Revenue Note for Guidance

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Revenue Note for Guidance

CHAPTER 5

Designated islands

Overview

This Chapter provided for a scheme of tax reliefs aimed at encouraging the construction and refurbishment of residential accommodation to promote residency on 23 islands off the coasts of Cork, Donegal, Galway, Limerick, Mayo and Sligo. The reliefs applied in respect of qualifying expenditure incurred in the 3 year period from 1 August, 1996 to 31 July, 1999. This period was extended to 31 December, 1999 where the relevant local authority certifies that at least 15 per cent of the total cost of the project was incurred by the end of July, 1999.

Provision was made —

  • in sections 361, 362 and 363, respectively, for relief against rental income in respect of expenditure incurred on the construction of certain rented residential accommodation, the conversion of certain buildings into such accommodation and the refurbishment of such accommodation,
  • in section 364, for relief to owner-occupiers in respect of expenditure incurred on the construction or refurbishment of certain residential accommodation.
  • in section 365, for measures which were supplementary to sections 360, 361, 362 and 363.

The scheme is now terminated, in so far as the termination date for incurring qualifying expenditure has passed. However, claims in relation to qualifying expenditure incurred before the termination date may continue to arise.

As part of the codification of legislation governing relief, under various tax incentive schemes, for expenditure incurred in relation to residential accommodation Chapter 5 was repealed by section 24(3) Finance Act 2002. However, a saving provision in relation to the relevant provisions of the Chapter, which preserves title to relief for existing beneficiaries and Revenue’s right to withdraw relief in appropriate circumstances, is contained in Chapter 11 of this Part in section 372AV.

CHAPTER 6

Dublin Docklands Area

Overview

This Chapter provided enabling legislation in relation to a scheme of tax reliefs designed to encourage the renewal and redevelopment of the Dublin Docklands Area. The qualifying period for the scheme was the period 1 July 1997 to 30 June 2000. The scheme, however, was never commenced and no areas were designated under the scheme prior to the termination date. In view of fact that the legislation was redundant, Chapter 6 was repealed by section 24(3) Finance Act 2002.

CHAPTER 7

Qualifying areas

Overview

This Chapter provides for a scheme of tax reliefs designed to foster urban renewal and improvement in certain qualifying urban areas. The process of selection of areas is based on Integrated Area Plans produced by local authorities which address the physical and socio-economic renewal of areas. The Minister for Finance will make orders designating areas, recommended by the Minister for the Environment and Local Government, for one or more of the tax incentives available. Tax incentives, in the form of accelerated capital allowances for certain industrial and commercial premises and deductions for expenditure incurred on certain rented residential premises and owner-occupied accommodation are available under this scheme. However, there is no blanket entitlement to all the reliefs for any particular qualifying area; these incentives may vary in mix for different areas. Additionally, there is provision to discriminate as between specific types of expenditure and specific types of commercial development for tax incentive purposes. In certain circumstances relief may be confined to the refurbishment of facades only.

Originally, the qualifying period for the tax incentives in relation to qualifying areas ran from 1 August 1998 to 31 December 2002. However, in certain circumstances this period may be extended to 31 December 2006 or to 31 July 2008.

The Chapter also contained measures to promote “Living over the Shop” (LOTS) on certain qualifying streets. These measures are aimed at providing residential accommodation in the vacant space over commercial premises in the five cities of Cork, Dublin, Galway, Limerick and Waterford. Again, the streets in question are to be designated for the purposes of the Chapter by way of order of the Minister for Finance. Tax incentives similar to those available in relation to commercial and residential buildings in qualifying areas are provided, but additional conditions apply. The incentives are available in respect of buildings which existed on 13 September 2000 and which front on to a qualifying street. They also apply to replacement buildings where the original building has to be demolished following a demolition order or, in certain cases, due to structural reasons.

Originally, the qualifying period for the tax incentives in relation to qualifying streets ran from 6 April 2001 to 31 December 2004. Again, 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. These restrictions apply in relation to both the Urban and LOTS schemes. In the case of the Urban scheme, 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 in relation to either scheme under this Chapter in certain circumstances – see section 372K for full details.

Provision was made —

  • in section 372A, for the linking of the reliefs in relation to qualifying areas to the enactment of urban renewal legislation (see the Urban Renewal Act 1998) which incorporates the concept of Integrated Area Plans as a basic component of that legislation – this section also contains various definitions for the purposes of the Chapter,
  • in section 372B, 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 provided and to discriminate as between different certain types of expenditure and of commercial development as regards the reliefs in question,
  • in section 372BA, to empower the Minister for Finance, on the recommendation of the Minister for the Environment and Local Government, to designate certain streets to be qualifying streets for one or more of the reliefs provided. Additionally, the section empowers the Minister to confine incentives in relation to commercial premises to those used essentially for the retailing or supply of local goods and services,
  • in section 372C, 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 372D, for accelerated capital allowances in respect of capital expenditure incurred on the construction or refurbishment of certain commercial premises in qualifying areas. Relief is also available for similar expenditure incurred in relation to buildings which front on to qualifying streets, but additional conditions apply,
  • in section 372E, for a double rent allowance in respect of rent paid for the lease of certain buildings, [NB: No area was ever designated for the purpose of this section and it was repealed by section 24(3) Finance Act 2002],
  • in section 372F, for relief against rental income in respect of expenditure on the construction of certain rented residential accommodation in qualifying areas and on the necessary construction of such accommodation on qualifying streets,
  • in section 372G, for relief against rental income for expenditure on the conversion of certain buildings, in qualifying areas and on qualifying streets, into rented residential accommodation,
  • in section 372H, for relief against rental income for expenditure on the refurbishment of buildings, in qualifying areas and on qualifying streets, comprising rental accommodation, and
  • in section 372I, for relief for expenditure on the construction or refurbishment of owner-occupied residential accommodation in qualifying areas. Relief also applied for the necessary construction or refurbishment of such accommodation on qualifying streets.
  • in section 372I, for measures which were supplementary to sections 372F, 372G, 372H and 372I.
  • in section 372K, 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 372F, 372G, 372H, 372I and 372J 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.

