Never paid preliminary tax on rental income

[Learner2015]

So a friend was chatting to me today and mentioned his new accountants had computed his rental tax liability for 2015 but also said he needs to pay preliminary tax for 2016 in October this year.

The thing is this person has been getting rental income since at least 2005, paid tax every year, but until the 2015 return had always done it themselves on a paper return and has never paid any preliminary tax.

I said I'd throw a query up here for him as he is worried Revenue may now look for interest or penalties for all the years of never paying preliminary tax - is this likely? What should he do, hold his hands up or pay prelim tax for 2016 and see what happens?

 

[cremeegg]

I suspect that this is more common than you might think.

If your friend has fully declared his income and paid tax on it then Revenue know his situation, there is nothing for him to hold his hands up to.

I suggest pay the preliminary tax now that the accountant has suggested it and leave it at that.

 

[Gordon Gekko]

It may or may not be picked up. More likely not to be picked up in my experience.

 

[Learner2015]

Thanks cremeegg and Gordon. I'll pass that on, hopefully will stop him panicking so much!

 

[Gordon Gekko]

Back of the envelope stuff, if he gets nailed, it'll be for an amount equal to around one year's tax liability.

(assuming reasonably linear numbers over the 10 or so years).

 

[gar32]

I was ask to pay this myself. I am a Non resident LL with tenant deducting tax and paying at the end of the year. So this year I have to Pay before Oct for 2016 and my tenant will pay around Nov also for 2016 the same amount. The tax office have gone to great length to explain that that's the way it works. Some times the tax office can have a good service but other times the have me wondering how they get any thing done.

My rule is when asked to pay tax pay 1st ask for it back later

 

[T McGibney]

I said I'd throw a query up here for him as he is worried Revenue may now look for interest or penalties for all the years of never paying preliminary tax - is this likely?

In my experience, it's highly unlikely unless the amounts involved are sufficiently sizeable to make it worth Revenue's while calculating and demanding interest. Penalties are not relevant here.

I said I'd throw a query up here for him as he is worried Revenue may now look for interest or penalties for all the years of never paying preliminary tax - is this likely? What should he do, hold his hands up or pay prelim tax for 2016 and see what happens?

I'd suggest the latter. But if it's worrying him he may well decide to opt for the former (imho overkill) approach.

 

[T McGibney]

I was ask to pay this myself. I am a Non resident LL with tenant deducting tax and paying at the end of the year. So this year I have to Pay before Oct for 2016 and my tenant will pay around Nov also for 2016 the same amount. The tax office have gone to great length to explain that that's the way it works.

You got very bad advice from them. There's absolutely no need to pay twice.

Also (although it's your call) I wouldn't under any circumstances have your tenant deducting tax. If they fail to pay it over to Revenue, you're totally exposed.

 

[cremeegg]

You got very bad advice from them. There's absolutely no need to pay twice.

Surely the landlord must pay the tax owing, he can claim a credit in regard to the tax remitted by the tenant, IF the tenant has in fact remitted any tax.

Also (although it's your call) I wouldn't under any circumstances have your tenant deducting tax. If they fail to pay it over to Revenue, you're totally exposed.

Is there not a legal obligation on the tenant to deduct the tax and pay it over to Revenue, where the landlord lives abroad and no Irish agent has been appointed.

I agree the landlord is exposed, but that is just another issue facing landlords.

 

[T McGibney]

Surely the landlord must pay the tax owing, he can claim a credit in regard to the tax remitted by the tenant, IF the tenant has in fact remitted any tax.

There's no need to double-pay Preliminary Tax IF the tenant is separately remitting it.

Is there not a legal obligation on the tenant to deduct the tax and pay it over to Revenue, where the landlord lives abroad and no Irish agent has been appointed.

There is indeed. That's why the landlord needs to circumvent this by nominating someone or anyone as their collection agent. Since the 1998 Ombudsman's Report, any action against an unwilling tenant to force them to remit unpaid tax is almost certainly doomed to failure.

