Revenue Tax Briefing

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Revenue Tax Briefing Issue 60, August 2005

Section 23 and Owner-Occupier Relief

Treatment of Social and Affordable Housing Costs for Section 23 and Owner-Occupier Relief Purposes

When granting planning permission for residential housing developments a local authority may require a builder/developer to enter into an agreement with it in order to increase the supply of social and affordable housing. Such an agreement may take several forms. For example, a builder/developer may be required to transfer to the local authority, alone or in combination, land, serviced sites, completed houses or a sum of money. The agreement may refer to the land that is being developed or to other land owned by the builder/developer that is within the functional area of the local authority

The purpose of this article is to state that the monetary value of any land, serviced sites or houses that are transferred to the local authority or any sum of money that is paid to a local authority in respect of social and affordable housing is not a construction cost of the builder/developer for the purposes of calculating the amount of relief available for ‘section 23’ or ‘owner-occupier’ relief purposes. Such a cost is distinguished from the allowable construction costs that are paid to a local authority such as development levies paid in return for the provision of certain infrastructure and services. (see under publications/technical guidelines - “A Guide to Section 23 relief” and “A Guide to Residential Owner-Occupier relief” for the treatment of construction costs)

Where a newly constructed property is purchased from a person who carries on the trade of a builder, the amount of the relief is calculated by using the following formula -

Price paid to builder ×


B + C

A = construction expenditure incurred in the qualifying period

B = total construction expenditure

C = expenditure on the acquisition of the site

The construction expenditure at A and B in the formula is the expenditure incurred by the builder and not that charged to the purchaser by the builder. It must not include any sums expended by the builder to a local authority in relation to the provision of social and affordable housing.

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