Renting to family member, below market rate

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sadie

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Say one sibling owns and investment property in Ireland, but their permanent residence is Overseas.
They rent the Irish property to another sibling for a sum below the market rate, what are the implications for both in relation to tax or CGT.
The market rate is €1200 a month, but they want to rent it to the other sibling for €600 a month, because they don't want strangers in it and they may come and holiday themselves in the house for several weeks/months per year so don't want to tie themselves to a tenancy agreement.
 
I am not an tax expert. This is only an opinion from the internet.

This seems like a 600 euro per month / 7200 euro per year gift to the renting sibling and should be liable for gift tax.

I don't see any CGT liability as no capital gain has been realized.
 
Thanks. You can gift 3k per year to any person without them being liable for tax. You can also give a sibling a maximum of €32,500 in their lifetime without it being taxed (and give them the 3k per year on top of that). I am thinking anything above that threshold is liable for tax? There is also the issue of the accommodation being a benefit in kind but maybe that only applies in an employer/employee situation.
 
PGF2016 said:
I am not an tax expert. This is only an opinion from the internet.

This seems like a 600 euro per month / 7200 euro per year gift to the renting sibling and should be liable for gift tax.
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Wouldn't the market rent need to be discounted for the fact that it isn't a standard tenancy and the owner wants to retain a right to occupy a right to occupy the property as it suits them?
 
If I own an investment property which has a market rate of €1200/month and let it for €600, and I am prepared to make a loss in payment for the person renting. Surely, its my decision, whether it be sibling or not, and my decision how much I want to receive in payment below the "normal" rate. If I earn more, I pay more tax, If I earn less, I pay less.

For the renter to be cought for extra tax because of a good deal is unfair on them.
 
Yes, I think the fact that the owner wants to retain the right to live there would have to be taken into consideration. The tenant has waived their rights to normal tenancy rights in exchange for reduced rent...which is exactly the case.
 
To rent a room the property must be your sole and main residence. In this case the owner lives overseas.
 
sadie said:
Say one sibling owns and investment property in Ireland, but their permanent residence is Overseas.
They rent the Irish property to another sibling for a sum below the market rate, what are the implications for both in relation to tax or CGT.
The market rate is €1200 a month, but they want to rent it to the other sibling for €600 a month, because they don't want strangers in it and they may come and holiday themselves in the house for several weeks/months per year so don't want to tie themselves to a tenancy agreement.
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This might be regarded as an uneconomic letting.

If it were then:
  • Expenses incurred in the letting would not be deductible,
  • Losses sustained could not be offset against rental income from other premises arising in the same year. Nor could they be carried forward to future years.

Link to Revenue leaflet
 
It is mentioned that the owner may wish to occupy part of the property on returns to Ireland so is the house being rented or is the person in fact acting as a caretaker and contributing to some costs for the property ?
 
If you let below the market rate to a family member, could the new rent control measures impact you adversely when they move out?
 
Pay the relative a nominal sum to be a caretaker and "mind" the property for you for when you want to come home and stay in it the odd time.
They can then buy you a few pints or give you a holiday or a few quid as presents every now and then. They might even be feeling generous and give you a few grand to go and have a pint with.
Rent it for €600 now and you will be stuck renting it for €600 + 4% a year forever. No matter who you rent it to after that.
I have been stung by these new rules with a property rented at 50% of the current market rate and now i am stuck. I just found out that no good deed goes unpunished. It hurts.
 
Singer said:
Rent it for €600 now and you will be stuck renting it for €600 + 4% a year forever. No matter who you rent it to after that.
I have been stung by these new rules with a property rented at 50% of the current market rate and now i am stuck. I just found out that no good deed goes unpunished. It hurts.
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According to RTB:

It is important to remember that not all properties in Rent Pressure Zones are subject to the 4% rental cap. Exempt properties include those that are new to the rental market and have not been let at any time in the previous two years, and those that have undergone a 'substantial change in the nature of the accommodation'.

If you are letting to family member, you do not have to register the tenancy with RTB (of course you equally don't get the tax deductions on inputs).

So if you rent for 2 years + 1 day at Eur600, you can then recommence a new tenancy with 3rd party at a market related rent, as the property has not been technically let for 2 years.
 
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