Revenue Tax Briefing

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Revenue Tax Briefing Issue 66, July 2007

The ‘Net Price Paid‘ Formula and Separate Site Sales and Building Agreements

For the purposes of calculating owner-occupier and Section 23 relief, the Revenue practice has been to regard a sale of a house that is effected by means of a contract for the sale of a site and a separate building agreement as the sale of a completed house where the contract and agreement are connected in some way or are dependent on each other.

This means that the relief is calculated by means of the same type of formula as that contained in Section 279 TCA 1997 and not by simply using the expenditure incurred under the building agreement. In relation to industrial and commercial buildings, Revenue has also held the view that where a site sale contract and a building agreement are interdependent in any way, the ‘net price paid‘ formula in Section 279 should be used to calculate the relief.

In the circumstances referred to above, selling or purchasing a building by means of a site sale contract and separate building agreement is simply a means of conveying the completed building; and the result in terms of calculating capital allowances or Section 23 relief, should be the same as that which would apply if the sale or purchase of the completed building were carried out by means of a single contract. In many cases, investors enter into building agreements at a stage when the building is already underway or actually completed. Construction expenditure has already been incurred and the relevant interest is being transferred to the investor. This is the situation which is provided for in Section 279 TCA 1997.