97A Pre-letting expenditure in respect of vacant premises

Summary

Expenses incurred on a vacant residential premises prior to it being first let after a period of non-occupancy are authorised as a deduction against rental income from that premises.

The section applies to expenditure on a premises which is let between the date of the passing of the Finance Act 2017 and 31 December 2027.

For premises which were let between the date of the passing of the Finance Act 2017 and before 1 January 2023 and which were vacant for at least 12 months, expenditure incurred in the 12 months before the premises were let as a residential premises may be deducted against rental income from that premises. The expenditure must be such as would be allowed against rental income if it had been incurred during the period of letting. The deduction allowed is capped at €€5,000 per vacant premises.

For premises which are let between 1 January 2023 and 31 December 2027, the deduction for pre-letting expenses is available where a premises has been vacant for at least 6 months. The deduction is capped at €10,000 per vacant premises for such premises.

If the person who incurs the expenditure ceases to let the property as a residential premises within 4 years of the first letting the deduction will be clawed-back in the year of cessation. Amounts allowed as a deduction under this section cannot also be allowed under another section of the Act.

Details

(1) The section contains a number of definitions including—

“specified day” means the day on or after the passing of Finance Act 2017 (25 December 2017) on which a vacant premises is first let as a residential premises after the end of the period during which it was not occupied.

“specified period” in relation to a vacant premises, means the period of 12 months ending on the day before the specified day.

“vacant premises” means any premises that is not occupied for the entire 6 months before the ‘specified day’. For first lettings that began before 1 January 2023, a vacant premises was one that was not occupied for 12 months before the specified day.

(2) Subject to subsection (3) the section applies to expenditure incurred on a vacant premises by the person chargeable on or before 31 December 2024.

(3) Where a person incurs expenditure on a vacant premises during the 12 months prior to first letting, and this expenditure would be authorised as a Case V deduction under section 97(2) if it had been incurred on or after the first day the premises was let, then it is authorised as a Case V deduction. The subsection applies notwithstanding the restrictions that would otherwise be imposed by section 105 and is subject to subsections (4) and (5).

(4) The deduction for pre-letting expenditure shall not exceed €€5,000 in respect of each vacant premises. With effect from 1 January 2023, the cap on the deduction for preletting expenditure increased to €10,000

(5) Where the person who incurred the pre-letting expenditure has obtained a deduction under this section and ceases to let the premises as a residential premises within a period of 4 years from the first letting, the deduction granted shall be clawed-back in the year of cessation. For the purposes of the clawback, the amount of the deduction is deemed to be profits or gains under section 97(1) and is assessed accordingly.

(6) Expenditure allowed under this section may not also be allowed under any other section of the Acts.

Relevant Date: Finance Act 2024