The Minister for Finance announced that a new 3 percent zoned land tax will replace the vacant site levy, which is expected to come into operation in 2024 for certain zoned land. The enhanced Help to Buy incentive scheme is being continued into 2022 and relief for landlords pre-letting expenses on vacant residential premises, due to expire on 31 December 2021, is being extended a further three years.
New zoned land tax
As part of the Government’s “Housing for All” strategy, a zoned land tax (“ZLT”) is being introduced “to encourage the use of land for building homes”. In its Next Financial Year position paper, Chartered Accountants Ireland had called for tax policy in this area to focus on promoting the supply of affordable housing by reducing development costs. The CCAB-I made a similar recommendation in its Pre-Budget Submission 2022.
As the ZLT is not expected to commenced before 2024 for land zoned before January 2022, the below details of the ZLT are taken wholly from the Minister for Finance’s speech.
The ZLT will be based on the market value of the land and the rate at the outset will be 3 percent, which aligns with the starting point for the vacant site levy when first introduced. Depending on the impact of the new ZLT, the Minister for Finance also said he will be open to reviewing the rate in the future. The Revenue Commissioners will be responsible for administering the ZLT which will also operate on a self-assessment basis, rather than local authorities.
Following its inclusion in the Finance Bill, an appropriate lead-in time is being introduced for the new ZLT with a two-year lead in time for land zoned before January 2022 (commencing in 2024) and a three-year lead in time for land zoned after January 2022 (commencing in 2025). This lead in time is also intended to allow for scope to review the workings of the tax, listen to stakeholders, and ensure the tax is both effective and equitable.
According to the Minister, the primary objective of the measure is “to increase the supply of residential accommodation, rather than to raise revenue”. The tax will apply to land which is zoned suitable for residential development and is serviced, but has not been developed for housing. It will therefore target land in areas which are zoned residential or which are zoned for a mix of uses, including residential.
The Minister is currently not proposing to have any minimum size exclusion given the potential for the tax to incentivise the development of small sites in town centres. However, there will be a number of exclusions from the ZLT such as dwelling houses and their gardens, amenities and infrastructure. Other exemptions will be defined in the Finance Bill 2021.
In order to identify zoned land within the scope of the tax, maps will be prepared and published by local authorities in advance of commencement and these will be updated on an annual basis. The Minister for Housing has also confirmed that a process will be established to allow applications to the relevant local authority to have the zoning status of land amended. This process will be aligned with normal local authority procedures, and each case will be considered on its merits both in the context of “proper planning and sustainable development”.
Extension of Help To Buy to 2022
At a cost of €83 million, the Help To Buy (“HTB”) incentive scheme is being continued beyond the revised end date of 31 December 2021 to the end of 2022. The scheme extension is at the enhanced rate of support which applies from 23 July 2020.
As part of the Government's July 2020 Jobs Stimulus package a temporary enhanced HTB incentive scheme was introduced from 23 July 2020 to 31 December 2020. Finance Act 2020 subsequently extended this to 31 December 2021.
According to the Budget publications, the extension of the scheme into 2022 aligns in broad terms with the “Housing for All Strategy” but will also allow time for other similar measures in the same policy space within the Strategy to become established before the HTB scheme comes to an end.
Consistent with the Budget 2022 Tax Strategy Group paper “Income Tax (Incorporating a Review of the Help-to-Buy Scheme)”, the Minister also announced that a full review of the HTB incentive scheme will be carried out in the course of next year.
Relief for landlord’s pre-letting expenses extended to end of 2024
The relief for certain pre-letting expenses of landlords on vacant residential premises, which is capped at €5,000 per premises, will be extended for a further three years to the end of 2024 at a cost of €3 million. This measure aims to continue encouraging landlords in the residential rental sector to return empty properties to the market as quickly as possible.
Section 97A TCA 1997, inserted by Finance Act 2017, provides that certain expenses incurred on a vacant residential property prior to it being first let after a period of non-occupancy, i.e. “pre-letting expenses”, are authorised as a deduction against rental income from that premises.
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