Urban Renewal Relief

Urban Renewal Relief

Qualifying Areas

Areas must be designated areas for the purposes of Urban Renewal Relief. Designated areas are based on Integrated Area Plans (IAPs) drawn up by the Local Authority. Queries in relation to whether a particular site/property/area is designated should be referred to the Local Authority for the particular area.

Qualifying period

The Qualifying period commenced on 1 August 1998 and ended on 31 July 2006. (To qualify for this deadline of 31 July 2006, the developer must have received a certificate from the Local Authority prior to 30 September 2003, stating that not less than 15% of the total project costs were incurred by 30 June 2003. An application for this 15% certificate must have been made to the Local Authority on or before 31 July 2003. Questions in relation to the 15% certificate should be referred to the relevant Local Authority.

Reliefs Available

Residential Properties:

  • Rented Residential Accommodation Relief (also known as Section 23 relief)
  • Owner-Occupier Relief

Commercial/Industrial Properties:

  • Capital Allowances for Industrial/Commercial premises

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Residential Properties

Conditions to Qualify

Residential property must be used solely as a dwelling. Shops/offices or other commercial premises will not qualify. The residential property must conform to certain floor area specifications and is constructed, refurbished or converted in accordance with Department of Environment, Heritage and Local Government regulations.

Amount of Qualifying Expenditure

Tax relief is due only for expenditure on work actually carried out in the qualifying period. The cost of the site does not qualify for relief. In the case of refurbishment or conversion neither does the cost of the building on which work was carried out.

Relief Due

Newly Constructed House
Purchase Price X the construction cost incurred in the qualifying period
The total construction cost + site cost

Converted/Refurbished properties
Purchase price X the conversion/refurbishment costs incurred in the qualifying period
Pre-converted/refurbished market value + total conversion/refurbishment costs.

Note: In relation to relief for residential properties- The type of relief applicable is dependent on the first use to which the property was put after the expenditure was incurred. Individuals cannot start off by claiming the Section 23 relief and then transfer after a few years to the owner-occupier type or vice versa.

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Rented Residential Accommodation (Section 23 Relief)

Who can claim this relief?

Individuals or companies who own or purchase a newly constructed, refurbished or converted residential property situated wholly within a designated area. The property must be used for letting throughout the 10 year holding period.

What can relief be offset against?

This relief can only be offset against Case V rental income arising in the State. Expenditure giving rise to the deduction is deemed to be incurred on the date the property is first let.

Does a claw-back arise?

The property must be let under a qualifying lease for a period of 10 years beginning on the date it is first let. If the property ceases to be let, or is sold or otherwise ceases to qualify within this 10 year holding period, a claw-back of the relief already granted occurs. It is withdrawn by treating the relief allowed as an amount of rent received in the period in which the house ceases to be a qualifying house. This amount of rent is taxable.

The passing of the property between spouses as a result of death or divorce does not result in a claw-back situation.

Can the relief be passed on?

Within the 10 year period in cases where a claw-back situation has arisen, subsequent purchasers or lessors of the property are entitled to claim relief provided the property remains unused between lettings. Subsequent purchasers or lessors only have to hold onto the property for the remainder of the 10 year period. There is no requirement that all the relief must be claimed within 10 years of the subsequent purchase. Depending on the individual's own circumstances and rental income, it could take longer than 10 years to write off the relief. The relief for the subsequent purchasers is based on the lower of:
The amount of the seller's relief and
Purchase price X construction costs incurred in the qualifying period
The total construction costs + Site cost

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Owner-Occupier Relief

Who can claim relief?

Individuals who own or purchase newly constructed/refurbished/converted residential property which is situated wholly within a qualifying area. The claimant must be the first owner and first occupier of the property and must use the property as his/her sole or main residence for each year of the claim and throughout the 10 year holding period.

How much relief can be claimed?

In relation to newly constructed houses the individual is entitled to a deduction of 5% per annum of the qualifying construction costs over 10 years. In relation to converted or refurbished houses the individual is entitled to 10% per annum of the qualifying conversion/refurbishment cost over 10 years. The relief is given against total income and is given by way of increasing the tax credits during the year or by repayment of tax at the end of the tax year.

