(1) Subject to this Chapter, the amount of the profits or gains arising in any year shall for the purposes of Case V of Schedule D be computed as follows:

(a) the amount of any rent shall be taken to be the gross amount of that rent before any deduction for income tax;

(b) the amount of the profits or gains arising in any year shall be the aggregate of the surpluses computed in accordance with paragraph (c), reduced by the aggregate of the deficiencies as so computed;

(c) the amount of the surplus or deficiency in respect of each rent or in respect of the total receipts from easements shall be computed by making the deductions authorised by subsection (2) from the rent or total receipts from easements, as the case may be, to which the person chargeable becomes entitled in any year.

(2) The deductions authorised by this subsection shall be deductions by reference to any or all of the following matters-

(a) the amount of any rent payable by the person chargeable in respect of the premises or in respect of a part of the premises;

(b) any sums borne by the person chargeable-

(i) in the case of a rent under a lease, in accordance with the conditions of the lease, and

(ii) in any other case, relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received,

in respect of any rate levied by a local authority, whether such sums are by law chargeable on such person or on some other person;

(c) the cost to the person chargeable of any services rendered or goods provided by such person, otherwise than as maintenance or repairs, being services or goods which-

(i) in the case of a rent under a lease, such person is legally bound under the lease to render or provide but in respect of which such person receives no separate consideration, and

(ii) in any other case, relate to and constitute an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

(d) the cost of maintenance, repairs, insurance and management of the premises borne by the person chargeable and relating to and constituting an expense of the transaction or transactions under which the rents or receipts were received, not being an expense of a capital nature;

(e) interest on borrowed money employed in the purchase, improvement or repair of the premises.

(2A) Notwithstanding subsection (2) but subject to the other provisions of this section, a deduction shall not be authorised by paragraph (e) of that subsection by reference to interest on borrowed money employed on or after the 23rd day of April, 1998, in the purchase, improvement or repair of a premises which, at any time during the year, is a residential premises.

(2B) Subject to subsection (2C), subsection (2A) shall not apply in relation to interest on borrowed money employed-

(a) on or before the [31st day of March, 1999]¹, in the purchase of a residential premises in pursuance of a contract which was evidenced in writing prior to the 23rd day of April, 1998, for the purchase of that premises,

(b) in the improvement or repair of a premises which on the 23rd day of April, 1998, or at any time during the 12 month period ending on that day, is or was a rented residential premises-

(i) in which the person chargeable had an estate or interest on that day, or

(ii) in respect of which the person chargeable is, or would be, entitled, by virtue of paragraph (a), to a deduction authorised by subsection (2)(e) by reference to interest on borrowed money employed in its purchase,

(c) in the purchase, improvement or repair of premises which is-

(i) a building or structure to which section 352 applies by virtue of the building or structure being a holiday cottage of the type referred to in section 268(3), or

(ii) a building or structure which is a qualifying premises within the meaning of section 353 by virtue of the building or structure being-

(I) a holiday apartment registered under Part III of the Tourist Traffic Act, 1939, or

(II) other self-catering accommodation specified in a list published under section 9 of the Tourist Traffic Act, 1957,

or

(iii) a qualifying premises within the meaning of section 356, 357 or 358,

(d) in the purchase, improvement or repair of any premises, other than premises to which paragraph (c) applies, the site of which is wholly within a qualifying rural area within the meaning of Chapter 8 of Part 10 of the Taxes Consolidation Act, [1997,]²

(e) in the purchase, improvement or repair of premises, other than premises to which paragraphs (c) and (d) apply, where-

(i) the premises is a holiday cottage, holiday apartment or other self-catering accommodation either registered under Part III of the Tourist Traffic Act, 1939, or specified in a list published under section 9 of the Tourist Traffic Act, 1957,

(ii) an application for planning permission for the development of the premises was received by a planning authority before the 23rd day of April, 1998, and

(iii) the terms under which planning permission in respect of the development of the premises was granted by the planning authority contain the condition that the premises may not be used by any person for residential use in excess of 2 consecutive calendar months at any one time and such condition is in force [during the year, or]³

[(f) in the purchase, improvement or repair of a premises which complies with the conditions of subsection (2F).]⁴

(2C)(a) For the purposes of subsections (2A) and (2B), borrowed money employed on or after the 23rd day of April, 1998, on the construction of a building or part of a building for use or suitable for use as a dwelling on land in which the person chargeable has an estate or interest shall, together with any borrowed money which that person employed in the acquisition of such land, be deemed to be borrowed money employed in the purchase of a residential premises.

