Written answers

Wednesday, 30 March 2022

Photo of Jackie CahillJackie Cahill (Tipperary, Fianna Fail)
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27. To ask the Minister for Finance the reason that ESB customers are being charged VAT on the PSO levy on their bills; and if he will make a statement on the matter. [16886/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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VAT is governed by the EU VAT Directive, with which Irish VAT law must comply. Article 78 of the VAT Directive provides that the taxable amount shall include “taxes, duties, levies and charges, excluding the VAT itself”. The amount on which VAT is chargeable, in accordance with section 37(1) of the Value-Added Tax Consolidation Act 2010, is the total consideration receivable by the supplier, “including all taxes, commissions, costs and charges whatsoever” but not including the VAT itself.

In this respect, in the case of an energy bill, which includes the PSO levy, VAT law dictates that VAT should be calculated on the PSO levy element of the bill as well as the charge for the service. Similarly, where an energy bill includes carbon tax, VAT is charged on the full amount of the charge to the customer, which includes the carbon tax. The same situation applies in the case of other excises, including for example excises on petrol, auto-diesel, tobacco and alcohol products, where the VAT charged on these goods is also charged on the excise value.

Photo of Catherine MurphyCatherine Murphy (Kildare North, Social Democrats)
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28. To ask the Minister for Finance the way the income from renting garden shed-type accommodation is treated from a taxation perspective; if it is treated as a registered standalone private dwelling at the same address; if it is treated as a rent a room in a dwelling context; and if he will make a statement on the matter. [16898/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that rent payments for standalone accommodation on an individual’s property are subject to taxation in the same manner as any residential property that is let by its owner.

Section 97(1) Taxes Consolidation Act (TCA) 1997 sets out the rules for computing rental profits or gains in such circumstances. Landlords are entitled to deduct certain expenses from the gross rental income received and are then taxed on the balance, which is the rental profit. Generally, expenses which are capital in nature are not allowable as deductions unless they fall into the category of “plant” for the purposes of section 284 TCA and can be claimed as capital allowances (over eight years at 12.5% of the allowable cost per year). However, the expense must have been incurred wholly and exclusively for the purposes of the business of letting the property.

In all cases involving the letting of property by an individual, if the net rental income (gross rental income minus expenses) is less than €5,000 and if the landlord’s only other source of income is employment income, he/she must declare the rental income by filing a Form 12 return. If the net rental income is over €5,000, the landlord must register for self-assessment and declare the rental income in a Form 11 return. Returns of income must be submitted by the return filing date for the year of assessment in question.

Further information on the tax treatment of rental income can be found on the Revenue website at revenue.ie/en/property/rental-income/irish-rental-income/index.aspx.

While it is not a matter for my Department, I understand that such ‘garden shed’ type accommodation should be registered with the Residential Tenancies Board (RTB) as it would not appear to fall within the RTB’s definition of exempt properties.

I am further advised that rent payments for standalone accommodation on an individual’s property will not qualify for rent-a-room relief because the accommodation is a self-contained unit that is not part of the ‘sole or main residence’ of the individual receiving the rent. To qualify for rent-a-room relief, the room or rooms being let must form part of the residence occupied by the individual receiving the rent as her/ his sole or main residence during the tax year. ‘Sole or main residence’ is best described as an individual’s home.

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