Select Committee on Finance and General Affairs debate

SECTION 31.

Mr. Quinn

I move amendment No. 46.

In page 46, to delete lines 30 to 39 and substitute the following:

"by the substitution for paragraph (a) of subsection (4) of the following paragraph:

‘(a) (i) Every asset of an undertaking for collective investment on the day on which a chargeable period of the undertaking ends shall, subject to the subsequent provisions of this subsection, be deemed to have been disposed of and immediately reacquired by the undertaking at the asset's market value on the said day.

(ii) Subparagraph (i) shall not apply to

(I) assets to which subsection (5)(a)(ii) relates other than where such assets are held in connection with a contract or other arrangement which secures the future exchange of the assets for other assets to which the said subsection does not relate, and

(II) assets which are strips within the meaning of section 29 of the Finance Act, 1997.'.".

This is a technical amendment to correct a drafting error in section 31. That section amends section 17 of the Finance Act, 1993 which provides for a tax regime for authorised unit trusts, undertakings for collective investment in transferable securities, often referred to as "UCITS", and authorised undertakings for collective investment within the meaning of the Companies Act, 1990.

Amendment agreed to.

Section 31, as amended, agreed to.

Sections 32 to 36, inclusive, agreed to.

Chairman

We now come to amendment No. 47 in the name of the Minister.

Mr. Quinn

Before I move that amendment I wish to state that I intend to introduce an amendment on tax relief for training fees paid by individuals on Report Stage. I am obliged to bring that to the notice of the proceedings of this committee before it finishes Chapter II.

NEW SECTIONS.

Mr. Quinn

I move amendment No. 47:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) Chapter II of Part I of the Finance Act, 1972, is hereby amended—

(a) in section 16, by the substitution of the following for subsection (4):

‘(4)(a) Any sum paid by an employer by way of contribution under the scheme shall, for the purposes of Case I or II of Schedule D and of sections 15 and 33(2) of the Corporation Tax Act, 1976, be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid but no other sum shall for those purposes be allowed to be deducted as an expense, or expense of management, in respect of the making, or any provision for the making, of any contributions under the scheme.

(b) For the purposes of this section and of section 16A—

(i) a reference to a "chargeable period" shall be construed as a reference to a "chargeable period or its basis period" (within the meaning of paragraph 1 of the First Schedule to the Corporation Tax Act, 1976), and

(ii) in relation to an employer whose chargeable period is a year of assessment, "basis period" means the period on the profits or gains of which income tax for that year of assessment falls to be finally computed for the purposes of Case I or II of Schedule D in respect of the trade, profession or vocation of the employer.

(4A) The amount of an employers contributions which may be deducted under subsection (4) shall not exceed the amount contributed by that employer under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to income tax or corporation tax, as the case may be.

(4B) A sum not paid by way of an ordinary annual contribution shall for the purposes of subsection (4) be treated, as the Commissioners may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Commissioners think proper.'

and

(b) by the insertion of the following section after section 16:

‘16A.—(1) Where—

(a) there is, after the 21st day of April, 1997, an actual payment by an employer of a contribution under an exempt approved scheme,

(b) that payment would, apart from this section, be allowed to be deducted as an expense, or expense of management, of the employer in relation to any chargeable period, and

the amount allowed to be so deducted in respect of the payment mentioned in paragraph (a) and of any other actual payments of contributions under the scheme which, having been made after the 21st day of April, 1997, fall within paragraph (b) in relation to the same chargeable period shall be reduced by whichever is the smaller of the excess and the amount which reduces the deduction to nil.

(2) In relation to any such actual payment by an employer of a contribution under an exempt approved scheme as would be allowed to be deducted as mentioned in subsection (1) in relation to any chargeable period

(a) the reference in that subsection to the total of previously allowed deductions is a reference to the aggregate of every amount in respect of the making, or any provision for the making, of that or any other contributions under the scheme, which has been allowed to be deducted as an expense, or expense of management, of that person in relation to all previous chargeable periods, and

(b) the reference to the relevant maximum is a reference to the amount which would have been that aggregate if the restriction on deductions for sums other than actual payments imposed by virtue of subsection (4) of section 16 had been applied in relation to every previous chargeable period,

and, for the purposes of this subsection, an amount the deduction of the whole or any part of which falls to be taken into account as allowed in relation to more than one chargeable period shall be treated as if the amount allowed were a different amount in the case of each of those periods.

