Revenue Note for Guidance

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Revenue Note for Guidance

97B Deduction for retrofitting expenditure

Summary

Section 97B provides a 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 section 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).

There is a clawback of the deduction in circumstances where, during the 2-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 (for example, failing to pay rent or engaging in anti-social behaviour) the deduction will not be clawed back provided that the landlord is actively seeking a tenant for the property.

Details

Definitions

(1) Terms used in the section are defined. These include “approved retrofitting grant”, “qualifying expenditure”, “qualifying premises”, “relevant amount” and “relevant period”.

“Approved retrofitting grant” means—

  • The Individual Energy Upgrade Grant,
  • The One Stop Shop Service, and
  • Any other grant administered by SEAI which has been designated by the Revenue Commissioners as an approved qualifying grant.

“Qualifying expenditure” means expenditure incurred by a landlord during the relevant period on qualifying works and for which the landlord has received an approved retrofitting grant.

“Qualifying premises” means a residential property, located in Ireland, owned by a landlord and—

and which is let continuously during the time the property is being retrofitted.

“Relevant amount” means the amount of the qualifying expenditure or €10,000, whichever is the lesser.

“Relevant period” is the period from 1 January 2023 to 31 December 2025.

(2) The Revenue Commissioners may add to the list of grants that come within the definition of “approved retrofitting grant” where they find that another SEAI grant is similar to those currently within that definition.

(3) The SEAI must notify the Revenue Commissioners where they set up a new grant scheme similar to those already covered in the definition of “approved retrofitting grant”.

(4) Where a landlord has incurred qualifying expenditure, he or she is entitled to a deduction in calculating her/his rental profits. The amount of the deduction will be the lower of €10,000 or the amount of the qualifying expenditure incurred. Qualifying expenditure is expenditure incurred between January 2023 and December 2025 on improving the energy efficiency of a rented residential property and in respect of which the landlord has received a retrofitting grant from the SEAI.

(5) The number of properties in respect of which a landlord can claim a deduction under this section is limited to two.

(6) The amount of a deduction that can be claimed under this section is capped at the “relevant amount”, which is defined in subsection (1) as the lower of the qualifying expenditure incurred and €10,000.

(7)&(8) Subsections (7) and (8) set out the circumstances that will result in a clawback of the deduction claimed. Such circumstances are, where within a period of two years following the end of the year in which the qualifying works are completed, —

  • the landlord breaches her/his obligations under Part 3 of the Residential Tenancies Act 2004,
  • the premises is no longer subject to a residential tenancy,
  • the tenant terminates their tenancy of the property, or
  • the landlord issues a notice of termination because the tenant has breached her/his obligations.

(9)&(10) Subsections (9) and (10) explain that a clawback will not arise where, following the ending of a tenancy the landlord secures another residential tenant for the property or the landlord is actively seeking a residential tenant for the property on fair terms and conditions.

(11) Subsection (11) sets out how a clawback of the deduction will operate. In any of the circumstances where a clawback will take effect, the amount of the deduction will be deemed to be profits of the landlord in the year of assessment in which the event resulting in the clawback takes place; the year in which the landlord breaches their her/his obligations under Part 3 of the Residential Tenancies Act 2004, the year in which the property ceases to be let as a residential property or the year in which the tenancy voluntarily leaves and the property is not actively marketed for rent by the landlord as set out in subsection (10). This section also provides that assessments will be made or amended to account for the clawback of the deduction.

(12) To claim the deduction under this section, the landlord must include the following information on his Form 11—

  • The unique identification number for the qualifying premises, assigned to that premises for LPT purposes,
  • Eircode for the premises,
  • The amount of the approved retrofitting grant received and confirmation of payment from SEAI,
  • Amount of “qualifying expenditure” and “relevant amount” for each qualifying premises,
  • Name, business address (including Eircode), tax reference number and VAT registration number of the qualifying contractor,
  • confirmation that the premises is a qualifying premises, as defined in this section, and

any other information that Revenue may require.

(13) No other relief under the Tax Acts or Capital Gains Tax Acts is available in respect of the expenses to which this deduction relates (e.g. capital allowances or other forms of relief/deduction cannot be claimed).

(14) Any expenses incurred, directly or indirectly by the State, any Board established by statute or any public or local authority will not be regarded as having been incurred by the landlord. The expenses to which the SEAI grant relate will therefore not be treated as having been incurred by the landlord.

(15) A landlord must be complaint with their LPT obligations to claim the deduction under this section.

(16) A landlord must also have tax clearance to claim the deduction under this section.

(17) Subsection (17) explains how a number of terms used in the section are to be construed where there is more than one owner of a “qualifying premises”, to apportion relief under the section and indicate responsibility for certain requirements.

Relevant Date: Finance Act 2024