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Irish Accountants Respond To Consultation On Landlord Taxation

Thursday, April 20, 2017

A group of Irish accountancy associations has called on the Government to reduce the income and capital gains tax burden on landlords.

A Working Group set up by the Irish Government is reviewing the tax treatment of landlords. A consultation on options for reform closed earlier this month. The Government wants to determine whether new reliefs should be introduced to incentivize landlords to remain in, or to enter, the residential accommodation market.

In its submission to the consultation, the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I) said that it does not believe that a relief from CGT on the disposal of a long-term rental property would encourage landlords to remain in or out of the market "unless the relief is guaranteed by the Government and not subject to a withdrawal in a few years down the line."

CCAB-I recommended that the CGT rate instead be reduced from 33 percent to 20 percent. It said a reduction "might encourage landlords to enter the rental market if they don't see the tax on exit as a deterrent and look to make a worthwhile investment."

The submission also pointed out that in the UK CGT rates range from 18 percent to 28 percent for individuals for residential property, while the annual exemption amount in the UK is GBP11,100 (USD14,427) for an individual compared with EUR1,270 (USD1,367) in Ireland. It argued that the Irish exemption should be increased to EUR5,000 a year, and that consideration should be given to reintroducing a form of rollover relief for the disposal of property.

CCAB-I also recommended that the Government:

  • Allow current year rental losses to be offset in the current year against: the earned and/or unearned income of the landlord, and the earned and/or unearned income of the spouse or civil partner;
  • Remove Universal Social Charge (USC) charges from rental income;
  • Increase the wear and tear rates for fixture and furnishing a rental property from 12.5 percent to 25 percent per year, to allow a larger tax deduction and encourage landlords to invest in the maintenance of rental properties;
  • Introduce full interest deductibility on money borrowed to acquire a rental property by 2018 and not 2021 as projected by the Government; and
  • Allow local property tax as a deduction against rental income.

The submission concluded: "We do not recommend a return to hugely generous tax reliefs in the form of property allowances but we do recommend that there is some relief for capital gains tax for individuals disposing of properties coupled with some additional reliefs to lower the income tax burden on landlords. We ask that the Government give some sort of comfort to the taxpayer that any reliefs introduced will not be taken away in a short few years."