In April 2018 Revenue published a new section of its Tax and Duty Manual entitled "Tax Treatment of Income Arising from the Provision of Short-term Accommodation".1
The guidance is stated as not being intended to focus on the tax treatment of rental income, as it directs readers to other guidance applicable to taxing such income. It instead focuses on "the tax treatment of income where a landlord/ tenant relationship does not exist" and, in particular, whether income from the provision of such accommodation should be classified as chargeable under Case I or Case IV.
To determine the relevance of the guidance, there is first the need to be able to distinguish between income where a landlord and tenant relationship exists, being rental income, and income where such a relationship does not exist, which is therefore not rental income.
The guidance does accept this point and confirms that the initial task is to determine whether the accommodation is provided under a landlord/ tenant arrangement, or not. It takes the view that a major determining factor in this exercise is whether the tenant has exclusive possession.
However, the author has concerns regarding certain aspects of the guidance on the basis that they do not fully adhere to certain principles set down in a High Court decision of 2009 in a case with which this author was involved.
That the manner of taxation of income from the provision of accommodation is a topical area can also be seen in the recent changes to rent-a-room relief2 in s24 FA 2018. The changes seek to exclude the availability of relief where the accommodation provided is used for a consecutive period not exceeding 28 days. There are exceptions to this exclusion for the following provided with the accommodation:
- individuals who are mentally or physically incapacitated,
- individuals who use the room or rooms for a minimum of four consecutive days for not less than four consecutive weeks and
- individuals receiving full-time or part-time instruction at a university, college, school or another educational establishment in the State.
These changes sought, in essence, to stop the relief being claimed in relation to premises let through Airbnb and other internet accommodation sites for overnight or very short-term purposes, thereby legislating for the views previously outlined by Revenue in an eBrief. Notwithstanding the clear political will that has been expressed in other quarters,3 the above represents essentially the only change in recent years in the law on taxing income arising from the provision of accommodation.
This article seeks therefore to provide a detailed review of the classification of income arising from the provision of accommodation, taking into account case law precedent, legislative changes and, in particular, a High Court decision on the subject handed down in 2009 by Laffoy J. The particular focus is the examination of how the income should be classified and assessed under the different cases of Schedule D, taking into account these sources.
1 Revenue, Tax and Duty Manual, Part 04-01-20.
2 Section 216A TCA 1997.
3 See, for example, changes that are anticipated to be made in relation to planning permissions for short-term accommodation.
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Originally published in Irish Tax Review
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