Rent a room Relief

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sillbill

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I hoping someone might have some insight into my issue:

My circumstance:

1) I own a house with my sister. My sister lives in Spain
2) I currently live in the house
3) For the past 5 years, I have rented out two of the rooms. The rent comes to 12,000 euro, I reported half of this 6,000 euro as rent a room relief on my form 12
4) In 2022, I rented out three rooms. The rent came to 16,000. Therefore I earned 8,000 rent.

So my question is: Is my rent a room relief threshold 14000 or 7000, since I own half of the house with my sister who lives in spain?
 
Normally the limit of 14000 is divided by 2. Though I have just realise your sister is abroad and not living in.
 
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You do not have to own a property to avail of this relief. Resident in the property is the only qualifying criteria. A tenant renting a whole property could rent out rooms and benefit from the full relief on that property (14k). As your sister is not living there, you should be eligible for the full relief. If she was living there, the relief would be split between both of you (7k each)
Are you giving her 50% of the rent? If so, what does she do with this (tax wise) in sl Spain or here?

I am not an accountant
 
You can earn 14k per year rent a room. You cant mix it with other rent from a standard lease rental I dont think. Once you go over 14k you pay tax on everything. So if you earned 16k you pay full tax on it. Its the rent on the room regardless of who owns it- not a transferrable benefit I dont think.
 
sillbill said:
I hoping someone might have some insight into my issue:

My circumstance:

1) I own a house with my sister. My sister lives in Spain
2) I currently live in the house
3) For the past 5 years, I have rented out two of the rooms. The rent comes to 12,000 euro, I reported half of this 6,000 euro as rent a room relief on my form 12
4) In 2022, I rented out three rooms. The rent came to 16,000. Therefore I earned 8,000 rent.

So my question is: Is my rent a room relief threshold 14000 or 7000, since I own half of the house with my sister who lives in spain?
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Why would you go over the 14k threshold? You now have to pay tax on the entire 16k whereas if you just kept to the 14k it would be tax free. Of course you still need to make a return for the 14k.
 
Your rent a room exemption is €14,000. Your sister in Spain is irrelevant. You owe tax on a full €16,000 for 2022.

Thats my understanding.
 
Right Winger said:
I think you'll find you made an error in working out the correct rent rate per room. Your renters are due a refund of €2000. Pay it immediately.
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OP can charge what they want if tenants will pay it. Cant exceed rent a room total of 14k though. Tax due on full 16k but they owe tenants nothing.
 
Is reducing the rent from €16k to €14k tax evasion?

A law which says "No tax on €14,000 but €7,000 tax on €14,001" is badly designed. So it seems ok to me to reduce the rent to €14,000.

He can certainly do it going forward.
But can he do it retrospectively?

Brendan
 
Brendan Burgess said:
Is reducing the rent from €16k to €14k tax evasion?

A law which says "No tax on €14,000 but €7,000 tax on €14,001" is badly designed. So it seems ok to me to reduce the rent to €14,000.

He can certainly do it going forward.
But can he do it retrospectively?

Brendan
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I think he can. Certainly if he has the same tenants, and he hasn't yet made or finalized his tax return, he might well find, on reviewing his accounts, that he has inadvertently overcharged on the rent. If he rectifies matters, and records that he has done so, it's hard to see how this might be in any way unlawful.
He simply returns the now corrected amount and has the appropriate documentary evidence to back him up in the unlikely event of a Revenue audit or query.
 
cremeegg said:
Your rent a room exemption is €14,000. Your sister in Spain is irrelevant. You owe tax on a full €16,000 for 2022.
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Edited.

I think the OP is liable for tax on €9k as he can only claim RaR relief on amounts up to half of €14k. See here.

The sister's tax situation is her own business.
 
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NoRegretsCoyote said:
I don't think this is right as the rent is split 50/50 with the sister.

Think of it as the OP letting one room in the house and the sister letting the other. Then in 2022 the OP changed to letting a room and a half and the sister letting the other room and a half. Therefore the OP received in 2022 €6000+€3000=€9000 in rent for rooms in the house he lives in and therefore can qualify for RaR relief as it is below €14k.


The sister's tax situation is her own business.
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The sister lives in Spain. So presumably she has a liability on her share anyway. The OPs question as to whether the threshold applies on a per property or per individual basis remains unanswered.

I haven't a clue as to what the legal position on this is, but if it applied per individual, then a married (or unmarried) couple would have a threshold of 28,000 between them. It seems unlikely our tax-hungry state would have legislated for that happy outcome.
 
I looked at the Revenue guidance and indeed if the rent is shared then the €14k is reduced.

5.1 Exempt amount Since 1 January 2017, the annual limit on exempt income for rent-a-room relief is €14,000. For 2015 and 2016 it was €12,000 and for 2008 to 2014 it was €10,000. Where more than one individual is entitled to the income, the limit is divided equally between them.
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So for a 50/50 split the OP receives €9k which is above the €14k/2 he is entitled to claim.

He is therefore liable for tax on the whole €9k, but presumably can reduce this if there are allowable expenses such as mortgage interest.
 
NoRegretsCoyote said:
I looked at the Revenue guidance and indeed if the rent is shared then the €14k is reduced.
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I knew it was too good to be true :rolleyes:

NoRegretsCoyote said:
So for a 50/50 split the OP receives €9k which is above the €14k/2 he is entitled to claim.

He is therefore liable for tax on the whole €9k, but presumably can reduce this if there are allowable expenses such as mortgage interest.
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Presumably, there's no need for a 50:50 split. The siblings can opt to split it unequally, taking tax efficiency into account. There might need to be some rationale for this to avoid triggering general anti-avoidance provisions, but this shouldn't be insurmountable. Again, an audit trail is important. If it's being split €9k/7k, then s/he should be able.to show 9k being transferred to the sister.
 
We don't know the arrangement between OP and sister. Assume it's 50/50 split but it could be other. Retrospectively reviewing rent received to dip under 14k for a single rent recipient would appear to be a tax avoidance measure.

Do Revenue audit Rent a Room and how could they when some of the agreements are casual or informal agreements between friends or family with payments in cash?

I would be pretty certain there are some/many exceeding 14k income. Some may not be declaring any rent a room income on a form 12.
 
Agreed if current or present. Rents can be reviewed up or down. A review rtrospectively is hard to argue tax planning. Planning to me is present and future.

It's impossible for Revenue to know what happens in most of these arrangements and they do not seem to be interested in them.
 
Right Winger said:
Presumably, there's no need for a 50:50 split. The siblings can opt to split it unequally, taking tax efficiency into account. There might need to be some rationale for this to avoid triggering general anti-avoidance provisions, but this shouldn't be insurmountable.
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I agree. It depends a bit on ownership, who carries out repairs, right of sister to visit, etc.

So you could justify a lot of rental splits once it's not something like 80:20.
 
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