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Section 23

  • 02-07-2015 5:28pm
    #1
    Hannaho
    Registered Users, Registered Users 2 Posts: 733 ✭✭✭


    Hi! I'm selling a Section 23 property after ten years. The ten years are up in July and the buyer wants to complete in September. My accountant is not too clear on S.23 - he says that I use the 29k allowances I have left against my 2014 rental income, but not against my 2015 rental income as I will have sold the property in the middle of 2015. Is this correct - after all I will have had the property for 9 months of 2015?


Comments

  • #2
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    Hannaho wrote: »
    Hi! I'm selling a Section 23 property after ten years. The ten years are up in July and the buyer wants to complete in September. My accountant is not too clear on S.23 - he says that I use the 29k allowances I have left against my 2014 rental income, but not against my 2015 rental income as I will have sold the property in the middle of 2015. Is this correct - after all I will have had the property for 9 months of 2015?

    Obviously you need to get proper professional advice on this as the consequence of getting it wrong could be a 5-figure sum.

    Answering the specific question you have asked would be in breach of the Forum Charter, so I am only going to make you aware of a few general facts:

    Section 372AP(7) of the Taxes Consolidation Act 1997, states:
    "Where a house is a qualifying premises or a special qualifying premises and at any time during the relevant period in relation to the premises either of the following events occurs -
    (a) the house ceases to be a qualifying premises or a special qualifying premises, as the case may be, or
    (b) the ownership of the lessor’s interest in the house passes to any other person but the house does not cease to be a qualifying premises or a special qualifying premises, as the case may be, then, the person who before the occurrence of the event received or was entitled to receive a deduction or, as the case may be, deductions under subsection (2) in respect of eligible expenditure incurred on or in relation to that premises shall be deemed to have received on the day before the day of the occurrence of the event an amount as rent from that premises equal to the amount determined by the formula-
    A - B
    where-
    A is the amount of the deduction or, as the case may be, the aggregate amount of the deductions under subsection (2) in respect of eligible expenditure incurred on or in relation to the premises, and
    B is that part of the amount of any excess (within the meaning of section 384) that is attributable to the deduction or, as the case may be, the aggregate amount of the deductions under subsection (2) in respect of eligible expenditure incurred on or in relation to the premises and which has been carried forward under section 384 to the year of assessment in which either of the events, referred to in paragraphs (a) and (b), occurs."

    The "relevant period" for a qualifying premises is defined as:
    "‘relevant period’, in relation to the incurring of eligible expenditure on or in relation to a qualifying premises or a special qualifying premises, means -
    (a) where the eligible expenditure is incurred on the construction of, or in relation to the conversion of a building into, a qualifying premises, the period of 10 years beginning on the date of the first letting of the qualifying premises under a qualifying lease, and
    (b) where -
    (i) the eligible expenditure incurred is refurbishment expenditure in relation to a qualifying premises or a special qualifying premises, the period of 10 years beginning on the date of the completion of the refurbishment to which the refurbishment expenditure relates, or
    (ii) where the qualifying premises or, as the case may be, the special qualifying premises was not let under a qualifying lease on the date referred to in subparagraph (i), the period of 10 years beginning on the date of the first such letting after the date of such completion;"

    Now, what all of the above sums to, is that a person who bought a Section 23 property and first let it in July 2005 has a "relevant period" that expires in July 2015.

    If they sell the property outside of that 10-year period, there is no claw back, and there is no restriction on their use of the section 23 relief, in 2015 or beyond... unless there is legislation elsewhere imposing such restriction (which there isn't).


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