Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 10

Designated areas of certain towns

Overview

This Chapter provides for a scheme of tax reliefs aimed at fostering the renewal and improvement of certain towns. The scheme is aimed at towns with populations between 500 and 6,000. However, towns which either benefited under the 1999 Urban Renewal Scheme, the Seaside Resorts Scheme or which are in the area covered by the Rural Renewal Scheme are excluded, as are towns within the administrative counties of Fingal, South Dublin, and Dún Laoghaire-Rathdown.

The scheme requires the preparation of Town Renewal Plans by relevant county councils in conjunction with local community/business interests, identifying areas where effective improvement may be achieved with the aid of tax incentives. Completed Town Renewal Plans are assessed by an expert advisory panel and the panel advises the Minister for Housing and Urban Renewal in relation to proposals for designation having regard to guidelines published on the scheme. The Minister for Finance will make orders applying one or more of the tax incentives provided for in the Chapter to areas recommended by the Minister for the Environment and Local Government.

The qualifying period for the scheme commenced on 1 April 2000 in the case of residential reliefs, and on 6 April 2001 in the case of business incentives, and was due to cease on 31 December 2004. However, in certain circumstances the period may extend to 31 December 2006 or to 31 July 2008. These dates are subject to any dates within these ranges which may be specified in orders made under section 372AB.

Where the extended termination date of 31 July 2008 applies, the amount of capital expenditure incurred in the year 2007 and in the period 1 January 2008 to 31 July 2008 must be reduced to 75 per cent and 50 per cent respectively of the amount attributable to the period involved. An overall cap also applies on the amount of expenditure incurred in the period 1 January 2007 to 31 July 2008 which may qualify (see notes on sections 270(4) to (7) and 316).

Tax incentives, in the form of accelerated capital allowances for industrial buildings or structures and commercial premises, are not available under Chapter 10 in certain circumstances – see section 372AJ for full details.

Provision was made—

  • in section 372AA, for the linking of reliefs to the enactment of town renewal legislation which envisages the concept of Town Renewal Plans as a central component of that legislation;
  • in section 372AB, to empower the Minister for Finance, on the recommendation of the Minister for the Environment and Local Government, to designate certain areas to be qualifying areas for one or more of the reliefs being provided and to discriminate as between different types of commercial development (such as offices only or other commercial buildings with a small office content) as regards the reliefs in question. Designation can also discriminate as between different types of expenditure and may be confined to the refurbishment of the facade of industrial, commercial and residential premises where required;
  • in section 372AC, for accelerated capital allowances in respect of capital expenditure incurred on the construction or refurbishment of certain industrial buildings or structures in qualifying areas;
  • in section 372AD, for accelerated capital allowances in respect of capital expenditure incurred on the construction or refurbishment of certain commercial premises;
  • in section 372AE, for relief against rental income in respect of expenditure on the construction of certain rented residential accommodation in qualifying areas;
  • in section 372AF, for relief against rental income for expenditure on the conversion of certain buildings into rented residential accommodation;
  • in section 372AG, for relief against rental income for expenditure on the refurbishment of buildings comprising rental accommodation;
  • in section 372AH, for relief for expenditure by owner-occupiers on the construction or refurbishment of their residential accommodation;
  • in section 372AI, for measures which were supplementary to sections 372AE, 372AF, 372AG and 372AH, and
  • in section 372AJ, to deny capital allowances for industrial and commercial buildings in certain circumstances and to prevent claims for double relief.

As part of the codification of legislation governing relief under various tax incentive schemes, for expenditure incurred in relation to residential accommodation, sections 372AE, 372AF, 372AG, 372AH and 372AI were repealed by section 24(3) Finance Act 2002.

The provisions of these sections and of the legislation governing relief in relation to residential accommodation under a number of other schemes, where the qualifying period had not expired, were consolidated by Finance Act 2002 and are now contained in Chapter 11 of this Part.

372AA Interpretation and application (Chapter 10)

Summary

This section is the interpretation section for Chapter 10. It contains definitions of a number of terms used throughout the Chapter. It makes the application of the Chapter and of Chapter 11 of this Part conditional on the enactment of legislation on town renewal which will provide for Town Renewal Plans. (This legislation was enacted in the Town Renewal Act 2000.)

