Own apartment for just short of 2years. Going travelling :Rent-a-room Scheme?

[murphaph]

Re: Own appartment for just short of 2years. Going travelling :Rent-a-room Scheme?

Yes, I was just having a stab in the dark, I've no idea what the rent-a-room rate would be, so I would have to check assuming this was even a viable option, but Im inclined to think that renting the apartment is the way to go; just hand everything over to a management company to look after while I enjoy a beer on a beach on a Thai island

Have a read through the threads about letting agents on the site first ;-)

Always best to manage the property directly and failing that by a close family member you can trust. Much better for someone to actually go around every month to collect the rent and keep an eye on your place if at all possible.

Problems can mount up and your letting agent may not even know and if the do may not pass the information on to you promptly.

 

[d3481553]

Re: Own appartment for just short of 2years. Going travelling :Rent-a-room Scheme?

Unfortunately, I think Ill have to go with management from a letting agency as my family live in Dublin, and I doubt they like me enough to drive down once a month

I've only been going by price in checking out letting agents , I never really considered who would give the better service, I just assumed they all do pretty much the same thing. Probably important to consider now that you've mentioned it. Tough to know which are better than others, Ill have to check out the threads on here as you've suggested.

 

[Afuera]

Re: Own appartment for just short of 2years. Going travelling :Rent-a-room Scheme?

Wow, that is some reception you received for your first post here d3481553. It seems that the quality of posters on this forum has really gone downhill since all the best ones were either banned or got fed up having their responses edited/deleted.

it's no what the rent a room scheme will cover-it's what the MARKET RATE for a SINGLE room will cover. You cannot legally charge your tenant over the rate for a room to push the rent up to the rent a room limit as this would indeed be tax evasion (pretending to rent a room when in fact the tenant is renting the house-otherwise the tenant wouldn't pay over the odds for the 'room').

I think there is a slight mix up here. The rent a room scheme falls under a licensing agreement and is outside the remit of the Residential Tenancy Act. Therefore there are no such restrictions that market rate be charged or even that the tenancy be registered with the PRTB.

As murphaph pointed out, there is a limitation on how much can be taken in under the rent a room scheme before tax will be charged. I think it currently stands at 10,000 per annum. You will need to declare the income to Revenue at the end of the tax year even though it is not taxable.

Definitely talk to an expert, but I think your original suggestion is perfectly legal. You could find a lodger willing to pay 600p/m, go away for 6 months to enjoy the Thai beaches, and when you return ask the licensee to leave and you would not have broken any of the rules regarding the scheme.

 

[Setanta12]

Re: Own appartment for just short of 2years. Going travelling :Rent-a-room Scheme?

As one who had to argue the meaning of the phrase 'principal private residence' with the Revenue, I suggest people break it down into their constituent parts 'principal' (i.e. you can have a few residences), 'private' (as in, not a public residence) and 'residence' itself (where you 'reside').

Its this latter word which causes difficulty. In the end, I ended up using CAT case-law to support my CGT position (or was it the other way around?) I argued successfully that a holiday cottage and not a presbytery was a priest's residence. In another case, in arguing the meaning of the word 'reside', I ended up arguing what constitutes a 'continous occupation', the Revenue argued an unbroken uninterrupted line of occupation, I argued that this militated against long holidays.

These matters are never as straight-forward as sometimes suggested on this website. But to my mind, the absence from the country for a year (even if termed a holiday) could hardly be deemed to be such (i.e. a holiday), however six-months could easily be termed a holiday.

 

[Gypsy]

I have a similar question to the guy who started this thread.I have had a house built on an adjacent site.I own my PPR for over 20 years.Can I move into the new house for a extended period to get a feel if I want to live there permenantly.Before selling my PPR. If I do can I still qualify for the Rent a Room scheme if a family member is still there with one or two rooms rented.Do I have to be actually living there even if I am not outside the country.?Also what is the max that can be earned under the Rent a Room Scheme without being liable for tax.

 

[murphaph]

Re: Own appartment for just short of 2years. Going travelling :Rent-a-room Scheme?

Wow, that is some reception you received for your first post here d3481553. It seems that the quality of posters on this forum has really gone downhill since all the best ones were either banned or got fed up having their responses edited/deleted.



