In recognition of the difficulties students can experience in obtaining suitable accommodation and following consultation with third level colleges, a special tax incentive was introduced to encourage the provision of student-rented residential accommodation in section 50 of the Finance Act, 1999. The tax relief gives 100% deduction of construction, conversion or refurbishment expenditure, which can be offset against all rental income whether derived from the premises in question or other lettings. The requirements of the section 50 tax incentive scheme apply for ten years from the date the property is first let to students. The scheme is available for expenditure up to 31 July 2006 where an application for planning permission has been lodged with a planning authority by 31 December 2004. The scheme is intended to increase the availability of dedicated student housing and represents a targeted response to the underlying issue of an accommodation shortage.
Crucial to the smooth operation of the scheme is the need to achieve equilibrium between supply of adequate student accommodation and demand for such accommodation particularly as oversupply would mean that a targeted measure involving tax expenditure was not meeting the effectiveness test within the requirements of securing value for money. Third level institutions are best placed to assess the extent of demand based on student numbers, need for rented accommodation, existing supply issues and related factors. Accordingly, the guidelines that underpin the workings of the scheme require that there should be early consultation with educational institutions for any proposed development. Institutions that have satisfied themselves that the supply and demand equation is in balance in respect of their students cannot reasonably be required to certify a demand that does not exist given that the legislation imposes on them a role in ensuring that the scheme meets its purpose.
For these reasons and to protect the interests of all parties including prospective developers, it is critical that before planning of a development commences for which tax relief may be sought, that there is dialogue and consultation between the developer and the relevant institution.
