Problems with The Revenue and Non Residential Landlord

jammyjambob

Sorry for the long post but really need help!

I applied to claim back tax on my rent last month. But Instead of getting any tax back. I was told I have an underpayment of tax of €1485. The reason is my landlord is a non residential landlord. And so every month I should have being withholding 20% of my rent for the last year for the tax office.

I was only made aware when the revenue decide to take an extra €400 in tax from my last pay check and I queried it with the revenue office. My landlord lives in the north of ireland but I pay my rent into his daughter's irish bank account.
So I dont see how I should be paying his tax. The revenue have being no help and say they will take extra €400 next month because I owe them.
But I dont understand why if I pay into an Irish Bank account

Any advice on what to do would really be appreciated!!

The_Conductor

Unfortunately there is not a lot you can do. The simple fact of the matter is that the law states that you have to withold 20% of gross rent and forward it to the Revenue Commissioners. It is the duty of the tenant to withold and forward this to the Revenue Commissioners. There is no way around this when you are renting from a non-resident landlord- not being aware of this is not a justifiable reason for claiming ignorance.

If I were you I would (belatedly) make an arrangement with the landlord- whereby the amount due to the Revenue Commissioners is simply deducted from the rent payable- leaving you in a neutral situation. It would be all above board- and it would be up to the landlord to clarify his/hers tax compliance with the Irish authorities.

This sort of query does come up periodically on this forum- if you do a hunt you'll find other people in similar positions.

If the landlord is not amenable to coming to an arrangement with you- contact the PRTB and initiate a dispute via them (regardless of whether the tenancy is registered with them or not).

TJM

The Ombudsman has not looked kindly in the past at these attempts by Revenue to enforce a law which is almost completely unknown to tenants.

A complaint against the Revenue Commissioners suggested that the law can sometimes place unfair burdens on ordinary tax payers who are not fully informed on tax law. The particular problem began when the Ombudsman's complainant discovered that she could claim income tax relief on the rental of her apartment. The Inspector of Taxes accepted that she was entitled to this relief and was due a tax refund of £265 for the two previous years. However, there was a sting in the tail as the Inspector told her that, as her landlord was resident outside the state, she (the tenant) should have been withholding income tax from the rent being paid. Where such tax is not withheld, the tenant becomes legally liable to pay the tax instead. Because she had not deducted tax from her rent payments, and paid it over to the Revenue Commissioners, she was now assessed with a tax liability of £801. The Inspector of Taxes off-set the tax refund due to her (£265) against this liability and assessed her with a net tax bill of £36. The woman involved felt this was very unfair. She felt it was unreasonable to expect her to have been aware of the tax law relating to non-resident landlords. In addition, her sister (with whom she was joint tenant) had made a similar claim for tax relief, giving the same details, and she had received a tax refund and had not been assessed in relation to the landlord.

The Ombudsman took the view that the application of the non-resident landlord tax provisions (which have been in place since 1969) can sometimes be unfair in the case of ordinary residential tenants. They cannot be assumed to have detailed knowledge of the tax code. In some cases they might not even know if their landlord is resident inside or outside the State. In the event, the Revenue Commissioners agreed to write off the tax bill of £536 (P. 17 of Report).

More details: http://www.ombudsman.gov.ie/en/Publications/AnnualReports/AnnualReportoftheOmbudsman1998/Name,3399,en.htm

I'd venture to suggest that a complaint to the Ombudsman would be in order and would result in a ruling in your favour.

While I am a lawyer, this is not legal advice. Your mileage may vary.

sharpsuit

There is a great deal you can do to avoid being restricted by the taxed owed by your overseas landlords. If you were not aware of the withholding obligation, you cannot be penalised for not applying it.

Below is a response to a Parliamentary Question on the subject. You will see that the Minister is clear that a tenant in OP's situation should not be penalised. Now that you know that the landlord resides outside the State, the withholding provision does apply.

You should withhold rent to meet what Revenue says the landlord owes - and get the restriction on your tax credits reversed immediately. It is much better for OP if the tax liability of his landlord is met by withheld rent rather than through his tax credits.

Also, once you have proof that you forwarded the withheld rent to Revenue, you cannot be held to be in rent arrears.

DÁIL QUESTION

NOS 104

* For WRITTEN answer on Thursday, 18th December, 2008.
Ref No: 47582/08


To ask the Minister for Finance his plans to reform the practice of the Revenue Commissioners in situations in which a tenant is paying rent to an overseas landlord, in order that there is direct contact from the Revenue Commissioners with the landlord and that the tenant is not penalised for failing to discharge the landlord's tax obligations; and if he will make a statement on the matter.


- Mary Upton.

REPLY
Minister for Finance ( Mr Lenihan) :

I propose to answer questions 103 and 104 together. The operation and impact of tax law as it applies to the legal obligation on a tenant, who pays rent to a non-resident landlord, to deduct income tax from the rental payments is monitored and reviewed on an ongoing basis as part of the normal work of my Department and the Revenue Commissioners.

