How to Declare free use of property

Jimjobjim

Registered User
Messages
18
Hi Folks

Take this scenario, nephew and his partner are living rent free in his aunts home since jan 2019, rental yield would be approx 2500 per month thus giving rise to tax, to note nephews gift tax threshold has been exhausted however his partner has never received a gift from her partners aunt

My understanding would be that 2500 * 12 gives a total annual rental yield of €30,000 divided by two equals 15,000 each then minus €3000 gives liability of 33% of 12,000 for nephew = €3,960 as nephews partner has not received any previous gifts she is still under the threshold therefore she has no liability for 2019, does this calculation look right and if so does nephew just make declaration in December and pay his bill of €3,960 then?

Finally not sure if relevant or not but nephew spent approx €10,000 on doing up property before they moved in, has receipts for materials to prove it, can that in any way offset against rent that is due?

Thanks for any input
 

David1234

Frequent Poster
Messages
214
This is the “off the record” advice we got from a tax consultant when a had a family member do something similar.

As the nephew and his partner are maintaining the property and ensuring it doesn’t go into a state of disrepair you could easily argue a significant reduction in the market rate, say €500 a month/€6k a year which is the tax free gift allowable from the aunt to the couple.
 

Jimjobjim

Registered User
Messages
18
This is the “off the record” advice we got from a tax consultant when a had a family member do something similar.

As the nephew and his partner are maintaining the property and ensuring it doesn’t go into a state of disrepair you could easily argue a significant reduction in the market rate, say €500 a month/€6k a year which is the tax free gift allowable from the aunt to the couple.
Hi, thanks so much for the reply, interesting, in that case would they be better off getting some kind of rental agreement signed up with the aunt now which sets out the terms and within that agreement allow for the €10,000 to be in lieu of rent and backdate the agreement to Jan 19 when they moved in? Bottom line is that aunt didn’t want them to pay rent just mind her home and maintain however by doing that they’ve inadvertently caused a liability with free use of property

Thanks for any opinions
 

NoRegretsCoyote

Frequent Poster
Messages
706
CSO Census data suggest that slightly over 1% of households occupy housing rent free.

That's a lot of people.

I wonder how many are declaring it as a gift for tax purposes.
 

David1234

Frequent Poster
Messages
214
Hi, thanks so much for the reply, interesting, in that case would they be better off getting some kind of rental agreement signed up with the aunt now which sets out the terms and within that agreement allow for the €10,000 to be in lieu of rent and backdate the agreement to Jan 19 when they moved in? Bottom line is that aunt didn’t want them to pay rent just mind her home and maintain however by doing that they’ve inadvertently caused a liability with free use of property

Thanks for any opinions
Personally I do not think an agreement is necessary if all parties are happy with the existing setup. The nephew should just hang on to receipts in case it is ever queried. Perhaps a one page note stating that in lieu of a market rate rent that the nephew will maintain the house and garden to a certain standard and pay all household bills. It may also be an idea to record that the nephew has no claim over the property regardless of the time he spends living there. It is unlikely the revenue will ever query this at they do not appear to be overly concerned with the issue at present. This could potentially change in the future all the same.

At present there are 2 houses (values circa €750k) sitting idle on my road where elderly owners have had to move into retirement homes. One for sure is under the fair deal scheme but I am unsure of the other. Having spoken to the family of the house that is required for the fair deal scheme they said that it is not worth getting tenants in for tax purposes and the hassle of being a landlord.
 

Jimjobjim

Registered User
Messages
18
Personally I do not think an agreement is necessary if all parties are happy with the existing setup. The nephew should just hang on to receipts in case it is ever queried. Perhaps a one page note stating that in lieu of a market rate rent that the nephew will maintain the house and garden to a certain standard and pay all household bills. It may also be an idea to record that the nephew has no claim over the property regardless of the time he spends living there. It is unlikely the revenue will ever query this at they do not appear to be overly concerned with the issue at present. This could potentially change in the future all the same.

