I am informed by the Revenue Commissioners that relief, generally known as "section 23 relief", is available for the refurbishment of rental accommodation under all of the main property incentive schemes such as the urban, rural and town renewal schemes and the student accommodation scheme. Relief is also available under the general countrywide refurbishment scheme for rental accommodation.
The relief is available in respect of capital expenditure incurred on the refurbishment of a qualifying property which complies with various conditions and which is let as residential accommodation. The expenditure incurred can be set against the rent received from the letting of the premises or against any other Irish rental income, thus reducing the amount of rental income that is subject to tax.
Commencing with the first letting, a refurbished property must continue to be let for a period of 10 years, subject to being temporarily unoccupied for reasonable periods between lettings. Any relief already granted is withdrawn if the property is sold or ceases to be let within this 10-year period. However, a purchaser of the premises within the 10-year period would generally be entitled to the full amount of the relief that was available to the vendor.
The relief is dependent on the issue of certain certificates by the Department of the Environment, Heritage and Local Government. A "Certificate of Reasonable Cost" certifies that the cost of providing the accommodation is reasonable, that it is within specified floor area limits and that it complies with certain housing standards. This certificate is required where the builder or developer retains ownership and then lets the newly refurbished property. Specifically, in the case of refurbished properties, it also certifies that the work was necessary for the purposes of ensuring the suitability of the property as a dwelling. A similar certificate, the "Certificate of Compliance" is required where tax relief on rental income is being claimed by a person other than the developer as, for example, by the purchaser of a refurbished property. In the case of the urban renewal and town renewal schemes, a property also requires certification by the local authority as meeting the objectives of the relevant Integrated Area Plan or the Town Renewal Plan respectively.
As part of the phasing out of most of the incentive schemes, the Finance Act 2006 extended to 31 July 2008, subject to certain conditions, the qualifying period within which the refurbishment of rented accommodation could be carried out. The conditions require the submission of planning applications and the carrying out of a certain amount of the construction or refurbishment work by specified dates. However, while the deadline has been extended, the amount of expenditure eligible for relief after 2006 has been reduced. Thus, only 75% of the expenditure incurred during 2007 and 50% for expenditure incurred in the period up to 31 July 2008 will now qualify for relief.
The general countrywide refurbishment scheme, as the name implies, is not confined to any particular scheme or area. The scheme was introduced as a result of the recommendations of the report of the Commission on the Private Rented Residential Sector published in 2001 and is aimed at improving the standard of existing rented residential accommodation. Relief is dependent on the refurbished building meeting certain standards specified in the Department of the Environment, Heritage and Local Government's Housing Regulations.
This scheme differs from ‘section 23' relief in several respects. Relief is only given for refurbishment expenditure, there are no maximum floor areas and the refurbishment expenditure is written off against rental income over seven years at the rate of 15% per annum for the first 6 years and 10% in year 7. As happens with ‘section 23-type relief', the relief already granted is withdrawn if the property is sold or ceases to be let within the 10-year period following its refurbishment. The scheme had previously been open-ended but now has a termination date of 31 July 2008 in line with the other incentive schemes.
The general countrywide refurbishment scheme is subject to compliance with the rented housing regulations, the enforcement of which is primarily a matter for the relevant local authorities. By virtue of section 11 of the 2006 Finance Act, eligibility for this scheme is also subject to compliance with the statutory requirements regarding registration with the Private Residential Tenancies Board.