Are transport costs and miscellaneous expenses tax deductible?

M

murphaph

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Hi all,
I'd say I've always been pretty conservative with my rental accounts wrt what is and what is not deducted when calculating net profit.

So far I have never deducted transport costs (associated with annual property inspections) but I really don't see why they should be excluded. I live abroad so I'd be flying home (with my family) at least once a year and as part of our visit I inspect my properties. we fly home several times a year but I obviously wouldn't inspect the properties with every visit, just once a year per property usually, unless some work needs doing or has been recently done.

I would be able to claim my share of the ticket costs as deductible here on a German tax return, is it expressly forbidden anywhere in the Irish tax code? I know I can't deduct for my time, but the transport costs themselves should surely be deductible if they are genuinely associated with inspecting the properties I own?

Much less important, but I also make a handful of phone calls and write a handful of letters to Ireland wrt my rental properties. Emails cost me nothing so obviously can't be claimed for and letters are easy, I just keep the receipts for the stamps and stationery but what about phone calls? I obviously don't want to use a phone bill as proof of calls made as it includes other information and I don't feel like blacking out 99% of my phone bills to claim for a few phone calls-if I had to I just wouldn't bother. Can I just claim for a reasonable amount without any written proof (say €50 per year for all my rental properties-small money but at the end of the day a cost associated with renting the properties out).
 
Hi Murphaph, you may remember the discussion in this thread where you also posted regarding inspection visits.

On Tommy McGibney's prompting and using Mandelbrot's post referring to the relevant sections, I contacted my accountant who checked with Revenue and it is exactly as Mandelbrot posted - the rental property is deemed to be the place of business and therefore travel to and from it is unfortunately not allowable.

I do claim for 'Sundry Expenses' including phone calls, admin, advertising, stationery, printing, photocopying, postage, etc. Some I have receipts for and some are estimated, such as the phone calls, which I estimate depending on the amount of contact I have had with the tenant during the year.
 
Ah thanks delgirl. I searched fro "transport costs" thinking I'd find that old thread but didn't see it. You're a star.
 
I think the post may as well be repeated here, for future searchers' reference:

Section 97(2) TCA 1997 sets out the deductions that a taxpayer can take against rental receipts.

S.97(3) states that the amount of deduction authorised by Subsection 2, is the amount you'd deduct if the receipt of rent were deemed to be a trade carried on by the landlord - I got hung up on this point the last time round, and failed to recognise something important... that S.97(2) doesn't contain the wholly and exclusively test that applies to trade deductions, so it is only the deductions specifically authorised that can be taken.

S.97(2)(d) states "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"

The way net rental income is calculated (under S.97(1)) treats each property as a separate business, and the surplus or deficit from each property is then aggregated.

The entitlement to a deduction for motor expenses in a trade situation derives from the fact that you operate from a place of business - in the case of many sole traders this is their home. In the case of a letting of property however, there is no trade, and there is no place of business other than the property subject to the particular letting.

As the property is the place of business, it follows that you cannot take a deduction for what is a private cost to you, of getting to/from the property...
 
Thanks to Mandlebrot for the clarification. I have read elsewhere that Revenue say that where you choose to live is your own business and this is the same argument as saying that the rental property is the place of business.

Am I right is saying that some transport expenses to or from the property can be claimed if for example you had to take away rubbish or collect something from a shop? Provided of course that the journey was wholly and exclusively related to the upkeep of the property? It would seem on a par to paying someone else to do it, but just doing it yourself instead.
 
It seems clear cut alright. I still thinks it's wholly unfair.

A builder has an office and builds some apartments on site A, site B and site C. His transport costs in getting to/from the various projects is deductible.

A landlord with an office next door to the developer buys all the units units in all three developments. His transport costs in getting to/from the various investments is not.

I find it mildly funny in a state that refuses to build anywhere near enough social housing that being a landlord is not seen as running a business by the powers that be.
 
murphaph said:
I find it mildly funny in a state that refuses to build anywhere near enough social housing that being a landlord is not seen as running a business by the powers that be.
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You may discover many such paradoxes. There is a distinction here between passive income and earned income. Another is that the State effectively subsidises landlords by granting relief of 75% of the morthahe interest against rental profits, thereby making residential properties more affordable for landlords. Owner-occupiers' incentives relief at the standard rate within limits doesn't compare. I don't find that funny.
 
murphaph said:
It seems clear cut alright. I still thinks it's wholly unfair.

