Vol. 476 No. 2
52 Mr. E. O'Keeffe asked the Minister for Finance if he will consider a change in revenue rules on tax treatment of leases in view of the change in issue 24 of tax briefing, issued in December 1996; and if his attention has been drawn to the concern among agricultural contractors, plant hire and haulage contractors in this regard. [6481/97]
I have been advised by the Revenue Commissioners that the article in issue 24 of Revenue's tax briefing to which the Deputy's query refers was issued in response to complaints from tax practitioners that, without clear guidelines from Revenue, they were unsure as to the correct income tax or corporation tax treatment applicable to finance leases. Where incorrect tax treatment had been applied by practitioners and was uncovered in a Revenue audit, the necessary tax adjustments usually gave rise to an additional charge to tax. Such unforeseen liabilities could cause cashflow problems for traders.
Recent issues of Revenue's tax briefing set out in detail the tax treatment applicable to finance leases of assets used for the purpose of a trade or profession. The guidelines as stated in issue 24 of Revenue's tax briefing, dated December 1996, represent a clarification of the correct treatment and not a change. These guidelines are based on long established principles of accounting and taxation.
Following the publication of the guidelines, it was represented to the Revenue Commissioners by interested persons, including the parties mentioned in the Deputy's question, that many traders entered into transactions on the understanding that a particular tax treatment would apply and that they were unaware that this treatment was incorrect. The Revenue Commissioners have now accepted that a strict application of the correct treatment, as outlined in the article, to leasing transactions which took place prior to December 1996 could seriously affect a trader's cashflow.
