first year - she will be living with friends.

Dr Strangelove said:
Is it a single entrance with one kitchen and six bedrooms? Or is it subdivided in any way?

Do you have individual tenancy agreements or a joint one? If individual agreements are they all registered with the RTB?

I ask as all of this has a bearing on rent limits if it’s in an RPZ - also whether it is possible for your daughter to occupy one part and tenants the other.
Click to expand...
Single entrance all one house, 1 kitchen, 1 living room, 6 bedrooms. So no subdivision
We have a single agreement registered with RTB, with all tenants listed on it.
It is in an RPZ.
 
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