Seán Fleming (Laois-Offaly, Fianna Fail)
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Question 89: To ask the Minister for Finance the final date for which construction and other capital expenditure must have been incurred for inclusion in urban renewal, town renewal, seaside renewal, rural renewal, multi-storey car parks, living over the shop, homes, housing for the elderly or infirm, hostels, guest houses, convalescent homes, qualifying private hospitals, qualifying sports injury clinics, buildings used for child care purposes, psychiatric hospitals, mental health centres, student accommodation, holiday camps, general rental refurbishment, third level educational buildings, Temple Bar scheme, resort area scheme, designated islands, Dublin docklands, double rent relief, industrial buildings, commercial premises, rented residential accommodation and owner-occupied residential accommodation schemes; the maximum free depreciation or initial allowance and annual allowances claimable; the final year in the future in which any such allowance may be claimed; the estimated amounts claimed; the cost to the Exchequer of tax foregone in 2007, 2008 and 2009 and an estimate for 2010 and the succeeding years until all allowances claimable under the schemes have been exhausted; the way the cost of these allowances and reliefs are incorporated into projected taxation receipts for each of the years concerned; if any of these schemes have not been closed to new entrants; if a closing date has been specified to date; and if he will make a statement on the matter. [23749/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The Revenue Commissioners have provided me with the information requested by the Deputy. The information is presented in tabular format. Because there are significant differences in the operation of tax relief between the commercial and residential schemes separate tables have been used in relation to the 'non-cost' elements of the schemes.

Table 1 contains the commercial schemes,

Table 2 contains the residential schemes, and

Table 3 contains composite figures for both commercial and residential relief in relation to the cost of the schemes to the Exchequer.

The Commissioners have also made some general points that should be noted when interpreting the tables. The termination dates are the dates by which the construction or refurbishment work on a building has to be carried out if the expenditure that is attributable to that work is to qualify for tax relief. Where a building is not completed by the termination date the expenditure attributable to any construction or refurbishment work that takes place after this date cannot qualify for tax relief. There are no set dates by which a person has to acquire a tax incentive property in order for tax relief to start to be claimed. Tax relief can only start to be claimed after a building has been completed and the building leased or owner-occupied for the purposes required by the particular scheme. Once a building has been leased or owner-occupied and is in use for the required purpose, tax relief can be claimed over varying periods. In addition, the rate at which the available tax relief can be used up depends on the particular taxpayer having sufficient taxable income in any year to absorb the relief. Any unused relief (with the exception of that for residential owner-occupier relief) can be carried forward indefinitely until it has been absorbed. Thus, it is not possible to provide an indication of the final year in which tax relief under these schemes will be claimed as the start year for relief can vary from building to building and the relief period applicable likewise can vary within some of the schemes and between different taxpayers.

At this stage the only scheme that is still open to new entrants is the Mid-Shannon Corridor Tourism Infrastructure Scheme. New entrants have until 31 May 2012 to submit project applications for approval in principle. Expenditure on approved projects under this scheme that is incurred before 31 May 2015 can qualify for capital allowances. The scheme for Specialist Palliative Care Units has not yet been commenced. When the Commencement Order is made, the commencement date will be made retrospective to 13 March 2008.

The Deputy asked about the way in which the cost of allowances and reliefs are incorporated into projected taxation receipts for each of the years concerned. While the exchequer cost attributable to a specific tax allowance or relief is generally set out (in the Summary of Budget Measures) in the year of its introduction, the ongoing cost of each specific allowance or relief is not thereafter disaggregated for forecasting purposes; projections for income tax receipts are based on assumed movements in macro-economic parameters and not by reference to the costs of individual tax reliefs.

Notes to Table 1

1) The termination date is the date by which qualifying construction/refurbishment expenditure must be incurred, not the date by which a building must be completed/sold or relief claimed.

2) Free depreciation (i.e. the ability to claim more than the basic annual rate of allowances for a single year or over a period of years) is available to owner/occupiers but not to lessors.

