Advice needed re rental income and taxes due.

J

JFIT

Guest
Hi,

3 years ago, my wife and I purchased a new family home. We tried to sell our first house but at the time the bottom fell out of the market and we were unable to sell. Rather than leave it on the market we advertised on Daft and rented it for EUR450 per month.

As the mortgage on the house is €750, we thought there would be no tax payable and therefore (innocently) did not declare anything.

However, we have just received a letter from Revenue stating that they have become aware of our undisclosed income and asked us to reply with details within 21 days. We never intended to be landlords, if we could get rid of the loss making property we would. However, can anyone please advise what our situation is, do we owe for rent received in the last 3 years (despite not covering the mortgage) and, if so, are we liable for penalties also?
 
JFIT said:
, do we owe for rent received in the last 3 years (despite not covering the mortgage) and, if so, are we liable for penalties also?
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Yes you are liable for tax on rental income and penalties even if the rent does not cover the mortgage.

Most important is to figure out how much and to now do up your tax returns. If you have not registered the tenancy with the PRTB you cannot write off the mortgage interest. I suggest you hire a good accountant right away.

How did the revenue find out about the rent?
 
Bronte said:
Yes you are liable for tax on rental income and penalties even if the rent does not cover the mortgage?[J/QUOTE]


But you can deduct expenses and interest on your mortgage so as its only €5.4k in gross rent, the taxable amount is likely to be reasonably small or might even be zero
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Yes millieforbes the rent is low, but if the OP didn't realise he had to declare the rent he probably did not register with the PRTB and therefor cannot deduct the interest. As you rightly pointed out he can make other deductions and the tax bill should be manageable. But is 3 years of rent and the penalties do add up.
 
Two interesting things here -

- In addition to not knowing that one actually pays tax on rental income, how is it possible that anyone renting a property is not aware of any of the other obligations - PRTB, NPPR, BES etc ?? (Big fines on NPRR have built up)

- As Bronte asks, how, especially if not registered with PRTB, was the OP caught by Revenue ? Do they go through Daft etc ads? Good job ,too, if they do. One does resent paying tax whilst others don't.
 
JFIT - First get in touch with revenue and explain the situation. They are reasonable enough as long as you make an effort. Then I would get in touch with an accontant. While they say you cannot claim relief on 75% of the interest, they may give you a break. Also, you are only liable for years up to 2011 at the moment so you may actually owe only 2 years.
 
oldnick said:
Two interesting things here -

- In addition to not knowing that one actually pays tax on rental income, how is it possible that anyone renting a property is not aware of any of the other obligations - PRTB, NPPR, BES etc ?? (Big fines on NPRR have built up)

- As Bronte asks, how, especially if not registered with PRTB, was the OP caught by Revenue ? Do they go through Daft etc ads? Good job ,too, if they do. One does resent paying tax whilst others don't.
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I presumed OP had paid NPPR and that was how it came to light. Re-reading the OP's post, I see that's not mentioned.
 
Thanks to all for your replies. I have not registered with PRTB. Ignorance is bliss!!! I will get hold of an Accountant asap. I assume revenue became aware through tenants claiming rent relief whereby my rsi nbr was used on the form. Again, assuming that the fact that no profits were being made on the property, I felt that I had nothing to hide!
 
PS I have also registered NPPR and am fully up to date with these payments
 
JFIT said:
I have not registered with PRTB.
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This is the first thing you should do and do it today on line. All you need is the tenant's prsi no and your own.

Revenue are increasingly looking to find landlords who don't declare rental income, the rent relief is one area (I think that tax reduction is being or has been phased out) and another is the PRTB listings and also tenant's who get rent from social welfare.
 
elcato said:
. While they say you cannot claim relief on 75% of the interest, they may give you a break.
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Revenue cannnot give the OP a 'break' in relation to this. Their hands are tied on that as it's in the legislation for the PRTB.
 
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