No "Case V" deduction for NPPR and the Household Charge.

[mandelbrot]

<I haven't had an argument with TMcGibney in at least a week, but this ought to get the ball rolling...>

... according to this month's Tax.Point, TALC have met Revenue and been informed that as with the NPPR, there will not be a Case V deduction for the household charge.


<...sit back and waits for all hell to break loose...>

 

[T McGibney]

Hopefully this time Revenue will actually publish their decision, and their reasoning, instead of letting it leak out through the minutes of a TALC meeting, which have no statutory legislative effect.

 

[ajapale]

Whats Tax.Point?
Whats TALC?
Whats Case V?

 

[mandelbrot]

Sorry
Tax point is a periodical on topical tax matters, from the institute of chartered accountants.

The Taxes Administration Liaison Committee (TALC) was established in 1989 and is a liaison committee between the Revenue Commissioners, the Irish Taxation Institute (ITI), the Consultative Committee of Accountancy Bodies of Ireland (CCABI) and the Law Society of Ireland.

Case V (the V being a roman numeral) is the Case under which rental income is charged to tax.

 

[oldnick]

Dear Judge,

I am a compliant tax-payer. I read whatever Revenue publish and abide by their advice and instructions. For example, in their Revenue guide IT70 it is states
" the following give examples of what expenditure you may deduct when calculating your rental income
- rates payable to a local authority"

I am unaware of despite searches of any other advice given by Revenue to the any member of the npublic seeking that advice.

 

[T McGibney]

Section 97(2) TCA 1997


97.—(1) Subject to this Chapter, the amount of the profits or gains arising in any year shall for the purposes of Case V of Schedule D be computed as follows:

(a) the amount of any rent shall be taken to be the gross amount of that rent before any deduction for income tax;

(b) the amount of the profits or gains arising in any year shall be the aggregate of the surpluses computed in accordance with paragraph (c), reduced by the aggregate of the deficiencies as so computed;

(c) the amount of the surplus or deficiency in respect of each rent or in respect of the total receipts from easements shall be computed by making the deductions authorised by subsection (2) from the rent or total receipts from easements, as the case may be, to which the person chargeable becomes entitled in any year.

(2) The deductions authorised by this subsection shall be deductions by reference to any or all of the following matters—

(a) the amount of any rent payable by the person chargeable in respect of the premises or in respect of a part of the premises;

(b) any sums borne by the person chargeable—

(i) in the case of a rent under a lease, in accordance with the conditions of the lease, and

(ii) in any other case, relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received,

in respect of any rate levied by a local authority, whether such sums are by law chargeable on such person or on some other person;

(c) the cost to the person chargeable of any services rendered or goods provided by such person, otherwise than as maintenance or repairs, being services or goods which—

(i) in the case of a rent under a lease, such person is legally bound under the lease to render or provide but in respect of which such person receives no separate consideration, and

(ii) in any other case, relate to and constitute an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

(d) the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

(e) interest on borrowed money employed in the purchase, improvement or repair of the premises.

 

[mandelbrot]

Dear Judge,

I am a compliant tax-payer. I read whatever Revenue publish and abide by their advice and instructions. For example, in their Revenue guide IT70 it is states
" the following give examples of what expenditure you may deduct when calculating your rental income
- rates payable to a local authority"

I am unaware of despite searches of any other advice given by Revenue to the any member of the npublic seeking that advice.

Why would it end up in front of a judge though Nick?!

Are you saying that if you got an audit and,
1. they bothered to make an issue of the non-deductibility, and
2. said give us €150 + interest (penalty negotiable but should be nil as what you've outlined could be deemed a technical adjustment),
3. you'd say no way josé, let's go to Appeal, and then
4. if the Appeal commissioner finds against you,
5. you'll go to Circuit Court, over €150 a year of tax...?!

In which case I would have to admire your willingness to stick to your principles!

 

[mandelbrot]

The most pertinent parts of this being:

Section 97(2) TCA 1997

....

(2) The deductions authorised by this subsection shall be deductions by reference to any or all of the following matters—

....

(b) any sums borne by the person chargeable...
in respect of any rate levied by a local authority, whether such sums are by law chargeable on such person or on some other person;

I knew you wouldn't be able to resist McGibney!

 

[z107]

In which case I would have to admire your willingness to stick to your principles!

I'm currently in dispute with the Revenue for a sum of €2.85.

If someone feels that they have been wronged by the Revenue, then surely they should proceed by whatever means necessary to resolve the case?

I certainly will not be handing over even a cent more than I'm legally required to.

 

[T McGibney]

I knew you wouldn't be able to resist McGibney!

Er, I haven't said anything I just copied the legislation to inform other users of what the law actually says

Btw, if you are in a position to disclose the source of the quote in your opening post, that would be great. Thanks.

 

[mandelbrot]

I'm currently in dispute with the Revenue for a sum of €2.85.

If someone feels that they have been wronged by the Revenue, then surely they should proceed by whatever means necessary to resolve the case?

