In Budget 2011, it was proposed that investors could only use the section 23 relief against the section 23 property itself and not as previously against their other income. Similarly the accelerated capital allowances could only be used against the property the capital allowances relate to.

The investors who bought them did so for the purpose of using the reliefs available to cover rental profit on other properties. The sudden withdrawal of the tax break would have lead to severe difficulties for some of these investors possibly pushing them to bankruptcy. Numerous submissions were made to the Department of Finance leading the proposal to be shelved for a year while a review was done.

Mr Noonan said in his Budget day 2012 speech: ” My Department has undertaken an Economic Impact Assessment of the measures proposed by the previous Government. It is quite clear that these proposals were unworkable and would have done significant and lasting damage to an already distressed property market, creating real difficulties for many ordinary people. The report also highlights the vulnerability of small investors to insolvency if they lose the reliefs”

The Economic Impact Assessment report concluded that small scale investors should not be restricted whereas large scale investors should make more of a contribution.

Mr Noonan announced that a property relief surcharge of 5% would be levied on investors who have a gross income over €100,000. This would apply on the amount of income sheltered by property reliefs in a given year.

This surcharge is essentially a higher rate of USC.

Gross income is the same as adjusted income for the purposes of the higher earners restriction.

Example (taken from Revenue website)

Taxable income (say)                €80,000

Add back:

  • Incentive property reliefs(including capital allowances,section 23,student accommodation)
  • Loss relief where the loss derives from an entitlement to the various property reliefs
  • BES
  • Film reliefs
  • Donations reliefs
  • Exemptions (including artists,stallion stud fees and patent royalties)

Taxable income (as above) €80,000 plus add backs equals Gross Income


  • Gross income is under €100,000, the property relief surcharge does not apply
  • Gross income is over €100,000, property relief surcharge of 5% applies but only on the element of income sheltered by property related reliefs.

Accelerated Capital Allowances

Investors in accelerated capital allowance scheme will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after 1st January 2015. Where the tax life of the scheme has ended before 1st January 2015 no carry forward of allowances into 2015 will be allowed.

Full details will be contained in the Finance Bill.