Tax Relief Availability

Wednesday, 17 June 2015

Questions (77, 81)

Pearse Doherty

Question:

77. Deputy Pearse Doherty asked the Minister for Finance if he will provide a list of all available tax reliefs associated with property; the rationale for such tax reliefs; the number of persons availing of them; and the cost to the Exchequer in the past full tax year. [24027/15]

View answer

Dessie Ellis

Question:

81. Deputy Dessie Ellis asked the Minister for Finance if he will provide a list of all tax reliefs available associated with property; the rationale for the tax relief; the number of persons availing of the tax relief; and the cost to the Exchequer in the past full tax year. [24082/15]

View answer

Written answers

Minister for Finance

I propose to take Questions Nos. 77 and 81 together.

I am advised by the Revenue Commissioners that within the tax code there are a significant range of tax reliefs associated with property. All reliefs, including property related reliefs, are a cost to the exchequer and in a report on tax expenditures published by my Department last October I set out this Government's tax policy basis in relation to future tax expenditures. The Government will:

- Support economic growth by ensuring that any increase in taxation be effected in the first instance by base broadening including through the elimination or curtailment of overly-generous, poorly targeted or otherwise unaffordable tax reliefs;

- Use tax reliefs only in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention;

- Time-limit all tax expenditures and subject those with higher costs to ex ante evaluation; and

- Conduct a regular programme of reviews of tax reliefs, engaging in public consultation as appropriate, and publish the results.

I propose to provide an analysis of the property reliefs under each Tax and Duty heading. Unless otherwise stated the figures relate to the year 2013.

Income Tax/Corporation Tax Reliefs

The following table is a list of the property based incentive schemes qualifying for capital allowances. It should be noted some of these figures are provisional. While the majority of these schemes have been terminated, (capital allowances have been retained for expenditure on hotels, holiday camps, holiday hostels, guest house and registered caravan and camping sites at a rate of 4% per annum over 25 years.) tax relief may continue to be claimed on expenditure incurred prior to the termination date in question.

Scheme	Number of Claimants	Tax Cost €m
Urban Renewal	2,618	45.4
Town Renewal	739	10.6
Seaside Resort	272	2.1
Rural Renewal	2,098	17.9
Multi-storey car parks	57	3.0
Living Over the Shop	43	0.5
Student Accommodation	522	11.5
Enterprise Areas	104	1.9
Park and Ride	19	0.7
Hotels	1,015	35.2
Holiday Cottages	572	11.0
Holiday Hostels	5	0.09
Guest Houses	6	0.07
Nursing Homes	411	10.7
Housing for the Elderly/Infirm	98	1.4
Convalescent Homes	12	0.5
Qualifying Hospitals	357	9.2
Qualifying Mental Health Centres	*	*
Qualifying Sports Injury Clinics	81	1.4
Buildings used for certain Childcare Purposes	296	4.2
Buildings or structures in registered Caravan & Camping sites	*	*
Mid-Shannon Corridor Tourism Infrastructure Investment Scheme	*	*

* is displayed in where the cost/number of claimants is negligible.

As statistics were not captured separately for Third Level Educational Buildings and the Countrywide Refurbishment Scheme (both now terminated) these have not been included. Also not included are the ordinary industrial buildings e.g. mill/factory (4%), and airport runways/buildings (4%) as statistics are not captured separately for these either.

Home Renovation Incentive (HRI)

This scheme provides a tax relief by way of an income tax credit on repair, renovation or improvement works on principal private residences or rental property carried out by tax compliant contractors. In addition to providing an income tax relief, the HRI also aims to support tax compliance in the building industry by moving activity out of the shadow economy into the legitimate economy.

The year 2014 was the first full year in which the incentive operated. The incentive came into operation on 25 October 2013 and will run until 31 December 2015. Rental properties were brought within the scheme from 15 October 2014.

Since the introduction of the incentive, works on 21,722 properties have been notified to Revenue's HRI online system (as of 12 June 2015). This represents more than €458 million worth of works involving some 5,286 contractors. The potential total cost to the Exchequer in respect of these properties is approximately €31m. As a claim for the HRI credit can only be made in the year after works have been paid for, there was no cost to the Exchequer in 2014 (works paid for in the period from 25 October 2013 to 31 December 2013 were deemed to have been paid for in 2014). The number of claims made in the period from 1 January 2015 to 12 June 2015 is 7,673, representing a total cost to the Exchequer of approximately €14.69m. This cost will be split evenly between 2015 and 2016.