I certainly will not be handing over even a cent more than I'm legally required to.

Well each to their own - to me €2.85 has a fairly limited value, I certainly wouldn't see myself investing hours of my time to recovering it... an irate phone call or two maybe, but a protracted dispute I don't think so.

I'd rather go to the pub and give out about the €2.85 that Revenue did me out of! But as I said, each to their own. But based on our previous exchanges on other threads, you clearly have a bee in your bonnet about Revenue, so I'm sure that might be an added motivation to you...!

 

[mandelbrot]

Er, I haven't said anything I just copied the legislation to inform other users of what the law actually says

Btw, if you are in a position to disclose the source of the quote in your opening post, that would be great. Thanks.

It's in the current (January 2012) edition of taxpoint, I saw it online earlier, but it's subscription only, so I can't link to it...

 

[mandelbrot]

Not specifically Revenue, but more the government.
Aren't the government due to be paying more billions out today? - (The day of Ivor Callely's arrest)

The Revenue are collecting money for the State, so I would have a 'bee in my bonnet' about that.

Anyway, all this is OT.

I'll indulge our foray off topic with one more observation - in the 7+ years I worked in practice, I never saw anyone get in a row with Revenue over amounts like €2.85 - plenty of times I saw people not get in a row over that kind of money, and yet not have to pay it...

Now I know times may have changed but I still don't think anyone in Revenue is going to dig their heels in over that kind of money without feeling a reason to do so. it would appear there's been a failure in diplomacy on both sides...

 

[oldnick]

Mandelbrot or TMcGibney- whose opinions i respect can either of you could state why the NPPr and Propety Charges are not deductible (- without quoting from some private or unofficial source.)

The Act quoted above with specific reference to 2bi would seem to add credence to my belief that these charges are deducible:-
They are both rates, in so much as they are a charge on property to pay for the provision of services of local authorities.
They are both levied by the local authorities in so much as it is to the local authorities that one makes payment and it is the local authority that can decide whether one is exempt or not.

I gather that a Revenue official stated ,though not publicly nor in any tax briefing, that he believed that "levied" could ONLY mean something that was introduced and imposed by the local authority. Therefore the NPPR and PropCharge were not included in 2bi as "they were not levied by a local authority."


His belief can de disputed in three wasy :-
- the semantic argument as to what does "levied" mean.
- in other EU state such charges are tax deductible
- and above all the question of literal interpretation versus the intent of the legislation. Increasingly in legal disputes the intent of the legal phrasing is considered more important than a literal interpretation. So, unless central government deliberately intended and stated that NPPR/P.C. are nondeductible and if the Act states that local rates are deductible, thenm it is an arguable case that all such charges are deductible.


I wonder why accountants without any official words from Revenue advise their clients not to deduct these charges,considering:-
-there's only a small chance of a Revenue audit and if the client is otherwise above board why should he care?
- Even if the Revenue auditor insisted these charges were nondeductible do accountants really believe that he'd impose a penalty ,especially if one showed him Revenue's own printed advice as per IT70 ?
- Surely the most that would happen is one would pay what one owes with ,possibly, some interest.

Consider, accountants, the savings one makes if one deducts these charges over, say ,five years:-
Say one lets ten properties- that's presently a cost of 3.000 euros x 5 years = 15.000 euros. That's a tax saving on ca. 7.500 euros if one deducts these charges.
And as charges may increase the savings get bigger.

It's crazy not to deduct them -and increasingly costly.

 

[T McGibney]

Mandelbrot or TMcGibney- whose opinions i respect can either of you could state why the NPPr and Propety Charges are not deductible (- without quoting from some private or unofficial source.)

Me? No. Non-deduction makes no logical sense to me. That said, Revenue have stated otherwise, albeit unofficially, and it would be foolhardy of me, as a general tax practitioner, to tell everyone that Revenue, and their specialist experts, are wrong and my own reasoning is correct. People can make up their own minds as to whether they want to deduct these costs. I'll keep an open mind on it.

 

[DB74]

The charges are non-tax-deductible because they are collected by the local authority as opposed to being levied by them (levied is the wording in the legislation). Unlike commercial rates, the local authority themselves do not decide how much to charge.


Letter from Inst of Tax to Revenue (23-Sep-2010)




Letter from Revenue 18-Oct-2010 in response




Here's some info from the Inst of Tax. They state that the NPPR isn't deductible but don't actually say why.

 

[oldnick]

The letter from the Revenue official ends with a promise "to arrange a tax briefing in the near future ".
this was in October 2010. Has there been such a tax-briefing on this subject?

If no, then it was an incorrect statement from that official. Therefore what credence can be placed on any other statement in that letter ?
That's besides the suspicion that the non-appearance of such a promised tax briefing raises doubts within Revenue as to the solidity of his argument.

As regards the statement he made concerning deductibility of NPPR I stick to my view that this is a semantic argument, and, in any case, the intention of the relevent clause in the Act is that rates are deductible. Yes,the Act says "levied" not "collected" but until such time as the govnt,Revenue or Uncle Tom Cobley states otherwise it is a costly madness to not deduct these charges.