(b) In any case where paragraph (a) applies, subsection (2B)(a) shall apply only where the money is employed on or before the [31st day of March, 1999]¹, and the person chargeable-

(i) has before the 23rd day of April, 1998, either-

(I) an estate or interest in land, or

(II) entered into a contract evidenced in writing to acquire an estate or interest in land,

and

(ii) in respect of any building or part of any building for use or suitable for use as a dwelling to be constructed on that land, either-

(I) has entered into a contract evidenced in writing before the 23rd day of April, 1998, for the construction of that building or that part of that building, or

(II) if no such contract exists, satisfies the Revenue Commissioners that the foundation for that building or that part of that building was laid in its entirety before the 23rd day of April, 1998.

(2D) Where-

(a) any premises in respect of which the person chargeable is entitled to a rent or to receipts from any easement consists in part of residential premises and in part of premises which are not residential premises, and

(b) subsection (2A) applies,

then, the amount of the deduction which is authorised under subsection (2)(e) by reference to interest on borrowed money employed in the purchase, improvement or repair of those premises shall be the amount of interest on that part of the borrowed money which can, on a just and reasonable basis, be attributed to that part of the premises which are not residential premises.

(2E) Notwithstanding anything contained in this section, where a premises in respect of which the person chargeable is entitled to a rent or to receipts from any easement is at any time on or after the 23rd day of April, 1998, the sole or main residence of that person, a deduction shall not be authorised by subsection (2)(e) by reference to any interest payable for any year or part of a year commencing after the date on which the premises ceases to be the sole or main residence of that person.

(2F)(a) The conditions of this subsection are-

(i) the premises was converted into multiple residential units prior to 1 October 1964,

(ii) the premises was acquired by the chargeable person under a contract which was evidenced in writing on or after 5 January 2001,

(iii) subsequent to the acquisition by the chargeable person of the premises, the number of residential units is not, subject to subparagraph (iv), reduced to less than 50 per cent of the total number of residential units contained in the premises at date of acquisition,

(iv) the premises consists throughout the year of a minimum of 3 residential units,

(v) at all times during the year (except for reasonable periods of temporary disuse between the ending of one lease and the commencement of another lease) not less than 50 per cent of the residential units in the premises are let under a lease where the lessee in the case of each such letting is either-

(I) a local authority, or a person nominated by a local authority under an agreement in writing between the lessor and that local authority, or

(II) a person who, at the commencement of the tenancy, is entitled to a payment under [section 198 of the Social Welfare Consolidation Act 2005]¹, in respect of rent, and

(vi) all the requirements of the following Regulations-

(I) the Housing (Standards for Rented Houses) Regulations, 1993 (S.I. No. 147 of 1993),

(II) the Housing (Rent Books) Regulations, 1993 (S.I. No. 146 of 1993), and

(III) the Housing (Registration of Rented Houses) Regulations, 1996 (S.I. No. 30 of 1996), as amended by the Housing (Registration of Rented Houses) (Amendment) Regulations, 2000 (S.I. No. 12 of 2000),

are complied with in relation to the premises throughout the year, and

(b) in this subsection-

"local authority", in relation to a premises, means the council of a county or the corporation of a county or other borough or, where appropriate, the council of an urban district in whose functional area the premises is located;

"residential unit" means a separately contained part of a residential premises used or suitable for use as a dwelling.

