Ukrainian Recognition Payment Reduction - Now what?

Folks

Would appreciate advice. We are in receipt of this payment for my mothers house. When we signed up the first year of the war, the house was in the fair deal scheme (it still is) as my mother was in a nursing home. I was volunteering in helping Ukrainians in Dublin fleeing from war and it made sense to provide them a home. It also made financial sense. Renting it out would have made us liable to pay more under fair deal as well as being taxable so it was more straightforward to get the 800e per month. I also knew that the Ukrainians would not be able to afford rent so kept putting off any decisions.

Several years on and the picture has changed somewhat:
- Rental income is now exempt from being assessible under the fair deal scheme
- Reduction of the 800e per month to 600e means that I need to assess if I'm losing money every month by not renting it out.

The house is a 3 bed with attic room in Dublin. At the moment there is a 3 bed apartment in the area to rent for 2400 per month.
Can I ask the following:
- With no mortgage repayments etc, would a broad calculation of profit each month be around 40% of the rental income. I have no experience of being a proper landlord so don't even know how to work this out.

I'd ideally like to move to a proper formal tenancy with them as tenants. However, they are I think unlikely to be able to pay the going rate. I don't mind reducing - they are good tenants but am in an RPZ so not prepared to take the implications of that.
At the same time, I know I'm not going to be able to tell them to leave if it means going back to a war torn country.

Please help.

Ballymag said:

At the same time, I know I'm not going to be able to tell them to leave if it means going back to a war torn country.

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If you can't face tough conversations, perhaps being a landlord in the open market is not for you unless you hire an agent to look after those elements on your behalf.

Ballymag said:

With no mortgage repayments etc, would a broad calculation of profit each month be around 40% of the rental income.

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I presume that this income is your mother's? To get an idea of what the net figures would be just add the gross rental income to any other taxable gross income that she receives and use a tax calculator to see the indicative net figures.

Could you ask them to top up the payment to €800 or even €1,000?

The government seems to have tacitly acknowledged top-up payments and is not issuing any diktats about it.


Revenue is a different story of course...

Folks
thanks for the replies
Leo - yes I agree with you! Probably not cut out for it
Yes the income is my mothers and ARP is paid into her bank account. Her only income is the standard contributory pension (most of which is taken by fair deal).
Would not object to a top up and then declare it on her tax return. Didn't know that was possible.

Rental income is subject to PRSI and USC, not just tax.

See below for details of allowable expenses etc if you wanted to do a calculation.


Your mother's rental income might be subject to a lot lower taxation that yours would be if you had assumed it was your income, and the tax return would be in her name.

Calico said:

The government seems to have tacitly acknowledged top-up payments and is not issuing any diktats about it.

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Doesn't this mean that the extension of the scheme will not apply where top-up payments are being made?

To insert the following after "6th March, 2025":

": provided that this Order shall take effect only after the Civil Law (Miscellaneous Provisions) Act 2022 has been amended to provide for the Accommodation Recognition Payment (ARP) scheme termination date to be extended, only for the following:

— ...

— recipients who are not in receipt of any additional or 'top-up' payments from a beneficiary of temporary protection.".

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One thing to consider as the house is subject to fair deal and if there is a loan for the contribution, would the house need to be sold to repay the loan? If so, consider how you would deal with tenants in that case, as most homes can't be sold unless you have vacant possession. This may focus your mind on how to rent it ie longer or short term lets.

Thanks Misemoi - thats a different problem for which I need advice! I am an only child and will owe 80k to Revenue when I inherit. Hoping to keep the house and am holding on to my own savings at the moment to fund that because I don't know if I could get a small mortgage on it if I had to (have a great credit rating so thats something at least)

Understand and I hope that it is a long way away.

Maybe worth considering what you will do with the house if you were to keep it - eg would it be for adult children to live in for education, open market rental, would you move in and sell your current home?

Is it worth you saving now to pay a loan and potentially inheritance tax that you may be able to pay by selling the property or your own property? Unless of course the current saving is comfortable for you, but as property prices increase, can your savings level keep up with property price inflation as that will impact the future inheritance tax bill? Lots to consider I am sure but just some thoughts for reflection/research.

Another issue with getting a top-up to the recognition payment is that it could be argued that the top-up is effectively a payment of rent. The occupiers could, in the future, claim tenant rights and try to make claims to the RTB. Who knows what the outcome might be?

I assume the top up is taxable as well if a rent payment?

If its agreed the top up is a contribution to maintenance and repair, would this circumvent it being considered a rent payment?

There is a template supplied by the red Cross if this is added to it then should be OK?

Need a Solicitor take on this as I'm not a an expert in this by any stretch.

Yes tax would need to be paid.

So did some calculations but would ask if these seem reasonable/accurate:

Gross income (Contributory Pension) is 300p.w. so 14,400 per year.

Assuming a rent of say, 2400p.m. so 28,800 per year and allowable expenses of say 3k on the property, would that be:

14,400 + 28,800= 43,200
Less allowable expenses 3k (ballpark)
Less personal tax credit (single person 2k?)
Is the tax, prsi and usc then taken off that figure so 20% tax and whatever the others are?

Ballymag said:

Gross income (Contributory Pension) is 300p.w. so 14,400 per year.

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€300 x 52 weeks = €15,600 p.a.!

Ballymag said:

14,400 + 28,800= 43,200
Less allowable expenses 3k (ballpark)
Less personal tax credit (single person 2k?)
Is the tax, prsi and usc then taken off that figure so 20% tax and whatever the others are?

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Why don't you use a tax calculator like I suggested earlier?

You probably did this for Fair Deal, but is the COAP the only income? Potentially yes if their employer didn't offer one but don't forget about any other pension income, including from other countries eg UK?

Clubman - sadly that was me using the calculator you suggested

You can see why I'm not cut out to be a landlord......

Yes COAP is absolutely all there is - she was a housewife most of her life and my father only had a contributory pension and she was her dependant until his death. Majority of her pension goes to fair deal as well as a percentage of her savings. If it wasn't for the 800e per month the savings would be eroding to pay for property tax, management fees etc etc.