 

[oldnick]

Looking up levy(verb),levied in Concise Oxford Dictionary - to impose or collect a tax
Same for Websters - impose or collect.

Swift writing about the inhabitants of Lilliput.....
"the pension for the education and entertainment of a child is levied by the emperor's officers" -clearly Swift means collect.

 

[mandelbrot]

Mandelbrot or TMcGibney- whose opinions i respect can either of you could state why the NPPr and Propety Charges are not deductible (- without quoting from some private or unofficial source.)

All we have at the moment is the reply from Eugene Creighton's office to the ITI Nick, so we'll have to work with what we have!

The Act quoted above with specific reference to 2b(i) would seem to add credence to my belief that these charges are deductible:-
They are both rates, in so much as they are a charge on property to pay for the provision of services of local authorities.

In the letter, the Revenue official doesn't address the issue of whether the NPPR constitutes a rate, but does state that "there does seem to be a number of differences" between the NPPR charge and a rate. Because he is of the opinion that the charge isn't levied by the Local Authority, whether or not it is in fact a rate, is irrelevant.

They are both levied by the local authorities in so much as it is to the local authorities that one makes payment and it is the local authority that can decide whether one is exempt or not.

I gather that a Revenue official stated ,though not publicly nor in any tax briefing, that he believed that "levied" could ONLY mean something that was introduced and imposed by the local authority. Therefore the NPPR and PropCharge were not included in 2bi as "they were not levied by a local authority."

The fact that the local authority are the collection agent, does not necessarily mean that they are the one levying the charge. This of course depends on the meaning of "levied" in this context.

His belief can de disputed in three ways :-
- the semantic argument as to what does "levied" mean.
- in other EU state such charges are tax deductible
- and above all the question of literal interpretation versus the intent of the legislation. Increasingly in legal disputes the intent of the legal phrasing is considered more important than a literal interpretation. So, unless central government deliberately intended and stated that NPPR/P.C. are nondeductible and if the Act states that local rates are deductible, thenm it is an arguable case that all such charges are deductible.

- A lot of arguments that go before the courts about legislation are centred around what would be generally regarded as semantics - the meaning of "levied" in this context is a good example. Just because it is an argument about semantics doesn't mean it is a trivial matter. While you are entirely correct that the dictionary definition of levied is "imposed or collected", in an economics or tax context, levying a charge generally means imposing a charge.
- I don't see the argument about how similar charges in other EU countries are treated, as flying TBH, as every country has its own legislation.
- Intent is all well and good, but it will still boil down to 1. whether the charge is a rate, and 2. whether it is levied by the local authority.

I wonder why accountants without any official words from Revenue advise their clients not to deduct these charges,considering:-
-there's only a small chance of a Revenue audit and if the client is otherwise above board why should he care?
- Even if the Revenue auditor insisted these charges were nondeductible do accountants really believe that he'd impose a penalty ,especially if one showed him Revenue's own printed advice as per IT70 ?
- Surely the most that would happen is one would pay what one owes with ,possibly, some interest.

Consider, accountants, the savings one makes if one deducts these charges over, say ,five years:-
Say one lets ten properties- that's presently a cost of 3.000 euros x 5 years = 15.000 euros. That's a tax saving on ca. 7.500 euros if one deducts these charges.
And as charges may increase the savings get bigger.

It's crazy not to deduct them -and increasingly costly.

The reason may well be that these accountants have read the guidance from the ITI, as linked by DB74, or been told the same thing at tax updates organised by ITI. In light of that, it would be reckless for them to advise their clients to claim for items when the best available advice is that they aren't allowable - unless of course they believe that the Revenue position is incorrect and they tell the client that they may need to go to Appeal or beyond, to secure the deduction in the event of audit.

The letter from the Revenue official ends with a promise "to arrange a tax briefing in the near future ".
this was in October 2010. Has there been such a tax-briefing on this subject?

If no, then it was an incorrect statement from that official. Therefore what credence can be placed on any other statement in that letter ?
That's besides the suspicion that the non-appearance of such a promised tax briefing raises doubts within Revenue as to the solidity of his argument.

No sign of the tax briefing yet - but it doesn't necessarily make him a liar - it all depends on your definition of "near future"..!
If it makes you feel any happier as soon as I finish this post I'm going to go and start correspondence to Income & Capital Taxes Division, to see if an ebrief might be forthcoming on this topic...

 

[Bronte]

If it makes you feel any happier as soon as I finish this post I'm going to go and start correspondence to Income & Capital Taxes Division, to see if an ebrief might be forthcoming on this topic...

That would be really great Mandelbrot, this and the new charge are really costing landlords and to me it is a business expense and should be allowed as such, as all other charges are, whatever they are called/labelled etc.

If they, revenue, can suddently decide themselves (no legislation) to allow mortgage 'term' life insurance they can certainly do the same for NPPR.

We had a whole debate on this about a year or two ago on here.