pre-letting expenditure on rented residential premises
Revenue have issued an updated tax and duty manual in respect of pre-letting expenditure on rented residential premises.
Taxpayers need to be aware of the restrictions on allowable pre-letting expenses when calculating their rental profits. We set out below a summary of the updated guidance.
The following expenses are allowable as a deduction against rental income:
Private Residential Tenancies Board (PRTB) registration.
Insurance premiums.
Repairs & Maintenance – e.g., cleaning, painting and decorating, general property maintenance.
Property fees – e.g., management fees, letting advertising, legal or accountancy fees.
Utility costs not repaid by tenant – e.g., light & heat costs.
Capital allowances on qualifying capital items – e.g., furniture, white goods.
However, with the exception of certain expenses such as management or legal fees, a deduction was not previously available for pre-letting expenses.
Finance Act 2017 sought to address the above and introduced an allowable deduction of up to €5,000 for certain pre-letting expenses incurred on vacant residential properties.
From 1 January 2023, the cap on the authorised deduction has been increased to €10,000 and the specified period for which the property must have been vacant was reduced from twelve to six months.
If a taxpayer avails of this deduction and then ceases to let the property as a residential premises within four years, the deduction for pre-letting expenses will be clawed back. This clawback will be triggered if there is a change of use from residential or if the property is sold.
For the full details please click link below:
If you feel you need some more detailed advice on your tax for 2023 feel free to get in touch with us directly by emailing our tax expert Padraig, at pambrose@nkc.ie.