(3) For the purposes of this section, any payment which is treated under subsection (4B) of section 16 as spread over a period of years shall be treated as actually paid at the time when it is treated as paid in accordance with that subsection.'.

(2) The Corporation Tax Act, 1976, is hereby amended, in Part 1 of the Second Schedule, by the deletion of paragraph 31.

(3) This section shall have effect in the case of any employer for a chargeable period (within the meaning of section 16 (as amended by this Act) of the Finance Act, 1972) being—

(a) where the chargeable period is an accounting period of a company, an accounting period ending with a day after the 21st day of April, 1997, and

(b) where the chargeable period is a year of assessment, any year of assessment the employer's basis period for which ends with a day after that date.".

This amendment clarifies the basis on which contributions by employers to approved occupational pension schemes may be allowed for tax purposes. The long-standing view of the law is that an employer may have a deduction from profits for tax purposes only for sums paid into an approved scheme and not for provision made for such payments. However, doubt has been cast on this view particularly following a statement of standard accounting practice in SSAP 24, Accounting for Pension Costs. That statement requires companies to seek to recognise in their commercial accounts the costs of providing pensions over the period of their employees' service as a constant percentage of payroll costs.

While the Revenue Commissioners are prepared to resist claims for relief on any basis other than for payments into the schemes, it is felt desirable to enact legislation to put the matter beyond doubt. The legislation now proposed provides that in future the following will apply: tax relief will be due only for sums paid into schemes and not for provisions or accruals in respect of such payments; and that no deduction can in any event be allowed for sums paid into schemes to the extent that provision in excess of contributions actually paid have already been allowed for tax purposes.

Mr. McCreevy

A technical expert might sum up the net effect of this because I do not understand why this is necessary.

Mr. Quinn

Tax relief was being claimed on a pension in respect of a notional contribution or accrued liability, even though the contribution had not been paid.

Mr. McCreevy

The contribution must be paid before relief is allowed on it?

Mr. Quinn

That is the gist of it.

Amendment agreed to.

Chairman

Amendment No. 48 is in the name of the Minister, amendments Nos. 49 and 50 are related and I suggest amendments Nos. 48, 49 and 50 be taken together by agreement. Is that agreed? Agreed.

Mr. Quinn

I move amendment No. 48:

In page 48, before section 37, but in Chapter 11, to insert the following new section:

"37.—(1)(a) In this section and in section 38—

‘designated area', exploration or exploitation activities' and ‘exploration or exploitation rights' have, respectively, the same meanings as they have in section 33 of the Finance Act, 1973;

‘exploration or exploitation assets' means assets used or intended for use in connection with exploration or exploitation activities, carried on in the State or in a designated area;

‘market value' shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975;

‘the new assets' and the ‘old assets' have, respectively, the meanings assigned to them in section 28 of the Capital Gains Tax Act, 1975.

(b) For the purposes of this section and section 38 a company shall not be regarded as ceasing to be resident in the State by reason only that it ceases to exist.

(2) This section and section 38 shall apply to a company (hereafter in this section and in section 38 referred to as the relevant company) if, at any time (hereafter in this section and in section 38 referred to as the ‘relevant time') on or after the 21st day of April, 1997, the company ceases to be resident in the State.

(3) A relevant company shall be deemed for all purposes of the Capital Gains Tax Acts

(a) to have disposed of all its assets, other than assets excepted from this subsection by subsection (5), immediately before the relevant time, and

(b) immediately to have reacquired them, at the market value of the assets at that time.

(4) Section 28 of the Capital Gains Tax Act, 1975, shall not apply where a relevant company—

(a) has disposed of the old assets, or of its interest in those assets, before the relevant time, and

(b) acquires the new assets, or its interest in those assets, after the relevant time,

unless the new assets are excepted from this subsection by subsection (5).

(5) If at any time after the relevant time a relevant company carries on a trade in the State through a branch or agency—

(a) any assets which, immediately after the relevant time, are situated in the State and are used in or for the purposes of the trade, or are used or held for the purposes of the branch or agency, shall be excepted from subsection (3), and

(b) any new assets which, after that time, are so situated and are so used or so held shall be expcepted from subsection (4),

and references in this subsection to assets situated in the State include references to exploration or exploitation assets and to exploration or exploitation rights.".

This is essentially an anti-avoidance measure. This proposal recommends the insertion of three new sections in Chapter II after the existing section 36. Their purpose is to ensure that a particular scheme which can currently be used by companies to avoid capital gains tax under the disposal of certain assets is no longer possible. I will elaborate on that if Deputies wish.

