Vol. 478 No. 6
8 Mr. Killeen asked the Minister for Finance the effect, if any, the alteration of the conditions governing capital allowances for hotel investment will have on the provision of additional tourist accommodation; and if he will make a statement on the matter. [9257/97]
The Deputy is referring to an antiavoidance provision in this year's Finance Bill which is designed to counteract certain packaged schemes which have come to notice involving groups of individuals investing in hotels. Typically, such schemes invite individuals to join a partnership for the purpose of investing in the construction of an aparthotel. Under an agreement in place at the time the investment is made, individual investors, after drawing down all the capital allowances available, are each to receive ownership of a nominated suite in the hotel.
Enhanced capital allowances were provided for hotels in recognition of the important role played by them in the tourism sector. However, it was never intended that such allowances would give rise to the type of schemes now emerging. Diverting hotel capacity, which has been provided at considerable Exchequer cost, to private use once the capital allowances have been claimed is a clear abuse of the system.
The Finance Bill provides that there will be no entitlement to capital allowances where, at the time of the investment, any agreement or arrangement exists which provides that individual investors are to obtain a room or suite in the hotel at the end of the capital allowance write-off period. This restriction will not affect genuine hotels or aparthotels which are not subject to such agreements or arrangements.
I am satisfied this change will not have any negative effect on the provision of additional tourist accommodation. Rather, it should have a positive effect by ensuring tax resources are focused on bona fide hotel projects.
I have no objection to this change. My only comment is that the tax adviser who exploited this loophole should be congratulated. It has been closed off in the Finance Bill.
