Revenue have questions on my Principal Private Residence

I

ivorystraws

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Hi All,

I co-owned a house with my brother from 2005 until it sold last month. It was my Principal Private Residence (PPR) as I co-owned it, used it as my main residence, had all post sent there and lived there. However, the house is based in the west of Ireland but my work required me to be based in Dublin and/or travel onsite to customers.

1. For CGT purposes, the Revenue have queried the following:

The property was my PPR from 2005 to 2017 but I did claim the Rent Tax Credit in 2005 and 2007 as it enabled me to attend my work office, attend courses and travel onsite to customers. I travelled home when I could, at weekends and sometimes during the week when I could benefit from working remotely.

The Revenue are looking for clarification on whether it was my PPR for those years. Does the fact that I claimed the Rent Relief mean that the property was not my PPR?



2. For tax payable on any rental income received, the Revenue have queried the following:

On occasion, from about 2012 to 2021, I rented out a rent a room, for the token amount of €190 per month (and that included bills). This was done under the rent a room license arrangement as one of the owners of the house (my brother or me) would have been living with the tenant in the property at the time.
Since any persons renting the room were licensees, I wasn’t aware that there was any requirement to register with the PRTB or enter the amount on the Income Tax Return (Form 11).
My understanding is that any rental income earned is exempt from income tax, as the income never exceeded the limits set out under the rent-a-room relief.

As I didn't claim any Tax relief on the Rental Income (i.e. I didn't note it on my Income Tax Return on or on the Form 12), am I liable for tax payable on any income received from tenants (since it hadn't been reported to the Revenue?



Thanks in advance for any helpful advice.
 
So you were renting elsewhere for 2 years and claimed relief on that. You are either one or the other for tax purposes and the fact that you claimed rental relief means you were renting. I may be wrong but it sounds like you want your jam and eat it here.
The rent as room is moot here I'd imagine seeing as revenue are querying that specifically.
 
There is Revenue guidance here that clarifies that use of the rent-a-room scheme does not eliminate PPR relief.

As for the use of rental tax credit you can qualify for PPR relief for:

(a) Any period(s) of absence up to a maximum of 4 years during which the individual could not live in the house - (i) because of the situation of his or her place of work, or (ii) because of any condition reasonably imposed by his or her employer requiring him or her to live elsewhere for the purpose of his or her employment.
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So it would be incumbent on you to prove that you were obliged to live elsewhere in 2005 and 2007 by your employer. Probably difficult at this remove.

In your shoes I would probably exclude those two years from the PPR relief on a pro rata basis. 2/17*capitalgain*33%*50% is just not going to be very much much money in the scheme of things and it would rule out further Revenue scrutiny.
 
elcato said:
In light of NRC's link above I 'umbly withdraw the jam remark above your honour.
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It's a fair point.

I can't find the guidance on the Revenue website for the rules in place at the time for Rent Tax Credit (they seem to have been archived). But common sense would dictate that you can't claim both rent tax credit and PPR relief.
 
Who can Claim
An individual, paying for private rented accommodation used as a sole or main residence. This
includes rent paid for flats, apartments or houses. It does not include rent paid to Local Authorities or
State Agencies or under a lease agreement for 50 years or more.
 
NoRegretsCoyote said:
There is Revenue guidance here that clarifies that use of the rent-a-room scheme does not eliminate PPR relief.

As for the use of rental tax credit you can qualify for PPR relief for:



So it would be incumbent on you to prove that you were obliged to live elsewhere in 2005 and 2007 by your employer. Probably difficult at this remove.

In your shoes I would probably exclude those two years from the PPR relief on a pro rata basis. 2/17*capitalgain*33%*50% is just not going to be very much much money in the scheme of things and it would rule out further Revenue scrutiny.
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Thanks @NoRegretsCoyote I agree that it would be near impossible to prove anything dating back 17 years but like you said, I can simply exclude those years from the PPR relief on a pro rata basis as it won't be very much at all.

