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Real Estate

Finance Bill 2020

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Help to Buy scheme

The expiry date for the enhanced relief available on the Help-to-Buy scheme has been extended by 12 months to 31 December 2021. This provides for an effective tax rebate of up to €30,000 which can be used by first time buyers in the purchase of new homes.

Stamp duty refund scheme

As announced on Budget day, the current scheme which allows for a partial refund of stamp duty on land used for residential development has been extended by one year to include developments commencing on or before 31 December 2022. The time allowed between commencement and completion of construction has also been extended from 24 months to 30 months.

VAT on hospitality and tourism

The bill provides for a reduction in the VAT rate applicable to this sector of 13.5% to 9%. The commencement date for this reduction is 1 November 2020.

Accelerated capital allowances scheme

Section 285A currently allows for a full write off of capital expenditure in the year incurred on certain qualifying energy efficient items. This scheme has been extended by a further 3 years to 31 December 2023.

Our view

It was a quiet Finance Bill today from a real estate perspective with no surprises.

The extension of the enhanced Help to Buy scheme by one year is helpful as it should give first time buyers the time to assess opportunities in the market without the need rush what is, for most, a life changing decision.

The widening of the stamp duty refund scheme is positive for property developers who in some cases had found it difficult to complete within the two year construction period allowed. Extending the scheme by a further year also aligns with the wider policy of addressing what remains a national housing crisis.

Further support was offered today to hoteliers, restaurateurs and other hospitality sector participants by way of a 4.5% reduction in VAT. In what has been an extraordinarily difficult year it is good to see these difficulties acknowledged in today’s bill.

Some of the most positive notes from today’s bill are things which didn’t happen:

  • There was no introduction of the ATAD interest limitation rules which is welcome. We would hope that consultation over the next year can be used to ensure the introduction of such rules do not disproportionately impact on real estate participants who by their nature are highly leveraged.
  • There was no change to the 1%/2% rate of stamp duty applicable to residential property.
  • There were no surprises either for institutional investors. Following on from the significant changes announced in the prior year there were no new provisions announced for IREFs or REITs. The absence of surprises in this regard will be welcome to existing market participants.

On a more disappointing note, there was no acknowledgement in the Budget or Finance Bill of the Covid anomaly faced by individual landlords. Landlords that have agreed to defer the collection of rent must pay the tax due on that rent when it arises rather than when it is received. Landlords in these circumstances therefore face an additional tax cost at a time when they may not have actually received the rent. Unfortunately, bad debt relief will not alleviate the position as the deferral is not a bad debt within the meaning of this relief. We would hope that before the Finance Act is signed this point could be considered and amended to ensure the position is fair to both landlords and tenants.

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