Dáil Éireann debate -
Wednesday, 28 Jan 1998

Vol. 486 No. 1

Written Answers. - Tax Avoidance.

Pat Rabbitte

Question:

100 Mr. Rabbitte asked the Minister for Finance if it is his intention to retain unchanged the anti tax avoidance of £25,000 limit on capital allowances for any one individual per annum against non-rental income as announced in the budget; if it is also his intention to retain unchanged section 24 of the Finance Act, 1991 (Restriction of Tax Incentives on Property Investment) and the interpretation of that section's restriction by the relevant anti-avoidance authorities, in particular in respect of the number of private individuals who may share the relief for any one qualifying project; if he will make a statement on media reports that he is subject to pressures and lobbying from accountancy firms, tax consultants and a State agency (details supplied) to relax one or both of the above anti-avoidance measures; and if he will make a statement on the matter. [1872/98]

Minister for Finance (Mr. McCreevy):

The restrictions introduced in the budget are designed to limit the extent to which capital allowances on investment in industrial and commercial buildings can be claimed against non-rental income by passive individual investors and partnerships. The measure arises from the need to maintain a balance between the provision of tax incentives to promote investment and the use of such incentives by high income earners for the purposes of sheltering large amounts of income from taxation.

Given the reliance generally placed upon capital allowances in framing investment plans, the restrictions were made subject to transitional provisions to cater for projects which at the time of the budget were at an advanced stage of planning or were already under way. I have received several representations since the budget on behalf of projects in the pipeline which may not come within these transitional provisions and I am considering in the context of the Finance Bill whether some relaxation of the transitional provisions is merited in the light of the commitments already entered into in respect of such projects and having regard to the level of new investment and employment arising therefrom.

As regards section 24 of the 1991 Finance Act, now section 408 of the Taxes Consolidation Act, 1997, this was introduced as an anti-avoidance provision to counter the sharing of capital allowances on a building or structure among a large group of individual investors. The purpose of this section is to contain the Exchequer cost of property investment schemes where a large number of investors come together to invest in a particular development. The provisions of section 24 will therefore complement the budget restriction of £25,000 per annum on the amount of capital allowances on buildings other than hotels which a passive individual investor may offset against non-rental income. While the provisions of section 24 will be kept under review, there are no plans to relax or modify them at this stage.