From Rent to Trade: The Exclusive-Possession Test for Emergency Accommodation Income after Hade v Revenue Commissioners

1. Introduction

The High Court decision in Hade v Revenue Commissioners ([2025] IEHC 385) addresses a long-standing point of uncertainty in Irish tax law: when does income generated from the provision of accommodation cross the line from “rent” taxable under Case V of Schedule D to “trading profits” taxable under Case I?
Mr Niall Hade owned a large house in Dublin used as emergency accommodation under an arrangement with Dublin City Council (DCC). Having originally returned the income as trading profits, he later re-classified it as rental income and claimed the popular “section 23” relief. Revenue disagreed, raised amended assessments, and the Tax Appeals Commission (TAC) upheld the assessments. Mr Hade appealed by way of case stated.

2. Summary of the Judgment

• Ms Justice Nessa Cahill dismissed the appeal and affirmed the TAC’s determination.
• The Court held that the payments received were not “rent” within section 96(1) TCA because there was no landlord–tenant relationship and no transfer of exclusive possession to DCC or to the homeless occupants.
• Consequently the income falls under Case I (trading) rather than Case V (rental) of Schedule D; the section 23 relief is unavailable.
• No error of law was found in the TAC’s interpretation of (a) section 96(1) TCA or (b) the leading authority J Twomey (Inspector of Taxes) v Hennessy [2011] 4 IR 395.

3. Analysis

3.1 Precedents Cited

1. J Twomey v Hennessy (High Court, Laffoy J)
   • Defined “rent” as requiring a landlord–tenant relationship characterised by exclusive possession.
   • Identified “badges of trade” where services go beyond ordinary letting.
   • Provided the interpretative template adopted by the TAC and Ms Justice Cahill.
2. Mara v Hummingbird (1982) ILRM 421 & Menolly Homes [2010] IEHC 49
   • Established that findings of primary fact by specialist tribunals stand unless unsupported by evidence.
3. Stanberry Investments [2020] IECA 33
   • Clarified the limits of curial deference: no deference on pure questions of law.
4. Other authorities (opened or referenced): Byrne 2021, Perrigo 2022, Heather Hill 2022, English cases such as Griffiths v Pearman and Walsh v Lonsdale were reviewed but distinguished or given minimal weight.

3.2 Legal Reasoning

The Court’s reasoning proceeds in four concentric steps:

1. Statutory text. Section 75 and Case V deem “rent in respect of any premises” to be taxable under Case V. Section 96(1) defines “rent” to include “any payment in the nature of rent, notwithstanding that the payment may relate partly to … goods or services.”
2. Interpretative principle (Twomey). A “payment in the nature of rent” must occur within a landlord–tenant relationship; the presence of ancillary services does not broaden the definition but merely allows genuine rents to cover modest services/furnishings.
3. Factual application. Drawing on uncontested findings, the TAC (and the Court) held that:
   • DCC never took possession; Mr Hade retained keys, office, caretaker, control over common areas.
   • Occupants enjoyed at most a licence to occupy beds; they could not exclude Mr Hade.
   • Services—24-hour staffing, fresh linen, security, reporting to DCC—went well beyond the obligations of an ordinary landlord.
4. Classification. Because the “crucial ingredient” of exclusive possession was missing, the payments were not rent. They were income from a composite service business analogous to a hostel or guesthouse, taxable as trading profits (Case I).

3.3 Impact of the Decision

• Emergency accommodation providers now have authoritative guidance: unless the local authority (or NGO) takes a genuine lease and assumes possession, payments will be treated as trading income.
• Tax relief planning. Landlords cannot access rental-specific reliefs (e.g., section 23, interest relief, CGT encouragements) where substantial services and retained control exist.
• Broader accommodation sector. The “exclusive-possession” test will influence the classification of:
  • Student residence operators
  • Short-stay / Airbnb style hosts
  • Bed-and-breakfast or guesthouse hybrids
  In each case, the more services and on-site management, the likelier the activity is “trade.”
• Revenue practice & manuals. The Court signalled that Revenue guidance is persuasive but not binding; the governing test is statutory interpretation informed by Twomey.
• Procedural clarity. The judgment reiterates the high hurdle for appellants on a case stated: only pure questions of law may succeed; factual findings are virtually unassailable.

4. Complex Concepts Simplified

• Schedule D, Case I vs Case V
  • Case I – profits from trade.
  • Case V – profits from rent.
  If income is Case I, normal business taxation rules apply; if Case V, specialised rental rules and reliefs apply.
• Exclusive Possession. The right to occupy and exclude the owner and the world at large. Without it, the occupant is likely a licensee, not a tenant.
• Lease vs Licence. A lease conveys an estate in land plus exclusive possession for a term; a licence is only personal permission to occupy.
• Badges of Trade. Traditional indicators (motive of profit, frequency of transactions, level of services, marketing) used to decide if an activity is commercial trade.
• Case Stated Procedure. A statutory avenue whereby the TAC states a case for the High Court on points of law only; findings of primary fact are taken as fixed.
• Curial Deference. Courts respect specialist tribunal findings on facts but give no deference on pure questions of law.

5. Conclusion

Hade v Revenue Commissioners crystallises a pivotal rule: without exclusive possession, payments for accommodation—even long-term and socially driven—will not be “rent” for tax purposes if substantial services are provided. The decision builds directly on Twomey, re-affirming that the statutory phrase “payment in the nature of rent” cannot be stretched beyond the classic landlord-tenant paradigm. Operators in the accommodation sector must therefore scrutinise their contracts, operational control, and service levels to determine their correct tax treatment. For advisors and litigants, the case also illustrates the limited scope of appeals by case stated and the persuasive—but non-binding—role of Revenue manuals.