John Browne (Wexford, Fianna Fail)
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219. To ask the Minister for Finance if he will confirm previous statements that the recipient of private residential rental income is a business person in respect of that rental income; if it is not recognised as a business, the legislation or ministerial orders that are needed to ensure that the taxation system recognises the normal costs of that rental business as being deductible from the applicable gross rent; and if he will make a statement on the matter. [8222/14]

Michael Noonan (Limerick City, Fine Gael)
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An individual involved in the letting of property may be considered, in the broadest sense, to be engaged in a business or enterprise and, as such, be considered a business person. However, it appears to me that the thrust of the Deputy's question is more to do with  whether an individual in receipt of rental income can be considered to be engaged in a trading activity.

In that regard, I am advised by the Revenue Commissioners that under existing legislation income tax is charged under Schedule D of the Taxes Consolidation Act (TCA) 1997 in respect of a number of sources of income, which are classified into five separate Cases. Under this provision, rent received by landlords (individuals and companies) from property in the State is chargeable to tax under Case V, while income from trading activity in the State is chargeable under Case I. Therefore, for tax purposes, rental income is viewed as distinct from income arising from trading activity.

In the case of trading activity, the law provides that taxable income is closely aligned to the accounting profit (subject to certain explicit prohibitions). In the case of rental activity, however, taxable income is the gross rent as reduced by a limited number of specified deductions as set out in section 97 (2) TCA 1997.

These are:

- any rent payable by the landlord in the case of a sub-lease;

- the cost to the landlord of any goods provided or services rendered to a tenant;

- the cost of maintenance, repairs, insurance and management of the property;

- the interest paid on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, is restricted to 75% of the interest and is subject to compliance with PRTB registration requirements for all tenancies that existed in relation to the property in the relevant year); and

- payment of local authority rates.

In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 12.5% per annum of the actual cost of the fixtures and fittings over a period of 8 years.I have no plans to change the current taxation distinction between rental income and income arising from trading activity. Neither have I plans to extend the range of allowable deductions from gross rental income in arriving at taxable income for Case V purposes, save for my intention, as stated in earlier Parliamentary Questions to allow for a deduction for Local Property Tax. Such a change will require an amendment to the primary law but the manner and timing of this has not yet been considered.