Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I move amendment No. 3:

In page 14, between lines 5 and 6, to insert the following:“Amendment of section 97 of Principal Act (computational rules and allowable deductions)

15. (1) Section 97 of the Principal Act is amended by inserting the following subsection after subsection (2J):

“(2K) (a) In this subsection—

‘Board’ means the Private Residential Tenancies Board;

‘household’ has the meaning assigned by the Housing (Miscellaneous Provisions) Act 2009;

‘housing authority’ has the meaning assigned by the Housing (Miscellaneous Provisions) Act 1992;

‘Minister’ means Minister for the Environment, Community and Local Government;

‘lease’ means any lease or tenancy in respect of a residential premises required to be registered by the person chargeable under Part 7 of the Residential Tenancies Act 2004;

‘qualifying lease’ means a lease granted by the person chargeable to a qualifying tenant;

‘qualifying tenant’, in relation to a qualifying lease, means—

(i) a household in respect of which rent is payable by a housing authority—

(I) in accordance with Part 4 of the Housing (Miscellaneous Provisions) Act 2014, or

(II) under a contract under section 19 of the Housing (Miscellaneous Provisions) Act 2009, between the housing authority and the person chargeable,

or

(ii) an individual in respect of whom a rent supplement is payable by, or on behalf of, the Minister for Social Protection;

‘register’ means the private residential tenancies register maintained by the Board under Part 7 of the Residential Tenancies Act 2004;

‘relevant borrowings’ means borrowed money employed in the purchase, improvement or repair of a premises or a part of a premises which, at a time interest accrues on the borrowings, is a residential premises let under a qualifying lease;

‘relevant interest’, in relation to relevant borrowings and a specified period, means the amount by which the aggregate deductions authorised by subsection (2)(e) are reduced by the application of subsection (2J) in respect of that part of the chargeable periods (within the meaning of section 321) that falls within the specified period and, for the purposes of this definition, interest shall be treated as accruing from day to day;

‘relevant undertaking’, in relation to a residential premises, means an undertaking under paragraph (b)(i);

‘rent supplement’ means any payment under section 198 of the Social Welfare Consolidation Act 2005 towards the amount of rent payable by an individual in respect of a residential premises;

‘specified period’ means a continuous period of 3 years commencing on or after 1 January 2016 but not later than 31 December 2019.

(b) (i) The person chargeable shall submit to the Board, in such form and containing such information as shall be prescribed by the Minister for the purposes of this subsection, an undertaking to the effect that the person chargeable will let a residential premises under a qualifying lease for the duration of a specified period commencing on—

(I) in the case of a qualifying lease commencing on or after 1 January 2016, the date of commencement of that lease, or

(II) in the case of a lease that commenced prior to 1 January 2016, which would, if the lease commenced on that date, be a qualifying lease, 1 January 2016.

(ii) The Board shall register the relevant undertaking in the register, and the provisions of Part 7 of the Residential Tenancies Act 2004 shall apply to information regarding a relevant undertaking registered in the register as they apply to information regarding a tenancy registered in the register, subject to any necessary modifications.

(iii) A relevant undertaking shall be submitted to the Board under subparagraph (i)—

(I) in the case of a lease referred to in clause (I) of that subparagraph, at the time the person chargeable is required to make an application to register the tenancy under section 134 of the Residential Tenancies Act 2004, and

(II) in any other case, by 31 March 2016.

(iv) Where the person chargeable submits a relevant undertaking in accordance with this paragraph and, following the end of the specified period (in this subparagraph referred to as the ‘first period’), submits a relevant undertaking (in this subparagraph referred to as the ‘subsequent undertaking’) in respect of a subsequent specified period (in this subparagraph referred to as the ‘second period’), the second period shall commence on—

(I) in the case of a qualifying lease commencing on or after the day following the end of the first period, the date of commencement of that lease, and

(II) in the case of a qualifying lease that commenced before the end of the first period, the day following the end of the first period, and the subsequent undertaking shall be submitted to the Board—

(A) in the case of a lease referred to in clause (I), at the time referred to in subparagraph (iii)(I), and

(B) in any other case, not later than 3 months after the second period commences, and subparagraph (ii) shall apply to a subsequent undertaking as it applies to an undertaking.

(c) For the purposes of this subsection, where a lease has commenced before 1 January 2016, which would, if the lease commenced on that date, be a qualifying lease and a relevant undertaking is submitted to and registered by the Board, the lease shall be deemed to be a qualifying lease commencing on 1 January 2016.

(d) (i) For the purposes of this subsection, where a qualifying lease (in this subparagraph referred to as the ‘first lease’) terminates during a specified period the currency of that lease shall be deemed to include a period immediately following its termination (in this paragraph referred to as the ‘intervening

period’) if—

(I) at the end of the intervening period, the person chargeable grants a subsequent qualifying lease in respect of the residential premises (in this paragraph referred to as the ‘subsequent lease’), and

(II) during the intervening period—

(A) the premises was not let under a lease that was not a qualifying lease,

(B) the person chargeable immediately before the termination was not in occupation of the premises or any part of the premises but was entitled to possession of the premises, and

(C) a person connected (within the meaning of section 10) with the person chargeable was not in occupation of the premises or any part of the premises, and the first lease and the subsequent lease shall be taken together and treated as one qualifying lease.

