Proof of Rental income tax when selling

ndilly

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

ross2010

The Solicitor won´t ask for it but they will ask for proof that he was resident in the property for the periods that the NPPR was in effect. So he will have to have utility bills etc in his name for that period. If he doesn't he will have to pay the NPPR plus penalties. (Am assuming if he dodged paying tax he also didn't bother paying the NPPR). I'm not aware how connected up Revenue are to the NPPR. The fact he didn't make a profit is irrelevant as tax is due on income less allowable expenses and not on profit. FYI the NPPR is no longer in effect and in 2025 the liability for past fees and penalties will cease to exist. But for now proof of either paying NPPR or being resident in the property for the periods it was valid are required for every residential property sale regardless whether it was your PPR or not.

relax carry on

ndilly wrote: »

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

File tax returns for the years when the property was rented out. If there's no taxable profit then there's no tax liability. Has the LPT been paid. Is there likely to be a capital gain.

Samuel T. Cogley

ndilly wrote: »

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

Betcha he did.

relax carry on wrote: »

File tax returns for the years when the property was rented out. If there's no taxable profit then there's no tax liability. Has the LPT been paid. Is there likely to be a capital gain.

The tax is on income not profit. It's a subtle difference, but one that can make a difference, especially where a mortgage is being paid.

ted1

Samuel T. Cogley wrote: »

ndilly wrote: »

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

Betcha he did.

relax carry on wrote: »

File tax returns for the years when the property was rented out. If there's no taxable profit then there's no tax liability. Has the LPT been paid. Is there likely to be a capital gain.

The tax is on income not profit. It's a subtle difference, but one that can make a difference, especially where a mortgage is being paid.

USC is in income, TAX is on profit

Peregrinus

ted1 wrote: »

USC is in income, TAX is on profit

Nope, it's called "income tax" for a reason.

The taxable income from different activities is measured in differerent ways. The taxable income from carrying on a trade, right enough, is the profits of the trade, so in the context of a trade you can reasonably talk of income tax as a tax on profits (although there are very strict rules about how the profits must be calculated for tax purposes). But taxable income from land is, basically, rental income plus allowable deductions. And since interest on a loan taken out to acquire the land is not an allowable deduction, the taxable income may considerably exceed what the landowner considers to be the "profits" he derives from the land.

Halloween Jack

ndilly wrote: »

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

Your husband will also be liable for capital gains tax on selling the property, though he may be due relief for any periods of time he resided in it

murphaph

Peregrinus wrote: »

Nope, it's called "income tax" for a reason.

The taxable income from different activities is measured in differerent ways. The taxable income from carrying on a trade, right enough, is the profits of the trade, so in the context of a trade you can reasonably talk of income tax as a tax on profits (although there are very strict rules about how the profits must be calculated for tax purposes). But taxable income from land is, basically, rental income plus allowable deductions. And since interest on a loan taken out to acquire the land is not an allowable deduction, the taxable income may considerably exceed what the landowner considers to be the "profits" he derives from the land.

Up until a few years ago mortgage interest was 100% allowable as an expense. Then it was reduced to 75%, but it hasn't been disallowed in my lifetime, if ever. Perhaps you meant the capital repayments are not allowable?

murphaph

OP: If there is no profit you can just own up to the "mistake" and file returns for the missing years. You'll have to prove the payment of LPT and or NPPR or give a reason as to why it wasn't due (property not suitable as a dwelling house during the period, for example) to your solicitor before the sale can proceed.

It is generally a seriously bad idea to evade tax. Once you are on the radar as a tax evader they will always be more likely to come after you in the form of audits, which is fair enough.

Revenue will always take a much dimmer view of somebody who they discover evading tax, rather than the person who comes forward and admits their "error". I would seek the advice of a good tax accountant used to dealing with this sort of thing.

I would also be surprised if there is no profit, unless the property was bought towards the height of the boom.

