The National Asset Management agency has been set up to manage non-performing property loans. As part of the set-up the government aims to prevent windfall gains from re-zoning land.

It has imposed an 80% rate of Capital Gains Tax on certain land disposals. This has caused some confusion as many taxpayers think that it relates to all land disosals are caught.

The disposals caught by the tax are

• Where the land has been rezoned.
• Getting planning permission is not rezoning.
• The designation of the land must change from

                            non-development to development 

                            from on type of development to another e.g from commercial to residential

Finance Act 2010 introduced a provision that planning perissions involving a material contravention of the Local Development Plan are also caught by the tax

This very brief outline shows how complex this issue is. You should always seek professional taxadvice.

There is some evidence of increased Revenue focus on rented property. The main reasons for this are

1. undeclared rental income
2. possible undeclared income used to buy the property
3. possible invalid claim of stamp duty exemptions

If a taxpayer falls foul of any of these it can lead to significant interest and penalties. Stamp duty problems could cause bills of tens of thousands alone. Revenue get information on rentals and are able to link up with stamp duty payments and exemptions.

Landlords who feel they may have a problem should contact their tax adviser to help resolve it.

.

Income Tax

There were no changes to basic rates and cut-off points.  The main changes were

1. Mortgage Interest Relief
2. High Earners restrictions
3. Non-Residents

Mortgage Interest Relief

Qualifying loans taken out before 1^st July 2011 will get relief for 7 years

There will be transitional measures for loans taken out between 1^st July 2011 and 31^st 12 2013.

Those whose entitlement to relief would expire in or after 2010 will continue to get the relief till the end of 2017.

The relief expires at the end of 2017.

High Earners Specified Reliefs

This affects taxpayers who had availed of what are called specified reliefs e.g. Section 23. They are taxed on an adjusted income calculation which reduces the value of these reliefs. Previously, the entry point to this restriction was €250,000. It is now decreased to €125,000. The full restriction kicks in at €400,000. The aim is to raise these taxpayers effective tax rate to 30%.

This can be a complex area and tax advice should be sought

Non-residents

Non-resident individuals who

1. Retain Irish domicile and
2. Have Irish assets exceeding €5 million and
3. Worldwide income over €1 million

will pay an annual levy of €200,000.

Carbon Tax

A new tax on fossil fuels has been introduced based on the carbon content. The tax is

 Excise duty on Alcohol

This was reduced with effect from midnight on 9^th December 2009. Wholesalers who had built up stocks will be hit as there is no reclaim mechanism.

Corporation Tax

The exemption from Corporation Tax for the first three years trading by a start-up company has been extended to start-ups in 2010.

Value Added Tax

The standard rate of VAT has been changed back from 21.5% to 21%. This is effective from 1^st January 2010.

 Capital Gains Tax

There were no changes in Capital Gains Tax.

Capital Acquisitions Tax

There were no changes

For any queries or help on your tax affairs, we at Conlon O Sullivan & Co, Registered Tax Consultants can offer you a proactive and expert service.  Please contact us to arrange a consultation.

Renting Out a Property

Especially in today’s challenging rental markets, it is important to manage the tax aspects of your rentals. There are several critical areas affecting different taxes and types of property.

Income Tax

Rents

Keep a record of your rents. Ideally get them paid by standing order or direct debit.

If the tenant pays for repairs which are your responsibility, this is rent.

Lease premiums have largely disappeared. However, any premium for a rental under 50 years is partly liable to income tax. This can be onerous. Your adviser can help to claim hardship provisions.

Mortgage interest

This is probably your biggest cost. From 2009 you can reclaim 75% of this interest. The critical points are

The loan must be to buy, refurbish or repair the actual rental property. 

For residential property you must register the tenancy with the Private Residential Tenancies Board.

Interest is only allowed after the first tenant moves in.

Other costs

Repair costs are only allowed after the first tenant moves in

Avoid paying cash in hand. You will save VAT at 13.5%. You lose income tax and levy deductions at 48%. This makes no sense

Professional fees and advertising are allowed pre-letting e.g. auctioneers, solicitors

Capital Allowances

Certain non-residential buildings get Industrial Buildings Allowances, normally 4% per annum. If you don’t have enough rental income you can use these against other income e.g. trading profit.

Other capital costs may be deemed as plant. These get 12.5% per annum, but only against rental profit. It can be valuable to identify these. For example, murals in a hotel or bar have qualified for this.

If you cannot use these in a year, they are carried forward against other rental income

Losses

Rental losses are allowed against other rental profit. If not used up, you carry them forward

Non-resident landlord

If the landlord is non-resident tax at 25% must be deducted from the rent and paid over to the Revenue.

The letting agent or the tenant can do this.

Stamp Duty

This is normally straightforward based on rental and lease premium values. However, there is a trap to be avoided for residential property!

Some householders may for personal reasons decide to rent out what is now their main residence. Many will have claimed stamp duty exemptions like first-time buyers relief.

 If, they rent out the property within two years of this, the stamp duty exemption is clawed back with interest.  Revenue has audited these transactions. Make sure to get your solicitors advice.

Capital Gains Tax

This is complex and you should consult your tax adviser.  For landlords it will arise on matters like

• Selling a freehold
• Granting a lease
• Selling a lease

VAT

VAT on property is very complex. All property transactions need good VAT advice as the amounts involved are large.

You must also keep a VAT history of the building, with particular reference to how much deduction you are allowed each year.

Important Note

This leaflet is meant only as a brief guide. It is not meant to replace professional tax advice.