Taxes Consolidation Act, 1997 (Number 39 of 1997)
299 Allowances to lessees.
[ITA67 s241(2) and s252; FA67 s11(3); FA71 s26(3); CTA76 s21(1) and Sch1 par6, par16, par53 and par60]
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(1) Where machinery or plant is let to the person by whom the trade is carried on, on the terms of that person being bound to maintain the machinery or plant and deliver it over in good condition at the end of the lease, and if the burden of the wear and tear of the machinery or plant will in fact fall directly on that person, then, for the purposes of sections 283 and 284, the capital expenditure on the provision of the machinery or plant shall be deemed to have been incurred by that person and the machinery or plant shall be deemed to belong to that person.
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(1) Subject to subsection (3), where machinery or plant is let by means of a [5]>finance lease (within the meaning of section 76D)<[5][5]>relevant lease<[5] to a person, by whom a trade is carried on, on the terms of that person being bound to maintain the machinery or plant and deliver it over in good condition at the end of the lease, and if the burden of the wear and tear of the machinery or plant in fact falls directly on that person, then, for the purposes of sections 283 and 284, the capital expenditure on the provision of the machinery or plant shall be deemed to have been incurred by that person and not by any other person and the machinery or plant shall be deemed to belong to that person and not to any other person.
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(1A) For the purpose of this section, a lease shall be a relevant lease where—
(a) the lease is a finance lease, or
(b) the lease is an operating lease, and each of the following criteria apply at the inception of the lease:
(i) under the terms of the lease, the discounted present value of the lease payments which are payable during the lease term amounts to 80 per cent or more of the fair value of the leased asset where the payments are discounted at the relevant rate;
(ii) the lease term is greater than or equal to 65 per cent of the predictable useful life (within the meaning of section 80A) of the leased asset;
(iii) the lease is granted on such terms that the use and enjoyment of the leased asset is obtained by the lessee for a period at the end of which it is considered likely that the leased asset will pass to the lessee.
(c) For the purposes of paragraph (b)(i), the relevant rate shall be the interest rate implicit in the lease under generally accepted accounting practice, but where such rate is unknown to a lessee, the lessee may use the incremental borrowing rate under generally accepted accounting practice.
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(2) Subsection (2) of section 285 shall not apply to qualifying machinery or plant (within the meaning of that section) which is let to a person on the terms mentioned in subsection (1), unless the contract of letting provides that the person shall or may become the owner of the machinery or plant on the performance of the contract, and, where the contract so provides but without becoming the owner of the machinery or plant the person ceases to be entitled (otherwise than on his or her death) to the benefit of the contract in so far as it relates to the machinery or plant, subsection (2) of section 285 shall be deemed not to have applied in relation to the machinery or plant and accordingly there shall be made [3]>all such additional assessments and adjustments of assessments<[3][3]>all such assessments or amendments of assessments<[3] as may be appropriate.
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(3) (a) [7]>In this subsection “lease payments”, “lessee” and “lessor” have, respectively, the same meanings as in section 80A.<[7][7]>In this section, ‘fair value’, in relation to a leased asset, means an amount equal to such consideration as might be expected to be paid for the asset at the inception of the lease on a sale negotiated on an arm’s length basis, less any grants receivable by the lessor towards the purchase of the asset.<[7]
(b) [8]>Subsection (1)<[8][8]>Where the lessee is an individual, subsection (1)<[8] shall only apply where—
(i) the lessor and lessee jointly elect, or
(ii) where the lessor is not a person within the charge to tax under Schedule D, the lessee elects,
that this section shall apply for the purposes of sections 283 and 284 by giving notice in writing to the inspector on or before the specified return date for the chargeable period (within the meaning of [4]>section 950<[4][4]>section 959A<[4]) in a form approved by the Revenue Commissioners and containing such particulars relating to the lessor and lessee and in connection with the lease as may be specified in the approved form.