I think there is a slight mix up here. The rent a room scheme falls under a licensing agreement and is outside the remit of the Residential Tenancy Act. Therefore there are no such restrictions that market rate be charged or even that the tenancy be registered with the PRTB.

As murphaph pointed out, there is a limitation on how much can be taken in under the rent a room scheme before tax will be charged. I think it currently stands at 10,000 per annum. You will need to declare the income to Revenue at the end of the tax year even though it is not taxable.

Definitely talk to an expert, but I think your original suggestion is perfectly legal. You could find a lodger willing to pay 600p/m, go away for 6 months to enjoy the Thai beaches, and when you return ask the licensee to leave and you would not have broken any of the rules regarding the scheme.

My point was this:
If the apartment is worth 600pm and a room is worth 300pm then to charge 600pm (even with the tenant's blessing) to a lodger to give him the full enjoyment of the house would be tax evasion as it is not your PPR once you let someone else have the peaceable enjoyment of the property. If you 'nudge nudge wink wink' to the tenant that you'll (for example) charge him 550 per month for the whole house but that legally he is a licensee rather than a tenant (to which he agrees for the 50 per month reduction) then that is clearly tax evasion.

The only way (IMO) to do this legally is to genuinely take in a lodger at the going rate for the room and then go on holidays while keeping your own room free for your own use at any time. Taking in a tenant for the whole house and labelling him a lodger (who is happy to pay twice the going rate for a room) is clearly tax evasion.

Independent advice required for sure but it seems the OP is heading down the road of waiting it out and letting the whole house. OP: If you are travelling the world presumably you will have no other income anyway and you should be paying no tax as your rental income (after allowances like mortgage interest/insurance/wear and tear/managemant fees) will be so small it'll likely be well under the taxable threshold!

 

[d3481553]

Thanks for your input Afuera/Setanta12, the last 10 or 15 posts is the kind of intelligent debate I was originally trying to generate.

@Gypsy
Unfortunately, Im not educated enough on this subject to answer intelligently on that one, hopefully one of the other guys might be able to answer your question. I would honestly only be guessing.

@murphaph
I actually only realised this morning about the tax credits building up over the time that Im not working, so that gave me a nice warm feeling! I was worried about coming back from holidays to a tax bill for thousands of euro.

Just on the allowance, is mortgage interest not only tax deductable against section 23 properties? How do I find out the capital/interest/TRS breakdown of my mortage repayments? Ring the bank I suppose?

Also, on the CGT thing, does my apartment become an 'investment property' FOREVER when I rent it out? Because it will be my PPR once I get back from my travels and you don't pay CGT on your PPR. So does the status change again from investment property back to PPR?!! As an earlier poster said, if I did decide to sell it in the future it would be harsh to have to pay CGT on it.

 

[murphaph]

Just on the allowance, is mortgage interest not only tax deductable against section 23 properties?

No. All Investment properties currently qualify for this allowance. You can now deduct only 75% of your mortgage interest payments (or from the end of this month, can't remember the exact date from which the budget reduced it from 100% to 75%).

How do I find out the capital/interest/TRS breakdown of my mortage repayments? Ring the bank I suppose?

Yup. You will have to instruct revenue to cease TRS from the date you start letting it out of course as TRS is an owner occupier relief. Revenue will then contact your bank and instruct them to cease the relief to you. The bank will be able to provide a statement for any date you need so you can work out how much interest you've paid during your year away.

Also, on the CGT thing, does my apartment become an 'investment property' FOREVER when I rent it out?

No.

Because it will be my PPR once I get back from my travels and you don't pay CGT on your PPR. So does the status change again from investment property back to PPR?!!

Yes.

As an earlier poster said, if I did decide to sell it in the future it would be harsh to have to pay CGT on it.

You may have to pay a proportion of CGT due if the property is ever sold with a capital appreciation. You would not be liable for the full amount due as if the property had always been an investment property, only that proportion due to the period of time it was. You may well have no worries on this score as prices are still heading south anyway and I presume you paid more for your place than it's currently worth given the timeline. Again, an independent tax advisor will be able to clarify.

 

[d3481553]

Excellent, thanks v.much for the info murphaph

I knew about having to cease the TRS alright, but the mortgage interest being tax deductable is a real eye opener, I reckon your right; by the time I allow for everything tax deductable, I dont think theres going to be any taxable profit, due to the monthly rent being so low.