Details

Definitions

(1) “facade” means the exterior wall of a building or structure, of a part of a building or structure, or of a house, which fronts on to a street. Where relevant this definition includes a facade which incorporates a shop-front.

“lease”, “lessee”, “lessor”, “premium” and “rent” are linked back to the definitions of those terms in 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. “Lessee” and “lessor” are to be construed accordingly and include successors in title. “Premium” includes any like sum whether payable to an immediate or superior lessor or to a person connected with the immediate or superior lessor.

“market value” means, essentially, the price which the unencumbered fee simple of the building would fetch in an open market sale. However, that price is to be computed on a site-exclusive basis.

“property developer” means a person wholly or mainly involved in the trade of constructing or refurbishing buildings or structures for sale. Thus, the greater part of a person’s trading activity, taking account of all of the person’s trading activities, must be devoted to the construction or refurbishment of buildings or structures for sale.

“qualifying area” is an area specified as such under section 372AB.

“qualifying period”, in the case of the business tax incentives is, subject to orders made under section 372AB, the period commencing on 6 April 2001 and ending on 31 December 2004 or, where subsection (1A) applies, 31 December 2006. [NB: The 31 December 2006 date is, subject to a commencement order, further extended to 31 July 2008 by section 33 FA 2006 – provided that the conditions of subsections (1A) and (3) are satisfied.]

The “qualifying period” in relation to rented residential accommodation and owner-occupied accommodation is contained in section 372AL in Chapter 11 of this Part.

“refurbishment” is defined as any work of construction, reconstruction, repair or renewal, including the provision or improvement of water, sewerage or heating facilities, carried out in the course of the repair or restoration, or maintenance in the nature of repair or restoration, of a building or structure.

“street” includes part of a street and the whole or part of any road, square, quay or lane.

Extension of qualifying period to 31 December 2006

(1A) This subsection, which relates to the extension of the qualifying period to 31 December 2006 for industrial and commercial premises, applies as respects expenditure on the construction or refurbishment of a building or structure if a valid planning application (other than for outline permission), in so far as planning permission is required, in relation to the work represented by the expenditure, is received by the planning authority:

  • by 31 December 2004, where the application is made in accordance with the Planning & Development Regulations 2001 to 2003, or
  • by 10 March 2002, where the application was made in accordance with the Local Government (Planning and Development) Regulations 1994.

Where the work involved is exempted development for the purposes of the Planning and Development Act 2000 the expiry date of 31 December 2006 may also apply provided the following conditions are met on or before 31 December 2004:

  • a detailed plan in relation to the development work is prepared,
  • a binding contract in writing exists under which the expenditure on the development is incurred, and
  • work to the value of 5% of the development costs is carried out.

Extension of qualifying period to 31 July 2008

(3)(a) and (b) This subsection, which relates to the extension of the qualifying period to 31 July 2008 for industrial and commercial premises, applies as respects expenditure on the construction or refurbishment of a building or structure if the relevant conditions of subsection (1A) were met and work to the value of at least 15 per cent of the actual construction or refurbishment costs (excluding site costs) of the building or structure is carried out by 31 December 2006. The person who carried out the work or, where that person sells the building or structure involved, the person who is claiming the capital allowances must be able to show that this 15% condition was satisfied.

By virtue of paragraphs (a) and (b) of section 270(7), local authority certification is required in respect of this 15 per cent condition. Such certification must include details of actual expenditure incurred to 31 December 2006 and of projected expenditure post 31 December 2006.

(3)(c) and (d) There is also a requirement that a binding contract in writing in relation to the construction or refurbishment is in place by 31 July 2006 and that any other conditions relating to compliance with State aid issues, that may be specified by the Minister for Finance in regulations, have been satisfied.

Requirement in relation to Town Renewal Plans

(2) The operation of the Chapter and Chapter 11 of this Part is linked to the enactment of general town renewal legislation by the Minister for the Environment and Local Government which provides for such renewal to be based on Town Renewal Plans drawn up for that purpose. (The Town Renewal Act 2000 was enacted to achieve this.)

Relevant Date: Finance Act 2021