Can I claim legal fee as Rental expense

[calluly99]

Hi
We're in the middle of switching mortgage providers - fees over 2k which almost negate worth of switching. Looking up revenue site I see paragraph on what cannot be claimed as expense

Pre-letting expenses, i.e. expenses incurred prior to the date on which the premises was first let apart from auctioneer's letting fees, advertising fees and legal expenses incurred on first lettings.

whats the definition of a first let - your very first tenant ?
Our current tenants would not be our first.
thanks for any advice.

 

[T McGibney]

Our current tenants would not be our first.

On that basis, the expense is not a pre-letting expense. On that basis you can claim it.

 

[elcato]

whats the definition of a first let - your very first tenant ?
Our current tenants would not be our first.

Are you saying you had tenants a while (long time) ago and then lived in it or had no tenant while switching mortgages ? Is there a time limit in between tenants as regards this ?

 

[calluly99]

Thanks for the replies - Our current tenant is our fourth tenant and we are switching mortgages while they are in situ - we have not lived in the house since we started to rent it out.

 

[T McGibney]

Please research this question fully before taking any action. My comment above is correct in relation to the definition of pre-letting expenses but off the top of my head I think there is a prohibition against you claiming fees in relation mortgage financing/refinancing as a deduction against taxable rental income.

 

[mandelbrot]

I suppose you're back to the issue of whether it can be shown to be "wholly and exclusively" incuured for the purpose of letting. Arguably not, since you already have a mortgage in place...

Although you could also argue that by incurring that cost you are decreasing the interest expense into the future, and thereby increasing future taxable rental income...!

So, where does that leave you? I don't know! Although I agree with Tommy, as soon as I saw your OP I had the same idea of it specifically not being allowed...

 

[Bronte]

This is very shaky ground, I'd be asking revenue in writing if it's allowed. Or submit it with your tax return with a letter explaining that you have a doubt about it and tell them to contact you if they have a problem with it. Registered post only.

If it is allowed you might post back on here for the benefit of other landlords.

 

[T McGibney]

Or submit it with your tax return with a letter explaining that you have a doubt about it and tell them to contact you if they have a problem with it. Registered post only.

I would caution against this course of action. Form 11 tax returns already contain an 'expression of doubt' panel for this purpose. Many tax experts contend that it is a very bad idea to include an 'expression of doubt' in a return as there is a belief out there that it exponentially increases the risk of the return being selected for Revenue Audit. I don't know whether this belief has any basis in reality but I would be inclined to tread carefully all the same.

 

[edwardg]

I apologise for resurrecting this thread. I am currently negotiaiting a top-up loan on a mortgage on an investment property. I have not established the legal fees as yet but they could be in the order of €500-€1,000.

Revenue's IT 70 Booklet states "Interest on any loan, or part of a loan, that is used to pay stamp duty, legal fees and other expenses incurred in relation to the purchase, improvement or repair of a premises is not deductible. Only interest relating to the actual purchase, improvement or repair costs is deductible"

What I understand this to say is that while you can pay for your legal expenses from your loan you cannot claim the interest portion of the loan related to legal expenses against your tax.

However, you can claim legal expenses related to arrangement of your top up loan as an expense in your tax return.

I hope I have expressed myself clearly but I think this is a correct interpretation