Parliamentary Question for the Minister for Finance (Michael Noonan TD)
For WRITTEN ANSWER on 11/02/2014
To ask the Minister for Finance if expenditure on maintenance and improvement of a property can be taken into account when determining the amount of capital gains tax due; and if he will make a statement on the matter.
Capital gains tax legislation sets out the rules relating to the expenditure that is allowed in computing a chargeable gain and the amount of capital gains tax due. Expenditure that is allowed includes the cost of acquisition of an asset, enhancement expenditure incurred during the period of ownership of the asset and costs incurred in disposing of the asset.
Enhancement expenditure means expenditure which adds to the value of the asset and which is reflected in the state or nature of the asset at the time the asset is disposed of. This expenditure must be expenditure of a capital nature. It follows that expenditure incurred on improvements to a property can be taken into account for capital gains tax purposes but only where it is capital in nature and comes within the definition of enhancement expenditure as explained above.
Expenditure of a revenue nature such as maintenance and repairs is not allowable for capital gains tax purposes but relief may be available for income tax purposes where the property is let or is used for the purposes of a trade or profession.
In the case of rental property, the cost of maintenance and repairs borne by the landlord under the terms of the letting agreement, but excluding any capital expenditure, is deductible from gross rents in computing rental income for income tax purposes.
In the case of a property used for the purposes of a trade or profession, the cost of maintenance and repairs wholly and exclusively laid out or expended by the taxpayer for the purposes of the trade or profession (but not the cost of improvements that is capital in nature) is deductible in computing the profits of the trade or profession chargeable to income tax.