Written answers

Wednesday, 8 October 2008

9:00 pm

Photo of Joanna TuffyJoanna Tuffy (Dublin Mid West, Labour)
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Question 206: To ask the Minister for Finance the position regarding the provision that allows property developers to seek refunds on their tax payments to the Revenue Commissioners on the basis that the value of their land has reduced; the amount of money in such refunds that have been paid out in the years 2006, 2007 and 2008 per year or part of a year; and if he will make a statement on the matter. [34015/08]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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I am advised by the Revenue Commissioners that a property developer may be entitled to claim a refund of tax paid as a result of losses arising from a reduction in the value of land and property where certain requirements have been met, as follows:

The developer would have to be engaged in a trade of land dealing and development so that any land and property held by the developer forms part of their stock in trade;

The method used for valuing trading stock must be in accordance with generally accepted accountancy standards and be applied on a consistent basis; a developer would have to show good reason for any change in the basis of valuation;

As trading stock is stated in the accounts at the lower of cost and net realisable value, any write-down in the value of trading stock would have to be of a sufficient amount as to reduce the value of land and property holdings to a net realisable value which is below cost; and

The write-down in value would also have to be of a sufficient amount to either (i) generate a trading loss for the chargeable period, which may be carried back and set off against profits for the previous chargeable period, or (ii) reduce a person's tax liability for the current chargeable period below the amount of preliminary tax already paid for that period, thereby generating a claim for refund of preliminary tax paid.

A tax refund may also arise in the case of a developer going out of business and claiming terminal loss relief under which trading losses in the last 12 months of the trade may be set off against trading income in the preceding three years. There has to be a permanent cessation of the trade for such loss relief to apply.

I should add that loss relief is not available in respect of a write-down in the value of property assets held as investments. Where property is held for investment purposes, losses are only allowed on disposals of assets and such losses may only be offset against current or future capital gains.

I am advised by Revenue that separate figures are not available on the amount of tax refunds paid to property developers on foot of refund claims made by them in respect of property re-valuations in 2006, 2007 and 2008. However, the Revenue Commissioners are not aware of significant refunds being claimed to date in this respect and there is no evidence so far to show that the issue has impacted in any material way on the overall tax yield. However, the position is being kept under review.

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