Lumen

Are conveyancing solicitors required to report suspected tax evasion to Revenue?

If so, are they require to disclose this reporting to their client?

Peregrinus

Lumen wrote: »

Are conveyancing solicitors required to report suspected tax evasion to Revenue?

No.

But, in this case, there is no reason why the conveyancing solicitor would become aware of the tax evasion. So far as I can see "have you declared any income that you earned from this property?" is not a question that needs to be asked or answered in order to handle the conveyancing.

Lumen

Peregrinus wrote: »

No.

Is not defrauding Revenue a "relevant offence"?

https://www.lawsociety.ie/Solicitors/Practising/Practice-Notes/Reporting-obligation-Criminal-Justice-Act-2011-s19/

Peregrinus

Lumen wrote: »

Is not defrauding Revenue a "relevant offence"?

https://www.lawsociety.ie/Solicitors/Practising/Practice-Notes/Reporting-obligation-Criminal-Justice-Act-2011-s19/

The Taxes Acts don't appear in the list of Acts under which relevant offences are defined.

The Minister has power to prescribe further offences under other Acts by order but, so far as I know, he hasn't made any order prescribing revenue offences as "relevant offences".

Even if he did (or has), the page to which you link contains a discussion of the extent to which the reporting obligation may be limited by legal professional privilege. You'd want to look at the particular circumstances very carefully, but if the solicitor acting for the vendor (who is in default in his tax obligations) becomes aware of the default, it's quite likely that he will be prevented from disclosing it by the obligations of legal professional privilege (which, remember, is the client's privilege, not the solicitor's).

If the solicitor acting for the purchaser becomes aware of the vendor's default, I don't think legal professional privilege would enter into it, since the vendor is not his client. But there is even less reason why the purchaser's solicitor would be come aware of it than the vendor's solicitor.

hawkelady

Lumen wrote: »

Peregrinus wrote: »

No.

Is not defrauding Revenue a "relevant offence"?

https://www.lawsociety.ie/Solicitors/Practising/Practice-Notes/Reporting-obligation-Criminal-Justice-Act-2011-s19/

I suspect a solicitor is there to handle the sale of a property and not to interrogate (probably harsh wording) their client over tax evasion.

Peregrinus

hawkelady wrote: »

I suspect a solicitor is there to handle the sale of a property and not to interrogate (probably harsh wording) their client over tax evasion.

Very much so. Solicitors provide advice to their clients. They don't provide advice that clients haven't asked for, and that isn't relevant to the matter on which they have been instructed, if only because clients generally don't want to pay for that advice.

In a case like this the incentive not to stray outside one's instructions is intensified. If you do acquire information which you are obliged to report to the authorities, you have to stop acting for the client.

Lumen

hawkelady wrote: »

I suspect a solicitor is there to handle the sale of a property and not to interrogate (probably harsh wording) their client over tax evasion.

Sure, but it's handy to know that Ireland's solicitors are complicit in their clients tax evasion.

Peregrinus

Lumen wrote: »

Sure, but it's handy to know that Ireland's solicitors are complicit in their clients tax evasion.

How can you possibly be complicit in something you know nothing about, and have no reason to know anything about?

Lumen

Peregrinus wrote: »

How can you possibly be complicit in something you know nothing about, and have no reason to know anything about?

Well, in cases like this your client might ask you, as a member of the legal professional, whether the fact that they evaded tax on rental income is likely to cause a problem in the sale.

What would be your response that situation, hypothetically, if you were a solicitor?

Heres Johnny

ted1 wrote: »

USC is in income, TAX is on profit

Wow, this is such bad advice to be giving. It's on income less some allowable expenses such as mortgage interest relief, repairs etc....but not on the mortgage repayments which loads of people think.

Rental income 1000
Mortgage 800 (of which 400 is interest)
No other allowable expenses in this example

Income tax is based on 1000 - (400*75%) which is 700 euro

Many people incorrectly think taxable income is on 1000-800 which is 200 euro.