Additional Income Tax Reliefs

Other property based reliefs include interest relief on loans to acquire a principal private residence, relief for rental payments on private tenancies (terminated for any new cases after 7 December 2010*) the rent-a-room relief and relief for expenditure on significant buildings or gardens. The cost of the reliefs and the number claiming the relief are set out on the attached table:

Year 2013	Number of claimants	Cost €m
Mortgage interest relief for PPRs	498,000	353.0
Rent paid for private tenancies	153,100	37.9
Rent-a-room relief	4,370	5.9
Expenditure on significant buildings or gardens	120	2.1

*Individuals who were in receipt of the relief at 7 December 2010 may continue to claim it until 2017

Capital Gains Tax Reliefs

For the purpose of capital gains tax there are three significant property based reliefs, the property purchase incentive, the Principal Private Residence relief and the farm restructuring relief.

Property purchase incentive

This relief was introduced in the Finance Act 2012. The relief applies to properties purchased between 7 December 2011 and 31 December 2014. For the relief to apply, the property must be owned for a period of at least 7 years. The rationale for the relief was to encourage investment in Irish property at a time when the property market was at low ebb.

Principal Private Residence Relief

This relief is available for individuals disposing of a house which was occupied by them as their only or main residence. Full relief is given where the house has been so occupied for the entire period of ownership of the house apart from the last 12-month period which is deemed to be a period of occupation by the owner. Where the house has been occupied by an individual for part of the period of ownership, only the portion of the gain that corresponds to the period of occupation is exempt. The rationale for the relief is to ensure that the sale of a house, which will generally be replaced with another house, can be done on a tax-neutral basis.

Farm restructuring relief

This relief was introduced in the Finance Act 2013. The relief applies where the first transaction in the restructuring - for example, the sale, purchase or exchange of land is carried out in the period commencing on 1 January 2013 and ending on 31 December 2016 and where the restructuring is completed within 24 months of that first transaction. The rationale for the relief is to facilitate the consolidation of land holdings, thereby increasing the productivity of those land holdings.

There is no statistical information available for the numbers availing of the Principal Private Residence relief and the farm restructuring relief or their cost to the exchequer. The property purchase incentive had no cost to the exchequer in the past full year since the entitlement to avail of the relief will not arise until a future point in time.

Capital Acquisitions Tax

The property based reliefs available for the purposes of capital acquisitions tax are set out on the table:

Relief	Rationale for relief	Number	Cost €m
Reduction of 90% in market value of agricultural property	To encourage entrepreneurial activity and to prevent the forced sale of farms to pay significant CAT liabilities.*	1,581	70.3
Reduction of 90% in market value of business property	To encourage entrepreneurial activity and to prevent the forced sale of businesses to pay significant CAT liabilities.*	495	94.1
Exemption from CAT on the inheritance or gift of a residential property where the beneficiary has lived in the property as a sole or main residence for a specified period both before and after the inheritance/gift.	To ensure that what may be the family home for many people will not be liable to CAT when it is the subject of a gift or inheritance.	619	N/A
Spouses and civil partners	Gifts and inheritances of property between spouses and civil partners are exempt from CAT.	24	N/A
Public or charitable purposes	To exempt from CAT gifts/inheritances of property where the property is applied for purposes that are public or charitable.	N/A	N/A
Heritage properties	To exempt from CAT gifts/inheritances of houses/gardens that are of national, historic or artistic interest and where there are reasonable viewing facilities offered to the public.	N/A	N/A

* The estimated cost for the agricultural and business reliefs are particularly tentative because of the potential interaction between these reliefs and the normal thresholds for CAT liability which are determined by the relationship between disponer and disponee.

"N/A" indicates "not applicable".

Valued Added Tax

The VAT Consolidation Act 2010 provides for the making of Orders whereby VAT that has been paid may be refunded in certain circumstances. Three Refund Orders provide for the possibility of recovering VAT associated with property.

