Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that, by virtue of sections 70 and 71 Taxes Consolidation Act 1997 (TCA) foreign rental income is taxable in Ireland under what is called Case III of Schedule D. Section 71(4) TCA provides that the computation rules for Irish rental income also apply to foreign rental income. The rules for computing rental profits or gains are set out in section 97 TCA, which provides that the amount of rental profits or gains is the aggregate of the “surpluses” computed in accordance with section 97(1)(c) TCA reduced by the aggregate “deficiencies” computed in accordance with section 97(1)(c) TCA in respect of each rent or easement. To arrive at a surplus or deficiency, the deductions permitted by section 97(2) TCA are subtracted from each rent received.

Section 97(2)(d) TCA provides that a deduction is authorised for “the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable that is, the landlord and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature”. Section 97(3)(a) provides that the amount of the deductions authorised under section 97(2) shall be the amount that would be allowed in computing the profits of a trade, if the receipt of rent was deemed to be a trade, during the period in which the lease was in place or, if there was no lease, during the period in which the landlord was entitled to the rent. This means that the expenditure must be wholly and exclusively for the purpose of receiving the rent, during the time that the lease or tenancy is in place.

Revenue guidance at www.revenue.ie/en/property/rental-income/foreign-rental-income/expenses-deductions-not-allowed.aspx outlines that the costs of travelling to a foreign rental property can only be deducted in calculating taxable rental income where the journey is undertaken wholly and exclusively for the purposes of earning rental income from the property. The circumstances in which this could be claimed are quite restrictive.

Where a landlord also uses the opportunity to take a holiday or short break, then the costs of travelling to the property are not deductible as they have not been incurred wholly and exclusively for the purposes of earning the rental income. A landlord can also not claim a deduction for travel expenses to view a property that she does not own or let, as that would not be expenditure during the period the lease was in place.

On a similar basis, a landlord’s costs in travelling to an Irish rental property can only be deducted in calculating taxable rental income where the journey is undertaken wholly and exclusively for the purposes of earning rental income from the property, and the journey is undertaken during the time the lease is in place. In this regard, a recent determination of the Tax Appeal Commission (TAC) (130TACD2020, available on the TAC website at www.taxappeals.ie/en/determinations/130tacd2020-income-tax) found that Revenue was correct to allow a partial deduction for a landlord’s fuel costs and to refuse an additional deduction for such costs, and also to refuse deductions for the cost of motor insurance, motor tax, NCT, repairs and maintenance for the landlord’s motor vehicle.