tenants paying two years rent upfront -tax implications?

[oldnick]

Tenants paying 12k p.a. are willing to pay a lump sum of 20k upfront for next two years rental.
I suppose its similar to buying a two-year lease with no rent during those 2 years.

Must I pay tax on the whole 20k in the year it is paid, or can I spread it over the two years the tenant is renting the property.

 

[Horatio]

I can't say why but I'd be very wary of this arrangement & not for tax reasons. If something sounds too good to be true...

tread carefully.

 

[Brendan Burgess]

It's a huge discount. On average, you are get the rent about 12 months early. So they are earning €4,000 on their €24,000 which is interest of around 17%.

I have an idea that tax is payable on the rent received as distinct from the rent earned. So you will pay tax on the €20,000 in October 2011 and will be able to claim the interest paid in 2011. In 2012, you will have no rental income to set the interest paid against. You will be able to carry it forward. But check this out for yourself - it may no longer work this way.

So you have to way the security of two years' rent up front against these downsides.

Brendan

 

[murphaph]

Make sure they don't turn your house into a Marijuana factory...it's happened before!

 

[oldnick]

This is a means of lessening the cost of abolition of the section 23.

I also believe that tax is paid on when one gets the money .

So, where there is no tax to be paid in one year (due to section23 relief) but in the following year the section 23 relief is abolished, then it would seem to make sense to get as much money as possible in the tax-free year. Maybe not as much as in my question, but maybe about 25% discount.

This applies to 2010 -last year -when relief on section was abolished on properties other than the one where section 23 expenditure was made.
-and from 2014 on the main property.

I will be left with a large sum of unused relief with the sudden abolition of sec 23 and am looking at ways to lessen the blow.
If it is legal to get 2/3 year deals at,say,25% discount then I'm saving 17% tax -plus gaining security and a lessening of my loan interest-ca.5% p.a.

The sums are several times more than in my example, so saving is quite big and the -mainly commercial -tenants are interested.

Could this be a way for landlords to lessen the blow of abolition of sec 23 ?
(obviously more difficult with small private tenants)