Non-resident landlords may have received a letter from Revenue advising of upcoming changes to the administration of withholding tax for non-resident landlords. Up to now, non-resident landlords had two options to report rental profits to Revenue:
Non-resident landlords asked their tenant to withhold 20% of the rent and to pay this to Revenue on their tenant’s personal income tax return. The tenant should have given the non-resident landlord a Form R185 (certificate of income tax deducted) so that a credit could be claimed for the tax deducted when submitting a personal income tax return.
Non-resident landlords appointed a Collection Agent, who registered for Income Tax on their behalf using a Collection Agent Income Tax Registration Form. Their Collection Agent was responsible for reporting the non-resident landlord’s rental profit for the year by filing an income tax return and paying any liability to Revenue on behalf of the non-resident landlord.
What are the upcoming changes?
A new Non-Resident Landlord Withholding Tax system is expected to go live from 1 July 2023 which will see changes to the obligations of tenants, collection agents and non-resident landlords.
Tenants will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform. They will not be responsible for paying the 20% tax deducted on their personal income tax return.
Collection Agents will no longer be responsible for filing an income tax return. A Collection Agent will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform.
Non-Resident Landlords will be responsible for filing their personal income tax returns. A credit will be allowed for the tax withheld in the new system.
What actions are required by non-resident landlords?
If you are a non-resident landlord whose tenants already withhold 20% of the rent or if you have appointed a Collection Agent, there are no actions required by you at this time. Further information will be released by Revenue shortly and a new Tax and Duty Manual will be published in due course.
All other non-resident landlords must now decide whether they want their tenants or a collection agent to withhold and pay to Revenue 20% of the rent under the new Non-Resident Landlord Withholding Tax system and take action accordingly.
Please contact us if you have further queries on this.
Employee share incentive schemes can be an effective way of offering tax savings to employees in addition to encouraging employee participation and loyalty. One type of share incentive scheme is an unapproved Share Option Scheme. We have set out below some frequently asked questions on the tax treatment of unapproved Share Option Schemes:
What do I receive when I am granted a share option by my employer?
When your employer grants you a share option, you receive the right to acquire shares in the company at a future specified date at a pre-determined price. You must actually exercise the option in order to take beneficial ownership of the shares.
What information will I get from my employer when I am granted a share option?
Your employer will generally issue documentation covering:
The number of shares that you can acquire,
The price that you have to pay for the shares (“Option Price”),
The dates from which, and by which you can exercise your option (“Exercise Period”), and
The conditions regarding the right to exercise the option, which may include good leaver and/or bad leaver provisions.
What is meant by “date of exercise”?
The “date of exercise” is the date at which the employee takes up their right to acquire shares.
Must I pay to acquire the shares under a share option?
The shares may be at no cost to the employee (nil option) or at a predetermined price that the employer has set. In some cases, the employee will have to pay something for the option itself.
Are there different types of unapproved share option schemes?
There are two types of share options for tax purposes:
(a) a ‘short option’ – which must be exercised within seven years from the date it is granted; and
(b) a ‘long option’ – which can be exercised more than seven years from the date it is granted.
There are tax implications for employees participating in unapproved share option schemes and reporting obligations for both employers and employees:
Tax Implications for Employees
Date of grant
There is no tax or reporting obligations due at the grant of short options. Where a share option is a long option, a charge to income tax may arise on both:
The grant of the share option (where the option price is less than the market value of the shares) and
The exercise, assignment or release of the share option.
Credit is given for any income tax charged on the grant of the share option against the income tax due on the exercise, assignment or release of the share option.
Date of exercise
When an employee exercises his/her right to the share options and acquires the shares at the pre-determined price, the difference between the price paid to acquire the shares (the exercise price) and the market value of the shares at the date of exercise of the option is called the share option gain. The share option gain can be reduced by any payment made by the employee for the initial grant of the option.
Where an employee exercises a share option he or she must pay what is referred to as “Relevant Tax on Share Options” (RTSO) in respect of any income tax due on any gain realised on the exercise of the share option. The relevant tax at 40% is calculated on the share option gain as well as universal social charge (USC) at 8% and PRSI at 4% (unless you have advance approval from Revenue to pay at a lower rate). RTSO is payable within 30 days of an option being exercised.
Example
Stock Option Exercise
Exercise of Shares
Market Price @ date of purchase
$100
Purchase price
$85
$15
Number of shares
10 shares
Total exercise price
$150
FX rate at date of purchase
1.1014
Share Option Gain
€136
Tax on exercise
Gross Gain
€136
Income tax @ 4%
€54
USC @ 8%
€11
PRSI @ 4%
€5
Total liability
€71
Net Gain
€65
Sale of Shares
An employee who acquires shares by the exercise of a share option is chargeable to capital gains tax (CGT) on any chargeable gain realised on the subsequent disposal of those shares.
