Section 268 of the Taxes Consolidation Act, 1997 allows tax relief on the purchase of a holiday cottage which is registered on the Bord Failte Holiday Cottages Register.
The principle features of this investment are:
Both individuals and companies can qualify for capital allowances on capital expenditure incurred on the acquisition of a holiday home which is registered in any register of holiday cottages established by Bord Failte.
The capital allowances available to both individuals and companies is 10% per annum of qualifying construction cost over 10 years. In order for investors to benefit from the capital allowances, the homes must be used only for short-term lettings.
Investment Proposal
This development consists of 31 self-catering holiday homes in the heart of Kenmare town. The price of the units, excluding VAT, is as follows:
The holiday homes will be operated and managed as a group for a 10 year period.
Net Rental Guarantee of €9,000 per annum for four years.
Capital allowances in excess of 98% are available on the cost of holiday homes at the rate of 10% per annum for 10 years. The allowances are available against all Irish rental income.
Capital allowances on the cost of fixtures and fittings at the rate of 12.5% per annum for 8 years. The allowances are available against all Irish rental income.
Full interest relief is available on funds borrowed for direct investment in the holiday homes.
Promoters will arrange for holiday homes to be registered with Bord Failte.
(*) Intending purchasers should ensure that they have sufficient Irish rental income with which to shelter the allowances. The allowances are not available for offset against other income such as salary, trading income, foreign rents etc. The tax saving computed above has been computed on the basis that purchasers would, in the absence of the allowances, be liable to tax at 47% (42% income tax, 3% PRSI and 2% Levies) on the Irish rental income earned by them which could be sheltered by the allowances. The allowances are subject to the 2006 Finance Act provisions concerning the amount of allowances which can be claimed each year for the 2007 tax year and subsequent tax years. The effect of these restrictions, if any, will depend on each individual purchaser’s circumstances.
It can be seen that on the basis of the above, the cost of the properties, excluding VAT and net of the benefit of tax allowances, is €201,669, computed as follows:
