John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Question 599: To ask the Minister for Finance the situation in relation to the living over the shop scheme; if it is in operation; the qualifying conditions; the areas where it is available; and if he will make a statement on the matter. [3083/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The 'living over the shop' scheme commenced on 6 April 2001 and is due to terminate on 31 July 2008. The aim of the scheme is to provide traders and investors with an incentive to develop existing vacant or under-utilised space over shops into residential accommodation. The scheme is in operation for the cities of Dublin, Cork, Galway, Limerick and Waterford where the relevant local authority has designated certain streets as being eligible for the scheme. Buildings that front onto designated streets can qualify for 'section 23'-type relief, owner-occupier relief and capital allowances where expenditure is incurred on their construction, refurbishment or conversion. Tax incentives only apply where the ground floor is in commercial use or, if vacant, where the last and the proposed use is commercial. Incentives for commercial development are conditional on residential development also being carried out.

The relevant local authority must certify that the work is consistent with the aims, objectives and criteria for the 'living over the shop' scheme. The ground floor of the building must be in use, or be intended for use, for commercial purposes. Industrial premises, offices and premises used for the provision of mail order and financial services are excluded from the scheme. The commercial part of the building must be in use either by an owner-occupier for the purposes of a trade or profession or by a lessee renting the premises on bona fide commercial terms at arm's length. The upper floor or floors of the building must be in use, or be intended for use, as residential accommodation. The accommodation can be either rented to tenants or occupied by the owner. The floor area for an individual residence must be at least 38 square metres and cannot exceed 125 square metres.

The completed building must have a certificate of reasonable cost or a certificate of compliance issued by the Department of the Environment, Heritage and Local Government. Property developers are not permitted to claim relief under the scheme.

Expenditure on construction, refurbishment or conversion of buildings can qualify for tax relief. However, relief for expenditure on conversion work applies only in respect of the residential part of a building. Expenditure on refurbishment qualifies only where it amounts to 10% or more of the market value of the commercial part of the building before the refurbishment takes place. The cost of a site or of the existing building or any costs associated with the acquisition of the site or building do not qualify. Finally, the amount of expenditure incurred on the commercial part of a building is limited for relief purposes to the amount of relief arising on the residential part of the building.

The original termination date by which qualifying construction, refurbishment or conversion work had to be carried out was 31 December 2004. However, along with most of the other property-based incentive schemes, this date was extended in the Finance Act 2006 to 31 July 2008 where certain conditions are met. These conditions require a full and valid application for planning permission to have been received by the relevant local authority by 31 December 2004 and work to the value of 15% of the overall qualifying costs to have been carried out by 31 December 2006. There is a gradual reduction in the amount of expenditure that can qualify for relief after 31 December 2006. Expenditure incurred during 2006 can qualify in full without restriction. However, only 75% of expenditure incurred in 2007 and 50% of expenditure incurred in the period from 1 January 2008 to 31 July 2008 can qualify for relief.

Enda Kenny (Mayo, Fine Gael)
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Question 600: To ask the Minister for Finance if a tax of 20% is deducted from alimony payments made to an ex-spouse resident here when paid from another EU country; if so, the reason for this; and if he will make a statement on the matter. [3126/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I assume that what the Deputy has in mind is the tax treatment in Ireland of maintenance payments received by a person from his or her former spouse resident in another EU country.

I am informed by the Revenue Commissioners that, in the circumstances mentioned and where the maintenance payment is made under a legally enforceable maintenance arrangement, the person receiving the payment is liable for tax at his or her highest rate of tax on the amount of maintenance received for his or her benefit.

This tax treatment arises from the provisions of Section 1025 of the Taxes Consolidation Act 1997. The section deals with payments made under a "maintenance arrangement". A maintenance arrangement is defined as an order of court, rule of court, deed of separation, trust, covenant, agreement or arrangement or any other act giving rise to a legally enforceable arrangement and made or done in consequence of the separation or the annulment or dissolution of a marriage.

The section provides that where a legally binding maintenance arrangement is in place, then (a) the paying spouse receives a tax deduction in respect of the alimony payments for the benefit of her/his spouse (but not in respect of maintenance for his/her children); and (b) the receiving spouse is taxed (at her/her highest rate of tax) on the amount of alimony received for her/his benefit (but is not taxed on the alimony received in respect of her/his children).

I am further informed by the Revenue Commissioners that where both spouses are Irish resident for tax purposes, a separated (but not divorced) couple may jointly elect to be treated for tax purposes as if the separation had not taken place and, where such an election is made, then the payer does not receive a tax deduction for the alimony payments and the receiving spouse is not taxable on them.

Payments made under a non-legally binding arrangement are ignored for income tax purposes.

Maintenance payments in respect of children are not taxable in the hands of the children or the receiving spouse. The effect of this is that the payments are treated the same way as if the taxpayer was providing for the child out of his or her after-tax income. This is in line with the tax treatment of all other parents, where the cost of maintaining their children is not tax deductible.