Finance Bill 2018
Landlords - Interest Relief on residential property restored to 100%
The restriction on interest relief on money used to buy residential property has been eliminated. Accordingly from 1 January 2019, 100% of interest payable will be available as a deduction against rental income from residential property whereas currently it is 85% of interest payable.
Tax relief on transfer of site to a child for house construction
This is an amendment proposed to a relief from Capital Gains Tax on the transfer of a site by a parent (or both parents simultaneously) to a child of the parents or one of the parents or on the transfer of a site by a civil partner (or both civil partners simultaneously) to a child of either civil partner, where the transfer is to enable the child to build his or her home on the site.
The area of the site must not exceed 1 acre and the value of the site must not exceed €500,000, and the relief is clawed back if the child has not constructed the house and lived in the house as his or her main residence for a period of 3 years. The amendment is proposed so that both a child and his or her spouse/civil partner may avail of the relief. The amendment will apply to disposals made on or after 1 January 2019.
Rent a room relief
The existing relief provides for the exemption of payments up to €14,000 in a year received by individual householders for room rental in their own homes, known as “rent-a-room relief”.
It is proposed to introduce a minimum rental period of 29 days. The proposal will not affect the relief for respite care, exchange language students or where the person uses the room as digs for a minimum of 4 consecutive days per week for not less than 4 consecutive weeks.
Stamp Duty relief on transfer of farmland
A number of amendments are proposed to this existing relief including a provision in relation to the qualifying conditions applying to a person who is to be treated as a ‘young trained farmer’ after the date of execution of the instrument transferring the land and who can claim a repayment of stamp duty.
It is proposed to extend the period for which the stamp duty relief will apply for an additional 3 years. Subject to a Commencement Order, the relief will apply to conveyances executed on or before 31 December 2021 instead of 31 December 2018.
Local property tax and vacant site levy
The Minister announced in the Budget in relation to the local property tax, which is to be rebased on 2019 valuations, next year, that any future changes will be moderate and affordable. So far no changes have been included in the Finance Bill.
The Vacant Site Levy which can apply to sites which have the potential to provide housing to meet local housing need and demand was not mentioned.
This is a serious issue for developers and for the purchasers of houses who will end up paying the levy through the cost of their house. The Minister had previously announced in his last Budget that the levy rate of 3% which will apply from 1 January 2019 for property which has been held in 2018, will be increased to 7% for each subsequent year. The vacant site levy rules are contained in the Urban Regeneration and Housing Act 2015.
Given the budgetary constraints, there were no significant measures in terms of taxation on property announced in the recent Budget and this has been borne out in the Finance Bill 2018 as initiated.
The previously announced restoration of 100% interest relief for landlords against rental income from houses, and the amendment to the relief from capital gains tax on a site transfer to a child for house construction are unlikely to significantly impact the housing crisis.
In relation to rent a room relief, which Revenue state is an incentive to increase the supply of residential accommodation for rent, there is a proposal to introduce a minimum rental period of 29 days, designed to expressly exclude short-term lettings (presumably Airbnb and the like), from the incentive.
There has been a lot of discussion around bringing vacant property into the market and some commentators had called for a low capital gains tax rate to be considered to free up some units into the market. This has not materialised in the Finance Bill.
In terms of attracting labour back from abroad, there are no incentives or help to attract people back and the reality is that in order to deliver so many units, we will need more tradesmen and some of these people are those who left some years ago. At a minimum some have called for the costs of relocation (perhaps capped) to be tax deductible from future income.
There had been calls for some other incentives around VAT reduction / refunds to those who invest but likewise hasn’t been included in the Finance Bill as initiated.
So on balance, no significant changes in the market from a tax perspective and it remains to be seen how the funds allocated to housing will be deployed and at what pace.