A tale of tax reliefs

THE Government’s consultation paper on tax relief schemes for property gives the lie to the myth that only the very wealthy benefited from these schemes as they sought to avoid paying tax. In fact, take-up of tax relief schemes was highest amongst those with incomes of less than €100,000 – 45% of all claims came from this grouping, it states. They also tended to invest in apartments in urban regeneration schemes whereas the high rollers earning more than €275,000 opted more for hotels and had “a lower participation in some of the area-based schemes”.

The consultation came about after the budget introduced a measure that would restrict the use of “legacy” property reliefs, subject to sign-off by Minister for Finance Michael Noonan. The consultation will give his department a better understanding of the benefits this would have for the exchequer but also an understanding of the impact it would have on those who bought properties under the schemes. The department has already been told that some investors and businesses may be faced with insolvency due to the unforeseen tax liability.

Property investors, excluding owner occupiers, made close to 60,000 claims for relief between 2004 and 2009, “with close to €5 billion in claims made which equates to about €1.9 billion in potential tax costs. Two thirds of the total tax cost to the State comes from the urban renewal, hotels and student accommodation schemes. If you add in the town and rural renewal schemes, those five schemes account for more than 80 per cent of the total tax cost to the State. Makes you wonder whether the other 20 schemes were worth bothering with at all.