Month: September 2018

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Rental Income including Airbnb

There has much press coverage of Revenue investigating tax affairs of homeowners, in particular, those letting rooms through the Airbnb website, as previously highlighted by us here.

A press release issued by Revenue on 18th September (read it here) has now directly referenced the recipients of Airbnb income. They state they are writing to 12,000 people, as a reminder to include this income in the yearly tax return.

In reference to this, we highlight the main areas you need to be aware of when receiving rental income –

 

If you receive rental income from renting out a property

If you are renting out a property and your profits exceed €5,000 per year, you will need to register for Income Tax. Each year you will need to file your Income Tax Return by 31st October through a Form 11.

If this rental income is less than €5,000 per year, then you are not required to register for Income Tax but you are still liable to be taxed on this income. You will need to file this yearly through a Form 12.

 

If you are renting out a room in your home (long term)

If you are renting out a room for a long period of time and your income exceeds €14,000, you will need to register for Income Tax. Each year you will need to file your Income Tax Return by 31st October through a Form 11.

If your rental income is less than €14,000, you may be eligible to apply for rent-a-room relief.

 

Rent-a-room Relief

This allows a homeowner to earn rental income tax free, you much meet the following criteria to apply;

  • Rental income does not exceed €14,000 in the tax year
  • The property must be in Ireland
  • The property must be your sole residence during the tax year
  • This relief only applies to residential and not to short term or temporary lettings i.e Airbnb

 

If you are renting out a room in your home (temporary/short term)

If you are renting out a room in your home or the entire property temporarily (i.e Airbnb) you are not eligible to apply for rent-a-room relief.

If this rental income is less than €5,000 per year, then you are not required to register for Income Tax but you are still liable to be taxed on this income. You will need to file this yearly though a Form 12.

 

Airbnb Rental Income

If you are in receipt of rental income through the Airbnb website, your rental income will be subject to 20% or 40% depending on your circumstances. This income has been split by Revenue;

Trading Income

  • Rental income exceeds €5,000 in that year or
  • You rent a room or property on 6 or more occasions per year or
  • Host for 30 or more nights in that year or
  • The property is available for renting all of the time
  • You will need to register for Income Tax. Each year you will need to file your Income Tax Return by 31st October through a Form 11.

Other Income

  • Rental income does not exceed €5,000 in that year
  • You are not required to register for Income Tax but you are still liable to be taxed on this income. You will need to file this yearly through a Form 12.

 

 

Renting to family members

Read our recent blog post on this here

 

Remember, you can offset a number of rental expenses which must be included in your rental return and keep a record of all invoices and receipts of expenses incurred. These include;

  • Mortgage Interest (80% for 2017, 85% for 2018)
  • Bank Charges
  • Letting Expenses
  • Insurance & Mortgage Protection premiums
  • RTB Registration Fee
  • Accountants Fees
  • Utilities
  • Advertising Expenses
  • Repairs & Maintenance
  • Wear & Tear

 

Why not also read our Pre-Letting Expenses blog here

 

Should you have any queries on this issue, please contact us on 01 5397999 or request our rental income form and application here

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Thousands of families face huge inheritance tax bills as home values rise

An article issued on independent.ie highlights the details contained in a recent survey completed by Coyne Research.

‘The survey shows 84pc of people in Ireland don’t know the current inheritance tax rate, which could seriously affect inheritance for their family. ‘ It also highlights there is a widespread lack of awareness of the levels of inheritance tax that may have to be paid by families in the coming years, with 2/3rds unaware of the current thresholds.

The advice is for families with assets to get professional legal, tax and financial advice to put a plan in place, including a will, to ensure an estate is taken care of in a tax-efficient way.

Read more of this article here

Should you require any inheritance guidance or advice, please contact us on 01 539 7999 or info@itasaccounting.ie

 

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Legal and Tax Implications of Directors’ loan

Companies and their directors are seen as two separate legal entities.

Therefore, when a director wishes to borrow money from their company for personal use even for a short period of time there are a number of legal restrictions and tax implications to be considered.

 

Directors’ loans and the Companies Act 2014

The Companies Act 2014 prohibits directors or connected parties to them been given loans greater than 10% of the company’s net assets except in certain circumstances.

  1. The loan is to another group company
  2. The relevant Summary Approval Procedure is followed allowing a company to provide a loan of greater than 10% of the company’s net assets to a director or connected parties to them. This is a declaration which set out the details of the transaction this must be delivered to the CRO with 21 days of the loan being made. The use of the SAP to legalise a director’s loan arrangement will expose all directors to unlimited personal liability for the debts of the company. Prior to utilising the SAP to legalise an activity, the directors should carefully consider the fact that they could be exposing themselves to unlimited liability.

If a company does provide a loan greater than 10% of the company’s net assets to a director outside of these exceptions, they are in breach of company law.  If this breach is brought to the attention of the Director of Corporate Enforcements, it may result in in them issue proceedings against the directors of the company.  This is particularly relevant to companies without audit exemption as auditors are legally obliged to report a breach of the directors’ loan legislation to the Office of the Director of Corporate Enforcements.

 

Tax Implications of Directors’ loans

There are a number of tax implications in relation to directors’ loans:

 Income Tax

  1. The first is Benefit in Kind chargeable to the director if they are receiving the loan interest-free or paying below the interest rates agreed by Revenue which is 4% for loans to purchase a principal private residence and 13.5% for all other loans.

Corporation Tax

  1. If a director does pay interest to the company on the directors’ loan this is treated as Interest Receivable for the company and taxed at the rate of 25%.
  2. Where a director does repay the loan within the twelve-month period the company is due to pay a surcharge when submitting their corporation tax return. The is surcharge is calculated on the basis that 20% income tax was deduced from the loan before the director received it and this must be paid to Revenue.  However, once the loan is repaid to the company the tax paid is refundable to the company.

ITAS Accounting are Registered Statutory Auditors experienced in dealing with the Financial Services industry in meeting their Revenue, CRO and Central Bank requirements.

If you or your client require any assistance, please do get in touch with us.

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