Gintax answers Sunday Independent readers’ questions on tax.
Article published on 22 March 2020

RENTAL TAX DILEMMA - NO INVOICE

Q: In August of last year, I hired a builder to replace windows and a door in a rental property I own. The agreed cost for this work was €6,000 and was paid in two instalments. Before the job started, I paid €3,000 via a bank transfer and then after the work was completed, I paid €3,000 in cash. Just before I paid the last instalment, I requested an invoice for the monies paid so I could use this to offset the cost of the work in my tax returns. The builder promised he would furnish me with an invoice and I naively took him at his word and paid the last of the money, with an agreement that the invoice would be sent via the post.

When the receipt did not follow, I rang the builder, who said he was under the impression that this was a cash job and no invoice would be provided unless I paid him the Vat amount. What are my options? Do I need the invoice to be able to claim the expense off my rental income tax return? Eoin, Co Kildare

In the event of a query from the Revenue Commissioners, it is your responsibility to prove that the expenses were incurred. The best evidence would be a supplier invoice and receipt - which can be crosschecked with proof of payment. In the absence of these, other documentation could help, such as the original quote coupled with the bank transfer details, emails and so on.

In this case, Revenue may well look askance at a large cash payment and indeed enquire why a cash payment was made, especially when the original payment was by bank transfer.

Of course, the builder may reconsider his stance if you mention you will be including the payments in your tax return. However, it is possible he may then seek to invoice you for the €6,000 plus Vat. This would then come down to a legal argument as to the terms of the contract agreed.

Finally, I should mention that an expense deduction here is not guaranteed as the costs may not be regarded as repairs (or tax depreciable fixtures and fittings) - but as capital expenditure.

If no rental deduction is available, then the costs may qualify for CGT relief, but this will only be relevant if you ever sold the house.