Section 23 investors get last chance to fight for tax relief
Finance Minister invites relevant property owners to make submissions by deadline of July 29
INVESTORS with section 23 properties have one last chance to persuade the Department of Finance not to abolish this tax relief by the end of this year.
The department wants investors to participate in a consultation process that involves answering a series of questions to help it gauge the impact of abolishing this tax relief.
It is also considering whether some schemes should be altered or maintained.
There was uproar when the previous Government introduced changes to the generous schemes that had initially allowed investors to make huge savings in their income tax but were later pared back to allow them to shelter income from properties they were renting to tenants.
These incentives were attractive to both small-time property investors, such as teachers and gardai, who mainly bought newly built apartments and houses in towns and cities around Ireland.
Higher earners tended to get tax relief by making bigger investments, mainly in hotels and nursing homes.
Some made these investments as a pension on the basis that they could enjoy tax savings on the rent over a long number of years.
But the U-turn on this relief has prompted an angry reaction from investors who claim this will put them under huge financial pressure or even lead to bankruptcy.
Yesterday, Finance Minister Michael Noonan said he knew many people had "strong views" on the property tax-relief issues but asked investors to help his officials to assess their impact.
"This is their opportunity to have their views heard and to contribute to the policy-making process," he said.
There are a wide range of issues that could influence the final decision and the minister said the Department of Finance is keen to hear by July 29 from everyone who has a section 23 property investment.
They can make their submission by email or by post to the department. Details are available at www.taxpolicy.gov.ie.
The Government is committed to "reducing, capping or abolishing property tax reliefs" and some €400m worth of annual savings over four years has been identified as part of the IMF/EU bailout package from changes to section 23-type schemes.
So far the department's own research shows that 60,000 claims for section 23 tax relief were made by people who bought properties that were part of rural- and urban-renewal schemes, holiday homes or student accommodation between 2004 and 2008.
Their total claims amounted to €5bn on which they were entitled to tax relief of €1.9bn. They were also entitled to shelter up to €5bn worth of income from various sources, with no restriction over how many years they could claim this tax relief. Theoretically, investors could claim tax relief until 2048.
The most popular of these tax-based property investments were hotels, urban-renewal and student-accommodation schemes, which account for two-thirds of the total tax cost to the State.
Any change to this tax relief will not affect owners who purchased these properties and are still living there or who are running their business from these premises -- they will continue to qualify for relief.