I am living and working in London as a higher-rate taxpayer with a house in Dublin which is rented out and fully declared to Revenue. Am I subject to additional tax to Her Majesty's Revenue and Customs (HMRC)? Your article in 2018 says not, however my accountant here says yes, I am.
A taxpayer with Irish rental income will have exposure to tax on the rental income earned in both Ireland and the United Kingdom and is required to declare the income in both countries. By earning income from Irish rental property, you are automatically liable to Irish income taxes, regardless of where you are tax resident. By being resident in the UK, you are also likely to be liable to tax on the rental income, as part of your worldwide income. However, the UK and Ireland operate under a double tax agreement. Under this agreement a taxpayer, in this case a UK resident, gets a credit for amounts paid to Irish Revenue when declaring to HMRC.
Additional liability
Given the differences in income tax rates in the UK and Ireland, as a higher rate taxpayer in the UK we would expect that you will have an additional liability in the UK. Where rent is paid to a foreign landlord directly by the tenant, the tenant should withhold tax at the standard rate of tax of 20 per cent and pay this over to Revenue.
This can be avoided by having an agent collecting the rent in Ireland on your behalf and submitting the tax return each year. In practice, the withholding tax is often not deducted by the tenant where it should be. Any expenses allowed as a tax deduction can be claimed through submitting a tax return such as mortgage interest, repairs, letting fees.
It is also important to note that a foreign landlord is liable to pay annual local property tax.
Suzanne O'Neill is a tax partner at RSM Ireland, rsmireland.ie.
