Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I move amendment No. 47:

In page 73, after line 36, to insert the following: “Deduction for retrofitting expenditure

26.The Principal Act is amended by the insertion of the following section after section 97A:

“97B.(1)In this section—

‘Act of 2004’ means the Residential Tenancies Act 2004;

‘approved retrofitting grant’ means any of the following:

(a) the grant commonly known as the Individual Energy Upgrade Grant;

(b) the grant commonly known as the One Stop Shop Service;

(c) any other grant administered by the Sustainable Energy Authority of Ireland and designated by order under subsection (2);

‘qualifying contractor’ means a person—

(a) who has been issued with a tax clearance certificate in accordance with section 1095 and such tax clearance certificate has not been rescinded under subsection (3A) of that section, and

(b) is either—

(i) a person to whom section 530G or 530H applies, or

(ii) in the case of a person who is not a subcontractor (within the meaning of Chapter 2 of Part 18), a person who satisfies the conditions specified in subsection (1) of section 530G or subsection (1) of 530H, other than the conditions specified in paragraphs (a) and (b) of either of those subsections;

‘qualifying expenditure’ means expenditure—

(a) incurred by the person chargeable on qualifying works in the relevant period, and

(b) in respect of which the person chargeable has received an approved retrofitting grant;

‘qualifying premises’ means a residential premises situated in the State—

(a) owned by the person chargeable,

(b) occupied by a tenant under a tenancy registered by the person chargeable under Part 7 of the Act of 2004, and

(c) which continues to be subject to a tenancy throughout the period during which the qualifying works are carried out;

‘qualifying works’ means works carried out by a qualifying contractor on a qualifying premises during the relevant period with the objective of improving the energy efficiency of that premises;

‘relevant amount’, means the lesser of—

(a) the qualifying expenditure, and

(b) €10,000;

‘relevant period’ means the period beginning on 1 January 2023 and ending on 31 December 2025;

‘tenant’ has the same meaning as it has in the Act of 2004;

‘tenancy’ has the same meaning as it has in the Act of 2004;

‘the 2-year period’, in relation to a qualifying premises, means the 2 years immediately following the end of the year in which the qualifying works concerned are completed;

‘VAT registration number’, in relation to a person, means the registration number assigned to the person under the Value-Added Tax Consolidation Act 2010.

(2) The Revenue Commissioners may, by order, designate a grant for the purpose of paragraph (c) of the definition of ‘approved retrofitting grant’ in subsection (1), where they are satisfied that the grant is similar in nature and objective to a grant referred to in paragraph (a) or (b) of that definition or previously designated under this subsection.

(3) Where the Sustainable Energy Authority of Ireland commences administering a grant similar in nature and objective to a grant—

(a) referred to in paragraph (a) or (b) of the definition of ‘approved retrofitting grant’ in subsection (1), or

(b) designated under subsection (2),

it will advise the Revenue Commissioners accordingly.

(4) Subject to subsections (5) and (6), where a person chargeable has incurred qualifying expenditure in a year of assessment, that person is entitled, in computing for the purposes of section 97(1) the amount of a surplus or deficiency in respect of the rent from the qualifying premises concerned for the year of assessment following that in which the qualifying expenditure is incurred, to a deduction equal to the relevant amount.

(5) A person chargeable shall not be entitled to a deduction under subsection (4) in respect of more than two qualifying premises.

(6) The maximum deduction available to a person chargeable under this section in respect of qualifying expenditure incurred on a qualifying premises during the relevant period shall not exceed the relevant amount.

(7) This subsection applies where—

(a) a deduction has been made in accordance with subsection (4) in respect of a qualifying premises, and

(b) one or more of the following conditions are satisfied during the 2-year period:

(i) the person chargeable is in breach of their obligations under Part 3 of the Residential Tenancies Act 2004 in respect of a tenancy of the qualifying premises;

(ii) the qualifying premises ceases to be subject to a tenancy;

(iii) subsection (8) applies in respect of the qualifying premises, but subsection (9) does not apply in respect of the qualifying premises following the termination of the tenancy concerned.

(8) This subsection applies in respect of a qualifying premises where—

(a) a tenant terminates a tenancy of the qualifying premises, or

(b) the person chargeable concerned issues a notice of termination of the tenancy of the qualifying premises on the ground that the tenant of the qualifying premises has failed to comply with any of his or her obligations in relation to the tenancy.

(9) This subsection applies in respect of a qualifying premises where, following the termination of the tenancy concerned, either—

(a) the qualifying premises is subject to a tenancy, or

(b) all of the conditions specified in subsection (10) are satisfied in respect of the qualifying premises.

(10) The conditions referred to in subsection (9)(b) are as follows:

(a) the qualifying premises is being actively marketed for rent with a view to the person chargeable entering into a residential tenancy agreement with a willing tenant;

(b) the rent sought for the qualifying premises does not exceed market rent;

(c) there are no conditions attaching to the tenancy which are unreasonable or designed to impede or disrupt the negotiation of a tenancy agreement.

(11) Where subsection (7) applies—

(a) an amount equal to the deduction shall be deemed to be profits or gains of the person chargeable computed under section 97(1) in the year of assessment in which, as the case may be—

(i) that person is in breach of Part 3 of the Residential Tenancies Act 2004,

(ii) the premises concerned ceases to be subject to a tenancy, or

(iii) the tenancy is terminated such that subsection (8) applies,

and

(b) assessments shall as necessary be made or amended to give effect to this subsection.