3) Under the 1994 Urban Renewal Scheme a maximum of 50% of qualifying expenditure incurred on commercial projects could be written off. The annual allowance for such projects was 2% per annum.

4) Under the Temple Bar Area scheme the emphasis was on refurbishment rather than construction. Refurbishment projects in general qualified for 100% write off of the capital expenditure incurred at the higher 4% rate of annual allowance. For most types of construction projects, only 50% of the qualifying expenditure could be written off at the lower 2% rate.

5) As per note 4, there were different rates for construction and refurbishment projects and for different types of projects.

6) As per note 4, there were different rates for construction and refurbishment projects and for different types of projects.

7) Under the Enterprise Area scheme lessors could claim capital allowances on 100% of qualifying expenditure at a rate of 25% initial allowance and 4% annual allowance.

8) Double Rent Deduction was not available for buildings in Enterprise Areas located at an airport.

9) The Initial Allowance was increased to 50% in the case of expenditure incurred from 1 January 1998 on a qualifying building located in an Airport Enterprise Area.

10) For Multi Storey Car Parks the annual allowance of 4%, free depreciation of 100% and initial allowance of 50% applied to expenditure incurred after 31/7/1998 where no lease had been granted for the purposes of double rent relief. For expenditure incurred prior to this date the capital allowances available were restricted to a maximum 50% write-off of the capital expenditure incurred. Under these circumstances an annual allowance of 2%, free depreciation of 50% and an initial allowance of 25% applied.

11) For Multi Storey Car Parks the latest date for entering into a qualifying lease for the purposes of double rent deduction was 30/09/1999.

12) Capital allowances for expenditure incurred on hotel projects are of long standing and different rates have applied over time. From 1956 to 27/1/1994 the annual allowance was 10%. From 28/1/1994 to 31/7/2008 the rate was 15% for the first 6 years and 10% in year 7. From 1/8/2008, subject to transitional arrangements, the annual allowance is 4%, giving a current write-off period of 25 years.

13) The accelerated allowances for Childcare Buildings are available in respect of expenditure incurred from 1 December 1999.

14) See Note 13.

15) This scheme has not yet been commenced. When the Commencement Order is made, the commencement date will be made retrospective to 13/3/2008.

16) Expenditure incurred on registered holiday camps after 31/7/2008 is written off at a rate of 4% per annum. For expenditure incurred prior to 27/1/1994 an annual allowance of 10% applied.

Notes to Table 2

1) There are two types of residential tax relief, 'section 23' type relief and owner-occupier relief. 'Section 23' type relief (rented residential relief) is given, in its entirety, as a deduction from rental income in the year the property is first let under a qualifying lease. If there is insufficient income to absorb the relief it is carried forward as a rental loss until used up. Therefore, there is no standard writing off period – it could vary from 1 year to indefinitely as it depends on the ability of the investor to absorb the relief. In contrast, owner-occupier relief is granted at a fixed annual rate over 10 years, i.e. at 5% of the qualifying expenditure in respect of expenditure on construction or at 10% in respect of expenditure on refurbishment.

2) 1/6/1998 for 'section 23' type relief and 6/4/1999 for owner/occupier relief.

3) 'Section 23' type relief only.

4) Relief is available under the Countrywide Refurbishment Scheme in respect of rented residential property that is located anywhere in the country. Unlike 'section 23' type relief for designated areas, the qualifying expenditure is written off at a rate of 15% per annum in the first 6 years and 10% in year 7.

Notes to Table 3

1) The information available on the cost to the Exchequer is based on personal income tax returns filed by non-PAYE taxpayers (Form 11) and corporation tax returns filed by companies for the years 2007 and 2008, the latest year for which this information is available. Data for 2009 cannot be provided as the tax returns for this year are yet due. It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return (Form 12) is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return (Form 11).

2) The estimated relief claimed has assumed tax forgone at the 41% rate for 2007 and 2008 in the case of individuals and 12.5% in the case of companies for both years. The figures shown correspond to the maximum Exchequer cost in terms of income tax and corporation tax.

3) The figures for 2008 are subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.