 

[gar32]

I am lucky my tenants pay the tax. If they don't pay the tax I have their deposit to cover it. The tax office say that the tenant is liable for the tax on their web site but don't seem to understand that when I am writing to them. I don't think they have many LL which are Non resident and have no agent. I would not have gone this way if it was not clearly stated on their site. I would have my sister collect the rent then pay later. I have nothing but hassle with them. Not to say about my tenants having to go to the tax office 3 times to get someone who understood what was going on and let them pay the tax. I know the tax is paid so I try not think about it. I just hope they are better next year and understanding their own rules.

 

[T McGibney]

Hi Gar

Unfortunately the tax office are in the tax collection business. They are not in the tax advice business. Sooner or later they will let you down and they will pin the blame on you, as they always do in such situations.

In the meantime I strongly recommend that you find someone or anyone that you can nominate as collection agent in order to avoid a future problem with your tenants and the deduction of tax. You may find my blog post useful: https://mcgibney.ie/2013/03/14/non-resident-landlord-how-to-appoint-tax-collection-agent/

Good luck with it.

 

[JamesN]

I rang the tax office last year and told them I could not afford the preliminary tax and could only pay the current year tax in instalments.

They were ok with that although they warned me they would go for full enforcement of the debt if I even missed one repayment.

 

[gar32]

Tax Advice is one thing but tax rules on their on web site are another. They seem to be guessing half the time what they should be doing. I have called and emailed and I have got no consistency. I will just over pay this year and let it roll over. I don't want to have an agent. I read the tax office web site and with that information went with Non resident. The fact they have no clue about it when I ring just confirms they just want money as easy as possible. Thanks for the advice. I will continue the endless fight to explain the tax system to the tax collectors

 

[Gordon Gekko]

As Tommy has said (repeatedly but not as bluntly), not appointing an agent is utterly insane.

As is relying on advice from the people who answer the phones in Revenue.

 

[gar32]

Utterly insane is a bit hard. My tenants a very nice people that is why I chose them. I get the form from them to add to my tax return. The pay the rent on time for over 2 years. The tax is just over the deposit they gave me. I don't see the great advantage as I have to do the same paper work and with preliminary tax have to pay in advance of my tax return. I have heard a lot worse stories then a tenant running off without paying the tax the are liable for to revenue.

 

[gar32]

So I received a sorry from revenue today. I do not have to pay preliminary tax as a Non resident LL.

The advice they give maybe be bad at times but its free

 

[T McGibney]

I don't see the great advantage as I have to do the same paper work and with preliminary tax have to pay in advance of my tax return. I have heard a lot worse stories then a tenant running off without paying the tax the are liable for to revenue.

The point is that the term "Collection Agent" is totally misleading in that the "agent" doesn't have to have any role in handling money or tax correspondence. A more accurate term would be "Revenue contact person". They're simply a nominee for Revenue to contact and chase if, for whatever reason, you end up failing to file returns or paying your tax bill. Anybody you know and trust (and more to the point, knows and trusts you) can be nominated for this purpose. It's simple and it cuts out so much risk.

 

[gar32]

Just got a final demand from the tax office for the tax paid 12 months ago by my tenant. I am just trying to follow their rules and they are P&^%ing me off. I may have to follow advice and go with a agent. I got a missed call about CGT. Not income tax. I returned they call and left a message ask what was the issue. No email no 1st or 2nd demand. My god I am so happy to be out of Ireland. I don't think I could ever move back.

 

[cremeegg]

Just got a final demand from the tax office for the tax paid 12 months ago by my tenant. I am just trying to follow their rules and they are P&^%ing me off. I may have to follow advice and go with a agent. I got a missed call about CGT. Not income tax. I returned they call and left a message ask what was the issue. No email no 1st or 2nd demand. My god I am so happy to be out of Ireland. I don't think I could ever move back.

But the flip side of that is that in Ireland you can get a long way on plamas even with the tax authorities. Preliminary tax, you are supposed to pay it but there seems to be no penalty if you don't, Form-11 ? Form-12? , who knows, but sure it doesn't matter, either will do so long as you get one of them in.

Other countries have this type of fuzzy around the edges rules as well. I recently had to close a bank account for a deceased relative, in one of those no nonsense, totally efficient northern European countries. No-one at the bank had the slightest idea of how it was done, this form, no that form, that person is out today, (me tearing hair out, "do you realise I flew here today with all the paperwork you said was needed", "sorry that person is out"). In Ireland they would get it sorted for you somehow.