Financial Resolution No. 5: Income Tax

THAT section 253 of the Taxes Consolidation Act 1997 (No. 39 of 1997) be amended by inserting the following after subsection (7):
“(8) Notwithstanding subsection (7), the deduction authorised by that subsection shall not exceed -
(a) as respects the year of assessment 2014, 75 per cent of the deduction that would but for this subsection be authorised by that subsection,
(b) as respects the year of assessment 2015, 50 per cent of the deduction that would but for this subsection be authorised by that subsection,
(c) as respects the year of assessment 2016, 25 per cent of the deduction that would but for this subsection be authorised by that subsection, and
(d) as respects the year of assessment 2017 and each subsequent year of assessment, zero per cent of the deduction that would but for this subsection be authorised by that subsection.
(9) This section shall not apply to a loan made after 15 October 2013.
(10) Subsections (8) and (9) shall not apply to a loan referred to in subsection (1) where the partnership is a farming partnership within the meaning of section 598A.”.
(3) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act 1927 (No. 7 of 1927).

Section 4 amends section 253 of the Taxes Consolidation Act 1997, which provides tax relief to individuals for interest on money borrowed to enable him or her to acquire a share in a partnership or to contribute or advance money to a partnership. This relief is part of a suite of measures that were introduced to help provide employment and foster growth by encouraging individuals to invest in their own enterprises. An internal review of these reliefs in 2005 recommended at the time that they should be abolished. The review found that the reliefs were disproportionately distributed, with the majority going to those earning in excess of €200,000 per annum. It also stated that there was no evidence that they were increasing employment or having any notable effect on economic growth. This review was published and is available on the Department of Finance tax policy website.

Based on 2011 taxpayer data, it is estimated that the cost of tax relief on loans applied in acquiring an interest in a partnership is approximately €4 million and is availed of by approximately 1,100 claimants. It is not intended that the withdrawal of this relief will affect the provision of tax relief for loans to invest in farming partnerships. The farming sector is a unique sector with its own challenges and these partnerships are in essence different from other business partnerships. The relief is being discontinued for new loans taken out from budget night and phased out over a three-year period for existing loans, with a cessation date of 1 January 2017.

Question put and agreed to.