(ii) More than one subsequent lease may be granted in respect of a premises under and in accordance with subparagraph (i).

(e) For the purposes of this subsection, where a qualifying tenant ceases to be a qualifying tenant during a specified period, the lease shall nonetheless be treated as a qualifying lease for so much of that period as the tenant occupies the premises under the lease.

(f) This subsection shall apply where the following conditions are met:

(i) a residential premises is let under a qualifying lease for one or more than one specified period, and

(ii) a relevant undertaking in respect of that premises for each specified period is submitted to and registered by the Board.

(g) (i) Subject to this section, a person chargeable who meets the conditions referred to in paragraph (f) may, after the end of the specified period, make a claim to have a deduction authorised by subsection (2)(e) in respect of the residential premises referred to in paragraph (f) computed as if the relevant interest for the specified period accrued on the day immediately following the end of that specified period, and subsection (2J) shall not apply to that relevant interest.

(ii) The relevant interest referred to in subparagraph (i) shall not be included in any computation of relevant interest for a specified period subsequent to the specified period referred to in that subparagraph.

(h) Any claim under this subsection shall—

(i) contain a statement to the effect that the conditions referred to in paragraph (f) are satisfied, and

(ii) be furnished to the Revenue Commissioners by electronic means and through such electronic systems as the Revenue Commissioners may make available for the time being for the purpose of a claim, and the relevant provisions of Chapter 6 of Part 38 shall apply.

(i) Where a premises in respect of which the person chargeable is entitled to a rent is let in part under a qualifying lease and in part under a lease other than a qualifying lease (in this paragraph referred to as the ‘other lease’), the amount of deduction authorised under subsection (2)(e) by reference to interest on borrowed money employed in the purchase, improvement or repair of those premises shall be computed on the amount of interest on that part of the borrowed money which can, on a just and reasonable basis, be respectively attributed to the parts of the premises which are let under the qualifying lease and the other lease.

(j) Notwithstanding section 886, where a person chargeable makes a claim under this subsection, the period for which the linking documents and records (within the meaning of that section) relating to the claim are to be retained by the person required to keep the records under that section shall commence on the final day of the specified period in respect of which the claim is made.”.

(2) Subsection (1) shall come into operation on 1 January 2016.”.

This amendment introduces a new section 15 to the Bill, which amends section 97 of the Taxes Consolidation Act 1997, relating to the rules applying to the computation of rental profits. The purpose of the new section 15 is to give legislative effect to the tax relief measure for landlords that was announced as part of the package of measures and reforms to the private rental sector announced jointly by the Minister for the Environment, Community and Local Government and me earlier this month. The aim of this package of reforms is to support housing supply and provide rent stability for both tenants and landlords. Deputies will be aware that the deduction against rental profits of interest on borrowings used to purchase, improve or repair a residential rental property has been restricted for several years now to 75% of the relevant interest incurred. With a view to incentivising landlords to rent or to continue to rent their properties to tenants in receipt of social housing supports, I am providing for the reinstatement of the full 100% interest deduction where the landlord undertakes, for a period of at least three years, to provide accommodation to such tenants and registers such undertakings with the Private Residential Tenancies Board within certain time limits.

The social housing supports involved include rent supplement, payable by the Department of Social Protection, and the housing assistance payment and rental accommodation scheme, which are administered by certain local authorities. The landlord will be able to avail of the increase in interest deductions from 75% to 100% after the end of the three-year undertaking and where other conditions have been fulfilled. It will be provided on a retrospective basis in that the additional annual 25% deduction for the three-year period will be rolled up and allowed as a deduction against rental profits in year four. This will be in addition to the 75% interest reduction that will be available to the landlord in year four in the normal way.

The new scheme includes a sunset clause specifying 31 December 2019 as the latest date by which a three-year undertaking period to rent to social housing support tenants can commence. The aim is to encourage landlords to buy into the scheme as early as possible so that they may be in a position to commit to a second three-year period and avail of a second tranche of additional rolled-up interest reduction. In essence, a landlord will be able to avail of the scheme for a maximum period of six years, but this will be the case only where the first three-year undertaking is commenced not later than the end of 2016.

The legislation includes provisions to ensure a landlord will not necessarily lose the additional interest reduction if, say, a tenant ceases to qualify for social housing supports or a tenancy in respect of a social housing tenant ceases before the three-year commitment period ends. This caters for cases where a relevant tenant might find employment during the period of the tenancy, for example.

Landlords can evaluate what is on offer from this scheme and decide if the expected rate of return from availing of the scheme in terms of tax savings outweighs the expected rate of return in the form of potential additional rents for remaining outside. Obviously, the additional interest reduction is unlikely to have any impact on those landlords with little or no borrowings. However, it must be remembered that 70% of landlords have outstanding debt on their property and therefore could benefit from the measure.

I would not for a moment suggest that this incentive will, on its own, solve the current crisis affecting the rental sector in so far as tenants seeking accommodation with the aid of social housing supports are concerned. However, I am convinced it will help in some way as part of the overall package of measures that have been introduced by the Government to tackle the problems being observed in the housing market.

I commend the amendment to the House.

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