Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Referring to the recommendation ruled out of order will give us context. The recommendation sought to amend section 381(a)(2) inserted into the Taxes Consolidation Act 1997 by section 18 of the Bill. The new section 381(a) concerned one of two measures contained in section 18, both of which relate to those engaged in the trade of dealing in, or developing, land. The other measure concerns debt forgiveness and the tax consequences that flow from it and affects all those engaged in dealing in or developing land either actively or passively. The new section 381(a) relates to the restriction on loss relief for individuals taxed as dealers or developers in land but who are not actively engaged in the trade. The restrictions apply where the loss arising from the interest on debt incurred to finance the purchase or development of land held as trading stock, which is deducted but not paid, or from a decline in the value of land held as trading stock where the loss in land value, has not actually been realised.

The Senator's recommendation seems to be going a step further in that he appears to propose that the facility to apply for loss relief against other income provided for under section 381 of the Taxes Consolidation Act 1997 should be denied in respect of any loss arising from the write-down in the value of land held as trading stock by the individual concerned, irrespective of whether loss is realised or not. The reason I have introduced the restriction on section 18 is that I have been made aware by the Revenue Commissioners of instances in which significant loss relief against other income, giving rise to very large repayments of tax, have been claimed where, for example, losses in land had not been realised. To some extent, the problem arises because of the accruals basis of accounting, which provides that expenses are recognised when they are incurred rather than when they are actually paid. However, I have no desire to deny taxpayers the long-established facility of setting losses incurred in one business activity against income from other sources so long as the loss has actually been suffered before doing so. The Senator's recommendation clearly goes beyond what is necessary to deal with the specific problem identified to me by the Revenue Commissioners. For that reason I did not accept the amendment.