There will be no tax benefit for wealthy philanthropists who lease property for free to Dublin Simon Community, under a new plan drawn up by the charity to help house people who are homeless.
PwC tax partner Tim O'Rahilly said that, for investors, the scheme will be "neither good nor bad from a tax perspective", suggesting the involvement of wealthy individuals and businesspeople in the scheme is a pure philanthropic play.
Dublin Simon has launched the initiative – called the Social Impact Fund – under which wealthy businesspeople will be asked to buy homes in the capital that would be leased to the charity for free for up to 15 years.
Dublin Simon hopes to secure enough funding to buy 50 one- and two-bedroom units in the greater Dublin area over the next two years, with the properties expected to cost €250,000-plus each.
Profit
If investors buy the property and then allow Dublin Simon to lease them for free, no tax benefit will accrue to them and they will have to pay 1 per cent stamp duty upon purchasing the property.
“It’s hard to see any tax benefit if you’re not making a profit,” Mr O’Rahilly said, noting that, if this were a donation, the taxation element would work differently.
Where individuals donate to a charity, that charity can claim a tax rebate while, in the case of corporations that donate to charity, they can get a tax deduction. In this case, Mr O’Rahilly said there is no donation because nothing being given to the charity has an attached monetary amount.
The tax implications clarify that investors taking part in the Simon initiative will be giving for the sake of giving rather than deriving any benefit. Mr O’Rahilly noted that they’re not even likely to be speculating on property prices because the 15-year horizon is too long a period.
Sam McGuinness, Dublin Simon chief executive, said the charity has already had calls on the matter this morning following publication of details of the project in The Irish Times.
He does not expect the new fund to detract from other Dublin Simon schemes. “There are people out there who may not be prepared to give a property but they’re more than happy to lease a property and get it back after 10 to 15 years and then review the situation,” he said, adding that these high net-worth individuals may not want to donate vast sums to Simon but “would like to help with the current [housing] crisis”.
The scheme was the initiative of successful food entrepreneur and Housing Agency chairman Michael Carey, and Neil O’Leary, a leading Irish corporate financier.
Mr McGuinness said a number of companies had signed up to lend support on a pro bono basis, including Savills Ireland, Bespoke Estate Agents and public relations agency Gordon MRM. Irish stockbroker Davy is helping the charity promote the scheme to high net-worth individuals.
"Clearly, the whole issue is huge and depressing and, on that basis, we said we'd try and help them in any way we could with our services. It's a very small gesture from us," said Ray Gordon, managing director of Gordon MRM.
Seán O’Donoghue, managing director of Bespoke estate agents, offered the company’s services pro bono in the wake of The Irish Times story. “We recognise that there’s a serious problem and if we can help in some small way, we’re more than happy to,” he said.
The fund aims to provide quality and affordable housing to people working their way out of difficulties. Dublin Simon will be responsible for choosing suitable tenants, collecting rents, repairing and maintaining the properties, and returning them to the benefactors in good condition at the end of the lease period.
