Revenue Tax Briefing

The content shown on this page is a Tax Briefing produced by the Irish Revenue Commissioners. To view the section of legislation to which the Tax Briefing applies, click the link below:

Revenue Tax Briefing Issue 65, December 2006

Property-Based Incentive Schemes - Inducements for purchase of property

Revenue is concerned at the manner in which some properties under the various property-based incentive schemes are being marketed. It appears that inducements are being offered by vendors of some properties to encourage purchases of those properties. Where payment is required for these inducements, the impression is being given that tax relief will be available to the purchaser in respect of this payment if it is included in the price paid for the property. The purpose of this article is to advise that tax relief is only available in respect of the cost of constructing a property. It is not available for the cost of inducements such as membership of sports and leisure clubs, hotel and other accommodation or the cost of the use of any other such facilities.

As a general rule, tax relief under the property incentive schemes is available in respect of the costs incurred on the construction, refurbishment or the conversion of a property. Where a completed property is purchased, tax relief, whether in the form of capital allowances, section 23 or owner-occupier relief, is determined by using a formula -

tax relief = price paid for property ×

construction costs

construction costs + site costs

The ‘price paid for the property’ to be used in the formula should only include the construction costs, including site clearance and preparation, and the builder’s and site owner’s profit on the transaction. It should not include any amounts in respect of membership of clubs or other inducements. Also, it should not, for example, include any additional costs such as legal and other professional fees or stamp duty paid in connection with the purchase, house contents such as furniture, appliances and carpets*. Where the formula is not required to calculate the amount of tax relief as, for example, in a case where a site owner engages a builder to construct a property, the same position applies and tax relief is only available on the actual construction costs.

In any case where a composite price is paid to the vendor of a property, the part of the price relating solely to the property should be separately identified. This will be required in the event of Revenue auditing a claim for tax relief.

This article applies equally to industrial buildings such as hotels and holiday cottages and to commercial buildings as it does to section 23 and owner-occupied properties.

Further information about allowable construction costs and qualifying expenditure for tax relief purposes in the case of industrial and commercial buildings is available in Tax Briefing Issue 60 and in the guidance notes on ‘Section 23 relief’ and ‘Owner-Occupier relief’. These publications are available at


*Where a property is rented out, tax relief in the form of plant and machinery allowances may be separately available for the cost of items such as furniture, appliances and carpets.