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Tax Code

Dáil Éireann Debate, Tuesday - 6 February 2018

Tuesday, 6 February 2018

Ceisteanna (142)

Marcella Corcoran Kennedy

Ceist:

142. Deputy Marcella Corcoran Kennedy asked the Minister for Finance his plans to reintroduce a tax incentive scheme similar to the section 23 scheme to increase housing supply and promote urban renewal; and if he will make a statement on the matter. [5778/18]

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Freagraí scríofa

The use of tax incentives and reliefs, ideally in accordance with the tax expenditure guidelines published by my Department, is one of a number of potential approaches that can be adopted to deal with the issues mentioned by the Deputy.

Recognising the serious challenge we face in terms of housing supply, the Government has prioritized the development and implementation of the Rebuilding Ireland Action Plan for Housing and Homelessness.

The Plan which is supported by €6 billion in ring-fenced funding is a multi-annual, broadly-based action plan which seeks to increase the overall supply of new homes to 25,000 per annum by 2020; deliver an additional 50,000 social housing units in the period to 2021; and meet the housing needs of some 87,000 households through the Housing Assistance Payment (HAP) scheme. All housing activity indicators point to housing supply recovering and increasing providing evidence that the measures introduced to date are having a positive impact.

On 22 January, my colleague Minister Murphy announced a further package of initiatives under the Plan, to help alleviate affordability pressures faced by households, particularly in areas of high housing demand and high accommodation costs. The new local authority mortgage and affordable housing supply measures are designed to enable low- to moderate-income households that do not qualify for social housing supports, to purchase or rent homes. Further details on this suite of initiatives are available at the following link: 

http://rebuildingireland.ie/news/min-murphys-statement-on-affordable-homes/.

Section 23 relief was previously available under the now terminated area-based property incentive schemes such as the Urban Renewal scheme. The final date for carrying out construction, refurbishment or conversion work, the expenditure on which could qualify for Section 23 relief, was 31 July 2008.

There are currently no plans to re-introduce a Section 23 type relief for rented residential property.

However, there are a number of tax incentives currently in operation which aim to address the issues of housing supply and the promotion of urban renewal.

The Living City Initiative (LCI) is a scheme which provides tax relief for expenditure on refurbishment and conversion work that is carried out on either residential properties or certain commercial properties which are located in pre-defined Special Regeneration Areas.

The Initiative targets particular urban areas that are most in need of regeneration, especially inner city areas, which are largely comprised of dwellings built before 1915 which demonstrate clear evidence of neglect, dereliction and under-use.

LCI was announced in Budget 2013 and commenced in May 2015. Changes were made to the scheme in Finance Act 2016 that came into effect from January 2017. These included extending the residential element of the scheme to landlords, who will now be able to claim the relief by way of accelerated capital allowances for the conversion and refurbishment of properties which were built prior to 1915 to be used for residential purposes.

Eligible expenditure must be incurred during the relevant qualifying period which began on 1 January 2017 and will terminate on 4 May 2020, which is the pre-existing end-date for the scheme.

Further information on the scheme can be found on the Revenue website:

https://www.revenue.ie/en/property/living-city-initiative/index.aspx .

A number of other measures have been introduced in recent years to boost housing supply and promote urban regeneration. These include the Home Renovation Incentive, the Pre-letting Expenditure for Vacant Properties, the Help to Buy scheme and the Stamp Duty Refund scheme.

The Home Renovation Incentive (HRI) was introduced on 25 October 2013 to promote the renovation, repair and improvement of the residential stock.  The scheme was extended from 15 October 2014 to include renovation, repair and improvement of rental properties whose owners are liable to income tax.  The scheme was further extended to local authority tenants from 1 January 2017.  Only works carried out by a tax compliant contractor qualify under the incentive.

HRI provides for a tax credit where the VAT exclusive spend on a qualifying property is at least €4,405. The tax credit represents 13.5% of the total cost of works subject to a maximum credit of €4,050. 

Further information on the scheme can be found on the Revenue website:

https://www.revenue.ie/en/property/home-renovation-incentive/hri-for-homeowners-and-landlords/index.aspx .

In Budget 2018 I announced a new, time-limited deduction for pre-letting expenses incurred on properties that have been vacant for one year or more.  The purpose of this relief is to encourage owners of vacant property to bring that accommodation into the rental system, thereby increasing the overall supply of residential accommodation. This relief was one of the options put forward by the Working Group on the Tax and Fiscal Treatment of Landlords which published its report on Budget Day last year.

The report is available at the following link:

http://www.finance.gov.ie/wp-content/uploads/2017/10/171010-Report-of-the-Working-Group-on-theTax-and-Fiscal-Treatment-of-Landlords.pdf .

The Help to Buy (HTB) incentive was designed to increase the demand for newly built houses by alleviating some of the specific challenges faced by first time buyers in accessing the housing market. Its aim is to provide immediate, targeted and time-bound support for first time buyers in meeting their deposit requirements.

Where a first-time buyer buys or builds a new home, HTB provides a refund of the income tax and DIRT that they paid over the previous four years.

The amount that can be claimed per property is capped at the lesser of:

- €20,000,

- 5% of the purchase value,

- the amount of income tax and DIRT paid by the first-time buyer(s).

Further information on the scheme can be found on the Revenue website:

https://www.revenue.ie/en/property/help-to-buy-incentive/index.aspx

Finally, in Budget 2018, I increased the rate of stamp duty on the purchase of non-residential land and buildings from 2% to 6% while leaving the rate of duty on residential buildings at 2%. A related measure intended to further incentivise the supply of housing was subsequently included in the Finance Act.  This scheme provides that land chargeable at the new 6% rate on its purchase and subsequently developed for residential purposes can qualify for a refund of the difference between the 6% and 2% rates, subject to certain conditions designed to ensure that the land is optimally utilised to deliver residential property within a reasonable timeframe.

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