I am informed by the Revenue Commissioners that the withholding of tax on rental income by tenants of non-resident landlords acts to promote greater compliance and deter evasion in this area, having regard to the obvious risk factors associated with non-resident taxpayers. The provision also ensures that a minimum tax payment is made by such landlords which might not be the case if the provision were removed.

The Revenue Commissioners accept that this provision might not be well known to some tenants and as a consequence could give rise to some practical difficulties. In recognition of this, where a tenant acts in good faith and is genuinely unaware of the obligation to deduct tax or of the residence status of the landlord, Revenue will only seek to apply the legislation from a current date. There is no question of such tenants being penalised for past failures to withhold tax from rental payments. This practical approach is reflected in Revenue’s operational instructions in this area. In this context Revenue are prepared to review the specific case outlined by the Deputy. If the person forwards details of the assessment to Gerard Moyles, Customer Services, Galway County District, he will be pleased to assist. He can be contacted at 091535952 or by email at gmoyles@revenue.ie.

On the general issue raised by the Deputy there are a number of factors that need careful consideration, not least to protect the Exchequer from loss of revenue through tax evasion. The removal of the obligation to withhold tax would create a situation where it would be easy for non-resident landlords to evade tax. Revenue would have no way of recovering the tax due as Revenue would not be in a position to force such non-residents to make a tax return and to declare their income.

I have to ensure that Irish income tax is capable of being collected and, having consulted with the Revenue Commissioners and considered the matter, I am of the view that the current position, whereby tenants operate a withholding tax on such rental payments coupled with the Revenue practice of accepting the good faith of tenants who were genuinely unaware of their responsibilities or of the residency status of their landlords, remains the most effective approach in this area. An alternative arrangement that would avoid opening up opportunities for tax evasion simply does not present itself at present.

antoinolachtnai

A well known politician was paying rent to an offshore landlord. Never did come up whether he remembered to pay the witholding tax.

In the case of the OP, because the OP paid the rent to an agent of the landlord (his daughter) resident in Ireland, she shouldn't be liable for the 20 percent. Look up the rule about it on the revenue website.

The agent, on the other hand, would be required to pay the 20 percent tax before remitting it.

This business about not having to pay taxes if you didn't know about them is very strange. I would not rely upon it. It is your business to make sure you are tax compliant.

The_Conductor

antoinolachtnai wrote: »

A well known politician was paying rent to an offshore landlord. Never did come up whether he remembered to pay the witholding tax.

In the case of the OP, because the OP paid the rent to an agent of the landlord (his daughter) resident in Ireland, she shouldn't be liable for the 20 percent. Look up the rule about it on the revenue website.

The agent, on the other hand, would be required to pay the 20 percent tax before remitting it.

This business about not having to pay taxes if you didn't know about them is very strange. I would not rely upon it. It is your business to make sure you are tax compliant.

That would be Bertie.....

dixiefly

antoinolachtnai wrote: »

A well known politician was paying rent to an offshore landlord. Never did come up whether he remembered to pay the witholding tax.

In the case of the OP, because the OP paid the rent to an agent of the landlord (his daughter) resident in Ireland, she shouldn't be liable for the 20 percent. Look up the rule about it on the revenue website.

The agent, on the other hand, would be required to pay the 20 percent tax before remitting it.

This business about not having to pay taxes if you didn't know about them is very strange. I would not rely upon it. It is your business to make sure you are tax compliant.

This is probably a good avenue for you to pursue as you are paying the rent internally in Ireland.

I would start playing hardball with the landlord (in reality your landlord is the daughter, they have their cosy arrangements probably for tax purposes).

When you get the tax situation sorted then get yourself a rental decrease of another 20% based on current market trends.

quietsailor

What address is on the lease for the landlord?
Is it a NI address or a Rep of Irl address for the landlord
Is there only an agent's name and address on the lease?

If the only contact address you have is a Rep of Ireland address then how can you be liable for a non residential landlord- all your documentation states the landlord resides in the Rep.

antoinolachtnai

The other thing you could do is just to stop paying rent and pay the rent to the revenue instead, until the 20 percent is made up. Tell the landlord that this is the 20 percent witholding and send him a copy of the revenue receipts.

If you are still in possession, it would be very simple to do this.

Note, I am not advising you do this, just pointing out that this is a possibility. You should consider taking professional advice.

The_Conductor

quietsailor wrote: »

What address is on the lease for the landlord?
Is it a NI address or a Rep of Irl address for the landlord
Is there only an agent's name and address on the lease?

If the only contact address you have is a Rep of Ireland address then how can you be liable for a non residential landlord- all your documentation states the landlord resides in the Rep.

The OP has stated that he/she knowingly paid the rent into the bank account of a person other than the landlord (his daughter). If they go down the road of claiming to be innocent of knowing their landlord was non-resident, knowingly doing this would be considered to be facilitation of tax evasion, which can in itself result in a criminal conviction.