Where due, CGT must be paid to Revenue within the following deadlines:
Date of Disposal
Payment Due
1 January – 30 November
By 15 December the tax year
1 December – 31 December
By 31 January in the following tax year
An individual must file a return by 31 October in the year after the date of disposal. A return is required even if no tax is due because of reliefs or losses. An individual must file a Form CG1 if not usually required to submit annual tax returns; Form 12 if a PAYE worker or a Form 11 if considered a chargeable person for tax purposes.
Reporting obligations for Employees
The employee must submit a Form RTSO 1 within 30 days from the date of exercise of the share option. A payment of Relevant Tax on Share Options must also accompany the submission.
Employees liable to pay RTSO must then submit an income tax return, containing details of all share option gains in a tax year, by 31 October following the year in which the gains are realised. The income tax return must be filed for the relevant year in addition to the form RTSO1.
Reporting obligations for Employers
The employer will have to complete and file a Form RSS1 by 31 March following the year of exercise.
Please contact us if you require assistance with the above.
A new Vacant Homes Tax (VHT) was introduced in Budget 2023. The primary objective of this is to increase the availability of housing, but landlords need to be aware of the restrictions on allowable pre-letting expenses when calculating their rental profits.
Vacant Homes Tax (VHT)
VHT applies to residential properties which have been occupied for less than 30 days in a chargeable period.
VHT is calculated at three times the residential property’s local property tax (LPT) liability.
The following will be exempt from the VHT:
Properties recently sold or listed for sale or rent.
Properties vacant due to illness or long-term care of the occupier.
Properties which were the principal residence of a deceased chargeable person in either the chargeable period or in the 12-month period prior to the commencement of the chargeable period.
Properties which were the principal residence of a deceased chargeable person where a grant to administer the estate issues in the chargeable period and for any chargeable period following such a grant, where the administration of the estate has not yet completed.
Properties which are vacant due to significant refurbishment work.
The first chargeable period runs from 1 November 2022 to 31 October 2023.
A VHT return will be due by 7 November 2023, with the tax payable by 1 January 2024.
Pre-Letting Expenses
In determining the taxable rental profits from the letting of residential property, a landlord may claim a deduction for the following expenses:
Costs not repaid by tenant – e.g., light & heat costs.
Capital allowances on qualifying capital items – e.g., furniture, white goods.
However, with the exception of property-related fees such as letting or legal fees incurred on the first letting, a deduction is not permitted for expenses incurred prior to the first letting of the property.
The Finance Act 2017 sought to address the above and introduced an allowable deduction of up to €5,000 for certain pre-letting expenses incurred on vacant residential properties. From 1 January 2023, this cap on the authorised deduction has been increased to €10,000 and the specified period for which the property was vacant has been reduced from twelve to six months. The landlord must incur the expenditure during the twelve months prior to first letting the property.
If the landlord ceases to let the property within four years, the deduction for the pre-letting expenses will be clawed back in the year in which the property ceases to be let as a residential property. Importantly, a clawback will be triggered if there is a change of use from residential or if the property is sold.
If you need any assistance with VHT or Pre-Letting Expenses, please contact Niall Grant, Partner in our Tax Services’ Department.
Budget 2023 saw the introduction of a new Rent Tax Credit which is available from 2022 to 2025.
The credit is 20% of the rent paid in a year, up to a maximum credit of either €500 for an individual or €1,000 for a couple, for:
A person’s principal private residence (i.e. sole place of residence).
A person’s ‘second home’ which they use to facilitate their attendance at their employment, office holding, trade, profession or a Revenue approved college course.
A property used by a child to facilitate their attendance at a Revenue approved college course.
Qualifying rents are any amounts paid in return for the use, enjoyment and special possession of the property but does not include payments made for security deposits, repairs or maintenance or any other services such as board, laundry, etc.
The main conditions of the relief are as follows:
The property must be a residential property located in Ireland.
The payment must have been made under a tenancy. Tenancy for rent tax credit purposes must fall under one of the following categories:
An agreement or lease which is required to be registered with the Residential Tenancy Board (RTB).
A licence for use of a room(s) in another person’s principal private residence. These arrangements are commonly known as “rent-a-room” or “digs”. (No RTB registration is required under these licences).
A tenancy for 50 years or more.
