TRS given incorrectly by Revenue

I've just had a letter from Revenue in relation to TRS on our mortgage. We use our house partly for business and claim 80% of the interest in our accounts. The remaining 20% is eligible for TRS as it is our main residence. We submitted the form to Revenue in 2006 advising them of this split. Now having looked at all the bank interest certs from 2006, it appears that we have been getting TRS on almost the full interest - something like 90% of it. The Revenue are now asking us to confirm the split. Given that it appears as if we have been getting too much TRS all along, will we have to pay it back? Also, our mortgage is shown as a commercial loan on the interest certificates so surely the bank should not have applied the full (almost full) TRS - do we have any comeback with the bank? I don't know why the correct TRS was not applied back in 2006 when we submitted the relevant form to Revenue - I suppose they will say that they never received it.

Yes you will have to pay it back. The bank only deduct what Revenue tell them to deduct. It's up to you to know whether you are getting the correct amount or not.

As a matter of interest, how can you justify claiming 80% of he interest against a business? I can't see any Revenue official accepting that sort of split in the event of an audit.

And is the PPR relief that you should lose in the medium to long term not worth more than the interest/utilities you're saving in the short term?

If its 80% of the interest are u also claiming 80% of all the other bills: heating/lighting/ insurance etc.
I would agree with DB74, very aggressive

hastalavista said:

If its 80% of the interest are u also claiming 80% of all the other bills: heating/lighting/ insurance etc.
I would agree with DB74, very aggressive

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+1 zillion

Who advised you that this was a good idea, unless of course you have actually got a purpose built shop, office etc incorporated into the house? Or more correctly, have you got a living quarters built onto what is essentially a commercial building?!

The specific facts are everything obviously, but I'd say you could be on a sticky wicket here; you need to be sure you can actually stand over the split you apply. The element of interest you claim against trade income has to be "wholly and exclusively" incurred for the purpose of the trade, so if you have a home office which is also a computer room / study for the household then you wouldn't be entitled to the deduction. But on the other hand it would qualify for TRS, and later on, for PPR relief.

I recommend you have a good long think before you respond, maybe talk to a good tax adviser, and consider your options, which currently include an unprompted qualifying disclosure (minimises any penalties)... given how unusual your setup is I wouldn't be surprised if their next step after you reply is an audit notification, in which case your potential liability gets bigger.

Thanks for all the replies. The business is actually a B&B - the only room in the house NOT used by guests is our bedroom so in that case, surely an 80/20 split is in order?? The guests don't (in most cases) come into the kitchen but this is obviously used for cooking their breakfast. Yes, we are claiming 80% of all the other expenses for business purposes.

Lane7 said:

Thanks for all the replies. The business is actually a B&B - the only room in the house NOT used by guests is our bedroom so in that case, surely an 80/20 split is in order?? The guests don't (in most cases) come into the kitchen but this is obviously used for cooking their breakfast. Yes, we are claiming 80% of all the other expenses for business purposes.

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Hi Lane7

That makes sense...however your opening post where you said that you use your home partly for business was a little misleading.

Lane7 said:

Thanks for all the replies. The business is actually a B&B - the only room in the house NOT used by guests is our bedroom so in that case, surely an 80/20 split is in order?? The guests don't (in most cases) come into the kitchen but this is obviously used for cooking their breakfast. Yes, we are claiming 80% of all the other expenses for business purposes.

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But you have a kitchen that isn't used "wholly and exclusively" for your guests, as I presume your family's meals are cooked there.

Ditto your living room, hallway, stairs, landing, attic, at least one bathroom, roof, external walls, foundation, windows, doors, electrical wiring, plastering.... you get my point. Do you have children? Where do they sleep?

I don't mean to be overly negative, but you've come looking for advice so I'm just being honest, and I still think you're on a sticky wicket here, I think you're dreaming with your 80/20 split; essentially the only part of the house wholly and exclusively used by the B&B business is the guest bedrooms, and maybe dining room. I fail to see how that gets you anywhere near the neighbourhood of 80%.