Introduction

The Northern Ireland Tax Committee of Chartered Accountants Ireland is pleased to have the opportunity to comment on the above consultation launched on 15 August 2016 as part of the Making Tax Digital (“MTD”) project. Information about Chartered Accountants Ireland and the Northern Ireland Tax Committee are provided on the previous page.

We would be happy to discuss any aspect of our comments herein and to take part in any further consultations/initiatives in this area that there may be in the future. We wish to comment briefly on some specific aspects of the current consultation. Our comments herein have been compiled from feedback received from our members via various channels over the course of the last few months.

Quarterly updates

In principle, we are supportive of introducing an optional cash basis for unincorporated property businesses as this will allow landlords to assess the true yield from their property portfolio. However the decision to extend the cash basis to this cohort of taxpayer should be taken independent of the MTD project.

The consultation document states at part 1.11 that “in conjunction with the Making Tax Digital regular updates, those using the cash basis should have a clearer picture in-year of their estimated tax position”. This does not gel with part 1.5 of the consultation which notes how many property businesses are relatively straightforward. In those cases, the benefit of quarterly reporting for landlords is difficult to see particularily where a landlord owns just one property with a long term lessee.

For this reason we think an exemption from MTD for landlords earning up to £100,000 in rental income would be appropriate.

Security deposits

We do not agreed that only recognising security deposits landlords are entitled to keep at the end of a tenancy would create unnecessary complexity. Landlords maintain records of deposits paid by tenants in any case and once a tenancy ends they consider if this should be repaid to the tenant or otherwise used to compensate the landlord for damages/repairs required to the property.

Deposits are legally returnable irrespective of whether the landlord holds these or they are held as part of a government backed tenancy deposit scheme. Taxing these upfront would simply be unfair when the landlord’s entitlement to these deposits only becomes certain at the end of the tenancy. Deposits should not be taxed until that point in time is reached.

Conclusion

Recent legislative changes to the taxation of landlords is causing pressure on this sector with many landlords suffering negative equity but increasingly higher tax bills. From 6 April 2017, interest relief will begin to be restricted to basic rate only.

This is in direct contract to a recent measure in the Irish Budget of 11 October 2016 which announced that the 75 percent restriction on mortgage interest available as a deduction against rental income by landlords will be increased again on a phased basis over the coming years. That announcement formed part of a package of measures to help ease the Irish housing crisis.

Whilst mindful of the consultation deadline, we feel that there are broader issues arising from the treatment of the buy to let sector and a wider review of the United Kingdom housing market as a whole, across all regions, is warranted.

Accordingly there may be implications which we are not best positioned to comment on because they are not solely tax issues. A review of this sector could, for example, be conducted as part of the Five Point Plan for housing announced in the 2015 Autumn Statement.

Freedom of Information

We note the scope of the Freedom of Information Act with regards to this submission. We have no difficulty with this response being published or disclosed in accordance with the access to information regimes. This response will be published on our own website in due course and will be available to all of our members and the general public.

Source: Chartered Accountants Ireland, www.charteredaccountants.ie.