Joan Burton (Dublin West, Labour)
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Question 19: To ask the Minister for Finance the conditions under which tax relief on loan interest is claimable by taxpayers; if the provision of tax relief is contingent on loan interest being made and the loan being serviced; the circumstances in which a borrower involved in construction or property development could attract tax relief on interest charged on a loan but where that interest is not being paid or is in arrears; the extent this tax relief can be off-set against other income; and if he will make a statement on the matter. [46634/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners that interest is allowed in computing trading profits or losses, including profits or losses arising in a construction or property development trade, to the extent that it is incurred wholly and exclusively for the purposes of the trade involved. As with other trading deductions, interest is allowable based on accounting principles and where an accrual of interest arises, a deduction would generally be available where interest is charged on a business loan even though the interest may not yet be paid. Where interest is not paid and the debt is released then, where a deduction had been allowed in calculating trading profits, the amount of interest released is treated as a trading receipt in the period in which the release happens. For rental income purposes, 75% of the interest on borrowings used in the purchase, improvement or repair of a rental property is an authorised deduction for rental income purposes. The authorised deductions, including interest, are computed as if the person entitled to the rent was carrying on a trade in relation to the let property. This means that, as with trades, a deduction for interest on a rental property loan would be on the basis of interest accrued.

I am also informed by the Revenue Commissioners that tax relief is available, subject to certain terms, conditions and restrictions, to individuals in respect of interest paid on monies borrowed for the purchase, repair, development or improvement of the individual's sole or main residence (i.e. mortgage interest relief). Relief may only be claimed for the tax year in which the interest is paid and is usually granted through the Tax Relief at Source (TRS) system.

Tax relief is also available, subject to certain terms and conditions, for the purpose of acquiring an interest in, or making a loan to, a company, or for the purpose of acquiring an interest in a partnership. Relief may only be claimed for the tax year in which the interest is paid. There is no restriction on the amount of interest in respect of which relief can be claimed.

Similarly, relief for interest treated as a charge on a company's income, rather than as a deduction in computing its profits, for example interest on a loan applied in acquiring an interest in another company, is allowed in the accounting period in which it is paid.

Finally, as respects the extent to which a deduction for interest can be set off against other income, I am informed that where an interest deduction creates or increases a trading loss, that loss is, in the case of a sole trader, available for offset against other income in the same year or it may be carried forward for offset against profits of the same trade in subsequent years. The treatment of trading losses arising to corporates is quite complex and is dependent on a number of factors, including the nature of the company's trade. However, trading losses for an accounting period may be carried forward as above and may also, subject to restrictions, be used in the same or prior accounting period. Restrictions are also in place in relation to the utilisation of losses on residential development land.

Rental losses on Irish property may only be offset against the profits from the letting of Irish property in subsequent years.

Joan Burton (Dublin West, Labour)
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Question 20: To ask the Minister for Finance the amount of tax relief allowed on interest on property related borrowings for each year from 2000 to date in 2010 for personal residential property that is mortgage interest relief, rental properties and other property or construction sector loans; and if he will make a statement on the matter. [46635/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I am informed by the Revenue Commissioners that the relevant information available is in respect of the estimated cost of mortgage interest relief on borrowings for the purchase, repair, development or improvement of a principal private residence and also for interest on borrowings used in the purchase, improvement or repair of a rental property. The available information is set out in the following table: Estimated Cost

*Short tax year.

Mortgage interest relief on borrowings for the purchase, repair, development or improvement of a principal private residence was given by way of tax relief at source (TRS) with effect from 2002.

The information provided for interest relief for rental property is based on claims for interest relief on all rental properties included in personal income tax returns filed by non-PAYE taxpayers declaring interest on borrowings to be offset against rental income assessable under Case V, Schedule D. It is not possible to separately identify how much of this cost is associated with residential property. It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figures provided in this reply.

The estimates for rental property are based on assuming tax relief to be allowed at the top income tax rate of 42% (up to 2006) and 41% for later years and the figures provided could therefore be regarded as the maximum Exchequer costs in respect of those taxpayers.

I am advised by the Revenue Commissioners that they are not in a position to provide data on rental property for 2009 and 2010 as the tax returns have either just been recently filed or are not yet due. The figures for 2008 are subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended. Corresponding suitable data is not available for the years 2000 to 2002.

The Deputy will no doubt be aware that the level at which interest repayments can be claimed against tax for residential rental properties was reduced from 100% to 75% in section 5 of the Finance Act 2009 at an estimated full year yield of €95 million.

Data in relation to interest paid that has been claimed as a deduction against corporation tax by companies involved in the property or construction sectors is only available for the tax years 2007 and 2008. It is tentatively estimated that the maximum cost, assuming the standard rate of corporation tax, of allowing a deduction for interest payable by these companies was in the region of €129 million for 2007 and €165 million for 2008. This does not take into account that some companies may not have had enough profits to absorb all of these expenses and includes the potential cost associated with all allowable interest payments by these companies.

The sector identifier on the tax records that is used to identify the property or construction sectors is based on the 4-digit NACE code (Rev. 1), which is an internationally recognised economic activity code system.