Terence Flanagan (Dublin North East, Independent)
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78. To ask the Minister for Finance his views on tax breaks lost for those who purchased hotels in 2009 and the scrapping of tax reliefs in 2015; and if he will make a statement on the matter. [8715/15]

Michael Noonan (Limerick City, Fine Gael)
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It is understood that the Deputy is referring to measures, introduced in section 17 of the Finance Act 2012, intended to reduce the legacy of property reliefs in line with Government policy to develop a fairer tax code.  These measures followed an Economic Impact Assessment undertaken by my Department of  provisions, introduced in Finance Act 2011,  which were never commenced and which have been repealed.  In providing a cut-off point in 2015, when introducing these provisions, I allowed time for persons affected to take steps to minimize the impact on them.  

The provisions of section 17 (now contained in Chapter 4A of Part 12 of the Taxes Consolidation Act 1997) apply only to the various accelerated property and area-based capital allowance schemes.  The ordinary industrial buildings allowance or the wear and tear allowance for plant and machinery are unaffected.  Additionally, these measures apply solely to passive investors.  Persons who are actively engaged in their respective trades are not affected.  With effect from the beginning of 2015 any unused accelerated capital allowances, which are carried forward beyond the tax life of the expenditure on the building or structure to which they relate, are immediately lost. This essentially means that if the tax life has ended at any time up to the end of 2014, then the unused allowances are lost in 2015.  On the other hand if the tax life is due to end later than 2014, the allowances are lost after the end of the tax life of the expenditure.

Capital allowances for expenditure incurred on the construction of hotels are  long standing and have been available at various rates over the years.  Subject to transitional arrangements, expenditure incurred up to 31 July 2008 on the construction of a hotel could qualify for accelerated capital allowances at a rate of 15% per annum for the first 6 years and 10% in year 7.  For expenditure incurred after 31 July 2008, or where the transitional arrangements were not met, the ordinary rate of 4% per annum over 25 years applies.  The provisions of Chapter 4A of Part 12 of the Taxes Consolidation Act 1997 only apply to expenditure which qualifies for the accelerated rate of capital allowances of 15% for 6 years and 10% in year 7 and only where the allowances are being claimed by a passive investor.   The tax life of expenditure on a hotel which qualified for accelerated capital allowances was 7 years from first use of the building.  

The Government understands the importance of the hotel industry and has extended the 9% rate of VAT for the hospitality sector and extended the Employment and Investment Incentive to include hotels, guest houses and self-catering accommodation in recent Budgets.