Revenue Note for Guidance

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Revenue Note for Guidance

372AO Qualifying lease


This section outlines the various conditions which must be satisfied in order that a lease will be a qualifying lease for the purposes of the Chapter.



(1)market value”, in relation to a building, structure or house, means the price which the unencumbered fee simple would fetch if sold in the open market less the part of that price attributable to site acquisition costs.

Premium must not exceed 10% of the relevant cost or market value

(2)(a) Provision is made that, subject to subsection (4), a lease of a house is a qualifying lease for the purposes of the Chapter where the lease provides only for normal rental payments taxable under Chapter 8 of Part 4.

(2)(b) If a premium is payable in addition to those payments, the premium must not exceed 10 per cent of the relevant cost of the house in the case of construction, or 10 per cent of the market value of the house at the time of completion of works in the case of conversion or refurbishment. In the latter case, the premium must be payable on or subsequent to the date of the completion of the refurbishment or, if payable before that date, must be payable by reason of or in connection with the refurbishment.


(3) In the case of conversion or refurbishment, provision is made for the apportionment of the market value of a building where a house is a part of a building and is not saleable apart from the building of which it is a part. This apportionment is of the market value at the time the works are completed and is done on a floor area basis.

Other conditions

A lease does not qualify for the purposes of Chapter 11:

  • (4)(a) if the terms of the lease enable the lessee or any other person to acquire an interest in the house involved for less than that which might be expected to be given if the acquisition were conducted in the open market at arm’s length,
  • (4)(b) in the case of the Rural Renewal Scheme, if the duration of the lease is for a period of less than 3 months, or
  • (4)(c) in the case of the Student Accommodation Scheme, if the lease does not comply with the requirements of the relevant guidelines.

Relevant Date: Finance Act 2021