At present there are 2 houses (values circa €750k) sitting idle on my road where elderly owners have had to move into retirement homes. One for sure is under the fair deal scheme but I am unsure of the other. Having spoken to the family of the house that is required for the fair deal scheme they said that it is not worth getting tenants in for tax purposes and the hassle of being a landlord.
Thanks for that information, it’s a similar situation in this case, Aunt not residing due to ill health and there was some vandalism of property while it was empty therefore family felt best it was occupied, from reading all of the above it appears the way to go is to have the aunt draw up a caretakers agreement with her nephew and his partner stating that in lieu of any rent being charged they will maintain property carry out repairs when necessary and pay bills and keep evidence of same, is there any formal document template that exists online for something like this or would it be a case that they draw up their own agreement?
 

Jimjobjim

Registered User
Messages
18
Any further thoughts on this folks, would a home made caretaker agreement do or is there a such a thing as an official caretaker agreement template online? Thanks
 

Desimomo07

New Member
Messages
2
A Caretakers agreement text;

Caretakers Agreement

CARETAKER'S AGREEMENT

I,We

Of c/o

DO HEREBY ACKNOWLEDGE THAT I have been this day put into the possession of ALL THAT AND THOSE
as Caretaker, by and for and that I know I am in possession of said solely as such Caretaker of and for the said and not under any contract of tenancy re the possession of the said AND I HEREBY FURTHER ACKNOWLEDGE that I have UNDERTAKEN AND AGREED with the said to take care of the said for him, and to preserve same from trespass and injury and to indemnify the said against all costs, claims, proceedings or demands by reason or on account of my being in possession of the said property under this Caretaker’s Agreement and to deliver up the possession thereof to the said , his Heirs or Assigns, immediately when required so to do.
IT IS HEREBY AGREED AND ACKNOWLEDGED that the property has been completed to our satisfaction and that our snag list has been duly completed.
Dated day of
Signed ________________________________
Solicitor Witness.
Name ___________________________
Address __________________________
________________________________
_________________________________
Occupation ______________________________



Just thinking here...could there be a BIK issue here? Occupier has benefit of effectively free housing in exchange for services.
 
Last edited:

Jimjobjim

Registered User
Messages
18
A Caretakers agreement text;

Caretakers Agreement

CARETAKER'S AGREEMENT

I,We

Of c/o

DO HEREBY ACKNOWLEDGE THAT I have been this day put into the possession of ALL THAT AND THOSE
as Caretaker, by and for and that I know I am in possession of said solely as such Caretaker of and for the said and not under any contract of tenancy re the possession of the said AND I HEREBY FURTHER ACKNOWLEDGE that I have UNDERTAKEN AND AGREED with the said to take care of the said for him, and to preserve same from trespass and injury and to indemnify the said against all costs, claims, proceedings or demands by reason or on account of my being in possession of the said property under this Caretaker’s Agreement and to deliver up the possession thereof to the said , his Heirs or Assigns, immediately when required so to do.
IT IS HEREBY AGREED AND ACKNOWLEDGED that the property has been completed to our satisfaction and that our snag list has been duly completed.
Dated day of
Signed ________________________________
Solicitor Witness.
Name ___________________________
Address __________________________
________________________________
_________________________________
Occupation ______________________________



Just thinking here...could there be a BIK issue here? Occupier has benefit of effectively free housing in exchange for services.
Thank you for the caretaker template
 

Jimjobjim

Registered User
Messages
18
This is the “off the record” advice we got from a tax consultant when a had a family member do something similar.

As the nephew and his partner are maintaining the property and ensuring it doesn’t go into a state of disrepair you could easily argue a significant reduction in the market rate, say €500 a month/€6k a year which is the tax free gift allowable from the aunt to the couple.
Hi David, one further question on above, let’s say this is what the nephew and uncle agreed to do as in uncle sets rent at a reduced rate of €500 per month how would the application of this work as in A. Would it be a case they pay €500 per month into uncles bank account and then Uncle has to pay tax on the amount? or B. Uncle sets rent at €500 per month through a written agreement however they don’t actually pay him any money as he can gift nephew and his partner €3000 each, each year which equtes to the total rent he would charge for the full year therefore in effect gifting them the rental fee? Would be most grateful for clarity on this
 
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