Do we have to pay tax on rental income of a sub-let?
Discussion
Could anyone tell me if my company would have to pay tax on rent on a commercial unit we are sub-letting out. We are not making any profit on the rent charged we are just renting it for the amount the landlord is charging us.
My husband thinks we won't have to but I just want to double check.
My husband thinks we won't have to but I just want to double check.
The income derived from the rental of the property is taxable in the normal way.
However, don't forget that you offset against the rental income the costs of running the property - so that would include any rental costs incurred by you.
Even if the rental property does not generate rental profits, it would still be correct to return the details to the Revenue. If you are making rental losses, those losses could be carried forward for offset against future rental profits from the same property.
However, don't forget that you offset against the rental income the costs of running the property - so that would include any rental costs incurred by you.
Even if the rental property does not generate rental profits, it would still be correct to return the details to the Revenue. If you are making rental losses, those losses could be carried forward for offset against future rental profits from the same property.
For as long as the rental property is in your posession.
If it continually makes losses, you just accumulate the losses until it starts making profits. Hoewever, if you sell the property before it ever makes any profits, the losses go to waste. They CANNOT be used to reduce any Capital Gains on the property.
These ARE the rules for all rented properties, busines or private "buy to lets".
There are some special rules which can apply to businesses that let out sections or portions of their business premises, in which case the rental income or losses can be incorporated as part of the business' normal trading income.
If it continually makes losses, you just accumulate the losses until it starts making profits. Hoewever, if you sell the property before it ever makes any profits, the losses go to waste. They CANNOT be used to reduce any Capital Gains on the property.
These ARE the rules for all rented properties, busines or private "buy to lets".
There are some special rules which can apply to businesses that let out sections or portions of their business premises, in which case the rental income or losses can be incorporated as part of the business' normal trading income.
Thanks Eric for the info. I had a feeling we had to pay tax because it is regarded as an income irrespective if we were making a profit or not on the rent.
You did mention that there are special rules because the business unit is 3,200 sq ft and we have sub-divided it in half purely because it is too big for us at this stage in our business. We are liable for the business rates, building insurance, gas etc. so our name would be on all these bills not the company we are sub-letting to. I think I might give my tax office a call and ask where I stand.
It might be worth the company we are going to sub-let to to go direct with the Landlord and this would avoid any tax liability on our part.
Sorry I logged in on my husband's name.
You did mention that there are special rules because the business unit is 3,200 sq ft and we have sub-divided it in half purely because it is too big for us at this stage in our business. We are liable for the business rates, building insurance, gas etc. so our name would be on all these bills not the company we are sub-letting to. I think I might give my tax office a call and ask where I stand.
It might be worth the company we are going to sub-let to to go direct with the Landlord and this would avoid any tax liability on our part.
Sorry I logged in on my husband's name.
Edited by topsparks on Friday 16th February 21:27
You hadn't mentioned previously that you were subletting a section of the business premises you were still trading from.
In these circumstances, the Revenue allows you to incorporate the subletting income into your main business accounts and treat it as part of your normal trading income (Rental Income is normally treated separately).
If you are making a loss on the renting activity, then incorporating the loss-making rental activity into your normal trade would be beneficial as it would serve to reduce your trading profit and therefore your overall tax liabilities.
Normally, rental losses cannot be offset against anything other than future rental profits on that particular property.
Before making any decisions, make sure you discuss this situation in depth with your accountant as he/she should be able to point you in the right direction as to what the best course of action should be.
In these circumstances, the Revenue allows you to incorporate the subletting income into your main business accounts and treat it as part of your normal trading income (Rental Income is normally treated separately).
If you are making a loss on the renting activity, then incorporating the loss-making rental activity into your normal trade would be beneficial as it would serve to reduce your trading profit and therefore your overall tax liabilities.
Normally, rental losses cannot be offset against anything other than future rental profits on that particular property.
Before making any decisions, make sure you discuss this situation in depth with your accountant as he/she should be able to point you in the right direction as to what the best course of action should be.
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