Rent Pooling - Income Tax

Revenue is concerned that residential housing developments are being marketed with the availability of rent pooling. Revenue understands rent pooling to mean the pooling of all of the expenses and rents for all of the houses or apartments in a development and the distribution of the net rental income to the individual house owners in proportion to their ownership share in the development. There is no provision in the Tax Acts for this type of arrangement. Section 97(1)(c) TCA, 1997 specifically requires the amount of the rental surplus or deficiency to be calculated for each individual rent, i.e. each individual house or apartment. It is only after the net rental surplus or deficiency has been calculated for each individual house that the aggregate rental surplus or deficiency is calculated for all of the rental properties of a particular landlord. Therefore, a group of houses or apartments, whether owned by the same or different persons, should not be treated as a single composite rental unit.

In its “Explanatory Note on the operation of the provisions of the Taxes Consolidation Act, 1997 in relation to the Student Accommodation Scheme” (available at www.revenue.ie under publications / technical guidelines), Revenue accepted a limited form of rent pooling. This limited form of rent pooling provided that management and letting fees and other deductible expenses that are appropriate to all houses could be pooled while expenses that are specific to an individual house could not be pooled. That document stated that Revenue was prepared to allow rent pooling in the particular circumstances and context of the student accommodation scheme only and only in respect of rents received from students during the academic year. Rent and expenses for periods outside of the academic year were to be allocated in accordance with the provisions of the Tax Acts.

It should be noted that the situation as outlined above remains unchanged and that Revenue does not intend to extend its acceptance of rent pooling beyond the student accommodation scheme. Accordingly, in the event of a Revenue audit, an investor who has availed of a rent pooling arrangement, outside of the student accommodation scheme, may find that their rental income computation will not be accepted by the inspector.

Enquires on this article should be addressed to mdorris@revenue.ie