Revenue Note for Guidance
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 Temple Bar Area. The relief is available only where a bona fide commercial lease is entered into in the qualifying period (6 April 1991 to 5 April 1999), or by 31 December 1999, and the lessee is not connected with the lessor. In general, the relief is available for a maximum rental period in respect of any one qualifying premises of 10 years taking into account all lease periods in respect of the premises under qualifying leases.
The term “qualifying premises” covers industrial buildings or structures and commercial premises which are situated in the Temple Bar Area and let on bona fide commercial terms and in respect of which capital expenditure is incurred in the qualifying 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 qualifying period must amount to not less than 10 per cent of the market value of the building or structure before its refurbishment.
(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 qualifying period, or in any subsequent period ending on or before 31 December 1999, 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 Temple Bar Area which are let on bona fide commercial terms and in respect of which capital expenditure is incurred in the qualifying 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.
(1)(b) In general, the maximum period for which the double rent allowance is available is 10 years in respect of any one premises. 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. Thus, for example, if a previous tenant had claimed a double rent allowance for a period of 4 years in respect of rent paid for the premises, the maximum period for which the double rent allowance would be available to a new tenant would be 6 years. 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 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.
(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 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 to be given where the rent is payable to a connected person.
(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.
(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.
(5) It is not possible to obtain “double relief” under this section and also under the Temple Bar Area legislation that operated under section 45 of the Finance Act, 1986 as applied by section 55 of the Finance Act, 1991. Any rent which qualified for a double deduction under that earlier legislation is treated as having been relieved under this section.
Relevant Date: Finance Act 2020