Mr. McCreevy

Because capital gains tax rates are so high Finance Bills have required the inclusion of additional sections to prevent anti-avoidance. The Minister has heard me make the point before that if the rate was lower a good deal of non-productive work that goes into devising and counting the schemes would be alleviated and the return to the Exchequer would be higher. An industry has developed in the area of anti-avoidance.

Amendment agreed to.

Mr. Quinn

I move amendment No. 49:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"38.—(1)(a) In this section—

‘deemed disposal' means a disposal which, by virtue of section 37(3), is deemed to have been made;

‘foreign assets' of a company means any assets of the company which, immediately after the relevant time, are situated outside the State and are used in or for the purposes of a trade carried on by the company outside the State.

(b) For the purposes of this section a company is a 75 per cent. subsidiary of another company if and so long as not less than 75 per cent. of its ordinary share capital (within the meaning of section 155 of the Corporation Tax Act, 1976) is owned directly by that other company.

(2) If—

(a) immediately after the relevant time, a company (hereafter in this section referred to as ‘the company') to which this section applies by virtue of section 37 is a 75 per cent. subsidiary of another company (hereafter in this section referred to as the ‘principal company') which is resident in the State, and

(b) the principal company and the company jointly so elect, by notice in writing given to the inspector within 2 years after the relevant time,

the Capital Gains Tax Acts shall apply subject to the following provisions of this section.

(3) Any allowable losses accruing to the company on a deemed disposal of foreign assets shall be set off against the chargeable gains so accruing and—

(a) that deemed disposal shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses, and

(b) the whole of that single chargeable gain shall be treated as not accruing to the company on that disposal but an equivalent amount (hereafter in this section referred to as the ‘postponed gain') shall be brought into account in accordance with subsections (4) and (5).

(4) (a) If at any time within 10 years after the relevant time the company disposes of any assets (hereafter in this subsection referred to as ‘relevant assets') the chargeable gains on which were taken into account in arriving at the postponed gain, there shall be deemed to accrue to the principal company as a chargeable gain at that time the whole or the appropriate proportion of the postponed gain so far as not already taken into account under this subsection or subsection (5).

(b) In this subsection ‘the appropriate proportion' means the proportion which the chargeable gain taken into account in arriving at the postponed gain in respect of the part of the relevant assets disposed of bears to the aggregate of the chargeable gains so taken into account in respect of the relevant assets held immediately before the time of the disposal.

(5) If at any time within 10 years after the relevant time

(a) the company ceases to be a 75 per cent. subsidiary of the principal company, or

(b) the principal company ceases to be resident in the State.

there shall be deemed to accrue to the principal company as a chargeable gain—

(i) where paragraph (a) applies, at that time, and

(ii) where paragraph (b) applies, immediately before that time,

the whole of the postponed gain so far as not already taken into account under this subsection or subsection (4).

(6) If at any time

(a) the company has allowable losses which have not been allowed as a deduction from chargeable gains, and

(b) a chargeable gain accrues to the principal company under subsection (4) or (5),

then, if and to the extent that the principal company and the company jointly so elect by notice in writing given to the inspector within 2 years after that time, those losses shall be allowed as a deduction from that gain.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 50:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"39.—(1) In this section—

‘chargeable period' means a year of assessment or an accounting period, as the case may be;

‘controlling director', in relation to a company, means a director of the company who has control of it (construing control in accordance with section 102 of the Corporation Tax Act, 1976);

‘director', in relation to a company, has the meaning given by section 119(1) of the Income Tax Act, 1967, and includes any person falling within section 103(5) of the Corporation Tax Act, 1976;

‘group' has the meaning which would be given by section 129 of the Corporation Tax Act, 1976, if in that section references to residence in the State were omitted and for references to ‘75 per cent. subsidiaries' there were substituted references to ‘51 per cent. subsidiaries', and references to a company being a member of a group shall be construed accordingly;

‘specified period', in relation to a chargeable period, means the period beginning with the specified return date for the chargeable period (within the meaning of section 9 of the Finance Act, 1988) and ending 3 years after the time when a return under section 10 of the Finance Act, 1988, for the chargeable period is delivered to the appropriate inspector (within the meaning of the said section 9);

‘tax' means corporation tax or capital gains tax, as the case may be.

