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//The Living City Initiative – An Overview

The Living City Initiative – An Overview

The Living City Initiative was introduced by the Finance Act, 2013 and is a scheme of property tax incentives, designed to regenerate both residential and commercial buildings in specified cities, one of which is Limerick.
The relief can be split into two elements – commercial and residential.
 
Commercial Relief
  • The commercial/retail relief is given in the form of an accelerated capital allowance for a “qualifying expenditure” on conversion/refurbishment of premises within the special regeneration areas.
  • There are a number of conditions to be satisfied to fall within the meaning of “qualifying expenditure”. One such condition is the expenditure on conversion/refurbishment must be at least 10% of the value of the property immediately before the work was carried out.
  • The capital allowance is given at the rate of 15% of qualifying expenditure for each of 6 years and 10% in year 7.
  • There is also a “use” condition, so the premises must be in use for the purposes of providing services or retailing goods, or be let under a lease on arm’s length terms and used for such a qualifying purpose.
  • Even though there is no limit on how much can be spent on the conversion/refurbishment, there is a limit on the amount of relief which can be obtained. This is capped at €200,000 for any individual project, so it does not matter how many investors there are.
  • Any unused capital allowances from previous years can be used by the claimant in addition to the capital allowances which he is entitled to in any year. Passive investors should note, though, that any unused capital allowances under the Living City Initiative, which are carried forward beyond the tax life of the building to which they relate, are lost immediately.
  • For the purposes of calculating the tax relief available, companies are deemed to have a marginal tax rate of 12.5% and individual investors 50%.
Residential Relief
  • The relief is only available for owner/occupiers of buildings built for use as a dwelling prior to 1915. Therefore, for example, an old derelict church located within the “special regeneration area”, which is to be converted into a dwelling does not qualify, as it was not originally built as a dwelling.
  • Landlords cannot claim relief under the residential arm of the Initiative.
  • The claimant is entitled to a deduction from their total income for each of 10 consecutive years of an amount equal to 10% of the qualifying expenditure.
  • A “Letter of Certification” must be obtained from the applicable Local Authority before any works have commenced.
  • The property must be occupied as the claimant’s sole or main residence for all or any part of each year for which he is claiming the relief. The claimant is not obliged to occupy the property for the entire 10 year period but no relief can be claimed for any year in which there was no period of occupation by the claimant.
Conclusion
This is a laudable initiative launched by Minister Noonan with the aim of encouraging people back to the centre of Irish cities to live in historic buildings and encourage the regeneration of the retail heartland of central business districts. So far the uptake in Limerick city has been minimal. One criticism of the residential relief is that the period of the relief is spread out too long. Another observation is that, historically, Limerick city dwellers have tended to be transient. This initiative should be seen as one element of the overall rejuvenation of these designated areas. Hopefully, it is a relief that is embraced.
Summary
The scheme applies to certain “special regeneration areas” in Dublin, Cork, Limerick, Galway, Waterford and Kilkenny.
The relief applies to both residential and commercial refurbishment and conversion work.
These works must be incurred in a 5 year period from 5 May, 2015.
2018-11-13T10:47:55+00:00June 1st, 2016|Publications|