- VAT Refund Order (No. 15) of 1981 allows for certain construction costs incurred in the adaptation of a house for certain qualifying disabled persons. The Order does not allow for the initial construction cost of a house.

- Refund Order (No. 29) of 1996 allows for VAT refunds/remission for qualifying accredited diplomatic personnel who purchase property for use as embassies/consulates and also for use as their principal private residences.

- SI 201 of 2012 provides for refunds of VAT for farmers on the construction, extension, alteration or reconstruction of farm buildings which are used solely or mainly in the farming business.

Each of the Refund Orders provides for relief for a number of areas of expenditure, including the property costs, so it is not possible to provide the cost to the Exchequer that relates solely to the property costs.

Local Property Tax

In relation to local property tax the following table sets out the exemptions and reliefs available:

Local Property Tax (LPT) exemptions	Rationale for exemption
Properties fully subject to commercial rates	To provide relief for owners of properties that may be fully liable for both LPT and commercial rates charged by a local authority.
Long term mental or physical infirmity	To provide relief for owners of properties who are unable to continue living in their property because of a long-term mental or physical infirmity and where those properties are vacant. An exemption is also available for nursing homes that are used exclusively for the care of such persons.
Owned and sold by builders and developers	To provide relief for builders and developers who have built properties with the intention of selling them but that were not yet sold or rented out or occupied as a residence at the time of the first liability date of 1 May 2013. In the event of a sale before the next liability date of 1 November 2016, the exemption continues to be available for the purchasers of such properties.
Special needs accommodation	To provide relief for charitable and social housing bodies who own properties that are made available to persons who require special accommodation and support to enable them to live in the community because of old age, physical or mental infirmity or other reason.
Recreational activities	To provide relief for charitable bodies who own properties that are used solely as residential accommodation to facilitate recreational activities in the course of carrying out the body's main purpose.
First time buyers	To provide relief, following the termination of mortgage interest relief, for persons who purchased properties during 2013 and who occupy the properties as their sole or main residence.
Unfinished housing estates	To provide relief, as had been done in relation to the Household Charge, to owners of properties that were located in housing estates that were certified as 'unfinished' by the Minister for the Environment, Community and Local Government.
Pyrite damage	To provide relief to owners of properties that have been appropriately certified as having been damaged to a significant extent by pyrite.
Incapacitated persons	To provide relief for owners of properties that have been acquired or adapted because of their suitability, or to make them suitable, for occupation by persons who are totally and permanently incapacitated from maintaining themselves by earning a living from working and whose condition dictates the type of property they can live in.
Reduced chargeable value of property	Rationale for reduction in chargeable value
Property adapted for occupation by certain disabled persons	To provide relief for owners of properties who have had to incur expenditure on construction or adaptation work to make the properties suitable for occupation by certain disabled persons where the work has the effect of increasing the value of the properties so that they move into a higher LPT valuation band with a higher tax liability.
Deferral of payment of LPT	Rationale for deferral
Income threshold	To provide relief for persons whose annual income does not exceed a specified threshold by allowing them to defer payment of either the full or partial LPT liability until their circumstances improve or their property ceases to be owned by them.
Estate of deceased person	To provide relief for executors and administrators of a deceased person's estate to give them an opportunity to transfer ownership of any residential property to a beneficiary or to sell the property and distribute the proceeds of sale.
Insolvency	To provide relief for persons who have entered into certain formalised insolvency arrangements for the management of their debts until such time as the arrangements cease to have effect.
Hardship	To provide relief for persons who suffer a significant financial loss or incur a significant expense that are unexpected and unavoidable and as a result of which are unable to pay their LPT liability.

In relation to the LPT exemptions, I am advised by the Revenue Commissioners that the cost to the Exchequer for 2014, the most recent year available, is estimated to be €12 million in total. Exemptions have been claimed for around 39,600 properties. LPT deferrals have resulted in delayed LPT receipts estimated at €7 million in 2014. Claims for deferral have been made in respect of around 24,300 properties for 2014. I am further advised that costs for individual exemptions or deferrals are not available at this time.

Stamp Duty

Finally, the table below sets out the relief or exemption from stamp duty for transactions associated with property.