The OP needs to contact the Revenue Commissioners and claim mitigating circumstances- preferably quoting the case above which came up in the Oireachtas. I would suggest insisting on talking to a HEO or AP- noone less senior has the authority to deal with this in the manner it should be.

SMcCarrick

antoinolachtnai

The issue isn't where the landlord is located, it's where and to whom the rent is remitted.

quietsailor

smccarrick wrote: »

The OP has stated that he/she knowingly paid the rent into the bank account of a person other than the landlord (his daughter). If they go down the road of claiming to be innocent of knowing their landlord was non-resident, knowingly doing this would be considered to be facilitation of tax evasion, which can in itself result in a criminal conviction.

The OP needs to contact the Revenue Commissioners and claim mitigating circumstances- preferably quoting the case above which came up in the Oireachtas. I would suggest insisting on talking to a HEO or AP- noone less senior has the authority to deal with this in the manner it should be.

SMcCarrick

But if the contact person on the lease is the landlord's agent, and their address is in the Rep. then it's surely the agent's responsibility to withold the 20%? I'm not trolling for an arguement, from other threads on here I got that impression - if an agent of the landlord is in the Rep and rent is paid to the agent then it is the agent's responsibilty to pay the 20%??

The_Conductor

quietsailor wrote: »

But if the contact person on the lease is the landlord's agent, and their address is in the Rep. then it's surely the agent's responsibility to withold the 20%? I'm not trolling for an arguement, from other threads on here I got that impression - if an agent of the landlord is in the Rep and rent is paid to the agent then it is the agent's responsibilty to pay the 20%??

Unfortunately (despite what would seem to be common sense) not. Legally the tenant is liable to pay the 20% withholding tax- regardless of agent status etc. The law is an ass, as they say. It doesn't differentiate in this situation.

antoinolachtnai

I think the guidelines on the revenue site say that it is up to the agent remitting abroad to take the witholding tax, not the tenant.

"Where an agent resident in the State, is appointed by the non-resident landlord to manage the property and the agent is collecting the rents, the rents must be paid gross to the agent. The agent is then chargeable to tax on the rents as Collection Agent for the landlord and is required to submit an annual tax return and account for the tax due under Self Assessment. pdfLeaflet IT10 Guide to Self Assessment* provides more detailed information."

http://www.revenue.ie/en/tax/it/leaflets/it70.html#section17

The_Conductor

antoinolachtnai wrote: »

I think the guidelines on the revenue site say that it is up to the agent remitting abroad to take the witholding tax, not the tenant.

This may be the case- it does not help the tenant though- and in a majority of cases, is irrelevant- as its common practice for a family member to collect rent on behalf of non-resident landlords, without at any stage being introduced to the Revenue Commissioners as an 'Agent' acting on behalf of Landlord Y.......

Often the situation may not come to light for years- until such time as someone decides randomly to claim rent-allowance, rent-relief or any other rent based subsidy.

Legally in a case such as this- where an official agent acting on behalf of the landlord has not been appointed- the tenant themselves are liable to collect the 20% withholding tax.

The daughter in this case can claim sort of a Fr. Ted excuse about funds resting in her bank account- that is a seperate issue- and indeed I'd be quite surprised if she isn't subject to an audit after whats happened.

The theory and indeed intention, behind all of this is sound- however its at variance with what normally happens on the ground.

antoinolachtnai

You don't have to be introduced to the revenue in order to be an agent! The daughter is liable, not the tenant.

Even if it turns out that it is the tenant that is liable, the tenant is still in possession and so is in a strong position.

Carawaystick

I'd use what sharpsuit posted, also Anto's post with the link to the reveue site about 3 posts up and then if you get nowhere the idea of paying a few months rent to the taxman instead of the landlord....
ask threshold or the prtb about that last one....

-maccer-

I have just moved into a new house, paid my deposit and first months rent. I was aware that the landlord was living abroad but was unaware of the tax law regarding the situation. Fortunately I heard a story about a friend of a friend claiming rent tax relief and being in fact charged by the revenue.

I am investigating the situation with my landlord at the moment but I suspect she is not paying any tax. I am paying rent directly into the landlords account. I informed her of the situation I find myself in and am awaiting her response.

I had also read what some previous people posted here about the legal responsibility shifting from the tenant to the agent if an agent is appointed. As I understood it the tenant would not be responsible if the rent was paid into a relatives bank account. It is all well and good the legislation saying that but the fact is that the OP was still docked by the revenue commisioners says otherwise.

Does anybody know for sure is there some kind of official process by the landlord to appoint an agent, do they have to specifically inform the revenue?

I would also be very interested to hear if anybody out there is actually in a situation where they are deducting 20% from their rental payment and paying it over to the revenue commisioners?

Obviously I find myself in an extremely awkward situation now and am hoping that it can be resolved without a complete breakdown of the tenant landlord relationship. Any advice would be appreciated.