first time landlord

C

Ciall

Guest
Afternoon folks,

First time user of the site so apologies if many of the issues I raise have been covered in other threads.

Some short background on my situation.

My wife and I bought an apartment at the height of the boom in 2007. We have a huge mortgage which we can pay fortunately. It is a 1 bed property so we moved out in August 2011 when I got a new job and we wanted to start a family. We are letting the apartment but the rental income is well short of the mortgage repayments which I make up from my own pocket.

I am on a tracker mortgage so I am saving a good bit over what the standard variable would be. I did not inform my Bank when we moved out and let the property as I suspected this would trigger a release clause from their side and put me onto the standard variable. Of even more potential concern to me is that I am still claiming mortgage interest relief on my mortgage (as far as I know).

October is on the horizon and I am doing up my tax return as I speak. I am a PAYE employee and my rental income for 2011 was only €4k gross so I think I am ok to use form 12 (I could be wrong here though, I am confused as to whether I need to use form 11). I have registered the property with the PRTB (I did this on letting the property and again this year when I got new tenants last month) and I have paid the NPPR.

I have any number of questions but the two that are worrying me most are

If I return a form 11 or 12 will the revenue ask me to pay back all the mortgage interest relief that has reduced my mortgage over the past 12 months (plus penalties?) and will they inform my Bank and cancel the interest relief at source going forward?

and

If the above does happen will my Bank look for me to refund them the additional payments I would have had to make if I had gone back to the standard variable rate in August last year?

I have a good few other questions on actually submitting my tax return itself, but I said I had better deal with the above first. I'm pretty worried about this to be honest so I would appreciate any help/advice on offer.
 
Even before you submit the tax return (form 12 is fine in your case) you MUST tell Revenue that from whatever date you are no longer entitled to TRS for the apartment. You will have to pay back the overpayment but if you come clean quickly then you won't be hit for interest and penalties.

The tax relief available to a landlord is basically 75% x your marginal rate so 30.75% if you're paying at 41% rate which is higher than the 15% trs you are getting.

Revenue will tell your bank to stop giving you the trs but it won't necessarily trigger the bank to dig any deeper. Are you sure your mortgage contract stipulates that you lose your tracker if you rent out the house? You may be worrying about nothing.
 
Thanks for your help Mrs. Vimes.
I'm not entirely sure what you mean by the second paragraph. I'm afraid. I knew I could claim 75% of the interest I am paying against any possible income tax on the rental income. This was less of a worry as my mortgage is so big in comparison to my rent I'm making a loss for tax purposes anyway.
Did you mean that the interest relief on the rental income I can claim is at least a benefit to me in terms of potential tax on the rental income?
Pretty sure that clause is in the mortgage offer letter alright.
 
Hi Ciall,
I think your understanding of what Mrs. Vimes was saying is correct. I wouldn't worry about the bank picking up on the interest relief been stopped. I was in a similar situation and I cancelled the TRS. That was four or five years ago. Heard nothing from the bank. I don't think they really care as long as your paying the instalments... They've enough problems without going looking for more :)
 
Much appreciated Luco. I was hoping that the Bank would turn a blind eye alright in light of the bigger problems they have. I haven't missed a P&I payment in 5.5 years do I'm hoping that a close analysis of my loan is bottom of their to do list.
After Mrs. Vimes advice I was all set to seek out how I would cancel my TRS. Since then though I have spoken to 3 different people in a similar situation to me and they are all telling me exactly the same story.
They fill in their ROS every year and pay their tax on the rental income. They pay the household charge, NPPR charge and register for the PTRB and they pay their mortgage up to date every month.
Not one of them have ever cancelled their TRS or had 1 word of correspondence from either the Bank or the revenue about it.
I absolutely don't want to be a tax cheat, (am i contradicting the rest of my post, very possibly) but am I completely stabbing myself in the foot by coming clean and cancelling my TRS? Isn't it bring phased out over the coming years anyway?
One lad I asked has been in this boat for 5 years. His firm opinion was that between the PrTB registrations, the payment of the NPPR and the filing of tax returns he has informed the revenue nearly 10 times in one form or another that his 1 bed apartment is let. He's never received so much of a phone call from anyone in revenue on this issue.
He looked at me like I was mentally ill when I told him I was thinking of cancelling my TRS.
 
Ciall said:
Not one of them have ever cancelled their TRS or had 1 word of correspondence from either the Bank or the revenue about it.
One lad I asked has been in this boat for 5 years. His firm opinion was that between the PrTB registrations, the payment of the NPPR and the filing of tax returns he has informed the revenue nearly 10 times in one form or another that his 1 bed apartment is let. He's never received so much of a phone call from anyone in revenue on this issue.
He looked at me like I was mentally ill when I told him I was thinking of cancelling my TRS.
Click to expand...

Your friend has never informed Revenue that the trs should be cancelled. Just because trs section doesn't currently cross-check with NPPR or IT doesn't mean they never will. Witness the people who ignored social welfare's instruction to tell Revenue that they were now receiving state pension, it has caught up with them eventually. PTRB is not part of Revenue although I believe they now data-share.

Your friends are the ones who are mental if they think they'll never get caught for interest and penalties.

Personally, I like to sleep at night.
 
Advice is much appreciated Mrs. Vimes. Thanks again for your help here.
Does anyone know, is MITRS only paid to you for the first 7 years of your mortgage?
If so I only have less than 18 months left. When it stops anyway are they really going to do a look back exercise for everyone they've paid for the last god knows how many years? I would have thought the revenue were run off their feet as it is...
 
Basically if you're getting TRS at the moment you will get it until 2017.

You might well get away with it, so might your friends.

I just reckon that at some point Revenue will realise that there is a big barrel of fish and they have a shotgun. Literally all they have to do is cross-reference NNPR and TRS. From what you're saying there are enough people mis-claiming TRS to make it worth their while.

There is no statute of limitations on fraudulently or negligently claiming a tax relief to which they are not entitled.
 
Have to agree with Mrs Vimes there...
Once Revenue pull the finger out there's so many different sources for them to catch out people it'll be very easy. I reckon your either all in or all out... Declare everything and cancel the TRS or declare nothing... Ultimately your friends are doing it half arsed. Declaring the income and then leaving it up to Revenue to latch onto their TRS. Their going to get a big bill at some stage. What will they say then " I'm not paying back the TRS because you should have known when I declared the rent..." But that's their problem if I was you I just wouldn't go there and get caught out as well....
 
It is highly unlikely the TRS being cancelled will trigger anything with the Bank. Revenue just send in lists and amounts of TRS due for accounts to bank head offices, this info is just input centrally and there are huge numbers of changes to TRS on accounts every month.

No one in the bank is going to even notice it's gone from your account unless there is some other reason why they are looking at your account, for example a query on repayments.
 
As you have registered with the PRTB you can deduct 75% of your mortgage interest from your rental income - TRS only gives you 30% (assuming FTB) so if your interest is 12k pa, for example, then your TRS is only 3.6k versus a deduction of 9k, which completely covers your gross rental income of €4,000.

So by doing things by the book and cancelling your TRS, not only do you not need to worry about future Revenue investigations but you also gain financially.
 
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