Before I start, I understand that if we were staying in Ireland there would effecitvely be no question because we would be assessed equally. However, we are moving to the UK which is where things get messy. My wife and I have a mortgage on a house (as far as I am aware we are joint tenants rather than tenants in common but I will check this out). As we are moving to the UK we will need to rent out the home (we'd like to sell but negative equity is what it is). I will be working and my income will go way past the 10K limit upon which you start paying tax in the UK. My wife, however, at least initially, will not be working and so will not incur any UK tax liability. The problem arises because, as we will be non-resident, we are not entitled to any tax credits here and whilst we are in the UK, Britain's tax coding is not passable from spouse to spouse unlike the personal tax credit here. As I understand it, the double taxation agreement between the UK and Ireland means we wouldn't be charged tax in the UK for what we have paid in Ireland, i.e. if our Irish tax liability were €500 and we paid that to revenue in Ireland, then revenue and customs in the UK would be satisfied once they received proof of that. I have read that, because of the double taxation agreement, we would receive a tax credit in the UK in lieu of the tax credit in Ireland, but I really don't understand what is meant by that as why would the UK give us an "extra" tax credit for revenue paid to the Irish exchequer. In the UK, however, it is possible to sign over 99% of the rental income to my wife. It involves completing various forms but it is possible and it is commonly done for this very reason. It in no way affects the mortgage liability, both spouses remain jointly liable to the bank for any loan amount plus interest. It does, however, make a big difference in terms of paying tax on the rental income. Is such a thing possible in Ireland? It would essentially make our tax liability on the rental income close to zero instead of it being a large amount (at least a large amount given my relatively low salary). Just to add, we are in no way looking to do anything remotely fraudulent. The idea I am suggesting is 100% legal in the UK, and is commonly done, so if it isn't legal in Ireland please excuse my asking. Also, if our rental income is below €3175, despite the fact that we wouldn't be PAYE workers in Ireland, can we still use form 12 rather than the more complicated form 11, to complete our return?
Can Spouses Split Rental Income Unequally?
- Thread starter Interista
- Start date
Really hard to read due to no paragraphs.
First off, I don't believe the idea of assessed equally exists in Irish tax law.
[broken link removed] may help.
Second: have you done the math on what the net taxable income will be on the house?
Would the simple way be for her alone to be the landlord in the rental agreement.
Having said that you need to read the bit here about NR landlords
http://www.revenue.ie/en/tax/it/credits/rent-credit.html
Third: I understand DTA's to give credit for tax paid in one jurisdiction when doing the tax comp in the other. I may be wrong here but I don't think they recognise tax credits.
Can you post the link to the DTA?
The Form 12 is designed for PAYE so you will be using the F11, having said that if you sign up for ROS it is easy to do.
First off, I don't believe the idea of assessed equally exists in Irish tax law.
[broken link removed] may help.
Second: have you done the math on what the net taxable income will be on the house?
Would the simple way be for her alone to be the landlord in the rental agreement.
Having said that you need to read the bit here about NR landlords
http://www.revenue.ie/en/tax/it/credits/rent-credit.html
Third: I understand DTA's to give credit for tax paid in one jurisdiction when doing the tax comp in the other. I may be wrong here but I don't think they recognise tax credits.
Can you post the link to the DTA?
The Form 12 is designed for PAYE so you will be using the F11, having said that if you sign up for ROS it is easy to do.