Vol. 506 No. 2
211 Mr. Perry asked the Minister for Finance the plans, if any, he has in place to allow property owners to write off profits received from rental property to students in particular against the interest paid for the purchase of the property; and if he will make a statement on the matter. [15150/99]
The Finance (No. 2) Act, 1998, abolished the deductibility of interest for borrowings in respect of private rented residential accommodation purchased on or after 23 April 1998 – subject to certain transitional provisions. The Act represents a significant part of the Government's package of measures aimed at addressing problems in the housing market. This is a three pronged approach aimed at increasing the supply of serviced land, reducing excess investor demand and assisting ordinary house purchasers. It was prepared on the basis of the report on house prices prepared by Peter Bacon and Associates.
The Government's action has helped to restore a degree of parity between the various market participants, i.e. the owner-occupier and the investor.
The measures in the Act were framed to address the situation identified in the report that investors were to some extent replacing first time buyers in the market – a development which is totally contrary to the thrust of housing policy over recent decades. Restoration of tax relief for private landlords in respect of provision of private rented accommodation would result in a reversal of the improvements in the position of first time buyers brought about by the Finance (No. 2), 1998. I do not therefore propose to make any changes to the measures introduced in the Act.
With regard to student accommodation, I announced in budget 1999, a measure to encourage the provision of third level student residences, preferably located at or near the third level campus. This was given effect in section 50 of the Finance Act, 1999. Section 50 provides for the granting of relief – commonly referred to as section 23 relief – for rented residential accommodation in respect of the provision of third level student accommodation. It covers three categories of expenditure – construction, conversion and refurbishment. This relief gives a deduction of 100 per cent of construction, conversion or refurbishment expenditure which is offset against all rental income whether derived from the premises in question or from other lettings. Each project will be subject to certification by the relevant third level institution in accordance with guidelines drawn up by the Minister for Education and Science in consultation with the Minister for the Environment and Local Government and with the consent of the Minister for Finance. These guidelines will deal with various features of the scheme including the institutions which will qualify, conditions relating to the standards and location of accommodation and the categories of students whose accommodation will be covered. The relief will be available for expenditure incurred in the four year period from 1 April 1999 to 31 March 2003.
The Government is aware of concerns regarding the impact of the measures in the Finance (No. 2) Act, 1998 on the supply of rented accommodation. In commissioning a study by Peter Bacon and Associates to assess the impact of last year's Government action on house prices, the Government ensured that the consultants included an assessment of the impact on the market for private rented residential accommodation. This report, which was published in March this year, did not recommend the restoration of deductibility of interest on borrowings undertaken for investment in residential property.
212 Mr. Penrose asked the Minister for Finance the date the increase in the amount of tax relief on redundancy lump sums became operative; if this provision will cover redundancies which took place in November 1998; and if he will make a statement on the matter. [15188/99]
The Finance Act, 1999, increased the amount of the basic exemption from tax in respect of non-statutory redundancy payments with effect from 1 December 1998. The increase applies to such payments made on or after 1 December 1998.
