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.