) 2018. • Implication:Denis is liable to pay tax

) Denis’s tax residency position Refer to Appendix 1, Denis’s Irish tax residency position since he left Ireland are as follows:2015: Resident, ordinarily resident & domicileIn 2015, he spent 181 days in Ireland. This is less than 183 days. However, he is still resident for 2015 since he spent more than 280 days in Ireland on aggregating the current and the previous years’ day of presence in the State. As he is resident for last three years consecutively, he is also an ordinarily resident.• Implication: Denis is liable to Irish income tax on worldwide income (Taxback, 2017). His Irish rental income and income from his employment in Canada will be taxed in Ireland. To avoid paying tax twice on his Canada employment income, under Double Taxation Agreement between Ireland and Canada, he can claim credit in Ireland for the tax paid in Canada on that income. This is allowed if the rate of tax paid on that income in Canada is lower.2016- 2018: Ordinarily resident & domiciled but not residentDenis is an ordinarily resident in Ireland for 2016 since he has been resident for each of three tax year preceding years. He will continue to be ordinarily resident for 2017 and 2018. • Implication:Denis is liable to pay tax on his worldwide earning with exception of income from a trade, profession and employment exercised outside Ireland besides other foreign income not exceeding €3,810. (Parfrey Murphy, n.d.). Therefore, Denis need only to pay tax on his Irish rental income.2019: Not resident, not ordinarily resident but domiciledAs Denis has been non-resident for three consecutive previous years, therefore he will become non-ordinarily resident for 2019.• Implication:Denis is liable to pay tax on Irish income only. Thus, he has tax liability on his Irish rental income.B) Tax compliance implication on Irish rental incomeThe receipt of Irish rental income is taxable in Ireland under Schedule D: Case III (Revenue, n.d.). Denis must declare his annual Irish rental income by submitting annual tax return to Revenue before 31 October of the following year. His first tax return for rent received in 2015 must be made by 31st October 2016. If his net rental income is less than €5000, he need to declare it through Form 12. However, if he expects to receive net rental income over €5000, he must register for self-assessment to declare his rental income since 1 July 2015 by completing Form 11 on Revenue Online Service (ROS). He also needs to keep all receipts for expenditure relating to the property.As Denis is a non-resident landlord, his tenant is legally to withhold 20% of the rent and remit this amount to Revenue. He can claim the credit for this amount by submitting a Form R185 that has been completed by his tenant together with his tax return. If he appoint a tax collection agent in Ireland who will collect the rent and file income tax on his behalf, the tenant is not required to deduct the 20% amount.  Denis is also entitled to deduction of general expenses, interest on mortgage for the purchase of the house, capital allowance and losses from his rental income (Fenero, 2016).C) Allowable expenses for Irish rental incomeAs Denis secured a mortgage to purchase his rental property, as stated by Selfemployed.ie (2016), he may claim 75% (80% from 1/1/2017) of interest accruing on the loan as deductible expense. However, he must first register with the Private Residential Tenancies Board within one calendar month of the tenancy commencing. Second, he can only claim the relief for the period the property is being rented out and for the temporary period between lettings where the property is unoccupied. Therefore, he cannot claim relief for the mortgage interest paid before 1 July 2015. Other example of allowable expenses include:• Repairs and maintenance for general upkeep of the property• Service charges for waste collection paid by Denis.• Accounting fees paid to professional for preparation of rental accounts.• Insurance premium paid for protection of the house• Management fees paid to agent if Denis appointed them to help to collect rent on his behalf.• Capital allowance on furniture and fittings if Denis rented out his property as furnished. D) Capital Allowance on Qualifying PlantThe expenditure incurred on Denis’s plant may qualify for capital allowance at annual rate of 12% over eight years if it met certain conditions (refer to Appendix 2). Below are cases cited in ACCA Global (2014) as a guidance for Denis to determine whether he could receive the allowance.1. SUCCESSFUL CLAIM• Cooke v Beach Stations Caravans (1974)The taxpayer constructed a swimming pool in a caravan park. The cost of excavation and construction of swimming pool was held to be plant, not premises or setting. The reason is the pool was used in the trade and performed the function “pleasurable buoyancy” for swimmers. So, the taxpayer could claim capital allowance.• CIR v Barclay Curle & Co Ltd (1969)The taxpayer built a dry dock and incurred expenses for excavation, building a concrete dock and valves and pumps. It had decided that the total expenditure would be treated as plant and machinery and the taxpayer was able to claim allowances on it. This is because the dock deemed to perform a function of raising and lowering ships for inspection for repairs.2. FAILED CLAIM• Rogate Services Limited v HMRC (2014)The taxpayer operates a garage as a Renault franchise. They constructed a valeting bay used solely for glass coat application and claimed capital allowances on expenditure of this construction. HRMC decided the bay was not a plant. It does not perform a function but was a place of work. Therefore, the no capital allowance allowed (Lovell Consulting, 2015).• Benson v Yard Arm Ltd (1979)The taxpayer purchased a ship and converted it into a floating restaurant. They claimed the expenditure incurred for such conversion was on plant because the ship was an apparatus which moved with the tides and waves and therefore qualified for capital allowance. The court held that no capital allowance allowed because the ship was merely a structure in which the business was carried on.E) Commencement Rules Revenue (2003) stated that when a trader starts business, the taxable profits from Schedule D Case I and Case II income for the first three tax years are as follows:First Tax YearThe assessment for the first tax year is based on ‘actual’ which is the profit from the commencement date of a business to the following 31st December.Second Tax Year  First, if there is only one set of 12-month accounts ending in the second year of assessment, then the profits of that 12-month period would be charged to tax. Second, if a trader has only one set of account ending in the second tax year but it is not 12 months in length, then the chargeable profits would be based on 12-month accounts which end on the last day of the account period. Third, the taxable profit would be the profits of the 12 month period ending on the last day of latest set of account if there is two or more set of accounts that end within the year. Fourth, if the previous conditions are not met, then the actual profits for the tax year must be taken.Third Tax Year The assessment of third year is on the current year basis which is the profits of the 12 month period of account ending in that year. However, if the actual profits of the second tax year are less than its original assessment, the taxpayer has the right to offset the excess against profit of the third year of assessment.

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