Those who have invested in property have been handed good news with an apparent reprieve in the forthcoming Finance Bill.

It said that the restriction of section 23-type tax relief is being postponed until at least 2012.

Landlords have been lobbying hard since the phased abolition of property-based legacy reliefs was unveiled in last December's Budget.

The proposal that section 23 tax relief would be ring-fenced for use against rental income from the property giving rise to that relief, as opposed to all Irish rental income as was previously the case, proved particularly controversial.

These provisions were due to come into force on January 1st, but the Government has now decided to delay this until an assessment of the potential economic impact of such changes has been completed.

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This reprieve also applies to the proposed restriction of accelerated capital allowances on a variety of buildings and structures.

The decision to hold off until its completion was made in light of the receipt of several hundred representations on this issue by the Department of Finance.

In many cases the rents on section 23 properties are low, while borrowings are generally high. As a result, there tends to be little or no taxable income arising from such properties. If tax relief were to be ring-fenced to this income, investors argued, it would be useless. This argument also applies to capital allowance projects.

Both Section 23 and the Rural Renewal Scheme were aimed at providing incentives for construction and renovation outside of Dublin were said to be also creating problems, by potentially over-inflating the housing market and forcing the use of energy inefficient and outdated technologies.

Section 23 provides tax relief for the capital expenditure incurred on construction costs and if a property costs €200,000 in total and has qualifying construction costs of 90%, the tax on this €180,000 total can be written off against all of the investor's other Irish rental income in the first year, with any unused relief being carried forward indefinitely.

In addition the Rural Renewal Scheme that includes Section 23 also allows the new owner of a rental property in an approved rural area to offset the interest payable on any borrowed money against any rental income from the property.

(BMcC/GK)