372AAE Capital allowances in relation to conversion or refurbishment of certain qualifying premises

Summary

Finance Act 2025 inserted a new section, section 372AAE. The new section is entitled “Capital allowances in relation to conversion or refurbishment of certain qualifying premises” but is commonly referred to as “Living over the Shop”. This section is aimed at encouraging owners of commercial and industrial buildings in SRAs which have what is commonly referred to as an ‘over the shop area’ to convert or refurbish that area into housing. The term “Over the Shop” is provided with a broad meaning so that qualifying expenditure incurred on the conversion or refurbishment of any part of the premises (to include the ground floor, and other elements of the premises) into housing stock is eligible for the relief where all the conditions for the relief are met.

There is no age specification for buildings to qualify for relief under this section.

This measure is provided under the de minimis Regulation and is subject to the conditions set out in Commission Regulation (EU) 2023/2831 of 13 December 2023 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid.

Details

Definitions

(1) The terms “conversion”, “house” and “letter of certification” have the same meaning as they have in Section 372AAB

“qualifying expenditure” means capital expenditure incurred by a person in the relevant qualifying period on the conversion or the refurbishment of a qualifying premises but excluding any State or public or local authority grants or payments received, or receivable.

“qualifying premises” means a building or structure (or part of a building or structure)—

1. the site of which is wholly within a special regeneration area,
2. the entirety of which, before the qualifying expenditure was incurred, was a relevant property liable to rates, this may include a building or structure which was in part liable to rates, as that part was in its entirety liable to rates,
3. in respect of which a letter of certification has issued for its conversion or refurbishment, as the case may be, into one or more than one house, and
4. which, following the incurring of qualifying expenditure on its conversion or refurbishment, as the case may be, into one or more houses—
   1. is, or the relevant portion thereof is, a relevant property not rateable, and
   2. the house or houses concerned are let on bona fide commercial terms for such consideration as might be expected to be paid in a letting of the house concerned negotiated on an arm’s length basis.

“rate” has the meaning assigned to it by section 4 of the Local Government Rates and Other Matters Act 2019. This Act provides that “each rating authority shall impose and collect a charge (in this Act referred to as ‘a rate’) levied in respect of a relevant property included in the valuation list caused to be published by the Commissioner of Valuation under section 23 of the Act of 2001 in the rating area of that authority in accordance with the provisions of this section”.

“relevant property” shall be construed in accordance with Schedule 3 to the Valuation Act 2001. Schedule 3 of that Act lists the types of properties that are rateable while Schedule 4 of that Act sets out ‘Relevant Property Not Rateable’.

“relevant property not rateable” means a property specified in paragraph 6 of Schedule 4 to the Valuation Act 2001. Paragraph 6 applies an exemption for domestic property provided for in the Valuation Act 2001. This exemption applies to all domestic premises with the exception of apartments in limited circumstances. The exception applies to apartments which ceased to be an aparthotel in the past 12 months.

“relevant qualifying period” means the period commencing on 1 January 2026 and ending on 31 December 2030.

Application of industrial buildings’ provisions

(2)(a) The provisions of Chapter 1 of Part 9 (relief for capital expenditure on industrial buildings or structures) are applied to capital expenditure incurred on the conversion or refurbishment of premises which qualify under this section. This means that subject to the provisions of this section, qualifying expenditure on a qualifying premises within the relevant qualifying period is treated as if that property were a mill or factory as defined in section 268(1)(a) for the purposes of capital allowances.

Allowances available

(2)(b) Allowances are available only in respect of capital expenditure incurred on the conversion or refurbishment of a qualifying premises during the relevant qualifying period.

Rate of allowances and tax life

(3) This provision sets out how the application, by subsection (2), of the provisions of Chapter 1 of Part 9 in relation to capital expenditure incurred on the conversion or refurbishment of a qualifying premises is to apply in the case of section 272.

• (3)(a) Section 272(3)(a)(ii) applies as if a reference in that subsection to 4% were a reference to 50% ─ this provides that qualifying expenditure incurred in the relevant qualifying period in relation to a qualifying premises is to be written off at the rate of 50% per annum.
• (3)(b) Section 272(4)(a)(ii) applies as if a revised subsection (4)(a)(ii) were inserted – this provides that the tax life (the period during which the relief attaching to the premises can be transferred to a new owner) of a qualifying premises in relation to qualifying expenditure incurred on its conversion or refurbishment is 10 years from its first use subsequent to the incurring of that expenditure.

Balancing events

(4) Where a sale or other event which might give rise to a balancing allowance or charge under section 274 occurs in relation to a qualifying premises, a balancing allowance or charge is not to be made if that event occurs more than 10 years after the qualifying premises was first used subsequent to the incurring of the qualifying expenditure.

Minimum spend

(5) Conversion or refurbishment expenditure incurred in the qualifying period must exceed €5,000 for relief under this section to apply.

Information to accompany Claim

(6) The following information must be provided to the Revenue Commissioners before any claim for capital allowances under this section can be made:

• the name, address and tax reference number of the person making the claim,
• the address of the qualifying premises in respect of which the qualifying expenditure was incurred, and
• details of the aggregate of all qualifying expenditure incurred by the person in respect of the qualifying premises.

(7) The information required under subsection (6) will be provided to the Revenue Commissioners by electronic means and through whatever electronic systems the Revenue Commissioners may make available.

Expenditure attributable to work actually carried out

(8) Conversion or refurbishment expenditure is to be treated as incurred in the relevant qualifying period only to the extent that it is attributable to work actually carried out in the relevant qualifying period.

Provision against double relief

(9) Relief shall not be given in respect of capital expenditure incurred on the conversion or refurbishment of a qualifying premises, under any other provision of the Tax Acts where relief is given by virtue of this section.

Application of De Minimis Regulation

(10) This provision limits the relief that may be claimed under this section to the permissible ceiling of aid in accordance with the de minimis Regulation. These aid limits are set out in Commission Regulation (EU) 2023/2831 of 13 December 2023 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid. The permissible ceiling of aid means the maximum amount of de minimis aid of €300,000 that may be granted to a single undertaking over any 3 year period from all sources where the aid is granted in accordance with Commission Regulation (EU) 2023/2831.

Relevant Date: Finance Act 2025