Tax relief on rent payments.

[acequion]

I am new to this forum and have joined because I'm really worried over a tax issue and need advice please.

I'm a PAYE worker and as I generally assume that my affairs are more or less in order, don't pay a huge amount of attention to my tax issues.

However I've been receiving a tax credit on rental payments that I stopped many years ago. I did actually phone in at the time to stop the credits and though I was verbally told that my situation was updated, I discovered at my next P60 that the change wasn't applied and despite feeling annoyed at Revenue incompetencies, I went off and forgot about it.Being PAYE with no extra income, I pay scant, if any attention to revenue correspondance.

Likewise I never went near them for refunds, including medical, until recently, when persuaded by a friend, I decided to claim back for medical expenses in 2010 and 2011.

Anyway I've just received a letter claiming that I've been selected for review and that they want all medical receipts [which is no problem]. The real problem is that they've enclosed a tax return Form 12 for years 2010 and 2011 and in addition, a claim form for rent relief. Not only that but in the covering letter, the tax inspector seems to zoom in on the rent thing, asking me to send in the lease agreement.

Needless to say I'm extremely anxious. I've never had any dealings with offiacldom and have always been tax compliant and law abiding. Therefore I need advise on what to do. Since moving from the appartment where I was legally claiming my 400euro yearly tax relief, I now live in an extension to the family home and pay my mother a very small amount in rent. Because the amount is so small and it's a family agreement, we've never made it official. I'm aware she wouldn't qualify under the rent a room scheme but as her small income is made up of a widow's pension [which I think is exempt from rent tax charges] and a small private pension from my father, I'm hoping I can declare what I pay her as my rent and that she won't be greatly affected.

I really am terribly worried about this and feel as if I'm in big trouble which I might be. I don't even know of an accountant as I've been so insulated against all of this kind of thing.

I would hugely appreciate any help and advice.Many thanks in advance.

 

[mathepac]

...
I'm a PAYE worker and as I generally assume that my affairs are more or less in order, don't pay a huge amount of attention to my tax issues.

However I've been receiving a tax credit on rental payments that I stopped many years ago. I did actually phone in at the time to stop the credits and though I was verbally told that my situation was updated, I discovered at my next P60 that the change wasn't applied and despite feeling annoyed at Revenue incompetencies, I went off and forgot about it.Being PAYE with no extra income, I pay scant, if any attention to revenue correspondance.

Likewise I never went near them for refunds, including medical, until recently, when persuaded by a friend, I decided to claim back for medical expenses in 2010 and 2011. ...

It sounds like you are not tax compliant as you seem to be in receipt of a tax credit you acknowledge you are not entitled to, the rent tax credit. Revenue will want this back obviously, but your medical expenses may balance this out.

Now for the bad news.

The rent-a-room scheme doesn't work for members of the same family, so you will not be able to claim tax-relief for the "rent" you pay to your mother.

The other side of this equation is that if your mother is in receipt of any "living alone" allowances or payments as part of her state pension package, she may lose her entitlement to these as you share the home with her.

I'm pretty certain that the generalities of my post are correct; someone else may be able to fill in more specific information.

I forgot to mention that checking the accuracy of a tax-payer's allowances / credits is the tax-payer's responsibility, as you'll see from the front of your FORM12.

 

[Mrs Vimes]

It is correct to say that rent-a-room does not apply to parents/children (I don't think siblings, etc are excluded) but what that means is that the parent/landlord cannot avail of the relief if the child/tenant is claiming the tax credit.

OP, your mother's widows pension is indeed taxable but if her private pension is very small it may not be enough to bring her into the tax net even with your rent payments.

Basically one or other of you may have a tax liability but you have the choice whether to have your rent payments taxable or not. You will need to do the sums to see which is more beneficial.

Also note that Revenue can claim back the wrongly claimed credit for as far as it was incorrect but you can only claim medical expenses, etc to offset for four years.

 

[acequion]

Many thanks to Mathepac and Mrs Vimes for the replies.

My mother does not want to be mixed up in this, and as she is elderly, I can respect where she is coming from. I would also have no problem adjusting things for 2010 and 2011 and going forward, as indeed the medical expenses would help to offset the bill.

However I'm really terrified that they'll go back as it's been many years since I was legally entitled to the rent relief. I am hoping that as they have only sent form 12 for 2010 and 2011 and if I send them back in honestly and accurately with proof of my health bills, that they will readjust my tax credits and that will be that.

What is the likelihood of that? Am I clutching at straws? What is the worst case scenario?

 

[Bronte]

Also note that Revenue can claim back the wrongly claimed credit for as far as it was incorrect but you can only claim medical expenses, etc to offset for four years.

This certainly used to be the rule but didn't we have a recent change on this that a poster pointed out here on AAM.

OP, surely the low rent you are paying your mother would not amount to much in the way of tax relief so why complicate your mother's tax affairs for this?

 

[acequion]

No,I will leave my mother out of it.

What recent change is this? All information is much appreciated. Thanks.

Also, is it true that as a PAYE worker my transgression would be classed as tax underpayment and that they don't generally charge interest and penalties in such cases?