Saturday 21 September 2019

Home economics: answering your property questions

Husband requires a nursing home
Husband requires a nursing home
Sinead Ryan

Sinead Ryan

Our property expert on the value of a Section 23 development and gives advice on the Nursing Homes Support (Fair Deal) Scheme.

Question: I saw an ad for a Section 23 development. Is there still money to be made on these as I understood they were being phased out? I am a self-employed graphic designer and would be interested in anything which saves tax. Section 23 relief, or rented residential relief, was potentially very valuable for investors, but it is on its way out and only available on mothballed properties (e.g. ghost estates being redeveloped by Nama) or where a seller hasn't utilised their full 10 year qualification.

Barry Flanagan of Taxback says: "It is available for expenditure incurred prior to 31 July, 2008 on a qualifying property let under certain conditions. As part of the phasing out, only 75pc of the 2007 expenditure and 50pc of the expenditure incurred pre-31 July, 2008 qualifies for relief.

"If an S23 property is sold more than 10 years after the date of its first letting under a qualifying lease, there is no withdrawal of the relief already granted and the new purchaser is not entitled to relief, even if it was not claimed by the original owner. If a property is purchased within the 10 year period and is still a qualifying property, S23 relief will be available to the new purchaser provided that s/he fulfils all of the relevant conditions."

So there may be cases where existing S23 allowances will have some residual value to an investor but tread carefully and get good financial advice.

Question: I have applied for the Fair Deal scheme for my disabled husband who now requires a nursing home. I know the amount our family home is valued at is capped after three years. However, it is far too big for me and I was planning on selling it to move to a smaller flat or a house. The house is worth about €800,000 but the new place will only cost around €300,000. Will the balance just be taken by the HSE?

Sinead replies: The purpose of the Nursing Homes Support (Fair Deal) Scheme is to prevent people from having to sell their family home to fund long-term care. While all assets (savings, property etc) are included in the financial assessment (less some deductions) and charged at 7.5pc of their value every year, the 'family home' is only valued for three years, irrespective of how long your husband requires care. The 'cap' therefore, is a maximum of 22.5pc (or 11.25pc for one of a married couple like yourself).

The HSE adds: "If at any stage an applicant decides to sell their principal residence, the proceeds are treated as cash assets and not subject to the cap. Cash assets are taken into account at a rate of 7.5pc per annum for as long as the person remains in nursing home care. A new residence will be considered to be the principal residence for the purposes of the scheme."

This means, in your case, the maximum you would have to pay of the family home is €90,000 if you stay in it, but if you move, you would be charged €33,750 plus an additional €37,500 per annum for every year your husband needs care.

It's worth noting that if you apply for the Nursing Home Loan (i.e. don't pay the amount annually), but subsequently choose to sell the family home, the amount loaned on the basis of that asset must be repaid within six months of the sale.

It leaves you in an unenviable position, and is an unfortunate quirk of the otherwise excellent scheme.

Staying put is by far the better financial decision, but you also have emotional and practical reasons to take into account.

For further information contact the Nursing Home Support Office (057) 9357627.

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