(12) On making a claim under this section, the person chargeable shall provide the following to the Revenue Commissioners on their annual return of income:

(a) the unique identification number assigned in accordance with section 27 of the Finance (Local Property Tax) Act 2012 for each qualifying premises on which qualifying works were carried out;

(b) the Eircode for each such qualifying premises;

(c) the amount of any approved retrofitting grant received in respect of each of the qualifying premises, and confirmation of the grant payment from the Sustainable Energy Authority of Ireland;

(d) the amount of the qualifying expenditure for each of the qualifying premises;

(e) the relevant amount for each of the qualifying premises;

(f) confirmation that each of the premises is a qualifying premises for the purposes of this section;

(g) the name, business address (including the Eircode), tax reference number and VAT registration number of the qualifying contractor;

(h) such other information as the Revenue Commissioners may require.

(13) Where relief is given under this section, no relief, deduction or credit under any other provision of the Tax Acts or the Capital Gains Tax Acts shall be given or allowed in respect of the qualifying expenditure.

(14) For the purposes of this section, expenditure shall not be regarded as incurred by a person in so far as it has been or is to be met, directly or indirectly, by the State, by any Board established by statute or by any public or local authority.

(15) A deduction shall not be given under this section where the requirements of the Finance (Local Property Tax) Act 2012, in relation to the making of returns and the payment of local property tax, have not been complied with in respect of the qualifying premises.

(16) A deduction shall not be given under this section unless the person chargeable has been issued with a tax clearance certificate in accordance with section 1095 and such tax clearance certificate has not been rescinded under subsection (3A) of that section.

(17) Where there is more than one person chargeable for the rental income from a qualifying premises—

(a) the references to ‘the person chargeable’ in the definition of ‘qualifying expenditure’ in subsection (1) shall be construed as references to all such persons,

(b) the reference to ‘the person chargeable’ in paragraph (a) of the definition of ‘qualifying premises’ in subsection (1) shall be construed as a reference to all such persons,

(c) the reference to registration by the person chargeable in paragraph

(b) of the definition of ‘qualifying premises’ in subsection (1) shall be construed as a reference to registration by any of those persons,

(d) the references in subsections (4), (6) and (12)(e) to ‘the relevant amount’ shall be construed as references to the amount of the portion of the relevant amount that is equal to the portion of the rental income from the qualifying premises to which the person chargeable concerned is entitled,

(e) the reference in subsection (7)(b)(i) to the person chargeable being in breach shall be construed as a reference to any of those persons being in breach,

(f) the reference in subsection (8)(b) to the person chargeable issuing a notice shall be construed as a reference to any of those persons issuing a notice,

(g) the reference in subsection (10)(a) to the person chargeable entering into a residential tenancy agreement shall be construed as a reference to any of those persons entering into a residential tenancy agreement.”.”.

This amendment inserts a new section into the Bill and into the Taxes Consolidation Act to provide for a new tax incentive for small-scale landlords who undertake retrofitting works while the tenant remains in situ, which has the aim of attracting and retaining small-scale landlords in the private rental sector. The amendment provides for a tax deduction against rental income for certain retrofitting expenses incurred by landlords on rented residential properties.

The expenses that qualify for deduction are those in respect of which the landlord has received a home energy grant from the Sustainable Energy Authority of Ireland, SEAI. At present, landlords may claim grants for retrofitting works under a number of schemes run by the SEAI. As such, the tax deduction is in addition to these grants. However, the tax deduction is conditional on the landlord having claimed an SEAI grant for the retrofitting works.

Linking the tax incentive to the SEAI grants reinforces the Government’s policy on retrofitting. The following are the key features. There will be a tax deduction of up to €10,000 per property in respect of retrofitting works. Retrofitting works carried out and certified by the SEAI in year 1 would be claimed against case V rental income in year 2. For example, retrofitting works undertaken in 2023 may be claimed as a tax deduction in 2024. As per standard practice, the tax deduction is claimed after deducting the amount of the SEAI grant received. The scheme will run for three years, such that a landlord will be entitled to a deduction for retrofitting expenses incurred between 1 January 2023 and 31 December 2025, provided the conditions of the relief are met. The landlord must be tax compliant and registered with the Residential Tenancies Board, RTB.

There will be a clawback of the deduction in circumstances where, during the two-year period following the end of the year in which the retrofitting works are completed, the landlord serves a notice to quit on the tenant or where the landlord ceases to let the premises. However, where a tenant voluntarily leaves or where a landlord serves a notice to quit because the tenant has failed to comply with their obligations, the deduction will not be clawed back provided that the landlord is actively seeking a tenant for the property.

It is estimated that this measure will cost €20.8 million in 2024. This is based on an estimate of 4,000 landlords retrofitting one property each, which equates to 2.5% of the total number of landlords registered with the RTB.

The combination of both the grants and the tax incentive means substantial support is available to landlords for retrofitting works, which has benefits for the landlord and importantly for the tenant or tenants. The landlord will benefit directly through the tax deduction which will reduce their case V tax liability. In addition, the energy efficiency of the property will also improve with increased BERs, and in turn the capital value of the property is likely to increase. The tenant of the property will also directly benefit as a result of a more comfortable home, through improved energy efficiency and therefore there should be a reduction in the cost of their energy bills.