372A Interpretation and application (Chapter 7)

Summary

This section is the interpretation section for Chapter 7. It contains definitions of terms used throughout the Chapter. It also makes the application of the Chapter and Chapter 11 (residential reliefs) of this Part, in relation to qualifying areas, conditional on the enactment of legislation on urban renewal to include the concept of Integrated Area Plans as a basic feature of that legislation. (This legislation was subsequently enacted in the Urban Renewal Act 1998.)

Details

Definitions

(1) “existing building” means a building or structure which existed on 13 September 2000 and which fronts on to a qualifying street (LOTS).

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

“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.

“multi-storey car park” is a building or structure of 2 or more storeys wholly or mainly in use for the purpose of providing car parking for the public generally. Parking facilities must be available (on payment of an appropriate charge) on a “first come, first served” basis.

“necessary construction” in relation to an existing building (LOTS), means:

  • construction of an extension not exceeding 30% of the floor area of the building before any work was carried out where the extension was necessary to provide access to residential premises which qualify under Chapter 11 of this Part,
  • construction of an additional storey(s) to the building to restore or enhance the streetscape, or
  • construction of a replacement building.

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

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

“qualifying period”, in relation to the business tax incentives provided in this Chapter, is:

  • in the case of qualifying areas, subject to orders made under section 372B, the period from 1 August 1998 to 31 December 2002. This period is extended to 31 December 2006 where subsection (1A) applies. [NB: The 31 December 2006 date is, subject to a commencement order, further extended to 31 July 2008 by section 30 FA 2006 – provided that the conditions of subsections (1A) and (3) are satisfied.]
  • in the case of qualifying streets, subject to orders made under section 372BA, the period from 6 April 2001 to 31 December 2004. This period is extended to 31 December 2006 where subsection (1B) applies. [NB: The 31 December 2006 date is, subject to a commencement order, further extended to 31 July 2008 by section 30 FA 2006 – provided that the conditions of subsections (1B) and (3) are satisfied.]

In relation to residential reliefs under both schemes, the “qualifying period” in relation to rented residential and owner-occupier relief is defined in section 372AL in Chapter 11 of this Part.

“qualifying street” means a street specified under section 372BA.

“refurbishment”, is any work of construction, reconstruction, repair or renewal, carried out in the course of the 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.

“replacement building” means a building or structure (or part thereof) which is constructed to replace an existing building (LOTS) where:

  • the demolition of the existing building was required under the Local Government (Sanitary Services) Act 1964 and an order or notice to that effect was given or made on or after 13 September 2000 and before 31 March 2001 (the replacement building, in this case, must be consistent with the character and size of the existing building), or
  • the demolition of the existing building, where it was a single storey building, was required for structural reasons so as to restore or enhance the streetscape by the construction of an additional storey(s).

“relevant local authority” means:

  • in relation to a qualifying area, the county council, city council or town council in whose functional area the area is situated, or the authorised company (within the meaning of section 3(1) of the Urban Renewal Act 1998) which prepared the integrated area plan for the area, and
  • in relation to a qualifying street means, the city council of Cork, Dublin, Galway, Limerick or Waterford, as appropriate.

“street” includes part of a street, road, square, quay or lane.

Extension of qualifying period to 31 December 2006 – Urban Renewal

(1A) The qualifying period for business incentives in relation to qualifying areas may extend to 31 December 2006 where the relevant local authority (which includes an authorised company) certified by 30 September 2003 that 15 per cent of the total costs of constructing or refurbishing a building or structure (or part of a building or structure) and of acquiring the site had been incurred by 30 June 2003. Application for the certificate had to be received on or before 31 July 2003.

Extension of qualifying period to 31 December 2006 – LOTS

(1B) The qualifying period is extended to 31 December 2006 in relation to the construction or refurbishment of a building or structure on a qualifying street 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 work 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 – Urban Renewal and LOTS

(3)(a) and (b) In the case of both schemes, a termination date of 31 July 2008 may apply provided that the relevant conditions of subsection (1A) or subsection (1B) 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 the case of the Urban Renewal Scheme (but not LOTS) 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) In the case of industrial and commercial buildings and structures in qualifying urban areas (but not for LOTS), 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 Integrated Area Plans

(2) The operation of the Chapter and Chapter 11 of this Part in relation to qualifying areas is linked to the enactment of general urban renewal legislation by the Minister for the Environment and Local Government to provide for such renewal to be based on Integrated Area Plans drawn up for that purpose. (The Urban Renewal Act, 1998, was enacted to achieve this).

Relevant Date: Finance Act 2021