The IRD recently heard the case of a taxpayer in this position. The taxpayer had rental property losses, as they owned several rental properties in a partnership. These were was operating at a net loss. The losses were offset against other income, which increased the taxpayer’s entitlement to Working for Families Tax Credits (WfFTC).
The question was, were these losses claimable for WfFTC purposes? The IRD said “no.” The reason? Despite the losses, the rental properties were found to be a business because they were an undertaking for making a pecuniary profit. The losses could not therefore be offset against other income for WfFTC purposes.
What are the implications? If you have a loss-making rental property/properties, the losses are still claimable. However, you can’t get more WfFTC because of those losses – the IRD appears to view this as a sort of “double-dipping.”
If you have any queries about tricky stuff like this, feel free to contact us at EpsomTax.com or on 0800 890 132.