(2G) Subsections (2A) to (2F) shall not apply or have effect in relation to interest on borrowed money employed [in the purchase, other than from the spouse of the person chargeable]¹, improvement or repair of residential premises where that interest accrues on or after 1 January 2002 and, for the purposes of this subsection, interest on such borrowed money shall be treated as accruing from day to day.

(2H) The reference to "spouse" in subsection (2G) does not include a spouse to a marriage-

(a) in which the spouses are separated under an order of a court of competent jurisdiction or by deed of separation, or

(b) that has been dissolved under either-

(i) section 5 of the Family Law (Divorce) Act 1996, or

(ii) the law of a country or jurisdiction other than the State, being a divorce that is entitled to be recognised as valid in the State.

(2I)(a) Notwithstanding subsection (2), a deduction shall not be authorised by paragraph (e) of that subsection by reference to interest payable for a chargeable period (within the meaning of section 321) on borrowed money employed in the purchase, improvement or repair of a rented residential premises unless the person chargeable can show that the registration requirements of Part 7 of the Residential Tenancies Act 2004 have been complied with in respect of all tenancies which existed in relation to that premises in that chargeable period.

(b) For the purposes of paragraph (a), a written communication from the Private Residential Tenancies Board to the chargeable person confirming the registration of a tenancy, relating to a rented residential premises to which paragraph (a) applies, shall be accepted as evidence that the registration requirement in respect of that tenancy (and that tenancy only) has been complied with.

(2J)(a) Notwithstanding subsection (2) but subject to the other provisions of this section (including paragraph (b) of this subsection), the deduction authorised by subsection (2)(e) shall not exceed 75 per cent of the deduction that would, but for this subsection, be authorised by subsection (2)(e) in respect of interest accrued on or after 7 April 2009 on borrowed money employed in the purchase, improvement or repair of a premises which, at the time the interest accrues, is a residential premises and, for the purposes of this subsection, interest on such borrowed money shall be treated as accruing from day to day.

(b) For the purposes of paragraph (a)—

(i) borrowed money employed on the construction of a residential premises on land in which the person chargeable has an estate or interest shall, together with any borrowed money which that person employed in the acquisition of such land, be deemed to be borrowed money employed in the purchase of a residential premises, and

(ii) where a premises consists in part of residential premises and in part of premises which are not residential premises, paragraph (a) shall apply to the interest accrued on the part of the borrowed money employed in the purchase, improvement or repair of the premises that is attributable, on a just and reasonable basis, to residential premises.

(3)(a) The amount of the deductions authorised by subsection (2) shall be the amount which would be deducted in computing profits or gains under the provisions applicable to Case I of Schedule D if the receipt of rent were deemed to be a trade carried on by the person chargeable-

(i) in the case of a rent under a lease, during the currency of the lease, and

(ii) in the case of a rent not under a lease, during the period during which the person chargeable was entitled to the rent,

and the premises comprised in the lease or to which the rent relates were deemed to be occupied for the purpose of that trade.

(b) For the purpose of this subsection, the currency of a lease shall be deemed to include a period immediately following its termination, during which the lessor immediately before the termination was not in occupation of the premises or any part of the premises, but was entitled to possession of the premises, if at the end of that period the premises have become subject to another lease granted by the lessor.

(4)(a) Where the person chargeable is entitled in respect of any premises (in this subsection referred to as "the relevant premises") to a rent or to receipts from any easement and a sum by reference to which a deduction is authorised to be made by subsection (2) is payable by such person in respect of premises which comprise the whole or a part of the relevant premises and other premises, the inspector shall make, according to the best of his or her knowledge and judgment, any appropriate apportionment of the sum in determining the amount of any deduction under that subsection.

(b) Where the person chargeable retains possession of a part of any premises and that part is used in common by persons respectively occupying other parts of the premises, paragraph (a) shall apply as if a payment made in respect of the part used in common had been made in respect of those other parts.

(5) Any amount or part of an amount shall not be deducted under subsection (2) if it has otherwise been allowed as a deduction in computing the income of any person for the purposes of tax.