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Living rent-free: tax implications?

  • 01-08-2008 10:23am
    #1
    King Ian
    Registered Users Posts: 142 ✭✭


    Hi I have an unusual situation which I've been wondering about recently.

    I moved to Cork a few months ago and have been living in apartment owned by an elderly Aunt and Uncle of mine. I don't pay them any rent, however I have an understanding with them that I will mind and maintain the place, and pay for any upkeep that needs to be done as and when it arises. (For example, a lot of painting and some electrical repair work which I had done recently, which was needed).

    They are happy with this situation, because they don't like the idea of the apartment lying empty, nor do they want to rent it out to strangers. They are not in need of the cash, and dont want the hassle of bringing in tenants they don't know.

    The question in my head is twofold:

    1) Are there tax implications for me in this scenario? Does the rent foregone by my aunt and uncle count as a "gift" for tax purposes? Or does my agreement with them in relation to upkeep, repairs etc. count as adequete rent?

    and

    2) Are there tax implications for them arising from it? ie. if the Revenue commissioners turn around and ask them where the rental income from their apartment is...?

    Im no legal expert so Im wondering if anyone knows the situaton with this?


Comments

  • #2
    dermot_sheehan
    Closed Accounts Posts: 2,062 ✭✭✭dermot_sheehan


    The answer is ask your tax advisor or solicitor.

    On a general note, I've heard 90%+ of the CAT liability that accrues in the country goes uncollected simply because the rules are drafted so widely and they are hard to enforce. CAT is gift/inheritence tax, theoretically when you get something from someone not for market value and is above the annual threshold you should pay 20% of its value above the threshold to revenue.


    For the vast vast vast majority of cases, no one bothers.


  • #3
    johnnyskeleton
    Moderators, Entertainment Moderators, Politics Moderators Posts: 14,535 Mod ✭✭✭✭johnnyskeleton


    Sounds like a standard caretaker agreement to me. In exchange for maintaining the place (consideration on your part) they allow you to live there rent free (consideration on their part). It is not a gift as such because it is a mutually beneficial relationship.

    However, the revenue have a very bull-headed view about these things, so it would be no harm to ring your local revenue office (you don't have to give your name) and ask them. They generally will give answers over the phone, and if you want certainty you can ask them to put it in writing.


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