Written Answers. - Seaside Resorts Scheme.
Jimmy Deenihan
Question:
159
Mr. Deenihan
asked the
Minister for Finance
the incentives available to those seaside resorts designated under the pilot tax relief scheme in view of the changes that have taken place to the scheme over the past two years; and if he will make a statement on the matter.
[10839/98]
The following allowances are available under the Taxes Consolidation Act 1997 in respect of qualifying resort areas.
Sections 352 and 353 provide for a special regime of capital allowances in respect of capital expenditure incurred on the construction or refurbishment of hotels, holiday camps, holiday cottages registered under the Tourism Traffic Acts and other classes of approved tourism facilities. One hundred per cent of the site exclusive cost of such expenditure may be written off. To qualify for allowances as refurbishment, the amount spent on refurbishment must not be less than 20 per cent of the market value of the building, excluding the site cost, before refurbishment. The allowances are 50 per cent of initial allowance in year one with a 5 per cent annual allowance thereafter or 75 per cent free depreciation with a 5 per cent annual allowance thereafter for the owner-occupier or trade and 50 per cent initial allowance with a 5 per cent annual allowance thereafter for the lessor.
Section 354 provides for a deduction, by way of an expense of the trade or profession, to the lessee of a business premises of twice the rent paid, provided certain conditions are satisfied. The double rent deduction is confined to a maximum rental period of ten years for each premises.
To qualify for the above allowances, the expenditure on the qualifying premises must be made in the period commencing on 1 July 1995 and ending on 30 June 1998 or 30 June 1999, where the local authority certifies on or before 30 September 1998 that not less than 15 per cent of the total cost of the building or structure and the site had been incurred prior to 1 July 1998.
Section 30 of the 1996 Finance Act amended one aspect of the legislation dealing with the scheme, namely the self-catering area. This section restricts the tax incentives for holiday cottages, holiday apartments and other self-catering accommodation in the designated resort areas in two ways. First, it provides that the double rent allowance and capital allowances cannot both apply in the case of registered holiday cottages and apartments and other self-catering accommodation listed under the Tourist Traffic Act, 1957. Second, it restricts the manner in which capital allowances for registered holiday apartments and other self-catering accommodation listed under the Tourist Traffic Act, 1957 can be set off, bringing their treatment into line with that already in place for registered holiday cottages. Thus, from 5 April 1996, capital allowances for all holiday cottages, holiday apartments and other self-catering accommodation in the designated resort areas can only be offset against rental income, including rental income from other sources, or, where the trade of operating such accommodation is carried on — against the income from the trade.
These restrictions do not apply in cases where certain steps have been taken before 5 April 1996 in relation to the planning or development of such registered holiday apartments or listed self-catering accommodation.
Section 30 of the 1998 Finance Act introduces an annual cap of £25,000 on the amount of capital allowances on buildings that a passive individual taxpayer can claim against non-rental income, subject to transitional arrangements. The buildings in question are all those on which capital allowances can be claimed including buildings in tax designated areas, for example, designated seaside resorts. Owner operators and corporate investors are not affected. The restrictions also do not apply to investment in holiday cottages since the capital allowances on such investments have already been ring-fenced to rental income, subject to transitional arrangements under section 30 of the 1996 Finance Act.
