RLAI SUBMISSION TO GOVERNMENT ON TAXATION ISSUES RELATING TO LANDLORDS

Background to this Pre-Budget Submission to the Minister for Finance

>> UPDATE: Read our Budget 2016 submission here

With the major shortages in housing and many landlords struggling in negative equity, the government would benefit from assisting landlords in their efforts to provide quality accommodation rather than introducing ongoing changes to legislation and taxation that makes it difficult for landlords to remain in the market.

It is felt that the present government has been anti-landlord and anti-investment in residential property by individuals.

Increases in taxes,  introduction of the NPPR, property tax, household charge,  increased standards, PRTB charges, reduction of loan interest relief to 75% and the coming water charges have put tremendous pressure on landlords, especially private landlords, being the sector that supply the greater portion of  rental accommodation for social housing in Ireland.

Residential Landlords Association of Ireland (RLAI) proposes the following recommendations:

1.  Remove the 75% restriction on the allowable interest as a deduction

This restriction applies only to residential properties and should be removed. Landlords have been under increased pressure to repay massive loans with increasing variable rates.

Many are in negative equity and this, coupled with the high income tax bills on properties where rental income does not cover loan repayments, is leading to many landlords becoming insolvent and unable to pay liabilities. Financial Institutions are repossessing properties and this is adding to the shortages in housing in the countrywide.

RLAI recommend that removal of this restriction would immediately benefit the housing crisis.

2. Allow a full deduction for the property tax when payable by the landlord

It was suggested by the government that the property tax would be tax deductible, but that it is to be introduced on a ‘phased basis’.

From 2015 the local authorities will set the level of property tax. This is therefore, effectively a rate, which should be fully tax deductible. Any rates levied by a local authority are fully deductible as per the TCA 1997 s97 (2)

The government should clarify the position as soon as possible.

3. Confirm that the water charges will be fully tax deductible

Similar to the property tax, this expense, if payable by the landlord, should be full tax deductible.

Landlords and potential investors in the residential property market need certainty that any additional charges, expenses and costs associated with water charges as applied to rented properties will be tax deductible – especially since the expenses are wholly and exclusively to providing rental accommodation.

4. Provide social welfare entitlements in respect of the PRSI payable

Why should PRSI on rental income paid by landlords not count towards the social welfare entitlements?

Having doubled the minimum PRSI to €500 for self-employed persons and introducing PRSI on rental and investment income, it seems like another attack on those providing rental accommodation in thecountry, while offering no benefits that PRSI payments are supposed to be used for. This needs to be addressed by the government.

The RLAI recommend that PRSI payments are allowed as standard contributions.

5. Allow accelerated capital allowances for furniture

Capital allowances are designed to provide a deduction for the cost of capital items over their useful life – this is perceived to be 8 years and allowed on a straight-line basis. However in reality, items such as carpets, beds, cookers, washing machines only last 3 to 4 years.

RLAI strongly recommend that capital allowances for furniture and equipment to be given on a straight line basis over 3 years.

6. Incentives for renovations and capital expenditure

The increased regulations in standards of housing to be provided for rental accommodation has led to the closing down of many houses that had provided budget accommodation around the country.

With a shortage of accommodation, especially in Dublin, there is a major need to assist the already pressurised landlords in improving the standards of accommodation in line with regulations.

The RLAI recommends that the Home Renovation Scheme be extended to rented residential properties. This will not only have the benefit of improving standards of housing but will create employment in the construction section and benefit the economy as a whole.

7. Rollover Relief for CGT

With the high increases in CGT which are now at 33%, the RLAI recommends that a rollover relief be available for landlords who sell their property and reinvest the proceeds in the residential, sector within a certain period.

Landlords, especially those for whom restoring Pre 63 properties is not presently financially tenable are holding on to properties that are at less than full capacity while others remain empty.

This action would assist greatly in increase the stock of residential properties.

8. CAT Relief

This tax has been increased from 20% to 33% in recent years. The effect is that rental type properties are being sold by a beneficiary in order to pay the extensive CAT liabilities.

Our research indicates that the bulk of rental income properties sold have gone into private residences. This further reduces the stock of rental accommodation.

The RLAI recommends that a relief similar to agricultural relief be introduced, where a deduction of the value of the property is allowed to determine the CAT liability on condition that the property is kept as rental property for a number of years after the transfer to a beneficiary.

Again, this action would assist in maintaining the level of rental accommodation stock – especially in urban areas.

Finally, we take this opportunity to offer to meet with the government officials or representatives in relation to the above recommendations and look forward to your responses to the matters outlined.

Submitted by:

Liam Burns BBS, ACCA, AITI – Founding Committee Member of the Residential Landlords Association of Ireland (RLAI)