(2) This section applies at any time on or after the 21st day of April, 1997, where tax payable (being tax which, but for section 37 or 38, would not be payable) by a company (hereafter in this section referred to as the ‘taxpayer company') for a chargeable period (hereafter in this section referred to as the ‘chargeable period concerned') is not paid within 6 months after the date on or before which the tax is due and payable.

(3) The Revenue Commissioners may, at any time before the end of the specified period in relation to the chargeable period concerned, serve on any person to whom subsection (4) applies a notice—

(a) stating the amount which remains unpaid of the tax payable by the taxpayer company for the chargeable period concerned and the date on or before which the tax became due and payable, and

(b) requiring that person to pay that amount within 30 days of the service of the notice.

(4) (a) This subsection applies to any person being—

(i) a company which is, or during the period of 12 months ending with the time when the gain accrued, was a member of the same group as the taxpayer company, and

(ii) a person who is, or during that period was, a controlling director of the taxpayer company or of a company which has, or within that period had, control over the taxpayer company.

(b) This subsection shall have effect in any case where the gain accrued before the 21st day of April, 1998, with the substitution in paragraph (a)(i) of ‘beginning with the 21st day of April, 1997, and' for 'of 12 months'.

(5) Any amount which a person is required to pay by a notice under this section may be recovered from the person as if it were tax due by the said person, and such person may recover any such amount paid on foot of a notice under this section from the taxpayer company.

(6) A payment in pursuance of a notice under this section shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.".

Amendment agreed to.

Chairman

We now come to amendment No. 51. Amendments Nos. 52 and 53 are related and I suggest we take amendments Nos. 51, 52 and 53 together by agreement. Is that agreed? Agreed.

Mr. Quinn

I move amendment No. 51:

In page 48, before section 37, but in Chapter II, to insert the following new section:

‘37.—(1) Section 464 (as amended by the Finance Act, 1992) of the Income Tax Act, 1967, is hereby amended in the proviso by the substitution for ‘Case I' of ‘Case I or Case IV'.

(2) This section shall apply and have effect in respect of interest on, and other profits or gains, accruing on or after the 21st day of April, 1997, from a security.".

Section 464 of the Income Tax Act, 1967 provides exemption from tax for persons not ordinarily resident in the State in respect of income and gains arising from certain Government securities. Sections 470 and 474 provide similar exemption in respect of securities issued by local authorities and certain State bodies respectively. These sections were amended in the Finance Act, 1972 in order to level the playing field by ensuring that the exemption did not apply to branches of non-resident companies carrying on a trade in the State. The sections refer to the following: to profits chargeable to corporation tax under Case I of Schedule D — these are normally trading profits of a company -and to profits chargeable under section 43 of the Corporation Tax Act, 1976 — these are profits of the life assurance fund of a non-resident life company trading in the State through a branch. There are situations where certain profits of a non-resident company trading in the State through a branch would be taxable under Case IV of Schedule D, for example, profits from pension business. For completeness these new sections insert the words "Case I or Case IV" into sections 464, 470 and 474 so that the tax exemption in respect of these securities does not arise in any circumstances for a non-resident company carrying on a trade in the State through a branch.

Amendment agreed to.

Mr. Quinn

I move amendment No. 52:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) Section 470 (as amended by the Finance Act, 1992) of the Income Tax Act, 1967, is hereby amended in paragraph (b) of subsection (1) by the substitution for ‘Case I' of ‘Case I or Case IV'.

(2) This section shall apply and have effect in respect of interest on, and other profits or gains accruing on or after the 21st day of April, 1997, from a security.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 53:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) Section 474 (as amended by the Finance Act, 1992) of the Income Tax Act, 1967, is hereby amended in subsection (2) by the substitution in the proviso for ‘Case I' of ‘Case I or Case IV'.

(2) This section shall apply and have effect in respect of interest on, and other profits or gains, accruing on or after the 21st day of April, 1997, from a security.".

Amendment agreed to.

Chairman

Amendment No. 54 is in the name of the Minister. Amendments Nos. 154 and 119 form a composite proposal and I suggest that amendments Nos. 54, 154 and 119 be taken together by agreement. Is that agreed? Agreed.

Mr. Quinn

I move amendment No. 54:

In page 48, before section 37, but in Chapter 11, to insert the following new section:

"37.—(1) In this section and in the Fourth Schedule, ‘relevant port company' has the meaning assigned to it in paragraph 1of that Schedule.