A builder has an office and builds some apartments on site A, site B and site C. His transport costs in getting to/from the various projects is deductible.

A landlord with an office next door to the developer buys all the units units in all three developments. His transport costs in getting to/from the various investments is not.

I find it mildly funny in a state that refuses to build anywhere near enough social housing that being a landlord is not seen as running a business by the powers that be.
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What you've outlined is the difference between the carrying on of a trade, compared to the carrying on of an investment business via the letting of property.

So no, a landlord isn't running a business in the eyes of the tax legislation, they are managing an investment.

This is fundamentally different from conducting a trade, and taxed differently.
 
Yeah, it's just weird that it's different in Ireland but in Germany it's considered a business like any other. Some things I can deduct here in Germany that I apparently can't in Ireland:

-I can deduct 2.5% of the initial purchase price of the property every year until I have written off the entire purchase price. (2% for properties built after 1924).

-Property tax can be written off in full

-100% of mortgage interest

-Transport costs to rented units, to see your accountant, to visit your bank, to B&Q, basically to anywhere you need to go on relation to your rental business (30c per km)

-In Germany you can also deduct pre-letting expenses if you can satisfy the Finanzamt that you are genuinely trying to let the property (ads in paper, estate agent hired, rent set at market level etc.)

Just reading again some things here (in German, sorry, though perhaps of interest to mandelbrot if his username is any indication) about what I can deduct and it seems I can also deduct the costs of running bank accounts and also membership fees for the equivalent of the IPOA. Would these be allowed in Ireland?

Btw, I'm not crying over spilled milk. I am just comparing the way the German and Irish authorities view the whole being a landlord thing. Perhaps the differences reflect in the lack of large scale landlords in Ireland. In Germany large companies who own huge portfolios are commonplace, but in Ireland the one man band is much more prevalent I'd say.
 
Kildavin said:
You may discover many such paradoxes. There is a distinction here between passive income and earned income. Another is that the State effectively subsidises landlords by granting relief of 75% of the morthahe interest against rental profits, thereby making residential properties more affordable for landlords. Owner-occupiers' incentives relief at the standard rate within limits doesn't compare. I don't find that funny.
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Hmmm, again to compare briefly with Germany: Owner occupiers get no relief whatsoever on mortgage interest here while landlords may deduct 100% of mortgage interest when calculating net profit because it's a cost associated with the running of the business. It's 100% in the UK too and any other jurisdiction I'm familiar with.
 
A few quick and perhaps interesting points re the German system of taxation;

- They 'allow' entertainment expenses for clients i.e. wining and dining

- on the personal side, one can opt out of the church-tax without penalty (in this life!)

- on the business side, their taxes are a nightmare and it can take many years to close out a year (unlike (say) Irish corporation tax, where after preliminary tax payments, you pay-and-file and that should prompt the Assessment)
 
murphaph said:
and also membership fees for the equivalent of the IPOA. Would these be allowed in Ireland?

.
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I deduct the fees for the IPOA.

On travel, prior to Mandelbrot advice on the thread the issue came up for me on AAM, as I too live abroad. The advice I was given at the time was that if the travel was solely for a business reason linked to visiting the property it could be allowable but if it was also a 'family' trip than it would not be acceptable. I was also advised that if I were to deduct it, flight, car hire and hotel, then revenue might not 'like' it and did I want them to go into audit territory with me.

In my case I had a very nasty tenant, who took me to the High Court, and I did one trip that was solely to see what they were up to. I decided not to claim for the trip.

http://www.askaboutmoney.com/showthread.php?t=84313&highlight=travel

Post 5 where I refer to some tax briefing I researched that says travel can be allowed.

I await Mandelbrot excellent reply to me on this as to why I've got it wrong
 
Bronte said:
I deduct the fees for the IPOA.

On travel, prior to Mandelbrot advice on the thread the issue came up for me on AAM, as I too live abroad. The advice I was given at the time was that if the travel was solely for a business reason linked to visiting the property it could be allowable but if it was also a 'family' trip than it would not be acceptable. I was also advised that if I were to deduct it, flight, car hire and hotel, then revenue might not 'like' it and did I want them to go into audit territory with me.

