Providers of emergency accommodation for homeless people and asylum seekers should not be able to get tax reliefs by claiming that payments from local authorities represent rental income, the Tax Appeals Commission has ruled.
A landlord with a 14-bed facility for asylum seekers in Dublin had challenged a tax demand for almost €59,000 issued by Revenue over monies he had received from Dublin City Council over a two-year period for providing emergency accommodation.
The TAC did not accept the businessman’s claims that such payments should be regarded as rental income for which he could claim “Section 23 relief”.
A hearing of the TAC was informed that the landlord entered an annual contract worth €122,640 in July 2003 to provide emergency accommodation for homeless foreign nationals.
Revenue claimed that the income was derived from trading activities and should be assessed accordingly for income tax.
It pointed out the owner of the property had provided accommodation, security, bed linen and kept a register of all occupants.
The issue arose after his tax returns for 2010 and 2011 were selected for audit and Revenue assessed that he had a tax bill due of €58,846.43 from what he was paid for providing emergency accommodation over the period.
The TAC heard that the landlord had declared money received from the council between 2001 and 2007 as income from a trade assessable for income tax.
However, he had categorised such payments as rental income between 2008 and 2012.
The appellant, who owned 18 other properties at the time, said he believed the majority of people who rented beds to Dublin City Council treated the income as rental income for tax purposes.
He denied that he has involved in trading as that would entail bookings on websites, dealing with bookings, enquiries, reservations and payments which did not happen with his property.
However, Revenue said the property remained at all times under the control of the appellant and he also occupied part of it which meant there was no landlord/tenant relationship in place.
The tax authorities also claimed his situation was totally inconsistent with a payment for rent as rent was generally set by the landlord and not by the tenant.
“Dublin City Council was clearly not renting the property from the appellant. If it was doing so, the council would have been in full control of the premises,” Revenue said.
In his ruling, Conor Kennedy, an appeal commissioner, said the owner of the premises was engaged in a trading activity as the level of services for which he was contractually obligated and actually did perform were “significantly more extensive” than the type of services normally provided by a landlord.
Mr Kennedy said he was satisfied that the council had no function in the day to day running of the premises.
The commissioner ruled a landlord tenant relationship did not exist between the man and the local authority or with the homeless people staying in the property.
Dublin City Council spent a total of €143.3m on emergency accommodation for homeless persons in 2018 with 15 hotels receiving in excess of €1m each.
