A Week In Review
QWBA – Beneficiary renting out Trust property
IR’s latest draft Questions We’ve Been Asked (PUB00346(a)) considers the taxation implications arising from a scenario where a beneficiary of a trust, rents out property owned by the trust, for use by others as short-stay accommodation.
The question IR attempts to answer, is under these types of scenarios, who should be declaring the income and what expenses can be claimed.
The present view espoused by the Revenue, is that since in these cases the property is otherwise the beneficiaries home (whether the property is rented out in whole or in part), it is the beneficiary that is the person who is granting a licence to others to use the property, and consequently it is the beneficiary that is deemed to be deriving the income for tax purposes.
What deductions can be claimed by the beneficiary may be more restricted therefore to say a scenario where it is the trustees renting out the property for similar purposes, because most of the non-capital costs related to the ownership of the property will be incurred by the trustees and not by the beneficiary.
Most non-capital costs however incurred directly by the beneficiary in deriving the income should be tax deductible, although adjustments may be required in respect of the quantum being claimed, where the beneficiary is also using the property privately or for other non-income earning uses.
The deadline for comment is 3rd December 2019.
The alternative QWBA
And to ensure that their analysis is complete when considering scenarios of trust owned property being rented out for short-stay accommodation purposes, also released for feedback is draft QWBA PUB00346(b), which endeavours to answer the question, of what the income tax implications are for trustees that rent out trust property in this way.
The answer given I suspect will come as no surprise to any of you, the income in these cases belongs to the trustees, with any expenses incurred by the trustees in deriving the income usually tax deductible, although again any private use (or other non-income earning use) of the property triggering an adjustment to the level of expenditure being claimed.
Naturally, as with most trustee income, once the quantum of income for the particular income year has been determined, the trustees then have the option of allocating the income to the beneficiaries of the trust, to be subject to taxation at the beneficiaries’ marginal tax rate, as opposed to the trustee tax rate of 33%.
It will also be of no surprise to you, that this QWBA has an identical comment deadline to the first, of 3rd December 2019.