In my case I had a very nasty tenant, who took me to the High Court, and I did one trip that was solely to see what they were up to. I decided not to claim for the trip.

http://www.askaboutmoney.com/showthread.php?t=84313&highlight=travel

Post 5 where I refer to some tax briefing I researched that says travel can be allowed.

I await Mandelbrot excellent reply to me on this as to why I've got it wrong
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The text you've quoted is located here:
http://www.revenue.ie/en/personal/buy-sell/foreign-property/foreign-rental-income.html

A couple of points in relation to it:
1. It refers specifically to foreign property, which is property outside of the state, and taxed under Case III (rather than Case V for rents on property situated in the state).
2. It is information on a website, albeit the Revenue website; it isn't the law, and has no legislative effect - all information on the website has a caveat, and as TMcGibney or any of the other practitioners on here will tell you, just because Revenue say something on their website doesn't necessarily mean it's correct..!

It's possible that there is a Revenue practice of accepting travel in relation to foreign lettings on a "wholly & exclusively" basis, though I've never heard of it.

If you look at the equivalent area of the Revenue website in relation to rental property generally (http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3) it makes no reference to motor/travel one way or the other.

So I'm back to my starting point, the legislation, which says that only the deductions authorised by S.97(2) are allowed.
 
mandelbrot said:
The text you've quoted is located here:
http://www.revenue.ie/en/personal/buy-sell/foreign-property/foreign-rental-income.html
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That's not what I was referring to. Why would I have looked at income from foreign lettings. I don't see the Tax Briefing I mentioned and I cannot find it now on revenue.ie as they are not listed the way they used to be.

If revenue say something on their website that is incorrect, they cannot use it to penalise a tax payer who acts on it.

Is term insurance allowed by S97 (2)?

I had a further look at your link, to try and find anything about travel, and I note that it says that where rents are irrecoverable that the landlord can treat it as no rent, you said that was not so on another thread. That you had to treat it as rent receivable and then deduct it back as you didn't receive it.

Mandelbrot is there no longer a list of all the tax briefings, or is their an easy way to find old ones?
 
Bronte said:
That's not what I was referring to. Why would I have looked at income from foreign lettings. I don't see the Tax Briefing I mentioned and I cannot find it now on revenue.ie as they are not listed the way they used to be...

Mandelbrot is there no longer a list of all the tax briefings, or is their an easy way to find old ones?
Click to expand...

Link to tax briefings:
http://www.revenue.ie/en/practitioner/tax-briefing/index.html
http://www.revenue.ie/en/practitioner/tax-briefing/archive.html

Bronte said:
If revenue say something on their website that is incorrect, they cannot use it to penalise a tax payer who acts on it.
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I'm sure a taxpayer could make that argument alright.

Bronte said:
Is term insurance allowed by S97 (2)?
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Revenue practice appears to be to accept that this is an allowable cost of management / insurance of the property. Do you disagree?!

Bronte said:
I had a further look at your link, to try and find anything about travel, and I note that it says that where rents are irrecoverable that the landlord can treat it as no rent, you said that was not so on another thread. That you had to treat it as rent receivable and then deduct it back as you didn't receive it.
Click to expand...

I presume you're talking about this:
http://www.revenue.ie/en/tax/it/leaflets/it70.html#section17

That's a simplified explanation, since that is the net effect - what I said was correct, and I think I linked the relevant legislation if it's the thread I'm thinking of; if you've a problem with what I said then feel free root out the old thread... ;)
 
Kildavin said:
. Another is that the State effectively subsidises landlords by granting relief of 75% of the morthahe interest against rental profits, thereby making residential properties more affordable for landlords. Owner-occupiers' incentives relief at the standard rate within limits doesn't compare. I don't find that funny.
Click to expand...

This is an utter distortion of the situation. Tax deductions for overheads are not subsidies, they are merely deductions against taxable rental income. It is just as easy to argue that, as landlords have to pay tax on their rental income, residential properties are less affordable to them than to owner-occupiers. Whether there is any point in arguing either case is another matter entirely.

In fact the 75% restriction on mortgage interest is a subsidy by landlords to other taxpayers as they are paying tax on non-existent "profits" that they have never earned.
 
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