Having inherited a house in very poor condition I had it refurbished and rented it out, claiming tax relief under the Countrywide Refurbishment Scheme. The relief is supposed to apply as 15 per cent.
It has been rented out now for just over 10.5 years, continuously except for periods when cleaning up,redecorating and finding new tenants, and for one period of about nine months during which I failed to get a tenant.
Because the house was in extremely poor condition, the refurbishment was expensive. Because it is in a rural location, the rental income is low. The result is that the greater proportion of the refurbishment cost has not yet been claimed as a tax relief.
My questions are:
1. Can I continue to claim this relief for years to come?
2. Is there any time limit?
3. Now that the requirement to have it continuously in the rental market for a minimum of 10 years has been fulfilled can I use it myself and later rent it out again, and still bring the loss forward to be claimed as a tax relief against the rental income?
4. The information sheet states: “Where the chargeable period in which the expenditure is incurred, or any other chargeable period, is less than a year, the amount of the annual deduction is proportionately reduced.” Could you possibly explain that sentence to me?
Mr AK, email
The Countrywide Refurbishment Scheme is one of a host of property incentives that existed in the Noughties. It was designed to improve the standard of the stock of rented residential housing and applied only to the upgrading of existing property rather than new builds (which were separately subject to a host of incentives).
The bad news for anyone looking to avail of the scheme now is that they can’t. It was introduced in the 2001 Finance Act but was was phased out along with a large number of other property incentive schemes in the 20006 Finance Act following a review of such programmes.
No new investment after July 2008 qualifies for relief under the scheme but it is still relevant for some people, such as yourself, who have not yet managed to claim the relief against rental income.
Under the terms of the scheme, the property had to be available for rent for a minimum period of 10 years following the refurbishment in order to qualify for full relief. If there was a gap between the refurbishment and the renting out of the property, the relief kicked in only in the year the property was rented.
If you did not rent the property for 10 years, clawback provisions came into the equation.
In your case, that’s not an issue. You mention that there was a period of around nine months when you failed to secure a tenant. Revenue assures me that “reasonable” periods of disuse, specifically including the end of one lease and the beginning of the next, do not trigger any clawback measure.
You have met the 10-year requirement but, because of the rural location of the property and the low rental yield, have not yet managed to secure your relief in full.
Relief was designed to be claimed against rental income on the property over seven years – at a rate of 15 per cent in years one to six and 10 per cent in year seven. Claims for the relief were made by returns filed under the system of self-assessment.
If the rent on the property was insufficient to meet the relief owed in a given year, the property owner was allowed to offset the balance against rental from other property.
If, as in your case, there was no other property, or some relief remained to be claimed in a given year, the”loss” could be carried forward and set against rental income in subsequent years.
But what if, in circumstances like yours, the relief has still not been claimed in full at the end of the 10-year period?
Revenue assures me that as long as the qualifying conditions have been met, you can continue to claim any “loss” beyond the 10-year period. A bit like capital gains, there is no time limit when it comes to offsetting any relief that remains owing against rental income in years to come until all relief has been claimed.
The only catch there is “rental income”. Yes, given you have rented the property for the 10-year period required after the refurbishment, you can take it off the rental market and use it yourself. But you cannot claim any outstanding monies owing under the scheme unless and until you later decide to rent it out again.
Assuming you will rent it again after this period of personal use, there will be no impediment to claiming any outstanding balance of relief owed at that time.
And as for the legislative gobbledygook that you cannot decipher, the issue of chargeable periods relates more to companies that might own property under the scheme rather than individuals. While for individuals, the tax year (the chargeable period) is a calendar year, the accounting period can on occasion be shorter for a company. If it is, there are constraints on how relief is claimed. Bottom line: it doesn’t affect you.
Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara St, D2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