(2) The provisions of the Fourth Schedule shall apply where assets are vested in, or transferred to, a relevant port company pursuant to the Harbours Act, 1996.

(3) This section and the Fourth Schedule shall have effect from the 1st day of March, 1997.".

This amendment relates to changes made with regard to the commercialisation of our harbours and follows on foot of harbour legislation introduced earlier. Amendments Nos. 54 and 119 propose to insert a new section 37 and a Fourth Schedule to ensure that no capital gains tax charge or capital allowance, balancing charge or allowance will arise on the transfer of assets from the old harbour authorities to the new port companies being established under the Harbours Act, 1996.

There is already a provision in section 40 of this year's Bill which provides for a two year exemption from corporation tax for income from normal harbour activities for all port companies and for a phasing in period of a further two years for corporation tax on these companies. Harbour authorities whose assets are not vested in port companies retain their exemption from tax in respect of their income. The new port companies are to be established by the Minister for the Marine under the Harbours Act, 1996.

As and from specific vesting dates these new companies will assume the rights and responsibilities of the harbour authorities they replace. To date eight such port companies have been established. After the transfer of all rights and property from the harbour authorities to the port companies, the harbour authorities will be dissolved automatically. This amendment is to ensure that as they move from being a harbour authority to a commercial company they will not be hit for tax and a provision in section 40 eases them into the real world of paying corporation tax.

Mr. McCreevy

I tabled an amendment to section 40 relating to port authorities.

Amendment agreed to.

Mr. Quinn

I move amendment No. 55:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) In this section ‘the authority' means the Dublin Docklands Development Authority.

(2) Notwithstanding any provision of the Corporation Tax Acts, profits arising to the authority in any accounting period ending after the 30th day of April, 1997, shall be exempt from corporation tax.

(3) As regards disposals made after the 30th day of April, 1997, section 23 of the Capital Gains Tax Act, 1975, shall apply to a gain accruing to the authority as it does to a body specified in that section.

(4) Section 42 of the Finance Act, 1988, is repealed with effect from the 1st day of May, 1997.".

This amendment is specifically in relation to Dublin Docks. Its purpose is to insert in the Bill a new section which provides for the exemption from corporation tax and capital gains tax the income and gains of the proposed Dublin Docklands Development Authority. Members will recall that we recently enacted the Dublin Docklands Development Authority Act which makes provision for the establishment of the authority. Its objectives are the securing of sustainable social and economic regeneration of the docklands area, the achievement of improvements to the area's physical environment and the continuation of development for financial services activities in the Custom House docks area. In this latter respect the intention is that the authority will act as successor to the Custom House Docks Development Authority which, under the Docklands Act, will cease to function simultaneously with the establishment of the new authority.

This amendment inserts a section which provides for the exemption from income tax, corporation tax and capital gains tax on the gains of the new authority from 30 April 1997 and terminates the tax exemption of the Custom House Docks Authority from 1 May 1997.

Amendment agreed to.

Chairman

Amendment No. 56 is in the names of Deputies McCreevy and Keaveney. I observe that amendment No. 57 is related and may, by agreement, be taken together.

Mr. McCreevy

I move amendment No. 56:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.— The Third Schedule to the Finance Act, 1995, is hereby amended by the addition of the following to the list of qualifying resort areas:

‘the Inishowen Peninsula'.".

I referred earlier to the seaside resorts renewal scheme initiated in 1995. Its provisions were extended between the publication of the Bill and the introduction of the Finance Act of that year and are further extended to include upwards of 17 eligible seaside resorts at present. Deputy Keaveney has been lobbying consistently for the inclusion of the Inishowen Peninsula for a wide variety of reasons she is well able to articulate.

In regard to amendment No. 57, the objective of which is to include the Bray seafront in the seaside resort renewal scheme, I was very surprised it had not been included in the Finance Bill, 1995, as published. When I was Minister for Tourism and Trade, the objective was to revitalise old, traditional seaside resort towns — Tramore, Bray, Ballybunion, etc. Tourists do not come to Ireland to see our seashore but Irish people used to frequent them. I was brought to these when I was a child. One could not but be struck by the dereliction of these towns over the years.

The original purpose of this scheme was to give those old, traditional seaport resort towns a lift. However, the scheme has been extended due to political pressure and nobody can argue that one should be included and another excluded. Nonetheless, I would have had Bray in mind for inclusion from the outset, simply because as children we went to visit an aunt who lived there; later, I brought my children to Tramore. Over the years I have observed how they and other traditional seaside resorts have deteriorated; they were not maintained to anything like their former standard. While Tramore is included in the scheme, Bray has been consistently excluded, for what reason I simply cannot understand.

