Spending caps

Deduction	Cap structure
Renovation deduction	Single cap of 96,000 euros per property unit
Energy efficiency deduction	Caps differentiated by type of work
Seismic upgrade deduction	Cap of 96,000 euros per property unit
Furniture allowance	Independent cap of 5,000 euros per property unit

The difference between the first and second structures is what matters. A single cap applies to the whole of the expenditure on the project; differentiated caps apply to each type of operation and, within the limits provided, are added together.

On energy efficiency works covering both window replacement and installation of a heat pump, the two caps coexist and the total benefit exceeds that of either separately. Separating the two operations in the accounts is the condition.

Every cap in the system attaches to the property unit and not to the building or to the project. Counting the units is therefore the first step of the calculation.

It follows that a project covering several units has several caps, and that identifying the units concerned bears directly on the overall benefit. The identification should be documented with the land registry plan.

It is not a land registry detail. On works covering two distinct units, the renovation deduction cap available doubles, and the difference in potential benefit runs to tens of thousands of euros.

The check must be made against the actual documented land registry position rather than against the perception of the property as a functional whole. Two units separately registered but used together remain two units for cap purposes.

This is the rule practice ignores most often and which produces the largest overstatements. It concerns the moment at which the units are counted.

The cap is assessed on the property units existing at the start of the works. A later subdivision does not increase the allowance.

Two asymmetrical effects follow.

Subdividing a unit during the works does not multiply the allowance. A project turning one unit into two has the cap of a single unit, the one existing when the works began.

Merging several units has the opposite effect and preserves the caps of the starting position. A project combining two units into one has the caps of two units.

The asymmetry is not accidental: it prevents artificially multiplying the allowance through land registry operations, while not penalising those who reduce the number of units. A merger therefore does not reduce the cap available.

For a professional designing a subdivision or a merger, this rule must be checked before preparing the estimate, because it shifts the benefit considerably. The check costs minutes and changes the order of magnitude of the estimate.

Several deductions may apply to the same property, each with its own cap, but one rule governs their coexistence. Combination is permitted across distinct operations and not on the same expenditure.

The same expenditure cannot be relieved twice. Different deductions may be used for different operations, within their respective caps, but not for the same operation.

The operational consequence concerns the structure of the bill of quantities. Separating in the accounts the operations attracting different deductions is the condition for combining them, and must be set up when the bill is prepared.

A bill aggregating into a single item operations attributable to different deductions makes the combination impossible to demonstrate, and on audit the burden of separating them falls on the taxpayer. The separation should be set up while the bill is being prepared.

One technical qualification concerns the energy efficiency deduction and should be known because most general sources omit it. The caps combine with maximum specific costs.

The historic caps of that deduction are in several cases expressed as a maximum deduction rather than as a simple spending limit. They must therefore be read together with the year's rate and with any unit cost caps applying to individual items.

The difference is substantial. A spending limit and a deduction limit produce, for the same figure, different orders of magnitude.

The effective limit depends on the combination of works, the characteristics of the building and the specific eligible costs, and the calculation must be carried out on the actual case using the current technical guidance notes. The guidance notes should be consulted in their current version.

One final aspect concerns works running across several tax years. The cap and the rate follow different timing logics.

The cap attaches to the project rather than to the year. Expenditure incurred in different years is aggregated for the purposes of the limit, and exhausting the allowance in one year bars relief on later expenditure on the same project.

The rate, by contrast, remains that of the year in which each item of expenditure is incurred. On works spanning a change of rate, scheduling payments therefore becomes an element of the financial plan.

The two rules should be read together: the cap is single across the project, the rate is annual on the expenditure. Expenditure moved to another year can therefore change rate at an unchanged cap.

Assuming that subdivision multiplies the cap is the first, and produces the largest overstatements. The count is made on the position at the start.

Treating the energy efficiency caps as spending limits without checking their nature is the second. The calculation must be carried out with the maximum specific costs.

Aggregating into a single item operations attributable to different deductions is the third, and makes combination impossible to demonstrate. Separation costs little when preparing and a great deal afterwards.

Treating the cap as annual rather than as attaching to the project is the fourth. The cap covers the whole project and not each tax year.