THE self-employed are currently preparing their 2015 tax returns ahead of the October 31 pay and file deadline, but they are not the only ones who have to file a return, writes Grainne McGuinness
Anyone who is in receipt of income that isn’t taxed through the PAYE or other systems must file, including those in receipt of rent from property, foreign income, or profits and dividends from shares.
One large group of people who need to be aware of the deadline is Airbnb hosts. Revenue has made it very clear that it regards income from hosting as taxable, as in the vast majority of cases it does not qualify for rent-a-room relief.
Tax advisers Taxback.com became partners with Airbnb earlier this year and senior manager Barry Flanagan said that they have met with a large number of hosts looking for assistance.
“Many Airbnb hosts are PAYE workers and, as such, have never had to file their own tax return, so this is new territory for these people and it can also seem quite daunting,” he said.
The main questions centre around whether the income is taxable, which it is, even if the host is not Irish or not living here themselves.
If the property is in Ireland, then the income arising will be taxable here, regardless of where the host is located.
The income should be reported as either Case I ‘Trading’ Income or Case IV ‘Miscellaneous’ Income.
The main difference between these is the allowable deductions.
Revenue has said that everyone must determine themselves which category they fall into, and to help them decide, Taxback.com has issued general guidelines. These are based on its interpretation and are not definitive.
The distinction between trading and miscellaneous is largely based on frequency, duration, and profit.
It is suggested that if you rent out the room/property on six or more occasions annually, ‘host’ for 30 or more nights in a year, or if your Airbnb income exceeds €5,000 per year, Revenue will determine that you are engaged in a trade. Offering any additional services, such as meals, would also suggest it is a trade.
If you are trading, then you have a wider range of deductions available. You can claim for some pre-letting expenses and for mortgage interest.
If you are not deemed to be trading, the income is classed as miscellaneous and you can only claim for expenses incurred directly for the letting. These include utility costs such as electricity and gas, but only the amount used as a result of hosting guests.
If this is your first time having to file a return, you must register for self-assessment using the TR1 form, which can be downloaded from revenue.ie. Should you wish to file your tax return online, you will also need to register for the Revenue Online Service (ROS). This can take up to two weeks to complete so get cracking if you haven’t already.
If you are using ROS the online deadline is November 10. To qualify for a deadline extension, you must both pay and file through ROS. You can set up a direct debit, use a credit or debit card or in some cases use online banking to pay. Where only one of these actions is completed through ROS, the extension does not apply and the deadline to submit returns and payments is October 31.
It is vital to meet the deadline, as if you make a late payment on your return, a significant surcharge is added to the tax bill. Where the return is made within two months of deadline, 5% of the tax up to a minimum of €12,695 is added; make the return more than two months after the deadline and the surcharge is 10% of the tax up to a minimum of €63,485.
The other advantage of filing online is that Revenue calculates tax liability based on the information you provide, rather that you having to calculate it yourself. For a person filing for the first time, and/or without the assistance of an accountant, this is much more straightforward.
ROS Helpdesk 1890 201 106 or email firstname.lastname@example.org.
DEAL OF THE WEEK
I f you are contemplating buying a new car but are worried about the rising cost of insurance, then Nissan’s new incentive may be for you.
It is currently offering two years’ free insurance to buyers of new cars.
The company says the offer is aimed at making the cost of running a car more affordable and is available to motorists ordering any new Nissan passenger car before December 31.
Figures released by the CSO today show that the cost of motor car insurance has risen by 9.2% over the last three years and that it is now 25.2% more expensive to insure a car than it was this time last year, making this a valuable offer.
Car-buyers interested in availing of the offer must be aged 26 or over, have a full driving licence, no more than three penalty points and a minimum of three years’ noclaims bonus.
Insurance does not extend to commercial use.
¦ For more information go to www.nissan.ie.
© Irish Examiner Ltd. All rights reserved