There is no seaside resort renewal scheme project in operation close to the Inishowen Peninsula. The scheme has been quite successful but I should like these two areas included.

Mr. Quinn

While Deputy McCreevy has expressed his party's views, he will recall — since it was he who first mooted this scheme — this was and is a pilot scheme being evaluated and it is not proposed to add other areas. For example, the idea that the entire Inishowen Peninsula would be so designated is much too ambitious, extensive and could not be sustained. In fact, its inclusion would dilute its overall effect. Therefore, I cannot accept the Deputies' amendment.

With regard to Bray, people no longer visit Bray, they live there; it has been overtaken by events. Sandymount was once a seaside resort——

Chairman

I remember it well.

Mr. Quinn

In the days when the centre of gravity in Dublin was around the King's Inns and Henrietta Street before the development of the south side of the city, including Leinster House, the villas along Strand Road, Sandymount, were summer villas, to which people from Henrietta Street and Mountjoy Square used to send family members to the sea, just as people would go to Brittas Bay or Bray.

Arklow was once a seaside resort. I look on it with nostalgia because we used collect waste paper in Inchicore to raise the busfare for our next trip there and buy bananas and lemonade with the proceeds.

Mr. McDowell

I might add I am very much in favour of including Dublin south-east where there is still a splendid swimming bath on Sandymount Strand awaiting refurbishment. Indeed it would be very hard to drown on Sandymount Strand.

Amendment, by leave, withdrawn.

Amendment No. 57 not moved.

Chairman

Amendment No. 58 already discussed with No. 28. How stands this amendment?

Mr. M. McDowell

I move amendment No. 58:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) With effect from 5th April, 1997, any person or company making a qualifying donation to a specified charity shall be entitled to a reduction in income tax or corporation tax payable in respect of any year thereafter equivalent to the amount of income tax or corporation tax otherwise payable by such person in respect of the amount of the qualifying donation.

(2) In this section, ‘qualifying donation' means any sum which is —

(i) not less than £250 net,

(ii) bona fide paid without any collateral agreement or arrangement of benefit, direct or indirect to the taxpayer,

(iii) satisfactorily disclosed in writing to the satisfaction of the Revenue Commissioners.

(3) In this section ‘specified charity' means a charitable body or association nominated by the Minister for Finance which complies with such conditions in relation to its charitable activities and in relation to its works as may be specified by the Minister from time to time.

(4) The reduction awardable under this section shall not, as regards an individual exceed £5,000, or as regards a company, exceed £50,000 in respect of any given tax year.

(5) The provisions of this section are without prejudice to other legal provisions relating to tax reductions in respect of charitable donations by individuals or companies.".

I will withdraw it and resubmit it on Report Stage. I am fortified in that determination by the Irish charities group which took issue with some of the Minister's remarks yesterday about the justification of doing nothing and awaiting a statutory reform of the law relating to charities.

Within the terms of my amendment, or along similar lines, I contend it is possible to designate some charities as eligible and others as not eligible. I appreciate that that would be an invidious task if conducted by reference to subjective criteria but charities which receive State aid — above a certain threshold of accountability and so on — are completely identifiable and, in that context, should be capable of being scheduled to a section or, alternatively, designated by regulation, as eligible charities without encountering all the problems the Minister mentioned yesterday.

Mr. Quinn

I might advise the Deputy, wearing his other hat, not to take action on behalf of an agreed charity not so designated; that is our problem. Our difficulty is that we consider we would be legally frail in terms of a Minister for Finance choosing between one charity and another unless the criteria were very explicitly set out. That is why the Department of Finance and tax law generally should reflect domestic law in its broader sense rather than initiate or lead it, which is the reason for the position I adopted yesterday; until such time as overall legislation with regard to the regulation of charities is modernised, the necessity for which we all accept, it would be premature for my Department, or a Finance Act, to anticipate it. However, the matter can be discussed and considered again on Report Stage. I have not seen the comment of the charities.

Amendment, by leave, withdrawn.

Chairman

Amendment No. 58a in the name of the Minister. Amendments Nos. 58b and 118a are related and I suggest that they be discussed together by agreement.

