Landlords cannot claim mortgage interest relief which is only available for owner occupiers in respect of their principal private residence. I am informed by the Revenue Commissioners that landlords may deduct interest on money borrowed to purchase, improve or repair commercial property from the gross rent when computing their rental profits for tax purposes on that property. Interest incurred before the first occupation of the property by a tenant for the purposes of a trade or undertaking, or between lettings, is not deductible.
Based on personal income tax returns filed by non-PAYE taxpayers for the tax years 2008 to 2010, the latest years available, the amount of tax foregone by allowing a deduction for interest on borrowings to be offset against domestic rental income assessable under Case V, Schedule D for both residential and commercial property and the number of claims by individual taxpayers is as shown in the following table. It is not possible to break down these costs between commercial and residential property.
|
Tax Year
|
Tax Cost
|
Number of Claims
|
|
2008
|
€1,210m
|
112,195
|
|
2009
|
€763m
|
117,984
|
|
2010
|
€679m*
|
123,167
|
*This is an update of an estimate of €660 million provided on 29 May last in my reply to Parliamentary Question number 26184/12 .
In relation to interest claimed as a deduction against foreign rental income , based on personal income tax returns filed by non-PAYE taxpayers for the tax years 2009 to 2010, the latest years available, the following table shows the estimated tax costs and the number of claims by individual taxpayers. The personal income tax returns for 2008 in respect of foreign rental income did not separately identify allowable interest from other expenses and therefore information is not shown for that year.
|
Tax Year
|
Tax Cost
|
Number of Claims
|
|
2009
|
€71m
|
11,773
|
|
2010
|
€69m
|
13,522
|
New claims cannot be separately identified from ongoing claims in the data source and accordingly the relevant details of these cannot be shown separately.
These estimates are based on assuming that tax relief was allowed at the top income tax rate of 41% and the figure provided could, therefore, be regarded as the maximum Exchequer cost in respect of those taxpayers. I am advised by the Revenue Commissioners that they are not in a position to provide data for 2011 as the tax returns for that year are not yet fully processed. The figures shown in both tables are subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.
It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figures provided in this reply. As rental income of companies is returned as net of interest on borrowings, the figures for interest are not separately distinguishable and there is, therefore, no basis on which an estimate of the cost in respect of companies can be given.