Peregrinus

Lumen wrote: »

Well, in cases like this your client might ask you, as a member of the legal professional, whether the fact that they evaded tax on rental income is likely to cause a problem in the sale.

What would be your response that situation, hypothetically, if you were a solicitor?

Difficult situation. I would probably consult with colleagues and seek professional ethical guidance. But my preliminary view is that this is probably protected by legal professional privilege; it would be unlawful for me to report this to the Revenue without my client's permission (which is unlikely to be forthcoming).

Lumen

Peregrinus wrote: »

Difficult situation. I would probably consult with colleagues and seek professional ethical guidance. But my preliminary view is that this is probably protected by legal professional privilege; it would be unlawful for me to report this to the Revenue without my client's permission (which is unlikely to be forthcoming).

Exactly! How glorious that after much head scratching, soul searching and consultation with learned peers the correct approach happens to coincide with not biting the hand that feeds you.

It's still being complicit, and immoral, regardless of the hoops you jump through to justify it.

Peregrinus

If the law forbids a solicitor from reporting something, how is that the solicitor's fault?

hawkelady

Lumen wrote: »

Peregrinus wrote: »

How can you possibly be complicit in something you know nothing about, and have no reason to know anything about?

Well, in cases like this your client might ask you, as a member of the legal professional, whether the fact that they evaded tax on rental income is likely to cause a problem in the sale.



What would be your response that situation, hypothetically, if you were a solicitor?

I know of a situation that exactly played out as you have laid out above .. the solicitor told this person that " I don't need to know that at all and it won't affect your sale".

ted1

Heres Johnny wrote: »

ted1 wrote: »

USC is in income, TAX is on profit

Wow, this is such bad advice to be giving. It's on income less some allowable expenses such as mortgage interest relief, repairs etc....but not on the mortgage repayments which loads of people think.

Rental income 1000
Mortgage 800 (of which 400 is interest)
No other allowable expenses in this example

Income tax is based on 1000 - (400*75%) which is 700 euro

Many people incorrectly think taxable income is on 1000-800 which is 200 euro.

Wow that is bad advice.

The 1000 is income. The tax is not on the 1,000.
Income after (allowed ) expenses is profit. Which is taxed.

You stated income is taxed, which it’s not. USC ( which you never mentioned) is applied to income

Moonbeam

relax carry on wrote: »

File tax returns for the years when the property was rented out. If there's no taxable profit then there's no tax liability. Has the LPT been paid. Is there likely to be a capital gain.

It is not just the profit that is taxable it is the total income from rent ;ess a few allowed deductions.

Lumen

Moonbeam wrote: »

It is not just the profit that is taxable it is the total income from rent ;ess a few allowed deductions.

This is really an argument over semantics.

Revenue uses the word "rental profit" to mean rental income minus allowable expenses.

https://www.revenue.ie/en/property/rental-income/irish-rental-income/index.aspx

It doesn't exhaustively list not-allowed expenses. For instance, mortgage principal payments are not allowable but not in the list of "What expenses are not allowed?", probably because they assume that only an idiot would think a principal payment was an allowable expense.

cruizer101

OP would you not just pay the taxes you owe

ted1

Other than USC there may be no taxes

handlemaster

ndilly wrote: »

Hi,my husband has a property that he has rented out for the last number of years however he has not declared the rental income. If we were to sell this property does he have to prove the rental income tax has been paid. He never registered as a landlord and never made a profit off the rent.Thanks

tell your husband im sick of paying taxes but I do so because it is the law and the right thing to do. its people like him that make it more expensive for the tax payers.

will56

ted1 wrote: »

Other than USC there may be no taxes

Unless the OP's husband has no other income there are going to be taxes.
Also he can't deduct the mortgage interest if the property was never registered with the PRTB

sbs2010

loads of random answers there. Maybe one or two answered the OPs question but with extras just to blur the point.

The answer is No.