Written Answers. - Tax Incentives.

Michael Ring


92 Mr. Ring asked the Minister for Finance if he will introduce a tax incentive to encourage people to invest in windfarms; and if he will make a statement on the matter. [10295/00]

Section 62 of the Finance Act 1998 provides for tax relief for corporate investment in certain renewable energy projects. To qualify for the relief the energy project must be in the solar, wind, hydro or biomass technology categories, and be approved by the Minister for Public Enterprise. The relief takes the form of a deduction for tax purposes from a company's profits for an investment in new ordinary shares in a company setting up a renewable energy project. The relief is capped at 50% of all capital expenditure, excluding land, net of grants, or £7.5 million for a single project. Investment by a company or group is capped at £10 million per annum, and unless the shares are held for at least five years by the company the relief will be withdrawn.

Following clearance of the scheme by the European Commission, I made an order providing that the relief would come into operation from 18 March 1999 for a three year period. I understand that while this relief was designed for corporate investment, individuals can also invest in renewable energy through a limited partnership structure.
In this regard, I remind the Deputy of a provision in this year's Finance Act which has an impact on the availability of the relief to individuals involved in a partnership structure.
As a result of an abuse of the right to offset losses, interest and capital allowances of limited partnerships against non-partnership income, I brought forward measures to curtail the use of such partnership losses. Section 70 of the Finance Act, 2000 restricts the application of this set-off, as it applies to non-active partners in partnerships, so that in future, relief for losses etc. will only be available for set off against income arising to the partnership and will be subject to an upper limit equal to the capital contribution to the partnership.
However, in the case of investment in renewal energy, I included transitional arrangements, in section 70, which allow for expenditure incurred under an obligation entered into before 1 March 2001 to be excluded from this restriction. These arrangements are very reasonable in the circumstances and I have no plans to make further changes in this area at this stage.