Section 23 relief still available?

landlord

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Has section 23 property relief completely gone or are section 23 property owners still able to claim relief on property's other than the property the relief was originally based on.
I was half considering purchasing one to shelter my rental tax liability.
 
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Paulie

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Hi Landlord

I understand they can still be claimed by those who purchased qualifying property within the qualifyng period if the 10 year period hasn't elapsed.

My question ( and someone else may need to help us) is what level of relief is available. If I may take an example for someone to give an answer on, it may help both of us

Example: Qualifying property completed in 2005. Qualifying expenditure of ( say) €200K to initial purchaser. Sold to a second purchaser in 2012 whose purchase price resulted in qualifying expenditure of , say, €100K. Obviously the lowerr qualifying expenditure is the one to be used in claiming relief for the second purchaser ( €100K), but does he only have 3 years to claim this relief i.e does it expire in 2015 ( 10 years after initial purchase) for tax relief for the second purchaser, after which unutilised s.23 allowance is no longer useable?


Also does it matter if initial purchaser did not claim s.23 relief? Does the 10 year period still apply?
 

oldnick

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landlord -there are many different section 23 type schemes, but I am still availing of one -living over the shop which is similar to urban renewal scheme - where the expenditure allowed (one must have certificate to prove allowance was approved by the relevent authority - in my case Dept of Environment) can be offset against income tax (repeat income tax -not USC,PRSI or any othe fee/charge) normally due on any rental income on properties within the state.

However -and this would make me worried about buying a section23 type property - there is always the chance that section23 type tax-relief could suddenly stop. The previous govnt had planned to stop it from 1/1/12 but the present govnt allowed it to continue . But for how long?
Anything is a target for the govnt which brings in more tax. Abolishing section 23 tax relief is always on the cards.

As regards Paulie's question - this is rather complicated and ,again, it depends on exact type of section23 type relief. But it does not stop after ten years -you have to start the claims within that period. Mind you, bear in mind it could stop at any time depending on govnt decisions.

Having said all that - you've both made me worried -I'm going to recheck all my documents !
 
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landlord

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Thanks.....
But I guess the question still stands, if I am willing to risk the current government stopping it for everyone tomorrow, could I go into an estate agent today and pick up a sec 23 and avail of its reliefs straight away?
 

laois1

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i think the answer to this is yes. They are still available. I also believe that there is no time limit to the allowance ie if you dont have enough rent to use up all the say 200k in 10 years you can roll it on indefinitely until it is used up. I dont think the government can roll back on this. Investors bought properties in disadvantaged areas where they would not have otherwise purchased at a premium where some of the tax relief was built into the price of the property by the developers ie a section 23 property was often 100k more expensive than a non section property in the same area. If the government were to roll back on this then it would be appealed through the courts at the very least id imagine. A lot of landlords are in serious difficulty paying back these loans as rents have dropped and are in negative equity so if the sec 23 were abolished that would finish them altogether.
 

Debtress

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Hi,
Was wondering the same thing is section 23 relief now only a available up to 1st January 2015, like the accelerated capital allowances. Or has section 23 relief been allowed to roll over till it is all used up.
I ask because I have a section 23 property bought in 2006, with relief of 300k. Have not used it yet as I was using up my Capital Allowance Frist and I believe you cannot claim both at once. Do I have till 2016(10 Years)?, 0r 2015(announced Budget 2012)?, Or do I have as long as it takes to use up the relief/Loss going forward, be it 10-15-20years as it was originally stated when I purchased the property??? If anyone can advise me "Thank you in advance"
 

Debtress

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Thanks for your reply, Landlord.

With regard to the section 23 property I have, do you know how long I have left to claim the relief?
Purchased in 2006, sec 23 relief of €300k (cert).
I have been told these three different answers and am not sure which one is right.

1. That you have 10years from the date you purchased the property. Ie: 2016 ( leaves me with 3 yrs left to claim the relief).
2. Due to changes in the budget you cannot claim section 23 relief after 1st Jan 2015. (leaves me with 2 yrs left to claim the relief).
3. You can use all of your relief over as long as it takes to use up all of your section 23 relief, as long as you start to claim it within the Frist 10 years of purchasing the property.
All of the above is assuming the property is let and meets all qualifying criteria of the scheme.

Can anyone tell me which one is the right answer, I have read everything I can find on Rev.ie and ITI. And I am still not clear as to whether or not I can bank on this relief sheltering me from my Tax liability on my rental income and for how long?
 

Knuttell

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3. You can use all of your relief over as long as it takes to use up all of your section 23 relief, as long as you start to claim it within the Frist 10 years of purchasing the property.
Option 3 is correct afaik.There are now caps on the amt of income you can shelter though through the sex 23,its capped at €100k anything over that amt gets hit with a surcharge of 5% (increased) USC

The abolition you are probably hearing about affects those who have legacy property reliefs in the form of capital allowances from hotels,hospitals,designated streets etc. These people lose their reliefs and losses forward from 31-Dec-2014.

I am not however an accountant just someone who owns sec 23 urban renewal scheme.

Have a good read of this not sure it will address this particular issue but if you own sec 23 or are considering buying one ,then this is required reading.

http://www.revenue.ie/en/tax/it/leaflets/s23.pdf
 

Debtress

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Thanks for that, Knuttell.

A bit of clarity at last, so many different views on section 23 relief , as a fellow section 23 owner, hopefully the bit of tax relief over the coming years will take some of the sting out of the absorbent prices we all paid for these properties.
 

Mrs Vimes

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Given how Section 23 relief is actually applied, I don't know how it would be possible to end it after a certain period (eg 10 years or on a certain date)

It is counted as an expense in the first year of claim and then added to losses forward for subsequent years (at least this used to be the case).

Without an extensive audit of every year since it was claimed it would not be possible to say whether S23 relief had been used up or whether the losses forward were actually accumulated mortgage interest/maintenance/management fees/etc.
 
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