Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Amendment No. 17 specifies proof of payment of management fees by landlords and registration of tenancies with the Residential Tenancies Board, RTB, in order to obtain a deduction of such expenses for tax purposes. I will deal first with the registration of tenancies with the RTB.

Section 97(2)(e) of the Taxes Consolidation Act 1997 permits the deduction for tax purposes of "interest on borrowed money employed in the purchase, improvement or repair of the premises" against rental income. However, section 97(2I) provides this interest relief is not authorised unless the person claiming it can show that the requirements under Part 7 of the Residential Tenancies Act 2004 to register residential tenancies with the RTB have been complied with. The purpose of section 97(2I) is to encourage compliance with RTB registration, rather than to deny the tax relief for interest. To ensure compliance with RTB registration, the return of income form, Form 11, includes a tick box to confirm that the tenancy is registered with RTB. If the box has been ticked and, on examination of the return, the Revenue Commissioners find that the tenancy had not been not registered with the RTB at the time of filing the return, interest deductibility is denied.

Landlords are required to register details of all of their tenancies with the RTB within one month of the commencement of the tenancies. Whereas new tenancies should be registered within one month of their commencement, provision is also made in the Residential Tenancies Act for late registration at double the normal fee. An acknowledgement from the RTB confirming registration in the case of a late registration will be accepted by the Revenue Commissioners as evidence of compliance with Part 7 of the 2004 Act. However, a person claiming an interest deduction in the annual tax return must be able to indicate compliance with the Part 7 requirements at the time of making the return.

If a tenancy is registered late, the Revenue Commissioners adopt the following administrative practice as set out in its manual:

Interest relief that has been denied for a particular chargeable period because a tenancy was not registered by the return filing date for that period can subsequently be restored if the landlord avails of the late registration facility, subject to the usual four-year time limit on claims for repayment of tax.

The first amendment also specifies certain proof related to payment of management fees in multi-unit apartment complexes, while the second asks for a report on the tax deduction for such expenses. Apartment management fees are an allowable deduction against rental income under this provision, provided they are borne by the landlord. Clearly, an item of expense is not allowable for tax purposes if it has not been paid.

On the issue of claiming deductions for expenses not actually borne, I am advised by the Revenue Commissioners that whereas the vast majority of taxpayers submit accurate and timely returns and declarations, Revenue minimises the opportunities for those who might seek a competitive advantage through non-compliance by conducting an extensive programme of compliance checks each year. In 2018 Revenue compliance activity focused on, among other areas, the rental sector. There were 5,277 compliance interventions in the rental sector in 2018, with a total yield of €41.62 million. I am advised by the Revenue Commissioners that while audit interventions and yield per audit are accurately recorded electronically in each case, the current recording system does not support extracting data for yield by specific expense restricted.

Neither of the proposed amendments is necessary. Rental income is dealt with under the headin gof self-assessment and if a return was audited, the Revenue Commissioners would seek proof of payment of management fees and registration with the RTB to verify that a deduction was allowable.