Revenue Note for Guidance

CHAPTER 13

Living City Initiative

Overview

The “Living City Initiative” is a property incentive scheme for certain urban special regeneration areas (SRAs). The scheme was originally targeted at the conversion and refurbishment of pre-1915 buildings for use as residential properties and the refurbishment and conversion of certain commercial properties. The SRAs have been described by order of the Minister for Finance for the purposes of the Living City Initiative.

Finance Act 2025 amended the pre-1915 building age requirement that applied to the owner occupier and rented residential elements of the scheme to provide that residential premises built before 1975 in the SRAs will be eligible for relief. It made other changes to the commercial and rented residential elements of the scheme and introduced a new Living over the Shop element to the scheme. The changes introduced by Finance Act 2025 take effect from 1 January 2026.

The scheme applies to:

• qualifying expenditure incurred between 5 May 2015 and 31 December 2030 on owner-occupier residential property and commercial property,
• eligible expenditure incurred on rented residential property between 1 January 2017 and 31 December 2030, and
• qualifying expenditure incurred between 1 January 2026 and 31 December 2030 on certain qualifying premises (Living over the Shop).

Provision is included to ensure that only expenditure properly attributable to works carried out within those periods will qualify for relief.

There are four separate elements to this property incentive scheme:

• owner-occupied residential properties,
• retail and other commercial properties,
• rented residential properties, and
• the conversion of certain qualifying premises into residential properties.

There is a reporting system in place for both the residential and commercial elements of this incentive and information will, in all cases, be submitted electronically. No relief will be available unless certain basic information regarding taxpayers, property locations and the amount of qualifying expenditure/eligible expenditure on each project is first made available to the Revenue Commissioners. This is to allow ongoing review of the relief, the cost to the Exchequer, and where relevant to assist in ensuring that the State aid requirements are met.

Owner-Occupier Residential Relief

The details of this element of the scheme are as follows:

• The relief is available on expenditure incurred on the refurbishment or conversion of certain buildings, referred to in this Chapter as relevant houses, situated in Special Regeneration Areas.
• For expenditure incurred before 1 January 2026, the building must have been constructed before 1915.
• For expenditure incurred on or after 1 January 2026, the building must have been constructed before 1975.
• The relief is given at the rate of 10% per annum over 10 years for qualifying expenditure incurred up to and including 31 December 2022, and at a rate of 15% per annum for years 1 to 6 and 10% in year 7 for qualifying expenditure incurred on or after 1 January 2023.
• Relief is available provided the property remains the individual’s principal private residence (PPR) during that time. If the property is not the PPR of the individual in any of the relevant years, then the relief is not available for that year.
• An individual who incurs qualifying expenditure on or after 1 January 2023 may carry forward unused relief for up to 9 years after the year in which a claim for the qualifying expenditure was first made.
• Where a property is sold during that 10 year period there is no clawback of relief already given but no relief carries forward to the new owner.
• The refurbishment or conversion expenditure may be incurred by the owner of the property, or the property may be purchased immediately after refurbishment or conversion has been completed. In the latter case, the cost is apportioned so that the relief only applies to the refurbishment or conversion costs and not to any element of the site cost.• Before the relief can apply, a letter of certification must be obtained from the relevant Local Authority stating that─
  • planning permission, insofar as it is required has been granted in respect of the work,
  • the work conforms to the relevant standards for construction and provision of water, sewerage and other services in houses, and
  • based on the information available at the time, the cost of the refurbishment or conversion seems reasonable.
• Expenditure which qualifies for this relief cannot include expenditure which qualifies for any other relief or deduction.
• In order for expenditure on refurbishment or conversion to qualify for this relief, it must exceed €5,000.

Accelerated Industrial Buildings Allowance

Capital allowances are available under this scheme in relation to the refurbishment or conversion of retail and other commercial premises (372AAC), the refurbishment or conversion of rented residential property (372AAD) and the refurbishment or conversion of certain qualifying premises known as “Living over the Shop” (372AAE).

The rate at which the capital allowances are claimed varies depending on the date on which the expenditure in incurred. Similarly State aid limits apply to the amount of relief that can be claimed by any single undertaking. These limits depend on when the expenditure is incurred.

The following criteria are applicable in relation to expenditure incurred prior to 1 January 2026:

• Under the rented residential (372AAD) and retail and commercial (372AAC) schemes the capital allowances are given over a seven year period (15% per annum for years 1 to 6 and 10% in year 7).
• The properties must be within the special regeneration areas.
• The commercial premises must be used for retail purposes or the provision of other services.
• While rented residential property must have been constructed prior to 1915 there is no such requirement for commercial premises.
• The amount of the relief in respect of any refurbishment or conversion project is effectively capped at €200,000, regardless of how much expenditure is incurred or how many investors there are. The relief available is shared among the participants. This €200,000 limit was introduced so that the relief conformed to the EU de minimis rules for State aid.
• The accelerated allowance may not be claimed by a property developer (as defined), or a person connected with the property developer.
• Undertakings in difficulty are excluded from the rented residential and retail and commercial schemes, an undertaking in difficulty is provided its meaning from the Commission Guidelines on State aid for rescuing and restructuring nonfinancial undertakings in difficulty.
• Expenditure which qualifies for relief under the scheme must be reduced by a multiple of 3 times any grant received or receivable, directly or indirectly from or through the State or any of its agencies.

The following criteria are applicable in relation to expenditure incurred on or after 1 January 2026:

• Under the rented residential (372AAD), retail and commercial (372AAC) and Living over the Shop (372AAE) schemes, capital allowances are given over a two year period (50% per annum for two years).
• Unused allowances may be carried forward and used for up to 10 years from the first use of the building after the expenditure was incurred.
• The properties must be within the special regeneration areas and the commercial premises must be used for retail purposes or the provision of other services.
• While rented residential property must have been constructed prior to 1975 there is no such requirement for commercial premises or properties coming under the Living Over the Shop scheme.
• The amount of the aid which can be claimed by any undertaking is capped at the limit imposed by the de minimis regulations. This limit is €300,000 per undertaking in any 3 year period. This applies to relief under this measure and any other aid granted under the de minimis regulations, including tax reliefs or grants.
• The restriction on property developers and connected parties no longer applies.
• Undertakings in difficulty are no longer excluded from the rented residential and retail and commercial schemes.
• Expenditure which qualifies for relief under the scheme must be reduced by the amount of any grant received or receivable, directly or indirectly from or through the State or any of its agencies

The following conditions apply regardless of when the expenditure is incurred.

• All of the normal capital allowance rules regarding writing down allowances, balancing allowances and charges apply,
• In order for relief to apply, the amount of expenditure incurred must exceed €5,000
• Where relief is given under this measure, no relief is available in respect of the same expenditure under any other provisions of the Tax Acts.
• The termination of carry forward of certain losses (section 409F), and the restriction on high income individuals (section 485C) apply to these measures.
• The property relief surcharge (section 531AAE) applies to the commercial element of the scheme (section 372AAC).