No Tax Return for Investment Property

We bought an investment property in 2005 with our combined salary of €65k - colleague in work encouraged me as partner worked in bank & said it would be easy. Looking for a quick fix to our constant money worries - i got swept up with it all and planned to sell within 12 months to make a profit. Like many in the country now stuck with a property in negative equity, however really did not get advice on this...Starting renting in Nov 2005 and this covered the interest on the property - we are not paying off the capital. Now we're in 2010, partner now unemployed and i don't know how to go about doing a tax return, i've never done one & i'm sick with worry as i only found out last year that it should have been done every year - i just thought we pay tax when we sell the house if a profit made and if the rental income is more than the mortgage payment. i'm afraid to do one, in case we get a huge bill & we're unable to pay it but also my partner has just received his 2nd week social welfare payment & having this rental income is something that should have been noted to social welfare office and now i'm in fear of that being cut off.
I know i need to talk to someone but not sure who is reliable and safe - an accountant or a financial adviser, plus i can't afford to pay for this service
any advice of next steps greatly appreciated

First of, I'm not an accountant.

Have you been registered with the PRTB? If so, you may be OK as this will mean that all of the mortgage interest will be tax decutable there is every possibility your expenses will exceed your income and you will not owe any tax. You should definatley do returns as the rental loss can be brought forward and can be offset in the future if/when you start to make a profit.

If you are not registered with the PRTB you will not be able to offset the interest for the tax years that were not registered. You will definately need to get some professional advice and the sooner the better.
There are alot of people on AAM who will be able to give you some more detailed advice, but that might start you off.

many thanks for your reply

i am aware that i urgently need to resolve this, i'm not sure where i can get a good accountant or do i just ring anyone?

i'm not sure if i'm registered with PRTB - at the time of the paperwork going through, the person that arranged our mortgage said that our letting agent will have registered us - can they tell me this?

i did pay the tax in September for investment property

i did pay the tax in September for investment property

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What tax are you talking about here - income tax, PRTB (€70 to register a tenancy), NPPR (€200 for NPPR)

What is the agreement with the letting agent ? Did they just let the property or do they manage the property? What does your contract with them state ?

The person arranging the mortgage (bank?) would not usually have any dealing with the letting agent, unless it's a broker you used who does both mortgages & letting.

italia90 said:

- i just thought we pay tax when we sell the house if a profit made and if the rental income is more than the mortgage payment.

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This is not how it works, you need to look up the investment property advice on here, look up revenue.ie for tax advice. Basically you need to do your accounts. How much did you receive in rent versus the costs that are allowable. If you are not registered with the PRTB you cannot deduct the mortgage interest. Your first step is to register with the PRTB, you cannot register tenants that are no longer there. Then you do your profit and loss, then you send in a tax return, and you are only going to make things worse for yourself if you don't do this now as the penalties and interest are onerous, also you need to inform social welfare of this property. If the house is not giving you a good return you may be better off selling it. Instead of worrying about it do something about it. You might also need to consider doing the money makeover section on this website for better advice.

we have a contract with the letting agent in which they manage the property by visiting every quarter & we pay them the value of one month rent that i receive annually.

i guess we were naive listening and getting sucked in by all the hyper of the celtic tiger and my colleague's partner told us it was no big deal, everyone was doing the same, said it would be no problem. Even when my husband pay slips were not on official documentation, he said bank would have no hassle in giving out the investment mortgage etc. He said that the letting agent will have sorted out the PRTB forms etc

Its our own fault really and we've noone to blame only ourselves as we didn't talk to anyone else about it and get advice. I was anxious soon after about holding onto it as rent was only covering the interest each month and tried to sell within one year. however, the house is now in an area like concrete jungle and it was impossible sell. Even now some of the newer ones built nearby have never been sold...

I have downloaded this form and will pay the late registration fee and i am meeting an accountant next week to seek advice and hopefully seek a way to manage this in the future as it won't be something that i can get rid of easily.

My own home mortgage is €160k and is not in negative equity thankfully - in the boom, neighbour house sold for 500K, so i'm thinking, now possibly €300K - worse case scenario so if i do manage to sell the investment property at a loss, remaining balance could be added to our home loan, that is providing husband gets a job this year

i'll keep you posted of the advice from the accountant - is it wise to get advice from one other acccountant or stick to the one?

italia90 said:

... worse case scenario so if i do manage to sell the investment property at a loss, remaining balance could be added to our home loan ...

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Sorry to hear about your problems and be very careful here. The lender may not be willing or able to roll the negative equity in the investment property into the mortgage on your PPR. You will need to discuss all of this with your financial adviser in the first place and then with the lender in advance of the eventuality arising.

italia90 said:

we have a contract with the letting agent in which they manage the property by visiting every quarter & we pay them the value of one month rent that i receive annually.

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With money so tight you should evaluate using a letting agent,its only one property and you should be more than able to run it yourself saving you a considerable chunk of change.

Heres a site that specialises in Lardlord related matters
http://www.irishlandlord.com/


Do not leave off dealing with the Revenue approach them before they approach you,do this immediately,it will be a weight off your mind.

italia90 said:

. He said that the letting agent will have sorted out the PRTB forms etc

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I don't understand this, did you not hire the letting agent and did you not discuss with him what he would do?

I also don't understand how you are now seeing an accountant when you said in the first post that you can't afford one?

From what you've posted so far it seems your best bet is to sell the investment property and put the negative equity on your own home. Until you post accurate figures on here you can't get proper advice. This advice is for free so it's in your own best interest, why don't you look at the money makeover section to see how it's done. The first step in sorting out the mess is in understanding where you are at. I don't think you get the revenue and social welfare implications which could be quite serious.

If what I've posted sounds harsh, it is not meant to be so.

Pretty sure rental income will not effect social welfare payment.Property is assessed by Social Welfare on current value less outstanding mortgage,so if you are in negative equity,you have no worries.But might be wise to update social welfare on the situation.

Could have worded "if you are in negative equity you have no worries" better,but you get my point re social welfare payment,I hopew.