Couple where one works, on a home carer, can you allocate rental income to worker only?

[Ceist Beag]

If a couple are renting out a property where one partner works and the other stays at home to mind the children, can you allocate 100% of the rental income to the income earner alone, in order to be able to avail of the home carers tax credit?
The section "If I am married or in a civil partnership and taxed under Joint Assessment, can I claim both the Home Carer Tax Credit and the increased Standard Rate Band for dual income couples?" under http://www.revenue.ie/en/tax/it/leaflets/it66.html states you cannot avail of the increased standard rate band and the home carer tax credit - you choose which is most beneficial to you.
However if only one of you is working are you considered a dual income couple due to rental income and if so, can you allocate the rental income to the earner to then be considered a single income couple and be able to avail of both of these? The property is owned by both and both names are on the deeds.
I didn't think this was possible (and was advised so by my accountant) but I have been in a discussion over on boards.ie where a poster states that this is possible and that they have been doing this for years now.

 

[Ceist Beag]

I don't suppose anyone has any views on this? I'm not looking to pull a fast one or anything here, just checking if it is possible to decide to who allocate rental income to when the property is jointly owned, so that you can claim to be a single income couple.

 

[Joe_90]

Ownership is 50:50 then the rent is 50:50.

 

[DB74]

I didn't think this was possible (and was advised so by my accountant) but I have been in a discussion over on boards.ie where a poster states that this is possible and that they have been doing this for years now.

Just because someone has been doing this on their income tax returns without Revenue saying anything is irrelevant. Revenue don't check every single tax return so people have this idea that if they did "got away" with something one year then they think that they are then compliant with the tax laws because Revenue haven't pulled them up on it. People doing their own tax returns for rental property are particularly bullish about this, with arguments about claiming 100% of the mortgage interest or putting in an expense for their own time being examples of this that I have personally dealt with.

Revenue's opinion here is as Joe says above, property owned 50:50, then rent is 50:50

However ... Revenue's opinion is only that, an opinion*

You could argue that if one spouse does all the managing of the property etc and that the couple regard the rental income as that spouse's "pocket money" then the income should be taxed under their name only. However you would need to be very persuasive and maybe be prepared to back your opinion all the way to the Courts to win the argument.

One way to strengthen your case is to register as a partnership and do up a partnership agreement which states that 100% of the income is treated as the income of one spouse. On the partnership tax return state that 100% of the profits are allocated to that partner. This at least shows that you are serious about the allocation of the profits anyway but Revenue will still argue their case.

*Just like their opinion that the Household Charge & Local Property Tax are not allowable against rental income. AFAIK the Irish Courts have recently ruled that the Household Charge IS allowable, or should I say WAS allowable as it was abolished on 01-Jan-2013. This is an interesting case as the timeline for claiming tax refunds for the year (2012) that the Household Charge was payable has expired so it will be interesting to see how Revenue deal with this when this hits the public domain and landlords start looking for refunds.

 

[T McGibney]

However ... Revenue's opinion is only that, an opinion*

You could argue that if one spouse does all the managing of the property etc and that the couple regard the rental income as that spouse's "pocket money" then the income should be taxed under their name only. However you would need to be very persuasive and maybe be prepared to back your opinion all the way to the Courts to win the argument.

It's more than a tad melodramatic IMHO to suggest that such an arrangement, if it properly reflects the actual circumstances of a property rental, would be so controversial to end up being adjudicated by the courts.

If I receive income from a property, that income is taxable in my hands, not those of the property owner.

 

[Ceist Beag]

Thanks folks. I think it is something worth investigating further by the sounds of it. The rental income goes into my account so as Tommy says I think I could reasonably argue it is my income to pay tax on. I will take it up with my accountant to see if it is something I can look to claim back and claim from now on.

 

[GabbyTheKing]

Who actually owns the house on the title deeds? These persons are the ones who are beneficially entitled to the income.

 

[torblednam]

It's more than a tad melodramatic IMHO to suggest that such an arrangement, if it properly reflects the actual circumstances of a property rental, would be so controversial to end up being adjudicated by the courts.

If I receive income from a property, that income is taxable in my hands, not those of the property owner.

Just going to play devil's advocate here...

If you receive income from a property, to which I have a legal and beneficial entitlement to half of as a co-owner, does me allowing you to keep my half and yours does necessarily mean it's all your income? If we fell out couldn't I at any time enforce my rights over the property and to enjoy the income from it?

If the tenant falls and hurts themselves on a wonky step that they'd asked *you* to fix, and they go to law for compo, am I likely to be in the clear if it's your letting?

And when it comes to deducting the mortgage interest, if it's a loan in both our names, are you going to take the full deduction?

If we sell it and all the proceeds go to you, is it only your disposal?

Or if I mandate my salary into your bank account and never see a penny of it, does that mean it's your income?

It seems to me that people can choose to appropriate money between them however they wish, but that's not particularly relevant to determining how the income derived from exploiting property rights is to be taxed.