Paschal Donohoe (Dublin Central, Fine Gael)

The development of apartments is a key goal of this Government and is vital in addressing the shortage of housing in our society. The high cost of developing apartments is creating a viability gap, preventing their construction in the numbers required to meet the Government’s housing targets. Section 40 introduces a new section 81E to the Taxes Consolidation Act 1997 to provide for an enhanced deduction for eligible apartment construction costs to help address these viability challenges and to accelerate development activity. This measure will provide a deduction against profits or gains of a trading property development company of 125% of certain construction costs, subject to a cap of €50,000 per apartment, delivering a net cost saving of up to €6,250 per apartment. The enhanced deduction will be available in respect of a qualifying apartment block consisting of ten or more apartments and is available for both new-build developments and the conversion of non-residential buildings into a qualifying apartment block.

Eligible expenditure includes the construction costs associated with developing apartments. Other costs such as professional fees, finance costs and levies are excluded from qualifying for the enhanced deduction. The enhanced deduction will be available in respect of qualifying completed developments where a first commencement notice was submitted to the relevant local authority between 8 October 2025 and 31 December 2030. The enhanced deduction is claimable by the beneficial owner of the completed development in the period when the certificate of compliance on completion is lodged with the relevant local authority and is to be claimed as part of the corporation tax return for that period.

I am now bringing forward amendments to the draft legislation to provide for the use of forward-funding models, which have become increasingly prevalent in the apartment construction sector. The amendment provides for situations where a beneficial owner of the completed development cannot meet the requirements of the rules, as initially drafted, as it does not carry out a "relevant property development trade". This could include, for example, where an approved housing body, AHB, enters into a forward-funding contract with the developer, which involves taking ownership of the land from the beginning of the project and entering into a construction contract. Therefore, I am bringing forward an amendment to the legislation to provide that in circumstances where the relevant beneficial owner cannot qualify for the relief, it may make a declaration in writing to the company they have contracted to carry on the development activities to allow that company claim the enhanced deduction.

To qualify for the enhanced deduction, the relevant contractor must be a company that carries out a trade that consists wholly or mainly of the construction or refurbishment of buildings or structures. The relevant contractor must retain the declaration and provide it to Revenue if requested to do so. The declaration must include the details of the relevant beneficial owner as well as details of the completed development. This amendment will ensure that the new enhanced deduction operates as intended by helping to address the viability gap in apartment construction.