Allowable expenses against rental income

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fangs

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I’d really appreciate your help on this guys and gals. My girlfriend and I are moving in together next year and I want to let her know the financial implications of her move (no smart comments pls). She’s moving into my house and the plan is to turn her PPR into an investment property and let it out etc. She has owned the property for 4 years. There are no stamp duty implications AFAIK as she wasn’t a FTB, the house was 2nd hand so she paid the going rate for stamp duty which was equivalent to the investor rate. I’ve read all the relevant key posts here and the revenue IT70 leaflet on the allowable expenses against paying tax on rental income. I would however like to flesh out what exactly is allowed for some of the expenses, namely

Wear and Tear allowance

How is the value of furniture calculated? Original purchase price, Original purchase price minus a depreciation or replacement purchase price. Are receipts required?
What furniture is allowable aside from the standard tables and chairs? Carpets, curtains, paintings, appliances, garden shed, gardening tools, bbq……….

Expenses incurred in collecting rent / inspecting property

The rental house is in Dublin and the lucky lady is moving to Cork. Can civil service mileage rates be applied in calculating the expense in driving to Dub to inspect property?

I’m also aware that there are CGT implications should she sell the property in years to come. I presume this will be based on the proportion of time the house was an investment property / PPR?

Thanking you all in advance

Alan
 
Hi Fangs,
There are loads of threads dealing with all these questions if you have the time to do some searches. Most of them will be here in the property investment section, with a few in the taxation section.
I'm sure you'll get most of your questions answered. I started to rent our a property last year and found that most of my questions were already answered. If you find there's something extra you need, or can't find then I find it easier to get replies to more specific, concise questions. Good luck with the renting and all it entails........
Geri.
 
Fangs:

The main rules are that any expense incurred in letting the property is deductible as a standard.

Coming in therefore:

- pre letting expenses for 1st letting are not deductible;
- place a value on the furniture and fittings which if you can back them up by invoices so much the better but a reasonable valuation is allowed;
- management visits are allowed but as these must be in relation largely to the collection of rents;
- you could claim the 'incurred expense' similar to self employed, but the civil service rates would not be 'incurred';
- also the interest on the loan would be deductible.[ There is a technical point if the loan was topped up prior to letting ..]

Hope that helps
 
On the issue of travel expenses, a case I was involved in a couple of years back, the Revenue Commissioners discounted the value of the claim against rent for travel to and from the premises, now in this case the cost involved flights but travel in itself was a definate exclusion. What the Revenue did allow was 10% of the gross rent to be allocated as a Management Expense which was not being claimed for. They then applied interest plus penalties to the balance (the penalties amounted to 100% of the tax - not the only item in the audit, the client was a particularly naughty boy, they were actually going for 200% penalties at the begining)
 
Thanks very much for your replies guys.

So to summarise

Wear and Tear on furniture -

Put a valuation on furniture, backed up by receipts for major ticket items if possible. In this instance it could be up to 20k as the house was not originally intended for letting.

Expenses for collecting rent -

~10% of gross rent
 
There is no real strict rule on the valuation of existingly owned Fixtures & Fittings but in general the Revenue will allow a value (as a concession only) with Wear & Tear deducted based on dated of first purchase as if the property had been let. So if you bought a carpet say for €1000 on 1/1/02 and you were first renting the property in 2006, then you would only have €200 worth of Capital Allowance left for that item which would be entirely written off in 2006. In cases where the individual does not have the receipts or some form of back up, strictly speaking the items are non-deductible but they will allow a pooled value genrally in line with the remaining Capital Allowance as previously detailed but don't go over the top with these, Revenue don't like and they do watch these. I've had case through the Revenue where the client just listed the items, dates, and estimated costs and I applied Wear & Tear from date of purchase. They have never disputed any of these, so far anyway but I have always made the client aware that they could as there are no receipts.

In relation to the Management Expense, the Revenue generally will allow a maximum of 10% (thats their view from meeting I have had with them) but not if you cannot back this up or give a good argument for it. What they will not allow is for the individual just to deduct 10% with no involvment of a management company just because the person had to travel miles to inspect the property as the expense must be incurred wholly and exclusive for the purpose and as you cannot prove that it is, strictly speaking it cannot be deductible. I would never recommend a straight 10% deduction in such case.
 
Clubman, I've read that before but I feel that it doesn't answer my particular questions. I find that a lot of the revenue guidelines, while factual and straight forward are still open to interpetation. Based on ones take on any guideline there could be a lot of €'s at stake. For instance on my original question on the wear and tear allowance you could write an essay on the nuances. I wanted to garner any practical experience AAM posters may have had with the revenue in order to minimise my tax liability.

Thanks for your advice KITTY, it's very useful and was exactly what I looking for.
 
fangs said:
Clubman, I've read that before but I feel that it doesn't answer my particular questions. I find that a lot of the revenue guidelines, while factual and straight forward are still open to interpetation.
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In that case I would suggest getting good, independent, professional advice on the tax and accounting matters involved - i.e. leave it to the experts to interpret Revenue guidelines and TCAs where there may be some room for interpretation.
 
The revenue office themselves can be very helpful. Might be an idea to ring them and depending on how you feel discussing the matter on the phone perhaps make an appointment to see someone there to have a general discussion about you queries.
 
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