Section 51 of the Finance Act, 2001, provides for the new scheme of capital allowances for expenditure incurred on the cost of taxi licences acquired on or before 21 November 2000. The allowances are effectively backdated with the cost being deemed to have been incurred on 21 November 1997 where the licence was purchased prior to that date.
The actual cost of the licence can be written off over five years at the rate of 20% per annum. The write-off will be allowed against the trading income only of the licence owner who drives the taxi. However, if additionally, the same vehicle is rented out on a part-time basis, then the cost can be written off against both the trading income and the rental income from the vehicle in question.
On the Committee Stage of the Finance Bill 2001, I introduced some further refinements to the provision as it then stood and these are now also reflected in section 51 of the Act. The objective was to address certain ‘hardship' cases that had been brought to my attention. Accordingly, section 51 also provides that: where a licence was inherited from a deceased spouse who carried on a taxi trade the licence holder may offset the capital expenditure incurred on the original acquisition of the licence against the rental income from the licence, even if there is no trading income from the licence. This measure will only be available in respect of one licence; in cases where inheritance tax or probate tax was paid in respect of a taxi licence, the value used for such tax purposes may be used instead of the actual capital expenditure cost, if that value is higher.
On Report Stage I further extended the provisions of section 51 to cater for the situation where a widow or widower, who has inherited the licence from his or her spouse, lets the licence to a third party who provides the associated vehicle.