Thursday, 19 January 2023
Department of Finance
I propose to take Questions Nos. 204 and 211 together.
Finance Act 2022 introduced the Rent Tax Credit, which is provided for in section 473B of the Taxes Consolidation Act 1997. This is an income tax credit of up to €500 per year (or up to €1,000 for jointly assessed couples) which may be claimed in respect of qualifying rent paid in 2022 and subsequent years to end-2025.
The legislation defines a qualifying tenancy as follows:
"...any agreement, contract or lease which has been registered under Part 7 of the Residential Tenancies Act 2004 ... or any licence for the use, as a residence, of a room or rooms in an individual's principal private residence, where there is no obligation under Part 7 of the Residential Tenancies Act 2004 for such licence to be registered...".
Accordingly, those, whether students or otherwise, in "rent-a-room" or "digs" arrangements may qualify for the some or all of the relief depending on their own taxable income and compliance with the various other requirements of the measure.
It should also be noted that tenancies in purpose-built student accommodation and other arrangements where the landlord is not resident in the premises are generally required to be registered with the Residential Tenancies Board and so capable of qualifying for the relief.
However, where a parent is seeking to claim the tax credit in respect of rented accommodation used by his or her student child, the tenancy may only be of a type which is required to be registered with the Residential Tenancies Board (RTB) and in circumstances where the landlord has complied with any such registration requirement.This means that the credit will not be available where the tenancy is of a type which is exempt from RTB registration, such as a ‘Rent a Room’ or ‘digs’ type arrangement.
In designing tax reliefs, there is always a balance to be struck between providing support to as many people as possible consistent with the overall policy intention behind the measure and ensuring that there is an appropriate degree of control in the management of limited Exchequer resources.The current rules for the rent tax credit seek to achieve such a balance having regard to the more informal nature of rent-a-room or digs type arrangements as compared with those that must be registered with the Residential Tenancies Board.
The operation of the rent tax credit will be closely monitored by my department in conjunction with Revenue in the coming months and the question of whether any further adjustments are needed will be considered in the context of the Budget and Finance Bill process later this year.