Mr. Quinn

I move amendment No. 58a:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—The Finance Act, 1982, is hereby amended—

(a) in section 52, as on and from the passing of this Act, by the substitution of the following for subsections (7) and (8):

‘(7) In this Chapter "the release date", in relation to any of a participant's shares, means the third anniversary of the date on which the shares were appropriated to the participant.

(8) Subject to section 56(4), for the purposes of provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of the individual's shares, any reference to "the appropriate percentage" in relation to those shares shall be determined according to the time of that event, as follows—

(a) if the event occurs before the third anniversary of the date on which the shares were appropriated to the participant and paragraph (b) does not apply, the appropriate percentage is 100 per cent., and

(b) if, in a case where at the time of the event the participant—

(i) has ceased to be an employee or director of a relevant company as mentioned in subsection (5)(a), or

(ii) has reached pensionable age, as defined in section 2 of the Social Welfare (Consolidation) Act, 1993,

the event occurs before the third anniversary of the date on which the shares were appropriated to him, the appropriate percentage is 50 per cent.',

(b) as respects sums expended on or about the passing of this Act, by the insertion of the following section after section 58:

‘58A.—(1) This section applies to a sum expended by a company in establishing a profit sharing scheme which the Revenue Commissioners approve of in accordance with Part I of the Third Schedule and under which the trustees acquire no shares before such approval is given.

(2) A sum to which this section applies shall be included—

(a) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or

(b) if the company is an investment company within the meaning of section 15 of the Corporation Tax Act, 1976, or a company in the case of which that section applies by virtue of section 33 of that Act, in the sums to be deducted under section 15(I) of that Act as expenses of management in computing the profits of the company for the purposes of corporation tax.

(3) In a case where—

(a) subsection (2) applies, and

(b) the approval is given after the end of the period of nine months beginning with the day following the end of the accounting period in which the sum is expended,

then, for the purpose of subsection (2), the sum shall be treated as expended in the accounting period in which the approval is given and not the accounting period mentioned in paragraph (b).'.

and

(i) by the substitution, in subparagraph (1) of paragraph 2, of the following for clause (a):

‘(a) is then an employee or full-time director of the company concerned or, in the case of a group scheme,

37.—(1)(a) This section applies to an employee share ownership trust which the Revenue Commissioners have approved of as a qualifying employee share ownership trust in accordance with the provisions of the Third Schedule and which approval has not been withdrawn.

(b) This section shall be construed together with the Third Schedule.

(2) Where, in an accounting period of a company, the company expends a sum—

(a) in establishing a trust to which this section applies, or

(b)(i) in making a payment by way of contribution to the trustees of a trust which at the time the sum is expended is a trust to which this section applies, and

(ii) at that time, the company or a company which it then controls has employees who are eligible to benefit under the the terms of the trust deed, and

(iii) before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes,

then, the sum shall be included—

(I) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains for that accounting period of a trade carried on by that company, or

(II) if the company is an investment company within the meaning of section 15 of the Corporation Tax Act, 1976, or a company in the case of which that section applies by virtue of section 33 of that Act, in the sums to be deducted under section 15(I) of that Act as expenses of management in computing the profits of the company for that accounting period for the purposes of corporation tax.

(3) In a case where—

(a) paragraph (a) of subsection (2) applies, and

(b) the trust is established after the end of the period of 9 months beginning with the day following the end of the accounting period in which the sum is expended by the company,

then, for the purposes of subsection (2), the sum shall be treated as expended in the accounting period in which the trust is established and not the accounting period mentioned in paragraph (b).

(4) For the purpose of paragraph (b)(ii) of subsection (2), the question whether one company is controlled by another shall be construed in a participating company, and'.

and

(ii) by the substitution of the following paragraph for paragraph 7:

‘7.—(1) The shares must be—

(a) fully paid up;

(b) not redeemable; and

(c) not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by subparagraph (2).

(2) Subject to subparagraphs (3) and (4), the shares may be subject to a restriction imposed by the company's articles of association—

(a) requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held; and

(b) requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.

(3) A restriction is not authorised by subparagraph (2) unless—

(a) any disposal required by the restriction will be by way of sale for a consideration in money on terms specified in the articles of association; and

(b) the articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in paragraph (a).

(4) Nothing is subparagraph (2) authorises a restriction which would require a person, before the release date, to dispose of his beneficial interest in shares the ownership of which has not been transferred to him.'.".

