SECTION 23 MELTDOWN
The unheralded changes to Section 23 tax reliefs in Budget 2011 have provoked an angry response from landlords, many of whom now face hefty tax bills next year, The Sunday Business Post reports.
Landlords of Section 23 properties and investors in capital allowance schemes such as hospitals, crèches, hotels and nursing homes have been affected by the proposed change. From January 1, an investor can only offset capital allowances against rental income from Section 23 properties, rather than his or her entire property portfolio.
“There is deep concern that we are likely to see bank repossessions, business closures and job losses as a result of the proposals,” said a spokeswoman from the Irish Taxation Institute.
The newspaper quotes several Section 23 investors, all of whom are worried by the implications of the abolition of the relief.
“The government has masked the changes by saying it’s a phased abolition, but the changes make the use of the Section 23 properties redundant as they never made money,” said David Flack, who paid over €1m on Section 23 properties in Dublin and Monaghan and who now faces a tax hike of €35,000 next year as a result of the new legislation. “I make no apologies that it was a tax shelter. The properties were overpriced as a result and hefty stamp duty was also paid on these properties. You were effectively buying allowances and I would never have bought the properties if the allowances had not been part of the investment. It’s dangerous for the economy, people will go bankrupt.”