Revenue Note for Guidance

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Revenue Note for Guidance

324 Double rent allowance in respect of rent paid for certain business premises

Summary

This section provides for the granting of a double deduction, as an expense in computing the profits or gains of a trade or profession, for rent paid on qualifying premises in the Custom House Docks Area. The relief is available only where a bona fide commercial lease is entered into in the specified period (25 January, 1988 to 24 January, 1999), or within the period of 2 years commencing on the day after the end of that period, and the lessee is not connected with the lessor.

In general, the relief is available for a maximum rental period of 10 years in respect of any one qualifying premises, taking into account all lease periods in respect of the premises under qualifying leases. However, there is an overriding termination date of 31 December 2008 in relation to rent payable under qualifying leases. Additionally, in certain cases no relief is available in relation to rent payable after 31 December 2003 (see subsection (5)).

The term “qualifying premises” covers industrial buildings or structures and commercial premises which are situated in the Custom House Docks Area and let on bona fide commercial terms and in respect of which capital expenditure is incurred in the specified period which qualifies for capital allowances. However, for a refurbished building or structure to be treated as a qualifying premises, the refurbishment expenditure incurred in the specified period must amount to not less than 10 per cent of the market value of the building or structure before its refurbishment.

Details

Definitions

(1)(a)lease”, “lessee”, “lessor” and “rent” take their meanings from Chapter 8 of Part 4 which deals with the taxation of rental income. Thus, “lease” includes an agreement for a lease and any tenancy but does not include a mortgage, and “lessee” and “lessor” include successors in title.

market value” is the price which the unencumbered fee simple of the building or structure would fetch in an open market sale less the part of that price attributable to the site of the building or structure.

qualifying lease” is a lease in respect of a qualifying premises granted in the specified period, or within 2 years of the end of that period, on bona fide commercial terms to a lessee who is not connected with the lessor or with any other person who is entitled to a rent in respect of the premises under that lease or any other lease.

qualifying premises” includes industrial buildings or structures and commercial premises situated in the Custom House Docks Area which are let on bona fide commercial terms and in respect of which capital expenditure is incurred in the specified period which qualifies for capital allowances. However, where the capital expenditure so incurred is on refurbishment, the building, structure or premises is not treated as a qualifying premises unless the refurbishment expenditure amounts to not less than 10 per cent of the market value of the building, structure or premises before its refurbishment.

refurbishment” is any work of construction, reconstruction, repair or renewal carried out in the course of the repair or restoration of a building or structure.

Duration of relief

(1)(b) In general, the maximum period for which the double rent allowance is available is 10 years in respect of any one premises. Thus, if a person enters into a qualifying lease in respect of a qualifying premises, all previous periods for which rent was payable in respect of the premises under a qualifying lease are taken into account in establishing the period of entitlement to the double allowance. However, in the case of a qualifying lease entered into by a person before 11 April, 1994, only those previous periods in which the premises was occupied under a qualifying lease entered into by that person or by any person connected with that person are taken into account.

(1)(c) Furthermore, in the case of qualifying leases entered into before 18 April, 1991, the period for which the double rent allowance is available in relation to a qualifying premises is a straight period of 10 years commencing on the date on which rent on the premises is first payable under the qualifying lease.

An overriding termination date of 31 December 2008 applies in relation to rent payable under qualifying leases. Additionally, in certain cases no relief is available in relation to rent payable after 31 December 2003 (see subsection (5)).

The relief

(2) A person who is carrying on a trade or profession in a qualifying premises under a qualifying lease and who is entitled, in computing the profits or gains of the trade or profession, to a deduction for rent paid on the premises for any period for which the relief under this section is available (see subsections (1)(b) and (c)) is entitled to a further equivalent deduction, thereby giving a double allowance. In the case of a qualifying lease granted on or after 21 April, 1997, the double allowance is not given where the rent is payable to a connected person.

Prevention of abuse

(3) A measure is included to counter possible abuse of the relief through cross-leasing between connected persons. Entitlement to the double rent allowance is conditional on the claimant and, in the case of qualifying leases entered into on or after 6 May, 1993, both the claimant and any person connected with the claimant not having an interest in a premises which is itself leased and qualifies for a double rent allowance. This condition does not apply where the claimant can show that the renting by him/her of the premises which is the subject of his/her claim for the double rent allowance was not undertaken for the sole or main benefit of obtaining that allowance.

Finance leases

(4) A finance lease is not treated as a qualifying lease for the purposes of the double rent allowance. A lease is a finance lease if, at the inception of the lease, the aggregate of the current value of the minimum lease payments (including any initial payment, but excluding any payment for which the lessor will be accountable to the lessee) payable by the lessee in relation to the lease amounts to 90 per cent or more of the fair value (that is, open market value less any grants receivable towards the cost of purchase of the premises) of the premises. A lease is also a finance lease if, in substance, it provides the lessee with the risks and benefits of ownership of the premises other than legal title to the premises.

Overriding termination dates in relation to relief for rent payable

(5) Relief under the section does not apply:

  • in relation to rent payable for the period 3 December 1998 to 31 December 2003 unless:
    1. in the case of a qualifying premises in areas included in the Custom House Docks Area by order of the Minister of Finance under section 322(2), an agreement or contract to secure the development of the qualifying premises or the building in which it is located had been entered into in the specified period, but by 2 December 1998, with the Dublin Docklands Development Authority, or
    2. in the case of any other qualifying premises, an agreement or contract to secure the development of the qualifying premises or the building in which it is located had been entered into in the specified period, but by 2 December 1998, and the development was wholly or mainly completed before 1 January 2000,
  • in relation to rent payable for the period 1 January 2004 to 31 December 2008 in the case of a qualifying premises referred to in paragraph (a) above,
  • in relation to rent payable for the period 1 January 2004 to 31 December 2008 in the case of qualifying premises referred to in paragraph (b) above unless the construction or refurbishment of the qualifying premises was completed prior to 1 April 1998, or the construction or refurbishment of the qualifying premises commenced prior to 1 April 1998 and a lessee occupied it prior to 9 February 1999,
  • in respect or rent payable for any period after 31 December 2008.

Relevant Date: Finance Act 2020