(c) Where this section applies—
(i) the amount to be deducted in computing the profits or gains to be charged to tax under Case 1 of Schedule D for any chargeable period of the lessee in relation to lease payments to be paid in respect of the [9]>finance lease<[9][9]>relevant lease<[9], shall be the amount in respect of those lease payments which in accordance with generally accepted accounting practice would be deducted in a profit and loss account for that period, and accordingly, the aggregate amount (referred to in subparagraph (ii) as the “aggregate deductible amount”) to be deducted in computing the profits or gains to be charged to tax under Case 1 of Schedule D for any chargeable period of the lessee in relation to lease payments to be paid in respect of and over the [10]>term of the lease<[10][10]>lease term<[10], shall be the amount in relation to those lease payments which in accordance with generally accepted accounting practice would be deducted in the profit and loss account over the [10]>term of the lease<[10][10]>lease term<[10], and
(ii) where capital expenditure deemed to have been incurred by the lessee would otherwise exceed the amount by which the aggregate amount of lease payments to be paid in respect of the lease exceeds the aggregate deductible amount, then the amount of capital expenditure on the provision of plant and machinery for the purposes of subsection (1) shall be deemed to be the amount by which the aggregate amount of the lease payments made in respect of and over the term of the lease exceeds the aggregate deductible amount.
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(4) Where this section applies and the lessor is a company, the amount to be included in the income of the lessor in respect of a relevant lease shall be—
(a) where the relevant lease is a finance lease, the amount of income from such a lease computed in accordance with generally accepted accounting practice, or
(b) where the relevant lease is an operating lease, the amount of income from such a lease as would be computed in accordance with generally accepted accounting practice if the relevant lease was a finance lease.
(5) Subsection (4) shall only apply to a lessor, in respect of a relevant lease, where—
(a) notwithstanding the provisions of subsection (1), the leased asset belongs to the lessor—
(i) immediately prior to the lessor entering into the relevant lease, and
(ii) throughout the relevant lease term,
(b) the lease is on the terms described in subsection (1),
(c) the lessor acquired the leased asset by way of a bargain made at arm’s length,
(d) the leased asset is not new machinery or plant for the purposes of an election by the lessor under section 290,
(e) the relevant lease has been entered into by way of a bargain made at arm’s length,
(f) where the lessee is not tax resident in the State, it is reasonable to consider that the amount which may be taken into account by the lessee as an expenditure or expense, or which may otherwise be deducted, allowed or relieved in computing the profits or gains on which tax falls finally to be borne for the purposes of foreign tax (within the meaning of section 835Z(1)) is similar to that calculated under subsection (3) and not similar to that calculated under section 76D,
(g) it is reasonable to consider that the relevant lease—
(i) has been entered into for bona fide commercial reasons, and
(ii) does not form part of any arrangement or scheme of which the main purpose, or one of the main purposes, is the avoidance of tax,
and
(h) the lessee—
(i) is an individual, an election is made under subsection (3)(b) and the information specified in subsection (9) is provided in the return required to be delivered under Part 41A, or
(ii) is not an individual, a claim is made in the return required to be delivered under Part 41A and, where the lessor and lessee are both within the charge to tax under Schedule D, the lessor and lessee jointly agree in writing at the commencement of the relevant lease that, under the terms of the relevant lease, the burden of wear and tear of the machinery or plant in fact falls directly on the lessee.
(6) Subsection (3)(c) shall only apply to a lessee, in respect of a relevant lease, where—
(a) the relevant lease is—
(i) an operating lease and the conditions specified in paragraphs (a) to (g) of subsection (5) are satisfied, or
(ii) a finance lease,
and
(b) the lessee—
(i) is an individual, an election is made under subsection (3)(b) and the information specified in subsection (9) is provided in the return required to be filed under Part 41A, or
(ii) is not an individual, a claim is made in the return required to be delivered under Part 41A and, where the lessor and lessee are both within the charge to tax under Schedule D, the lessor and lessee jointly agree in writing at the commencement of the relevant lease that, under the terms of the relevant lease, the burden of wear and tear of the machinery or plant in fact falls directly on the lessee.
