Tax Code

Dáil Éireann Debate, Tuesday - 29 January 2013

Tuesday, 29 January 2013

Ceisteanna (257)

Noel Grealish

Ceist:

257. Deputy Noel Grealish asked the Minister for Finance if he will consider removing the interest restriction applying to private landlords who have taken out loans for the provision or upgrading of private rental property, in view of the fact that it can give rise to a taxable gain on a loss; his views that the restriction is unfair, especially as it only applies to private landlords and not to those operating formal businesses; if its continued application since its introduction in the April 2009 supplementary budget can be justified on grounds of tax inequality, notwithstanding that the estimated cost of removing the restriction is €95 million per year; and if he will make a statement on the matter. [4173/13]

Freagraí scríofa

Minister for Finance

This question relates to the restriction on the deductibility of interest in computing taxable rental income from residential property: in the case of interest accruing on or after 7 April 2009 (insofar as it would otherwise be allowable) the deduction available to the landlord is limited to 75% of such interest. For the purpose of this reply, I am treating the reference to “formal businesses” as being a reference to trading businesses. In this regard, I am advised by the Revenue Commissioners that there is no inherent right to interest deductibility in the case of investment property and this is reflected in the structure of the tax code. Unlike in the case of a trading business, where the law provides that taxable income is closely aligned to the accounting profit (subject to certain explicit prohibitions), for landlords, whether individuals or companies, the taxable amount is the gross rent as reduced by a very limited number of specified deductions set out in section 97 (2) TCA 1997. While those specified deductions have generally included interest on borrowed money to purchase, improve or repair the rented premises, that entitlement has been removed or restricted on a number of occasions. An example was the interest restriction imposed between 1998 and 2002 in respect of certain rented residential property borrowings (following the Bacon reports).

Question No. 258 answered with Question No. 237.