With the added benefit of qualifying for Section 50 tax relief, investors can now offset their tax liabilities on their Irish source rental income. The Finance Act of 1999 introduced this “Section 23” relief in respect of the construction, conversion or refurbishment of rented residential accommodation for third level students.
The Department of Education and Science has issued the qualification guidelines for this type of tax relief. Essentially the guideline states that the accommodation must be available for the use of students for the academic year, outside of this, the properties can be let to non-students. The tax relief available to investors in St. Angela’s Student Residences, to offset against all of their Irish source rental income, will be in the region of 97.8% of the purchase price of the property (not including the fit-out, as Capital allowances also apply to this).
Interest relief is also available to investors on monies borrowed to fund the purchase.
Rental income will be pooled for the academic year
Commonly Asked Questions regarding Section 50
Q1: Is Section 50 the same as Section 23?
A: Section 50 is described as Section 23 type relief. This means that tax relief can be claimed on the purchase price (less site costs) against all rental income derived in the State. The main difference to you the investor is that Section 50 apartments must be let to students attending the approved 3rd level institution. St. Angela’s Student Residences is the sole on campus approved Student Accommodation.
Q2: How much tax relief is available?
A: Circa 91% of the purchase price is available as tax relief against all rental income derived in the State.
Q3: Can I claim tax relief in the first year?
A: Yes, if you have sufficient Irish rental income to fully utilise all of the tax relief in Year 1 you are allowed to so do. Section 50 is flexible in how the relief is allocated against your other rental income. The length of the tax break is 10 years. However, any unutilised relief at the end of the 10-year period can be carried forward to subsequent years.
Q4: Can I use tax relief from St. Angela’s Student Residences against other rental income I have in Ireland?
A: Yes, tax relief from your investment in St. Angela's Student Residences is available for all rental income derived in the state of Ireland. This refers to both residential and commercial income.
Q5: Can I provide my own fit out?
A: No, all apartments are fitted out to the same high quality standard. It is important that all apartments meet the same standard of finish.
Q6: Can I claim mortgage interest relief
A: Yes, mortgage interest relief is available to purchasers of the units.
Q7: Will someone manage my property?
A: Yes, there is a letting and management company in place with an office in the development. The charge for letting and management for the academic year will be circa. 12% of the rental income.
Q8: What does the annual service charge cover?
A: It will cover the annual cost of landscaping, refuse collection, common area cleaning, security, lift maintenance, contingency fund, block insurance, public liability insurance, contents insurance (excess will apply), maintaining the records of the management company and other costs associated with maintaining the development to the highest standards.
Q9: Can my property be let out for the summer season?
A: Yes, under Section 50 the properties can be let to “non-students” during the summer season. Summer lettings will be the responsibility of the owner. The Management Company will be available to provide this service at the request of the owner. You will be contacted by the Management Company about this matter in due course.
Q10: Can I claim back the VAT element of the purchase price?
A: Yes, it is possible to reclaim VAT. However, we recommend that the purchasers obtain financial advice on their circumstances in relation to Vat.
Q11: How can I be sure my apartment is protected?
A: Section 50 gives you an opportunity to purchase an apartment that has been specifically designed for rented self-catering accommodation. The fit-out is of the highest quality with built in beds, wardrobes and desks. A landlord/tenant agreement will be put in place between the owner and the students, with parents as guarantor. The rent and a security deposit will be paid in advance. A loss of rent and landlords contents insurance policy is part of the service charge. There is an excess clause for every claim.
Q12: How many students are in the college?
A: 800 students attend the college, providing a student to bed ratio of 4:1.
Q13: Who sets the rent?
A: The owners set the rent for the development on an annual basis. The rents are uniform throughout the development. This will facilitate ease of letting.
Q14: Is the rental income pooled?
A: Yes, the development will operate a system of pooling the rental income for the academic year.
Q15: Can I sell my unit during the 10-year period?
A: Yes. you are free to sell your property during the 10-year period. However, there will be a claw back of the relief where the premise is sold within 10 years. Subsequent owners can claim the original allowances where claw back arises.
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