Rent a room scheme

P

Petermack

Guest
2 years ago I rented out a room in my house under the rent a room scheme. I was charging 165 euro a week, but this was made up of rent + Electricity + Phone + Heat and other expenses. The sum was agreed up front for the first year. The amount of actual rent was 120 euro a week and the 45 was for the other expenses, esb, heat etc. Because I did not exceed 7620 in rentable income I did not think that I would be taxed on the amount.

It now turns out that the person who rented the room has applied for Tax relief on the full 165 euro a week even though they were only paying 120 rent. Revenue have written to me now asking me to make a full submission of rent received, as they believe I was not making correct returns.

Is this correct or can I explain my situation to the revenue and hope they believe me.
 
can I explain my situation to the revenue and hope they believe me.
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Absolutely. You are entitled to charge for esb etc as long as the total does not exceed €7620. Their problem is that the figures you gave and the tenant is giving dont actually tally so they're wondering why.
 
Although you may not have intended to do so, it appears that you have effectively underdeclared your rental income. If so,this is a serious matter and you will need to urgently make a revised return. Otherwise you will be facing a potentially bruising Revenue Audit, with heavy penalties arising in addition to any tax owing.

You should be entitled to claim appropriate expenses such as ESB against the gross rental income.

If the entire amount received by you in rent (including pyt for ESB etc) exceeds the appropriate threshold for the year, then you will not be entitled to the Rent a Room Scheme.
 
The trouble is that the 120 rent + the 45 in expenses was being credited to my account in one single transaction. This makes it look like I was receiving the whole amount in rent. This now looks like I received 8580 for the full year in rent which exceeds the ceiling for the rent a room.
 
This is why a rent book, apart from being a tenant's right and a landlord's obligation, is a good thing for all parties concerned (tenant, landlord, Revenue) in that it clearly identifies, among other things, which payments are in respect of rent and which are in respect of bills/utilities.
 
The relevant legislation states explicitly that payments for expenses and supplementary charges must be included in the gross rental figure. This will apply regardless of what is or isn't included in an agreement or rent book.

BTW, this is one of the scenarios that prove that it is essential for individuals to obtain proper professional advice on their tax position in relation to rental income, unless of course that they have a comprehensive knowledge of all the tax implications and issues.
 
The relevant legislation states explicitly that payments for expenses and supplementary charges must be included in the gross rental figure. This will apply regardless of what is or isn't included in an agreement or rent book.
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So basically "rent" = all payments in respect of room/board/bills? Thanks for that clarification.
 
Ah Sorry - Didn't do the maths and assumed that 165 * 52 was still under the threshold, hence my suggestion above.
 
Rent a room

Thanks for the info above


One question, maybe Tommy could answer for me. Would a deposit also come under the general term of Rent . Lets say that rent for the year came to 7200 euro, but there was a 500 euro refundable deposit. Would a tenant be within their rights to claim rent relief on the deposit, which would place the landlore over the rent a room ceiling level
 
Rent a Room

Another question.

If you are a PAYE worker and the total rent you are receiving is under the € 7,620 allowed do you have to complete a tax return?
 
Re: Rent a Room

Refundable deposits are not income (at least as long as they remain refundable) and so afaik should not be recorded as rent paid. This is a general principle and the facts of a particular case may necessitate a different approach so obtain Revenue or professional clarification on this.

Rent-a-room relief claimants must complete a tax return to avail of the scheme.
 
Re: Rent a Room



While the income you receive from renting a room or rooms in your principal private residence is not liable to either PRSI or the 2% health levy, it must be included on your annual income tax return.
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Thanks for the Info Tommy.

It looks like I should have done a bit more investigation before availing of the rent a room scheme.

I am still a bit surprised that you are taxed on 100% of your rental proceeds if you go over the 7620 euro ceiling. It makes more sense to tax only the portion over the 7620 ceiling. I suppose thats why Im not the Tax man
 
An expensive mistake

Don’t forget that you’ll probably also have to pay a substantial stamp duty clawback too.

*************************************deleted *******************************************************.
 
Re: An expensive mistake

Clubman is the name of am administrator on this site. I have never known him to suggest an illegal action as suggested in the previous post. I have deleted accordingly as I believe this is a malicious use of his name.
 
Rent-a -room

I did'nt think there was a stamp duty issue if you rented out rooms in your PPR (in a situation where you paid stamp duty on the basis that it is your PPR).
 
Re: Rent-a -room

Yes - SD is not an issue if room rental falls under the qualification criteria of the rent a room scheme. If you don't qualify for the rent a room scheme (e.g. rent goes above the €7,620 limit) then you will be treated as a normal investor as far as SD (claw back if relevant), rental income tax, CGT etc. go.
 
rent a room

under the rent a room scheme is it possible to rent more than one room eg; can the upper part of dormer house be rented to family if rent is under the allowed amount
 
Re: rent a room

Yes - you can rent as many rooms as you want as long as the total rental income for all rooms is under €7,620 p.a. - otherwise you will be treated as a normal residential property investor.
 
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