75% mortgage interest for investment properties

L

landlord

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I know you can now only claim 75% of mortgage interest on investment properties for the tax year of 2009 onwards so, where it says under the tab irish rental income on the online form 11. ......under "Allowable Interest" do i put in my total investment property mortgage interest and let it calculate the 75% or do I calculate the 75% and stick that figure in myself?
the Guide to completing the 2009 pay and file tax return is not out yet on line as I dont see it listed here http://www.revenue.ie/en/tax/it/leaflets/index.html ??

thanks ....
 

I would calulate 75% myself and put it on return
 
81.5% of interest is allowable. 100% from 1 Jan '09 - 6 April '09 & 75% from 7 April '09 - 31 Dec '09. Enter the restricted amount of interest on the form
 
Dont forget - now is the ideal time to review the amount of your property which is qulifying for capital allowances -this can further reduce your tax bill. Note that many landlords forget to value all the items which qualify for capital allowances on the initial purchase of the property! - e.g. heating system! This is relevant if you bought your property within the last 8 years.
PM me if you require further information on reducing exposure to tax on rental income. Kieran Coughlan, Tax Manager at CXC
 
Remember also that it is only interest on purchase of rented residential property that is restricted i.e. no restriction on commercial property.
 
Cxc makes a good point. When a house is purchased for rental you need to go through the whole house with the list of allowable items for capital allowances purposes. You can then claim 12.5% of these for 8 years until they are wrote off. I am also coming across a lot of clients who have stated they have paid the PRTB when they actually have not. Due to the number of queries I am getting from the Revenue I suspect that the revenue are cross referencing rental returns to the PRTB database.
 
CXC can you clarify your point please? I am under the impression that you can only claim capital allowances on capital items that you specifically relate back to receipts. Are you saying that you can allocate a portion of the purchase price of the apartment to kitchens, heating systems etc. and write that off? How does the mechanism work?
 
Without giving away my own tax research and IP, yes this is in effect what is done. Capital allowances can still be claimed on the fixtures and fittings. The ability to claim capital allowances is based on incurring expenditure, which is in effect what has happened.

On Simplyjoe's point, yes Revenue were recently given powers to access PRTB's database of landlords, if you have not registered with PRTB and you are declaring rental income with a deduction for interest expect a Revenue audit - but dont forget you can backdate registration with the PRTB. Note also that if your outside the four year limit for changing a tax return then the backdating of the PRTB registration may not be effective and open to challenge from Revenue.
 
I'm a bit confused by this - would you not be claiming tax relief twice if you claim for wear and tear on heating systems etc? Presumably, the cost of heating systems etc are factored into the price you pay for property, which you then claim mortgage interest relief on. So then you're then claiming relief again for capital allowances for the same thing (unless you don't have a mortgage and are not claiming mortgage interest relief?).
 
Interest on plant element of building would be tiny, much better to claim the capital allowances. E.g. Fixtures and fittings of €30,000, the interest on this would be just €1,200 per year assuming 4% interest and 100% loan to value. However, the capital allowances would be worth €3,750 per year.
 
Ok, so you don't claim mortgage interest relief for the fixtures and fittings, but claim capital allowances instead? Can this only be done for the first 8 years? What if you have a second -hand property more than 8 years old?
 
If you bought the property secondhand you can still claim the w&t on the fixtures and fittings - if you have the property for more than 8 years and have fully claimed w&t then thats it - your relief is expired - in the meantime your mortgage should be substantially reduced and the benefit you would have got from claiming a deduction for the "interest" would be significantly eroded.
 
Hi CXC,

I bought a house in 2003 and and have completed my tax returns each year. The w and t allowance on fixtures and fittings is now basically used up.

I am about to reburbish the house completely, knock an extension and replace with one a bit larger, replace boiler, all doors and windows, flooring, bathroom, kitchen, appliances, dryling and all new furniture stove etc. Can I now start claiming capital allowances for the next 8 year period with this new fit out which could be in the region of €30K?

I understand I cant claim anything for the building work (exension, new boundary wall etc). Am I correct in this? If house is sold down the line, can I use the building costs to reduce capital gain? Its probable there wont be much of a gain anyway! So is it ok to go with a builder who will do work much cheaper if some of payment is in cash as there probably wont be much need for receipts anyway?
 
So is it ok to go with a builder who will do work much cheaper if some of payment is in cash as there probably wont be much need for receipts anyway?
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No. This is tax evasion and is illegal.
 
elcato said:
No. This is tax evasion and is illegal.
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It's tax evasion and illegal for the builder if he doesn't declaire his income to revenue. Just because he doesn't give a receipt to a customer doesn't necessarily mean he is not declaring income.

It is not illegal for a person getting a job done in a house to pay the supplier in cash a not get a receipt. If you got work done and didn't get a receipt you could still show revenue(If audited) the extension, refurbishments etc. and they may accept a reasonable amount for the work.
 
In the context, the statement was suggesting that the builder would do it cheaper for cash as he would not declare it. Just because you choose not to see the 'nod nod wink wink' does not clear you of blame. You are party to tax fraud.
 
elcato said:
In the context, the statement was suggesting that the builder would do it cheaper for cash as he would not declare it. Just because you choose not to see the 'nod nod wink wink' does not clear you of blame. You are party to tax fraud.
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My point is a person paying a builder, tradesman, publican, doctor etc for work/service in cash and not requesting or receiving a receipt is not committing any criminal offence or fraud.
 
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