Can claw-back situations apply?

If the property is sold or ceases to be a qualifying premises within the 10 year period or if the individual ceases to use the property within the 10 year period, there is no claw-back of the relief already granted. However, the relief cannot be passed onto subsequent purchasers. In other words the tax relief ceases.

How to claim the residential reliefs

Claims for the relief should be made to the individual's Regional Revenue office. Individual's who make their tax returns under self-assessment should claim the relief on their tax returns for the appropriate year. The following documents as appropriate are required in support of a claim. They should be retained and forwarded to Revenue if requested:

  • A certificate of compliance where a newly constructed/refurbished/converted house has been purchased from a builder
  • A certificate of reasonable cost where a newly constructed/refurbished/converted house is to be lived in by the person who built/converted/refurbished the house or had this work done
  • Written confirmation from Local Authority or authorised company that the property comes within a designated area
  • In the case of a sale, a copy of the memorandum of agreement between the parties showing the sale price
  • Details from the builder showing costs and how much was completed within the qualifying period
  • A copy of the lease in cases where the property is let
  • In relation to houses purchased second-hand the documentation used by the previous owner in support of a claim should be passed on to the new owner.

Certificates of compliance and certificates of reasonable cost can be obtained from the Department of Environment, Heritage and Local Government, Housing Grants Section, Room F9/10, Government Offices, Ballina, Co. Mayo.

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Commercial/Industrial Properties

Capital Allowances for Industrial/Commercial Properties

What reliefs apply?

Accelerated capital allowances are available under the Urban Renewal Scheme for the construction/refurbishment of industrial buildings and commercial premises situated wholly within an area designated under the IAP. Queries in relation to whether a particular site has been designated should be directed to the Local Authority for the particular area.

What are Qualifying Industrial premises?

In order for a building or structure to be considered an industrial building there must be a trade carried out in the premises. The types of buildings or structures that are considered industrial buildings are set out in Section 268(1)(a) TCA 1997. To qualify under the Urban Renewal Scheme the industrial building must be situated wholly within a designated area.

What are Qualifying Commercial premises?

A building or structure (or part of a building or structure) wholly within a designated area, in use by an owner-occupier for the purposes of a trade or profession or is let to a lessee on commercial terms at arms length is regarded as qualifying commercial premises. The building or structure must not be an industrial building within the terms of Section 268 TCA 1997 or be in use as a dwelling.

What Capital Allowances apply to Industrial/Commercial premises?

For Owner-Occupiers (Traders), there is a 50% Initial Allowance with an Annual Allowance of 4% thereafter until the balance of the Qualifying expenditure is written off. Owner-Occupiers also have the option of Free Depreciation, which means for those who do not wish to claim 50% of the expenditure in Year 1, they can opt to have the annual allowance increased up to 50% in any year, with the 4% annual allowance available for the other years until the balance has been claimed. For Lessors of industrial/commercial properties, the 50% Initial allowance and the 4% annual allowance applies. Lessors are not entitled to the option of Free Depreciation.

What expenditure qualifies?

The expenditure which qualifies for the capital allowances is the expenditure incurred on the construction/refurbishment/conversion work carried out in the qualifying period. Where work has commenced but is not completed in the qualifying period, only the cost of the work carried out in the qualifying period qualifies for relief. The cost of the site does not qualify for capital allowances.

Refurbishment expenditure

The allowances available for refurbishment expenditure are only allowed if the cost of the refurbishment expenditure is not less than 10% of the market value of the building prior to refurbishment.

Claw-back of relief

A claw-back situation arises if the property is sold within 13 years of it first being used.

Reference Material and other Renewal Schemes

Urban Renewal Scheme
pdfLeaflet IT26A - Urban Renewal Scheme (PDF, 40KB)

Rural Renewal Scheme
pdfLeaflet IT65 - Rural Renewal Scheme (PDF, 892KB)
Section 372 TCA 1997

Town Renewal Scheme
pdfGuide to Town Renewal Scheme (PDF, 77.4KB)
Section 372 TCA 1997

Living Over the Shop
pdfGuide to Living over the Shop Scheme (PDF, 64KB)
Section 372 TCA 1997

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