Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 8

Qualifying Rural Areas

Overview

This Chapter provides for a scheme of tax reliefs aimed at invigorating certain areas of rural Ireland on similar lines to the renewal schemes which were previously made available in an urban context. The scheme covers all of the counties of Leitrim and Longford as well as certain areas in counties Cavan, Roscommon and Sligo designated on a District Electoral Division basis under the scheme.

Schedule 8A describes the rural areas which are to be qualifying areas for the purposes of this scheme.

The qualifying period for the business (industrial and commercial) tax incentives started on 1 July 1999 and originally was due to end on 31 December 2004. However, in certain circumstances this period may be extended to 31 December 2006 or to 31 July 2008.

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. There is also an overall cap 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).

The qualifying period for the residential reliefs available under the scheme is set out in Chapter 11 of this Part.

Tax incentives, in the form of capital allowances for industrial buildings or structures and commercial premises, are not available under Chapter 8 in certain circumstances – see section 372T for full details.

Provision was made—

  • in section 372M, for accelerated capital allowances in respect of capital expenditure incurred in the construction or refurbishment of certain industrial buildings or structures in qualifying rural areas,
  • in section 372N, for accelerated capital allowances in respect of capital expenditure incurred on the construction or refurbishment of certain commercial buildings or structures such as shops, offices, etc. Also included are buildings or structures in use for the provision of sewerage facilities, water supplies and roads for public purposes,
  • in section 372O, for a double rent allowance in respect of rent paid for the lease of certain industrial buildings and commercial premises used for the purposes of a qualifying trade or profession. [NB: No trade or profession was ever specified as qualifying for the purpose of this section, and the section was repealed by section 24(3) Finance Act 2002],
  • in section 372P, for relief against rental income in respect of expenditure on the construction of certain residential accommodation in qualifying rural renewal areas,
  • in section 372Q, for relief against rental income for expenditure on the conversion of certain buildings in those areas into rented residential accommodation,
  • in section 372R, for relief against rental income for expenditure on refurbishment of buildings comprising rental accommodation, and
  • in section 372RA, for relief for expenditure by owner-occupiers on the construction or refurbishment of their residential accommodation.
  • in section 372S, for measures which were supplementary to sections 372P, 372Q, 372R and 372RA.
  • in section 372T, to deny capital allowances for industrial buildings or structures and commercial premises 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 372P, 372Q, 372R, 372RA and 372S 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.

372L Interpretation (Chapter 8)

Summary

This section is the interpretation section for the Chapter. It contains definitions of terms used throughout the Chapter and, in particular, sets out the qualifying period for the scheme of reliefs provided by the Chapter.

Details

Definitions

(1) “lease”, “lessee”, “lessor”, “premium” and “rent” have the same meanings as 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” 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” is the price which the unencumbered fee simple of the building, structure or house would fetch in an open market sale less the part of that price attributable to the site of the building, structure or house.

“property developer” means a person wholly or mainly involved in the trade of constructing or refurbishing buildings for sale.

“qualifying period” is, in the case of the business incentives covered by sections 372M and 372N, the period beginning on 1 July 1999 (the date appointed by order of the Minister for Finance) and —

  • ending on 31 December 2004, or
  • where subsection (2) applies, ending on 31 December 2006, or
  • where subsections (2) and (3) apply, ending on 31 July 2008. [NB: This extension to 31 July 2008, as provided for in section 31 Finance Act 2006, is subject to a commencement order.]

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

“qualifying rural area” means the rural areas which are to be qualifying areas for the purposes of the scheme and these are described in Schedule 8A.

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

Extension of qualifying period to 31 December 2006

(2) This subsection, which relates to the extension of the qualifying period to 31 December 2006 for commercial and industrial premises, applies as respects expenditure incurred 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 extension to 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 possible extension of the qualifying period to 31 July 2008 for commercial and industrial premises, applies as respects expenditure on the construction or refurbishment of a building or structure if the relevant conditions of subsection (2) 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.

Relevant Date: Finance Act 2021