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.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?
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......
4) In 2022, I rented out three rooms. The rent came to 16,000. Therefore I earned 8,000 rent....
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.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.
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.
I suspect that they're hinting at a way to evade tax.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.
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.
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.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
Edited.Your rent a room exemption is €14,000. Your sister in Spain is irrelevant. You owe tax on a full €16,000 for 2022.
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 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.
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.
I knew it was too good to be trueI looked at the Revenue guidance and indeed if the rent is shared then the €14k is reduced.
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.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.
Retrospectively reviewing rent received to dip under 14k for a single rent recipient would appear to be a tax avoidance measure.
I agree. It depends a bit on ownership, who carries out repairs, right of sister to visit, etc.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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