Tenancies under “rent to buy” arrangements.
The landlord and the individual making the claim cannot be parent and child. If they are otherwise related the credit may be available as long as the RTB registrations have been complied by. Therefore, the credit is NOT available where the tenancy is under different arrangements such as “digs” or “rent-a-room”.
The individual must not be a supported tenant (in receipt of any State housing supports such as HAP or RAS).
The landlord must not be a Housing Association or Approved Housing Body.
You can claim the Rent Tax Credit for rent paid during 2022 by submitting a 2022 Income Tax Return to Revenue. For 2023 and subsequent years the claim can also be made in-year using Revenue’s Real-Time Credit Facility.
If you are not registered for self-assessment, you can submit your Income Tax Return via Revenues’ MyAccount. By selecting “Review your Tax 2022” and requesting a “Statement of Liability”, you can input the information under the “Tax Credits & Reliefs” page.
The Real Time Credit Facility for 2023 and subsequent years enables you to claim the Rent tax credits in during the year. To claim the credit you must select “Manage your Tax 2023” and “Add new credits”, there it will give you the option to add the “Rent tax credit” and input the relevant information. Once the claim has been processed by Revenue, an amended Tax Credit Certificate is issued, and an amended Revenue Payroll Notification will be made to your employer.
For further information about the Rent Tax Credit, please contact us.
Tax-payers who pay third level fees on their own behalf or on behalf of another person will be happy to know that they can claim tax relief.
Tax relief at the standard rate is available in respect of certain third-level tuition fees paid to approved colleges. Revenue publishes a list each year of both private and public colleges approved for tax relief. The relief is given by way of a tax credit equal to the fees paid multiplied by 20% (the standard rate of tax). A credit for third level fees cannot result in an income tax refund.
What is an Approved College?
Revenue have provided guidance on what constitutes an approved college. This is a college or higher education institute in the state which provides approved courses (definition below) or an institute in the UK or another EU Member state which is maintained by recurrent grants from public funds of any EU Member State. The college in either the Irish State, the UK or in an EU Member State must be a duly accredited university or institution of that country.
What is an Approved Course?
Revenue have also provided guidance on what constitutes an approved college course. A full-time or part-time undergraduate course must be at least two academic years. A postgraduate course leading to a postgraduate award based on a thesis or on the results of an examination or both, which is between one to four years and requires the student to have a prior degree or an equivalent qualification.
Who can claim & how much can be claimed?
An individual can only claim the relief if they themselves incurred the cost of the fees. Relief is calculated on aggregated fees paid subject to a maximum of €7,000 per person, per course, per academic year where the first €3,000 (full-time) or €1,500 (part-time) is deducted. The general effect of this is that claimants who are claiming for more than one student will get full tax relief for 2nd and subsequent children in their claim.
Relief does not extend to payments such as registration fees, administration fees or student accommodation.
If in receipt of any grant or payment towards the fees, this must be deducted from the claim being made when claiming the relief.
How to claim tuition fees?
There is no specific form required to claim relief for tuition fees paid for third level education courses. An individual can use PAYE services in myAccount to apply for relief for tuition fees by completing the Form 12 or if income tax registered can claim this through their yearly tax return.
Should you require any further information or assistance in claiming the tax relief, please contact us.
The Tax Appeals Commission’s (TAC) objective is to fulfil the obligations placed on it by the Finance (Tax Appeals) Act 2015 and the Taxes Consolidation Act 1997 (“TCA 1997”). To fulfil these, the TAC facilitates taxpayers in exercising, where appropriate, their right of appeal to an independent body against decisions and assessments of the Revenue Commissioners and the Criminal Assets Bureau.
The Issue for Determination
Recently, the TAC issued a determination regarding an Appellant’s complaint about the treatment of an IQA allowance he received in respect of his contributory pension for the years 2019 and 2020. The Appellant was dissatisfied with how he was assessed in relation to his contributory pension, in respect of which he received an increase for his spouse as a Qualifying Adult (Increase for a Qualifying Adult, or “IQA”).
The Background
The Appellant’s complaint related to how the Revenue Commissioners had interpreted an IQA allowance he received in respect of his contributory pension. According to the appellant, “this allowance [was] paid directly to his spouse”, who had “full and sole discretion over how it [was] expended”. In the appellant’s opinion, “whoever actually receives the money should pay the Tax on it. To expect someone else, who received none of that money, to pay the tax on it is unbelievable and very unfair”.
