THE new Urban Renewal Scheme was introduced in August 1994 to replace the previous one and considerably extended the designated areas in many towns and cities in which individuals could buy development property and claim tax relief. It expires next year.
That tax relief incentive includes Section 23/27 relief on the construction, conversion and refurbishment of certain residential accommodation.
The new scheme also provides a tax allowance for the capital cost incurred by an owner or occupier on a private dwelling.
Section 23 type relief is available only if certain pre conditions are met, the main ones being that the property conforms to very specific floor space and that it is not to be occupied by the owner within 10 years of the first letting. (Tax reliefs will be clawed back if it is sold or owner/occupied within that period.)
There must also be a qualifying lease, to ensure that it is a genuine rental. Nor can the tenant be granted an option to buy the property at less than its market value.
The biggest advantage of purchasing a dwelling in a designated area is that over the 10 year period you can virtually recoup the entire construction or refurbishment cost in annual tax relief against your income tax and still avail of ordinary mortgage interest relief as well. Any qualifying rental income can also be offset against the development or refurbishment cost.
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