Revenue Note for Guidance

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Revenue Note for Guidance

343 Capital allowances in relation to construction or refurbishment of certain buildings or structures in enterprise areas

Summary

A scheme of capital allowances is made available in respect of capital expenditure incurred in the qualifying period on the construction or refurbishment of certain buildings or structures in enterprise areas which are to be used by qualifying companies in the carrying on of certain trading operations (manufacturing or internationally traded services). The section provides that capital allowances for qualifying buildings in enterprise areas at regional airports cannot be claimed by property developers in certain circumstances (see subsection 11).

Qualifying companies must be certified by the Minister for Enterprise, Trade and Employment on the recommendation of Forfás. The full amount (100 per cent) of the expenditure so incurred is available for write off as follows—

  • annual writing-down allowances of 4 per cent (available to both owner-occupiers and lessors),
  • an industrial building (initial) allowance of 25 per cent (available to both owner-occupiers and lessors), and
  • accelerated writing-down allowances (free depreciation) of 50 per cent (available only to owner-occupiers).

Details

Definitions

(1)property developer” means a person wholly or mainly involved in the trade of constructing or refurbishing buildings for sale,

the Minister” is expressed to mean the Minister for Enterprise, Trade and Employment. The reference to “except where the context otherwise requires” is necessary to avoid any confusion with the one reference in the section to the Minister for Finance.

qualifying building” is a building or structure the site of which is wholly within an enterprise area, and which is in use for the purposes of the carrying on of “qualifying trading operations” by a “qualifying company”, but does not include any part of a building or structure in use as, or as part of, a dwelling house. Thus, a qualifying building may be an industrial or a commercial (including offices) type building.

qualifying company” is a company —

  • which has been approved for financial assistance under a scheme administered by Forfás, Enterprise Ireland, the Industrial Development Agency (Ireland) or Údarás na Gaeltachta, or which is employed in the freight forwarding business in an enterprise area adjacent to a regional airport, and
  • to which the Minister for Enterprise, Trade and Employment has given a certificate certifying that the company is a qualifying company which certificate has not been revoked by that Minister.

qualifying trading operations” covers manufacturing activities qualifying for the 10 per cent rate of corporation tax, internationally traded services, that is, those services designated under the Industrial Development Act, 1986, and freight forwarding and certain allied services in enterprise areas adjacent to the regional airports.

Procedure for certification as a qualifying company

(2) The Minister for Enterprise, Trade and Employment may give a certificate to a company certifying that a company is, with effect from a date to be specified in the certificate, to be treated as a qualifying company. Such a certificate may be given only —

  • on the recommendation of Forfás (in conjunction with Enterprise Ireland, the Industrial Development Agency (Ireland) or Údarás na Gaeltachta, as may be appropriate or the Minister for Public Enterprise in the case of a company engaged in freight forwarding at a regional airport), in accordance with guidelines laid down by the Minister for Enterprise, Trade and Employment, and

(4) The Minister for Enterprise, Trade and Employment may not certify that a company is a qualifying company unless—

  • the company is carrying on, or intends to carry on, qualifying trading operations in an enterprise area, and
  • that Minister is satisfied that the carrying on by the company of such trading operations will contribute to the balanced development of the enterprise area.

(5) In certain circumstances a certificate may be revoked. These are where—

  • the company to which the certificate has been given ceases to carry on, or fails to commence to carry on, qualifying trading operations in the enterprise area, or
  • the Minister for Enterprise, Trade and Employment is satisfied that the company has failed to comply with any condition subject to which the certificate was given.

In either case that Minister may revoke the certificate by way of notice served on the company by registered post. The revocation will take effect from such date as is specified in that notice.

(6) The Minister for Enterprise, Trade and Employment may take certain action if of the opinion that any activity of a company has had, or may have, an adverse effect on the use or development of the enterprise area or is otherwise inimical to the balanced development of the enterprise area. In any such case, the Minister may serve a notice in writing on the company by registered post requiring the company to desist from such activity with effect from a date to be specified in the notice. If the Minister is not satisfied that the company has complied with the requirements of the notice, the Minister may, by a further notice in writing served by registered post on the company, revoke the certificate given to the company. The revocation will take effect from such date as is specified in that further notice.

Application of law relating to industrial buildings or structures

(7)(a) Subject to the modifications set out in subsections (8), (9) and (11), the provisions of the Tax Acts relating to capital allowances for industrial buildings or structures apply to qualifying buildings, despite anything to the contrary in those provisions. Those provisions are so applied as if a qualifying building were, at all times it is a qualifying building, an industrial building or structure within section 268(1)(a) (for example, a mill, factory or other similar premises). The reference to the qualifying building being so treated “at all times at which it is a qualifying building” ensures that the allowances continue to be available only as long as the building or structure remains a qualifying building.

Allowances available

(7)(b) Allowances are available only in respect of capital expenditure incurred on the construction or refurbishment of a qualifying building during the qualifying period (see subsection (10)).

The effect of subsection (7)(a) is to make annual writing-down allowances of 4 per cent available under section 272 in respect of qualifying expenditure. The writing-down allowances are available to both owner-occupiers and lessors of qualifying buildings.

(8)(a) An industrial building (initial) allowance of 25 per cent of qualifying expenditure is made available under section 271 (In the case of an enterprise area adjacent to a regional airport, the rate is 50 per cent with effect from 1 January, 1998.) The initial allowance is available to both owner-occupiers and lessors of qualifying buildings.

(8)(b) Free depreciation (an acceleration of the annual writing-down allowances) of up to 50 per cent of qualifying expenditure is made available under section 273. Free depreciation is available only to owner-occupiers of qualifying buildings.

Balancing charge

(9) Where a sale or other event which normally might give rise to a balancing charge under section 274 occurs in relation to a qualifying building, a balancing charge is not to be made if that event occurs more than 13 years after the qualifying building was first used or, in the case where refurbishment expenditure on the qualifying building qualified for capital allowances, more than 13 years after that expenditure was incurred.

Qualifying expenditure

(10) The capital expenditure which is to be relieved under this section must be expenditure incurred on work carried out during the qualifying period. Where work commences, but is not completed, in the qualifying period, only the part of the expenditure referable to the work carried out in that period qualifies for relief.

This provision negates, for the purposes only of determining the amount of expenditure to be relieved under this section, other provisions of the Tax Acts which, by treating expenditure as incurred later than the carrying out of the work, might otherwise deprive a person of relief under this section. The provisions so negated are —

  • section 279 which deals with a case where an industrial building or structure is bought before it is used or within one year of it commencing to be used and provides for certain expenditure to be treated as having been incurred when the purchase price becomes payable,
  • section 316(2) which for the purposes of capital allowances for industrial buildings or structures treats expenditure as incurred when the sum in question becomes payable, and
  • section 316(3) which for the purposes of industrial building (initial) allowances treats expenditure incurred before a trade commences as incurred when the trade commences.

Property developers and airport enterprise areas

(11) Capital allowances may not be availed of by a property developer who holds the relevant interest (within the meaning of section 269) in expenditure incurred on the construction or refurbishment of a qualifying building in an airport enterprise area, in circumstances where that expenditure was incurred by the property developer or by a person connected (within the meaning of section 10) with the property developer.

Relevant Date: Finance Act 2020