On 30 November 2021 and 6 December 2021, the Appellant received P21 Balancing Statements for the years 2019 and 2020. These indicated underpayments of income tax in the amounts of €3,660.36 and €3,810.69 respectively. On 16 December 2021, the Appellant duly appealed the P21 Assessments to the Commission, arguing that:
“Revenue’s position is that I am deemed to be the beneficiary of the Pension, plus the Increase for a Qualified Adult. They are clearly wrong in that stance. I am the beneficiary of the Pension only and my Wife is the beneficiary of the Qualified Adult Increase. Surely, the beneficiary has to be the person who actually receives the money and not somebody else? Regardless of what way the Government tricks around with the wording of the Acts, it cannot change that fact, which should override everything else.”
By contrast, the Revenue Commissioners’ position was that the IQA allowance was deemed to be the Appellant’s income for tax purposes, pursuant to section 126(2B) of the TCA 1997.
Opposing Arguments
The Revenue Commissioners submitted that “…it is incumbent upon [the Appellant] to demonstrate that Revenue has erred in the way he was taxed with regard to the QAD portion of his pension. Respectfully, the Respondent would argue that the assertion that Revenue is ‘clearly wrong’ does not meet that burden in a matter where the wording of the legislation is quite clear.”
For the Revenue Commissioners, that the appellant claimed “the government has tricked around with the wording of the Acts” implied dissatisfaction with the legislation itself, rather than with the Revenue Commissioners’ interpretation of the legislation.
Determination
The TAC in its determination considered all the facts and information presented, paying particular attention to the following:
Past case law examples – Lee v Revenue Commissioners [IECA] 2021 18 & Stanley v The Revenue Commissioners [2017] IECA 279.
The Commissioner determined that the Appellant had failed in his appeal and had not succeeded in demonstrating that the tax was not payable. It was noted that there is no discretion as regards the application of section 126(2B) of the TCA 1997 and the Revenue Commissioners were correct in their approach to the IQA income for the years under appeal.
The Tax Appeals Commission’s (TAC) objective is to fulfil the obligations placed on it by the Finance (Tax Appeals) Act 2015 and the Taxes Consolidation Act 1997 (“TCA 1997”). To fulfil these, the TAC facilitates taxpayers in exercising, where appropriate, their right of appeal to an independent body against decisions and assessments of the Revenue Commissioners and the Criminal Assets Bureau.
The Issue for Determination
Recently, the TAC issued a determination addressing a taxpayer’s assertion that their amended assessment for tax year 2016, issued by Revenue Commissioners in January 2018, was incorrect. The taxpayer’s assertion related to certain payments received following the termination of his employment. The taxpayer contended that this payment – “success fees” – was a payment linked to the termination of his employment, taxable under S123 TCA 1997 (to which certain reliefs can be applied via S201 and Schedule 3 of TCA 1997). The amended assessment, however, had treated the payment as being a payment made in connection with his employment and therefore liable to income tax under S112 TCA 1997 (Schedule E).
The Background
Prior to the above complications, the taxpayer had been a senior employee of a company, (“his Employer”) by way of employment contract, since 2010, holding an annual salary of €150,000 and certain conditional share option entitlements. In July 2015, having had differences of opinion with the Chairman regarding the future strategic direction of the company, the taxpayer and his employer entered a further written agreement (“termination agreement”). The termination agreement included dates for the earliest termination of the employment. While the potential date of termination was dependent on certain deliverables, the final date for this was to be no later in any event than March 2016. The termination agreement stated that “your salary and other contractual benefits will be paid up to the Termination Date less tax, employee PRSI, USC and any other deductions required by law”.
The termination agreement set out various types of payments to be made on termination. These included payments in excess of €500,000 (“success fees”), on the successful raising of finance by the taxpayer for the employer.
Opposing Arguments
The taxpayer argued that the “success fees” were not contingent in fact on the raising of finance for the company as this work was already substantially completed. The taxpayer argued that the termination agreement in this respect was drafted to give the Board of the company a belief that they were getting most value for money for the large termination payment.
The Revenue Commissioners argued that the “success fees” were intrinsically linked to the performance of the taxpayer’s employment and were not termination-related payment.
Both sides quoted differing Irish and UK cases and indeed the Revenue Taxes and Duties Manual (part 05-09-19) to aid their respective positions.
