QUESTION: I live in Belfast, but I lived in Dublin for several years. I retained my Dublin flat and have rented it out for years and never declared the rent because it just covers the large mortgage payment. I have now received an enquiry letter from the Irish Revenue Commissioners. How do I regulate my tax affairs?
ANSWER: There are both Irish and UK tax issues to be dealt with in your case. Irish is the most pressing as you are under enquiry.
The rental income that you received should have been reported on an Irish tax return.
The Irish tax year runs alongside the calendar year with returns due for filing by the following October 31 at which time the tax liability is paid.
When a landlord rents property out in Ireland, they must register the tenancy with the Private Residential Tenancies Board (PRTB) and failure to do so will deny any tax relief on mortgage interest – a significant issue in your case.
In addition, as you are a non-resident landlord in Ireland, there is an obligation for the tenant or collection agent to deduct 20% withholding tax from the rental payments.
They will then remit the 20% withholding tax to the Revenue Commissioners via the new non-resident landlord withholding tax (NLWT) system on ROS.
You will get a credit for any tax withheld when you file your Irish tax return.
As well as having to file an Irish tax return and pay tax on your Irish rental receipts, you will also have to pay a further tax, known as Local Property Tax (LPT).
This tax is calculated based on the value of your Irish property on November 1 2021.
For the purposes of the LPT, the property values are organised into bands.
Local authorities can vary the basic LPT rate on residential properties in their area.
You will need to make a settlement of all unpaid tax and you will also have to pay interest and negotiate a penalty with the Revenue Commissioners.
When you have resolved your Irish tax affairs you will then need to bring your UK tax affairs up to date.
You will have to contact HMRC and make a voluntary disclosure using HMRC’s Let Property Campaign disclosure facility.
You will have to compute your annual undeclared rental profit using UK tax rules.
While the UK and Irish rules are largely similar, in the UK tax relief for mortgage interest is restricted to the basic rate of tax even if you are a higher rate taxpayer.
You will be able to claim double tax relief on your UK Tax Return for the Irish income tax that you must pay the Revenue Commissioners as part of your settlement with them.
- Paddy Harty (paddy.harty@aabgroup.com) is tax partner at AAB Group Accountants Ltd (www.aabgroup.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
