Following discussions between Revenue and practitioners at the TALC Direct Taxes Technical forum, Revenue reviewed the practice set out in Tax Briefing No. 23 regarding the clawback of “section 23” relief on the death of a spouse and in other limited circumstances. Arising from their review, Revenue has published Tax Briefing 08 (June 2010) which reaffirms the practice set out in Tax Briefing No. 23 and makes a further option available in the case of the transfer of “section 23” properties on the death of a spouse.

In Tax Briefing No. 23 Revenue confirmed that in the case of the transfer of “section 23” property on death to a surviving spouse, they are prepared to allow a set-off of the deduction due to the surviving spouse against the amount assessed on the deceased in the year of death in respect of the property involved. In addition to the practice outlined in Tax Briefing No. 23, Revenue are prepared to make a “further option” available where rented residential “section 23 type” property passes to a surviving spouse and a potential clawback of the relief applies in relation to the deceased spouse.

This “further option” is set out in Tax Briefing 08 of 2010 and provides that an election may be made so that:

• No clawback of “section 23 type” relief will be applied in the case of the deceased spouse and,
• Any unused balance of “section 23 type” relief will transfer to the surviving spouse, where such relief has not been used in full by the deceased spouse in relation to rental income received up to the death of death.

Tax Briefing 08 of 2010 also sets out the interaction of such “death cases” with Tax Instruction 4.8.12 (statutory position in relation to the use of rental losses between spouses) and the restriction of reliefs for high earners as contained in Chapter 2A of Part 15 TCA 1997.

The full article from Tax Briefing 08 of 2010 is available at http://www.revenue.ie