Determination
The TAC in its determination considered all the facts and information presented, paying particular attention to the following:
The termination agreement expressly stated that all payments were conditional upon the taxpayer agreeing to all the terms of the agreement. These terms included the termination of his employment and no future right to sue his employer
The termination agreement drew a distinction between the taxpayer’s entitlements in connection with the termination and those from his employment contract
The taxpayer’s circumstances within in the company gave the taxpayer no option but to leave the company
The TAC determined that the taxpayer was entitled to succeed in his appeal, that he was overcharged to income tax, and that the Notice of Assessment be reduced accordingly.
https://www.crowleysdfk.ie/wp-content/uploads/shutterstock_657337522-1-scaled.jpg16962560Alison Bourkehttps://www.crowleysdfk.ie/wp-content/uploads/crowleysdf-chartered-accountants-1.pngAlison Bourke2022-06-23 08:18:462022-06-23 08:18:46Tax Appeals Commission Determination | Income Tax: Payments Received Following a Termination of Employment
With the recent outbreak of COVID-19, employees throughout the country have been asked to work from home. While these are challenging times for both employers and employees, Revenue offer a measure of relief for employers and employees who are engaged in “eWorking”. Revenue have today confirmed in their eBrief No. 045/20 that the current Government recommendations for employees to work from home as a result of COVID-10 meet the conditions for the “eWorking” tax relief.
Revenue define eWorking as where an employee works:
at home on a full or part-time basis
part of the time at home and the remainder in the normal place of work
eWorking involves:
logging onto a work computer remotely
sending and receiving email, data or files remotely
developing ideas, products and services remotely.
Employers can make a payment of €3.20 per workday to an employee who is working from home without deducting PAYE, PRSI or USC. This payment is to cover expenses such as heating, electricity and broadband costs. Amounts paid in excess of €3.20 are subject to tax as normal. Records of payments made must be retained by the employer for the purpose of any potential future Revenue compliance intervention.
In addition, where employers provide any of the following equipment to their employees, no benefit-in-kind arises as long as it is primarily for business use:
computer, laptop or computer equipment (eg. printers, scanners)
software to allow you to work from home
telephone, mobile and broadband
office furniture.
There is no obligation on employers to make this payment. If employers do not make this payment, employees can instead make a claim online at the end of the year by filing a tax return. Employees are not entitled to claim the round sum of €3.20. They are entitled to claim for vouched expenses that are incurred wholly, exclusively and necessarily in the performance of their duties of the employment. For most office workers this would be their home heating and electricity costs.
Any reimbursement of these expenses that has already been paid by the employer should be deducted from the claim amount. While receipts are not required to file the return, Revenue can request these for a period of up to six years after the year in which the claim relates, so employees should always keep a record of these.
In the case of utility bills, Revenue have advised that they are willing to accept that the average proportion of the house attributable to a home office is 10%. Therefore, for every day an employee works at home as a result of the current Government recommendations, they are able to make a claim for 10% of the utility bills for that day.
It is important to note that outside of the current Government recommendations regarding working from home, the eWorking relief does not apply to workers who bring work home outside of normal working hours, ie. evenings and weekends.
If any further information is required or if you have questions on the above, please don’t hesitate to contact our dedicated COVID-19 Client Response Team or our Tax Department.
There were two amendments made to the Capital Acquisitions Tax Dwelling House Exemption by Finance Act 2017, in such cases where the recipient of the dwelling house is a dependent relative of the disponer.
A ‘dependent relative’ is defined as a relative who is permanently and totally incapacitated due to mental or physical infirmity from maintaining himself or herself, or who is of the age of 65 years or over at the date of gift or inheritance.
The position following the amendments is as follows:
In the case of a gift or an inheritance of a dwelling house taken by a dependent relative, the dwelling house is not required to have been the only or main residence of the disponer.
A gift of a dwelling house that becomes an inheritance as a result of the disponer dying within two years of making the gift can qualify for the dwelling house exemption, where the beneficiary is a dependent relative.
All other provisions to the exemption remain unchanged.
The amendments to the Dwelling House Exemption take effect from the date of passing of the Finance Act 2017, 25 December 2017.
Should you require any further details on the above, please contact a member of our Tax Department.
https://www.crowleysdfk.ie/wp-content/uploads/property-tax.jpg391600Alison Bourkehttps://www.crowleysdfk.ie/wp-content/uploads/crowleysdf-chartered-accountants-1.pngAlison Bourke2018-08-13 13:51:012019-11-11 15:27:13Amendments to Dwelling House Exemption
https://www.crowleysdfk.ie/wp-content/uploads/shutterstock_541584718.jpg30144774Alison Bourkehttps://www.crowleysdfk.ie/wp-content/uploads/crowleysdf-chartered-accountants-1.pngAlison Bourke2018-06-05 09:42:162023-02-22 10:16:18Revenue moves to PAYE Modernisation and Real Time Reporting
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