Revenue Tax Briefing Issue 25, February 1997
A number of queries have been received from companies which provide services involving document storage, management and retrieval of documents and other archive services asto whether payments made by theirclients will qualify for double rentallowance.
For a double deduction to be due under Section 42 Finance Act 1994 a person must pay rent under a qualifying lease in respect of a qualifying premises andmust be, apart from Section 42, entitledto a deduction for the rent paid inrespect of the qualifying premises which is occupied by such person forthe purposes of his/her trade or profession. The lease must also be granted on bona fide commercial terms by a lessor to a lessee who is notconnected with the lessor. The termslease, lessee, lessor and rent have the meanings assigned to them in ChapterVI, Part IV, Income Tax Act 1967 (Case V).
Whether or not the interest which theuser of the storage, management, retrieval or archive service acquires is a leasehold interest in a premises will depend on the facts of the case and the agreement between the parties. If such a leasehold interest exists payments ofrent made by the user, in respect of aqualifying premises which is occupiedby that person for the purposes ofhis/her trade, will qualify for the doublerent deduction provided they are onbona fide commercial terms between unconnected persons. It is the Revenue view that other payments in respect ofancillary services involved do notconstitute rent for the purposes of Section 42 Finance Act 1994.
Practitioners and their clients should satisfy themselves that they comply with the provisions of the legislation before a claim is made. Additionally the expression of doubt provision contained in Section 14(4) Finance Act 1988 should be used in a case where a doubtarises. Any incorrect claims which havebeen made should be brought to the attention of the Inspector involved.