(7) In making a claim under subsection (5)(h)(ii) the lessor shall provide the following information in respect of each relevant lease:
(a) the name of the lessee;
(b) where—
(i) the lessee is resident in the State, the tax reference number (within the meaning of section 891B) of the lessee,
(ii) the lessee is not resident in the State but is, under arrangements that have the force of law by virtue of section 826(1), regarded as being a resident of a territory with the government of which such arrangements have been made, the name of that territory,
(iii) the lessee is not resident in the State or a territory referred to in paragraph (ii) but is, by virtue of the law of another territory regarded as a resident in that other territory, the name of that other territory, or
(iv) an entity is not regarded as resident in any territory in accordance with subparagraph (i), (ii) or (iii), the name of the territory under whose laws it was created;
(c) whether the lessee is an associated enterprise of the lessor for the purposes of Chapter 4 of Part 35C;
(d) the open-market price (within the meaning of section 289(1)) of the leased asset;
(e) the discounted present value of the lease payments under the lease and the discount rate used;
(f) the amount of the capital allowances foregone by the lessor.
(8) In making a claim under subsection (6)(b)(ii) the lessee shall provide the following information in respect of each relevant lease:
(a) the name of the lessor;
(b) where—
(i) the lessor is resident in the State, the tax reference number (within the meaning of section 891B) of the lessor,
(ii) the lessor is not resident in the State but is, under arrangements that have the force of law by virtue of section 826(1), regarded as being a resident of a territory with the government of which such arrangements have been made, the name of that territory,
(iii) the lessor is not resident in the State or a territory referred to in subparagraph (ii) but is, by virtue of the law of another territory regarded as a resident in that other territory, the name of that other territory, or
(iv) an entity is not regarded as resident in any territory in accordance with subparagraph (i), (ii) or (iii), the name of the territory under whose laws it was created;
(c) whether the lessor is an associated enterprise of the lessee for the purposes of Chapter 4 of Part 35C;
(d) the open-market price (within the meaning of section 289(1)) of the leased asset;
(e) the discounted present value of the lease payments under the lease and the discount rate used;
(f) the amount to be deducted in computing the profits or gains to be charged to tax under Case I of Schedule D in the period in respect of which the return is made;
(g) the amount of the capital expenditure deemed to have been incurred by the lessee by reason of the relevant lease;
(h) the wear and tear allowance claim made by the lessee in the period in respect of which the return is made;
(i) confirmation that a joint agreement has been made in respect of the relevant lease.
(9) Where an election is made under subsection (3)(b), both the lessor and the lessee shall include the following details in the return required to be made under Part 41A:
(a) in respect of each relevant lease—
(i) confirmation that an election under subsection (3)(b) was made,
(ii) whether the lessor is an associated enterprise of the lessee for the purpose of Chapter 4 of Part 35C, and
(iii) the open-market price (within the meaning of section 289(1)) of the leased asset;
(b) the total number of relevant leases to which these provisions apply in the chargeable period (within the meaning of section 959A) to which the return relates;
(c) the total value of machinery or plant allowances transferred in relation to the leases referred to in paragraph (d);
(d) the total open-market price (within the meaning of section 289(1)) of the leased asset at the time the allowances referred to in paragraph (c) were originally transferred.
(10) Notwithstanding the generality of this section, section 539 shall not apply to a lease of machinery or plant other than a lease in respect of which a valid election or claim under this section was made.
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Substituted by FA10 s36(1)(a). Applies to chargeable periods (within the meaning of Part 9) commencing on, or after, 3 April 2010.
[2]
Inserted by FA10 s36(1)(b). Applies to chargeable periods (within the meaning of Part 9) commencing on, or after, 3 April 2010.
[10]
Substituted by F(No.2)A23 s39(d)(iii)(III)(B). Comes into operation on 1 January 2024.