Revenue Tax Briefing

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Revenue Tax Briefing Issue 31, April 1998

Capital Allowances - Transitional Arrangements

Capital Allowances Restrictions

The Minister for Finance, in his budget speech on 3 December 1997, announced a number of restrictions on the capital allowances on buildings that an individual passive investor can claim against non-rental income. These restrictions are contained in Sections 409A and 409B Taxes Consolidation Act 1997 [as inserted by Section 30 Finance Act 1998].

Certain transitional arrangements were also provided for pipeline projects where specified conditions are met. This note deals with one aspect of these transitional measures and its purpose is to provide clarification and guidance for persons seeking to rely on its terms.

Section 409A(5)(b)(ii) which deals with industrial buildings and other premises and Section 409B(4)(b)(ii) which deals with hotels, state that the restrictions will not apply, where the following conditions exist:

  • An application for planning permission for the work on the building in question has been received by a planning authority before 3 December 1997 or a detailed plan had been prepared and detailed discussions had taken place with a planning authority before that date
  • Expenditure on the building in question is incurred under an obligation entered into by an individual before:
    (I) 3 December 1997
    (II) 1 May 1998, pursuant to negotiations which were in progress before 3 December 1997.

This condition “pursuant to negotiations which were in progress before 3 December 1997” is explained in subsections 6(b) and 5(b) of Sections 409A and 409B, respectively. These state that unless preliminary commitments or agreements in writing were entered into before budget day, then the condition above will not be satisfied.

Revenue’s view on preliminary commitments or agreements in writing

An individual seeking to come within the terms of this aspect of the transitional measures and thereby claim unrestricted capital allowances must be able to demonstrate, through pre-budget written evidence, that he/she was committed before budget day in a preliminary manner to the project. This does not mean that a binding contract or agreement had been entered into but is more in the nature of an agreement reached or a commitment given, which subject to certain conditions, e.g. planning permission being obtained, continuation of tax allowances etc. The agreement or commitment is, however, something more substantive than a mere expression of interest by an investor in a project.


The type of written evidence which is acceptable to Revenue can include evidence of payments of deposits, signed heads of agreement, exchanges of correspondence between investor(s) and developer. Copies of minutes of meetings and conversations may also be relevant, where other supporting documentary evidence is available. It is imperative that any written evidence pre-date the budget. Revenue will not accept letters, affidavits or statutory declarations which retrospectively verify events taking place before budget day, as evidence on their own, but will, very exceptionally, use them where there is other strong supporting evidence of a commitment or agreement.

These comments apply equally where there is more than one investor involved in the project, written evidence must be provided in respect of each investor, together with his/her respective interest in the project.


Revenue recognises that there are circumstances in which one individual (referred to here as an agent) may give a commitment for an investment in a project on behalf of a number of individuals. The agent may or may not be an investor in the project. The requirements of the legislation, in Revenue’s view, are no different where these circumstances exist to those required where no agent is involved. Evidence of a pre-budget preliminary commitment or agreement in writing must be provided together with an explanation of the circumstances whereby the agent was appointed. Additionally, Revenue should be supplied with written evidence that each individual investor who has been committed by the agent was a party to the project before the commitment was given and it must also be possible to demonstrate his/her respective interest in the project. Again, statements providing retrospective confirmations will not be accepted on their own but will, very exceptionally, be used where there is other strong supporting evidence of the identity of the investor.

It should be noted that Revenue cannot, in any circumstances, provide confirmation to any investor whose identity was unknown at the time the commitment was given, on the grounds that the transitional arrangements do not apply in such cases.

Claims for unrestricted Capital Allowances

While the sections require the claimant to prove that he/she comes within the terms of the transitional provisions, the ordinary rules of self-assessment apply. Claims for unrestricted capital allowances (i.e. cases which come within the transitional provisions) may be made in the ordinary way. In case of doubt the expression of doubt facility (Section 955(4) Taxes Consolidation Act 1997) should be used. Alternatively, investors may seek confirmation that the transitional arrangements apply to their investment. When doing so, they should provide all available documentation from all sources (e.g. developer, solicitors, accountants, other investors etc.) in order to allow Revenue to give careful consideration to the request.

Requests for confirmation should be sent to:
Declan Rigney,
Direct Taxes Administration Division,
Incentives Branch,
Dublin Castle,
Dublin 2.
Telephone: 01 - 702 4105
Fax: 01 - 679 3314.