Michael Ring
Question:199 Mr. Ring asked the Minister for Finance if he will review the town renewal scheme 2000; and the take-up on this scheme. [30451/01]
Written Answers. - Town Renewal Scheme.
The tax reliefs for the areas and sub-areas designated under the town renewal scheme were provided for under section 89(a) of the Finance Act 2000. The scheme provides for capital allowances of 100% in respect of qualifying construction or refurbishment expenditure incurred on qualifying commercial buildings and capital allowances of up to 100% in respect of qualifying expenditure incurred on the construction or refurbishment of qualifying industrial buildings. In the case of lessors, the relief is written off at 50% in year one and the remainder at 4% per annum. Owner occupiers can qualify for similar relief but can also avail of free depreciation of 50%, which allows the owner to defer writing off the year one allowance if they so wish.
The reliefs outlined were subject to European Commission approval in the context of State aid and were notified to the Commission in July 2000. Agreement was reached with the Commission in March of this year to allow the application of commercial and industrial incentives to the majority of projects under the town renewal scheme. Details of the new arrangements which are tailored to meet the Commission's requirements on State aids were announced by the Minister of State at the Department of the Environment and Local Government on 16 March last and the reliefs were introduced with effect from 6 April 2001. In view of the delay in reaching agreement with the Commission on the commencement of the commercial and industrial elements of the scheme, the termination date of the scheme has been extended from 31 March 2003 to 31 December, 2003.
Incentives are available to small and medium enterprises, SMEs, that is, enterprises defined by the EU as having certain characteristics, including a staff of fewer than 250 employees, with either an annual turnover not exceeding 40 million or an annual balance sheet total not exceeding 27 million. In detail, the range of projects that have been cleared to proceed from 6 April 2001, following discussions with the European Commission, are all new build SME projects – such projects will be eligible for both commercial and industrial incentives and refurbishment projects in the following categories: SME projects where the expenditure incurred is below 800,000 or £630,051 will qualify for the full range of commercial and industrial incentives; SME projects which involve both expenditure on refurbishment and the provision of an extension where the cost of the extension is at least 25% of the market value of the existing building – this category will also qualify for commercial and industrial incentives; local retail SME projects, excluding mail order and financial services – incentives for office and industrial development are therefore excluded under this category.
Projects which qualify under any of the three refurbishment categories outlined above are eligible under the scheme. Refurbishment projects which do not fall within these categories are the subject of ongoing discussions with the European Commission.
Provision to allow the implementation of these arrangements was included on Report Stage of the Finance Bill, 2001. The provision also provided that capital allowances will not apply in respect of expenditure incurred, on or after 6 April 2001, on industrial and commercial premises in designated areas under this scheme where any part of that expenditure is met by way of grant assistance from State bodies or elsewhere. This amendment was made in order to ensure that the scheme complies with the European Commission's regional aid guidelines for the period to 2006 and similar amendments were made on Committee stage in respect of the urban and rural renewal schemes.
The scheme also provides for relief in respect of expenditure incurred on the refurbishment, conversion or construction of residential property. In the case of rented residential property, relief is available against all Irish rental income in respect of 100% of qualifying expenditure incurred on the refurbishment, conversion or construction of qualifying property. Owner occupiers can also avail of relief of 100% over ten years against all income in respect of qualifying refurbishment/conversion expenditure incurred on qualifying residential property. In the case of construction expenditure incurred on residential property, owner occupiers are entitled to relief at 50% of the qualifying expenditure over ten years against all income. These reliefs were not subject to European Commission approval and were introduced from 1 April 2000 and will run until the scheme's deadline of 31 December 2003.
As indicated, the full range of reliefs available under the town renewal scheme have been in operation for less than one year. It is therefore premature at this stage to review the operation of the scheme or to ascertain the take up of these reliefs. In addition, it is also too early to give consideration to the possibility of introducing additional reliefs under the scheme and, in any event, any amendments to the business elements of the scheme would be subject to European Commission approval.