‘Staging a property’: is that a cost that I can set against capital gains?

Just wondering if you ever got a clearer answer on whether the cost of staging a sale – €5,800.00 in my case – is tax deductible?

Lots of people including the staging company say YES it is. An accountant friend has just told me it’s not. Your final paragraph in an article you wrote back in November 2021 would very much suggest that it is tax deductible.

Mr M.D.

This is one of those messy ones. It’s absolutely no surprise to hear the staging company would say they are deductible. I don’t suppose they provided the legal or other professional opinion to back that assurance up.

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Similarly, I’m not too surprised at the position of the accountant who, I am sure, is simply taking the legislation at face value.

The first thing to note is that this is clearly not your own home because, if it was, there would be no issue of capital gains tax arising. Any person can sell their principal private residence – their family home – without having to concern themselves about capital gains tax.

[ Home staging: Add thousands to the value of your home with a careful do-over ]

[ How to pick the best estate agent and maximise the sale price of your home ]

Or almost any person. If the site being sold on which the property rests is more than an acre, you could well have an issue. And if you are selling a property for its development potential rather than simply as a family home or investment property for a new owner, then capital gains will also be something you need to concern yourself about.

However, for most of us, family homes are exempt, so we’ll assume here that this is a second property that you do not use as the family home.

Staging is very common these days for people selling their homes, and it is clearly a cost that would not be incurred without the house being put on the market so it could commonly be understood to be a cost incurred solely and exclusively in the sale of the property.

That would tend to meet the common sense understanding of an expense allowable against capital gains. However, it is not specifically included in the legislation.

That might be because the legislation dates back to 1997 and staging would really only have been an issue for owners of very high end properties. But it is a problem because the legislation is particularly specific.

Section 552 of the Taxes Consolidation Act 1997 which deals with acquisition, enhancement and disposal costs in relation to capital gains tax.

Section 522 (2) states: “For the purposes of the Capital Gains Tax Act as respects the person making the disposal, the incidental costs to the person of the acquisition of the asset or of its disposal shall consist of expenditure wholly and exclusively incurred by that person for the purposes of the acquisition or, as the case may be, the disposal, being fees, commission or remuneration paid for the professional services of any surveyor, valuer, auctioneer, accountant, agent or legal adviser and costs of transfer or conveyance (including stamp duty), together with:

(b) in the case of a disposal, costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation under this Chapter of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by the Capital Gains Tax Acts.”

As you can see, certain professional costs are very pointedly covered – lawyers, estate agents, valuers etc. – but not specifically those staging properties.

And it does not come under section 552 (1)(b), which covers enhancement – either as that relates to things that permanently increase the value of the property and clearly staging is a short-term, temporary measure to secure the sale.

So I asked the Revenue Commissioners whether staging could be considered an expense against tax. And their answer is that it depends – but not in a way that’s going to reassure you.

Essentially, if a developer or builder was to stage a show house, then “the costs of staging the property for sale may be deductible in arriving at the taxable profits of the trade”. Note, even then, that is only a “may”.

However, outside of that, Revenue appears to be sticking to the letter of the law.

“If the disposal is that of an investment property, and the costs incurred are capital in nature ... such costs must fall within the categories outlined above to be considered allowable costs in calculating the chargeable gain arising on the disposal of the property.”

This categories “outlined above” are:

– “fees, commission or remuneration for the professional services of a surveyor or valuer, auctioneer, accountant, agent or legal adviser;

·– “costs of transfer or conveyance (including stamp duty), and;

– “in respect of a disposal, costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of computing the gain arising on the disposal.”

That would seem to rule staging costs out as an incidental cost against capital gains. However, even Revenue is not categoric, ending by saying: “Whether [such costs would fall within the permitted category] may be established depends on the specific facts of the case.”

In answer to a separate question I put to them on whether there had been any decided case law involving the Revenue on this issue, they are more black and white.

“Revenue are not aware of case law where a determination or judgment has been provided in respect of the cost of ‘staging’ a property for the purposes of CGT.”

Where does that leave you? Still in the grey zone. Especially if specifically advised by an estate agent, you might be able to argue it. I’d still be inclined to claim it as a cost “wholly and exclusively incurred by that person for the purposes of the disposal” but don’t be surprised to see it knocked back.

It really will depend on the interpretation of the Revenue official dealing with your file.

You’d like to think someone would settle the issue with a court challenge but the fact is that the charges are too small to justify the risk (and cost) of legal action.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice