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Allowable tax expenses

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  • 12-08-2016 4:24pm
    #1
    Quandary
    Registered Users Posts: 5,320 ✭✭✭


    I will be renting out a property in the coming weeks and was wondering if I could keep the utilities in my name (ESB and Broadband) and continue to pay them myself instead of the tenant footing the bill.

    This seems to suggest that utilities are an allowable expense against tax when they are provided by the landlord.
    The following are examples of expenditure you may deduct when calculating your rental income or losses. As advised in the introduction, a separate calculation must be made for each letting.

    rents payable by the landlord in respect of the property, e.g. ground rent,
    rates payable by you to a local authority in respect of the property,
    the cost of any service or goods you provide and for which you do not receive separate payment from your tenant, e.g. gas, electricity, central heating, telephone rental, cable television, water and refuse collection

    source - http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3

    Are there any landlords here who avail of this?


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    #2
    Gumbo
    Moderators, Society & Culture Moderators Posts: 39,406 Mod ✭✭✭✭Gumbo


    Quandary wrote: »
    I will be renting out a property in the coming weeks and was wondering if I could keep the utilities in my name (ESB and Broadband) and continue to pay them myself instead of the tenant footing the bill.

    This seems to suggest that utilities are an allowable expense against tax when they are provided by the landlord.



    source - http://www.revenue.ie/en/tax/it/leaflets/it70.html#section3

    Are there any landlords here who avail of this?


    As long as you physically pay them and do not charge your tennant for them, they are an allowable expense.


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    #3
    Mrs OBumble
    Registered Users Posts: 25,966 ✭✭✭✭Mrs OBumble


    Do you really think your tenant will go for that - they will find it hard to prove their address in some circumstances.

    Also, how will you stop them running up massive electricity bills???


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    #4
    Quandary
    Registered Users Posts: 5,320 ✭✭✭Quandary


    Mrs OBumble wrote: »
    Do you really think your tenant will go for that - they will find it hard to prove their address in some circumstances.

    Also, how will you stop them running up massive electricity bills???

    My wife and I lived in the property for nearly 10 years and it's virtually impossible to run up a colossal electricity bill. There is no power hungry appliance like a tumble dryer. Besides even if they did run up a large bill it would be easily absorbed by the tax expense write off.

    To be honest I can't see why a tenant wouldn't want to have their bills paid for free. They can have proof of address with bank statements, phone bills, revenue docs like p60 etc


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    #5
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    There would be no point in doing it. The bill has to be paid so the tax write off will only be worth about half of it. A €200 bill will cost you €100. If you don't charge a higher rent to take account of it you are reducing your net income by €100. If you increase the rent to cover it you will be taxed on the higher rent, so it is a zero sum game. Furthermore, the tenants may not fully value the free utilities and so the comparisons with other rent being sought will not be favourable to you.
    This is a classic case of being blinded to reality by a tax deduction. It is sometimes simpler cheaper and more profitable to pay your taxes, believe it or not.


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    #6
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    kceire wrote: »
    As long as you physically pay them and do not charge your tennant for them, they are an allowable expense.

    It's actually irrelevant whether he on charges the tenant provided of course that he includes the income from the tenant as income from the property.

    OP: the general rule is that provided the expense is not "capital" in nature (generally meaning that it does not give rise to a lasting or enduring benefit like a new feature) then the question is whether it is "wholly and exclusively" spent for the purpose of the rental. In layman' terms meaning that it does not give you a private benefit but relates to providing the property and associated services so that you can earn the rental income.


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    #7
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    Marcusm wrote: »
    It's actually irrelevant whether he on charges the tenant provided of course that he includes the income from the tenant as income from the property.

    OP: the general rule is that provided the expense is not "capital" in nature (generally meaning that it does not give rise to a lasting or enduring benefit like a new feature) then the question is whether it is "wholly and exclusively" spent for the purpose of the rental. In layman' terms meaning that it does not give you a private benefit but relates to providing the property and associated services so that you can earn the rental income.

    If the o/p return reimbursement by the tenant it as income it will attract USC. It would be money down the drain.


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    #8
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    4ensic15 wrote: »
    If the o/p return reimbursement by the tenant it as income it will attract USC. It would be money down the drain.

    The assessable income for USC is the assessable Case V income for income tax purposes (is after deducting allowable reliefs). There has been a USC surcharge for reliefs relating to designated areas etc but that is not pertinent to the OP's situation.

    Next strawman please!


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    #9
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    Marcusm wrote: »
    The assessable income for USC is the assessable Case V income for income tax purposes (is after deducting allowable reliefs). There has been a USC surcharge for reliefs relating to designated areas etc but that is not pertinent to the OP's situation.

    Next strawman please!

    If he adds on reimbursement of utilities to his income it becomes case V income. If he pays a utility and recoups from the tenant and makes no return because of no income that is one thing, but paying it and showing it is another.


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    #10
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    4ensic15 wrote: »
    If he adds on reimbursement of utilities to his income it becomes case V income. If he pays a utility and recoups from the tenant and makes no return because of no income that is one thing, but paying it and showing it is another.

    What you are suggesting is illogical and as ill thought out as you suggested his plan was.

    If he charges 100 extra rent to cover utilities then his assessable case V income is the profit he makes. Whether it is higher or less than a normal rent will be determined by whether his tenant runs up a higher utility bill not the tax treatment. Ceteris paribus, he will continue to be taxed on his commercial profit.


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    #11
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    Marcusm wrote: »
    What you are suggesting is illogical and as ill thought out as you suggested his plan was.

    If he charges 100 extra rent to cover utilities then his assessable case V income is the profit he makes. Whether it is higher or less than a normal rent will be determined by whether his tenant runs up a higher utility bill not the tax treatment. Ceteris paribus, he will continue to be taxed on his commercial profit.

    I am not suggesting anything. I commented that his suggestion was unwise and could lead to an additional USC charge.


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    #12
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    4ensic15 wrote: »
    I am not suggesting anything. I commented that his suggestion was unwise and could lead to an additional USC charge.

    Your suggestion was that if the OP followed his proposed course of action that he would lose a significant amount due to taxation; that was illogical given that case V income is the aggregate of surpluses and deficiencies arising from individual rentals and such surpluses and deficiencies are, with the exception of capital allowances and interest, computed on a commercial basis such that no dislocation should arise between his commercial arrangements and the taxation thereof.

    The particular phrase which I find not only I.logical but frankly inappropriately condescending is the one:

    "This is a classic case of being blinded to reality by a tax deduction. It is sometimes simpler cheaper and more profitable to pay your taxes, believe it or not."

    At no point did the OP suggest that he was seeking to obtain a tax advantage nor to fail to pay the appropriate level of tax.


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    #13
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭4ensic15


    Marcusm wrote: »

    At no point did the OP suggest that he was seeking to obtain a tax advantage nor to fail to pay the appropriate level of tax.


    That was the whole point of the o/ps question. Why propose it at all then?


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    #14
    Marcusm
    Registered Users Posts: 10,336 ✭✭✭✭Marcusm


    4ensic15 wrote: »
    That was the whole point of the o/ps question. Why propose it at all then?

    I see nothing in his post to suggest that the reason for maintaining the utilities in his name to be tax motivated; rather he states that he wants to keep them in his name and inquires as to the tax consequences.


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