Over the last number of years there has been a significant rise in the number of people letting residential property on a short term basis. Platforms such as Airbnb have facilitated and accelerated this trend. Such short term lettings have proven controversial, not just in Ireland but internationally as well. Some cities have clamped down on short terms lettings, whether for being “unlicensed” or for being in breach of planning permission.
The Irish Government recently announced that they intend to introduce regulations for short-term lettings, originally with the intention that the regulations would come into force in June 2019. Under the proposed regulations properties will require planning permission to be used for tourism/short term letting purposes. Landlords may therefore have to seek planning permission for a change of use. Individuals will still be entitled to let their private residence without applying for planning permission but not for more than 14 days at a time and not longer than 90 days in the year.
Notwithstanding the legal considerations, the tax treatment of the income from such lettings has also given rise to a number of complexities for taxpayers. In this regard, in 2018 Revenue published detailed guidance on their treatment of short term rentals, summarised below:
Rent a room relief
Revenue had stated in their guidance notes that “Rent a room relief” did not apply to income from short term lettings, such as Airbnb type income. However, Revenue guidance notes are not law, merely the Revenue’s interpretation of the law. In Finance Act 2018 the Government took the opportunity to amend the Rent a room relief provisions in an attempt to bring closure to the matter and to specifically exclude short term lettings (with certain exceptions). The new provisions provide that in order for rent a room relief to apply, the property must be used by the occupant for more than 28 consecutive days. There are a number of important exceptions in the legislation:
The legislation is very clear that where a taxpayer seeks to rely on one of the above exceptions Revenue may require the individual to provide proof of their entitlement to the relief.
The above changes are effective for the 2019 tax year and subsequent tax years.
Case V - Relief for interest on borrowings
On a positive note, Finance Act 2016 had restored mortgage interest relief on a phased basis for interest on borrowings applied in the purchase, improvement or repair of rented residential property. The percentage of interest qualifying for tax relief was set to increase to 90% in 2019 and 100% in 2020. Finance Act 2018 has accelerated the timeframe providing for 100% interest relief for qualifying borrowings with effect from 1 January 2019.
Return to Tax Issue - Spring 2019
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