With respect to the rent a room scheme, I understand that this won't affect PPR entitlements but my question on this is whether I am liable for tax payable on any income received from tenants (since it hadn't been reported to the Revenue?
 
ivorystraws said:
Thanks @NoRegretsCoyote I agree that it would be near impossible to prove anything dating back 17 years but like you said, I can simply exclude those years from the PPR relief on a pro rata basis as it won't be very much at all.

With respect to the rent a room scheme, I understand that this won't affect PPR entitlements but my question on this is whether I am liable for tax payable on any income received from tenants (since it hadn't been reported to the Revenue?
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I rented rooms to students many years ago.

My understanding that in order to claim the rent a room relief (although letting to students does defer a little) firstly you must declare it on your Tax Return and secondly you have only 4 years to claim back this relief.

Also, I understand you must be residing in the property at the time (e.g. the place where friends and family would be most likely to find / contact you), which you were apart from the 2 years you were renting, although your brother was living there.

Not sure how understanding the Revenue will be as you were entitled to the relief but failed to declare the income.
 
peggy14 said:
I rented rooms to students many years ago.

My understanding that in order to claim the rent a room relief (although letting to students does defer a little) firstly you must declare it on your Tax Return and secondly you have only 4 years to claim back this relief.

Also, I understand you must be residing in the property at the time (e.g. the place where friends and family would be most likely to find / contact you), which you were apart from the 2 years you were renting, although your brother was living there.

Not sure how understanding the Revenue will be as you were entitled to the relief but failed to declare the income.
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Yea, I can declare the rental income from 2018 to 2021 (as that's when it ended) online. Then there's just the years from 2012 to 2017 (inclusive) of when I rented a room and complied with the rules outlined for the scheme but didn't declare that income.
I guess I could try to get bank statements from those years to confirm the amounts received in rental income (as it wasn't rented all the time), if the Revenue wanted. That would only prove the amounts and they may still penalise me or want other additional info.
 
ivorystraws said:
Yea, I can declare the rental income from 2018 to 2021 (as that's when it ended) online. Then there's just the years from 2012 to 2017 (inclusive) of when I rented a room and complied with the rules outlined for the scheme but didn't declare that income.
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There's nothing to stop you declaring it now.

The relevant Tax & Duty Manual makes no reference to a time limit for claiming Rent a Room relief, and says it applies automatically once the criteria are met.

Although the relief applies automatically, the rent-a-room scheme does not remove the obligation to make a tax return
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T McGibney said:
There's nothing to stop you declaring it now.

The relevant Tax & Duty Manual makes no reference to a time limit for claiming Rent a Room relief, and says it applies automatically once the criteria are met.


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That is excellent information and obviously something I wasn't aware of.

How do I go about declaring the rental revenue for those years now i.e. is it enough for me to respond to the Revenue with reference to the Tax & Duty Manual or would they prefer if I completed on some form?
 
ivorystraws said:
That is excellent information and obviously something I wasn't aware of.

How do I go about declaring the rental revenue for those years now i.e. is it enough for me to respond to the Revenue with reference to the Tax & Duty Manual or would they prefer if I completed on some form?
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I assume you'll have to file tax returns for each year? Depending on the categorisation and nature of the Revenue query, it may be a good idea to get proper professional advice on it. From what I've seen you've done little wrong, at worst claimed a minor tax credit in error on two occasions circa 15 years ago, but it might be worth forearming yourself on the off-chance that it gets nasty.
 
T McGibney said:
I assume you'll have to file tax returns for each year? Depending on the categorisation and nature of the Revenue query, it may be a good idea to get proper professional advice on it. From what I've seen you've done little wrong, at worst claimed a minor tax credit in error on two occasions circa 15 years ago, but it might be worth forearming yourself on the off-chance that it gets nasty.
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Professional advice is probably best here. In my specific case, are you talking about a tax advisor or an accountant?
 
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