Stamp Duties Consolidation Act 1999 Exemptions and reliefs from stamp duty:

Section	Relief	Rationale for relief	Numbers	Cost €m
Section 79	Associated companies	Exemption from stamp duty is available where property is transferred between companies with a significant degree of common ownership	1,237	€3,841
Section 81AA	Young trained farmers	Exemption from stamp duty is available to encourage the early transfer of farmland to young farmers with approved educational qualifications.	812	€4.7
Section 82	Charitable bodies	Exemption from stamp duty is available where property is transferred or leased to a charitable body.	589	€3.5
Section 82B	Approved sports bodies	Exemption from stamp duty is available where land is transferred to an approved sports body where the land is used for the sole purpose of promoting athletic or amateur games or sports.	65	€0.2
Section 82C	Pension schemes and charitable bodies	Exemption from stamp duty is available where property is transferred by pension schemes and charitable bodies	13	€1.3M
Section 93	Industrial and provident societies	Exemption from stamp duty is available where a house is transferred or leased by a registered industrial and provident society to a member of the society for the purpose of providing housing for members of the society.	N/A~	N/A
Section 93A	Approved voluntary body	Exemption from stamp duty is available where land is transferred or leased to a voluntary body for the purpose of providing social housing.	45	€0.08
Section 94	Land Commission	Exemption from stamp duty is available where land is purchased from the Land Commission	N/A	N/A
Section 95	Commercial woodlands	Partial relief from stamp duty is available to encourage the sale or lease of land on which trees have been planted as a commercial undertaking.	108	€12
Section 96	Spouses and civil partners	Exemption from stamp duty is available where property is transferred between spouses and civil partners.	3,579	€9.1
Section 97	Dissolution of a marriage	Exemption from stamp duty is available where property is transferred on foot of a court order between divorced spouses and between civil partners where the civil partnership has been dissolved or annulled	405	€0.6
Section 97A	Cohabitants	Exemption from stamp duty is available where property is transferred on foot of a court order from one cohabitant to his or her cohabitant.	< 10	*
Section 98	Foreign property	Exemption from stamp duty is available in respect of transfers of property that is situated outside the State.	N/A	N/A
Section 99	Dublin Docklands Development Authority	To encourage development in the docklands area of Dublin, exemption from stamp duty is available where land is acquired by the Dublin Docklands Development Authority	< 10	*
Section 99A	Courts service	Exemption from stamp duty is available where land is acquired by the Courts Service.	< 10	*
Section 100	Temple Bar Properties Limited	To encourage development in the Temple Bar area of Dublin, exemption from stamp duty is available where land is acquired or leased by Temple Bar Properties	N/A	N/A
Section 103	Shared ownership leases	Exemption from stamp duty is available to assist those on low incomes to purchase their own homes under a shared ownership lease.	< 10	*
Section 106A	National Building Agency Limited	Exemption from stamp duty is available where land is transferred or leased to the National Building Agency Limited for social housing purposes	N/A	N/A
Section 106B	Housing authorities and Affordable Homes Partnership	The stamp duty charge is capped at €100 where property is transferred or leased to certain social housing bodies.	599	€0.7
Section 106C	Grangegorman Development Agency	To encourage development at Grangegorman, exemption from stamp duty is available where land is acquired or leased by the Grangegorman Development Agency	N/A	N/A
Section 108AA	Strategic Banking Corporation of Ireland	Exemption from stamp duty is available where property is transferred or leased to the Strategic Banking Corporation of Ireland which was established by the Minister for Finance to improve the supply of funds to SME's.	N/A	N/A
Section 108B	National Asset Management Agency	Exemption from stamp duty is available where property is transferred or leased to the National Asset Management Agency	N/A	N/A
Section 108C	Ireland Strategic Investment Fund	Exemption from stamp duty is available where property is transferred or leased to a Fund Investment Vehicle under the control of the NTMA	N/A	N/A
Schedule 1	Consanguinity relief	A 50% reduction in the rate of stamp duty encourages early transfers of farmland to certain relatives who will actively carry on farming activities.	3,973	€6.9

"N/A" indicates "not applicable"

* indicates that, where the numbers are less than 10, the costs are not provided on the basis of protecting confidentiality.