All three amendments relate to the same subject which is employees' share schemes. Members will be aware that in Partnership 2000 the Government and social partners gave their support to more favourable tax treatment for employees' share schemes and profit sharing as a means of deepening partnership and securing commitment at the level of enterprise. Following consultation with the social partners, I am now putting forward legislative proposals which will underpin these concepts. The amendments are in two parts. No. 58a provides for some adjustments to the existing approved profit sharing schemes, known as APSSs, while amendments Nos. 58b and 118a introduce a new employee shareholding concept known as employee share ownership plans, generically known as ESOPs.

The tax relief for approved profit-sharing schemes was first introduced 15 years ago. Since then approximately 100,000 employees have participated in these schemes. Essentially, they allow employer companies to get a tax deduction for any profits contributed to the trustees of an APSS. The trustees then use that money to acquire shares in the employer company either by subscribing for new shares or by purchasing from existing shareholders. The employees would pay no income tax on the value of the shares appropriated up to a maximum value of £10,000 provided they retain ownership for a minimum period, currently five years.

My proposed amendments to the qualifying conditions and reliefs are as follows. First, to reduce the minimum holding period for employees from five years to three years. This should further increase the attractiveness of these schemes to employees and reflects the reality that employees tend to be much more mobile nowadays than in the past. Second, to allow a corporation tax deduction to the employer company for the costs, legal, etc. of establishing an APSS. While the employer company is entitled to a tax deduction for a contribution to the APSS to purchase shares and meet running expenses, the position as regards the initial cost of establishing the trust was unclear and, therefore, we have provided clarity in that regard.

Amendment agreed to.

Mr. Quinn

I move amendment No. 58b:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"37.—(1) (a) This section applies to an employee share ownership trust which the Revenue Commissioners have approved of as a qualifying employee share ownership trust in accordance with the provisions of the Third Schedule and which approval has not been withdrawn.

(b) This section shall be construed together with the Third Schedule.

(2) Where, in an accounting period of a company, the company expends a sum—

(a) in establishing a trust to which this section applies, or

(b)(i) in making a payment by way of contribution to the trustees of a trust which at the time the sum is expended is a trust to which this section applies, and

(ii) at that time, the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed, and

(iii) before the expiry of the expenditure period the suum is expended by the trustees for one or more of the qualifying purposes,

then, the sum shall be included—

(I) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains for that accounting period of a trade carried on by that company, or

(II) if the company is an investment company within the meaning of section 15 of the Corporation Tax Act, 1976, or a company in the case of which that section applies by virtue of section 33 of that Act, in the sums to be deducted under section 5 (1) of that Act as expenses of management in computing the profits of the company for that accounting period for the purposes of corporation tax.

(3) In a case where—

(a) paragraph (a) of subsection (2) applies, and

(b) the trust is established after the end of the period of 9 months beginning with the day following the end of the accounting period in which the sum is expended by the company,

then, for the purposes of subsection (2), the sum shall be treated as expended in the accounting period in which the trust is established and not the accounting period mentioned in paragraph (b).

(c) the transfer of securities to a profit sharing scheme approved under Part I of the Third Schedule to the Finance Act, 1982.".

Amendment agreed to.

Chairman

We now proceed to amendment No. 59. Amendments Nos. 60 to 65, inclusive, and 110 are related. Is it agreed that amendments Nos. 59 to 65, inclusive, and 110 be taken together? Agreed.

Mr. Quinn

I move amendment No. 59:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"Chapter III

Urban Renewal Reliefs:

Introduction of New Scheme in the Dublin Docklands Area.

37.—In this Chapter—

‘qualifying area' means an area or areas in the Dublin Docklands Area (within the meaning of section 4 of the Dublin Docklands Development Authority Act, 1997) specified as a qualifying area by order under section 38;

‘lease', ‘lessee', ‘lessor', ‘premium' and ‘rent' have the same meanings respectively as in Chapter VI of Part IV of the Income Tax Act, 1967;

‘market value', in relation to a building, structure or house, means the price which the unencumbered fee simple of the building, structure or house would fetch if sold in the open market in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the building, structure or house, less the part of that price which would be attributable to the acquisition of, or of rights in or over, the land on which the building, structure or house is constructed;

I take "homesteading" to mean owner occupation within the city as distinct from rented apartments. I hope these provisions will be extended to the rest of the inner city in due course.

Mr. Quinn

I intend to table one or two technical amendments on Report Stage to the new Chapter III.

Amendment agreed to.

Mr. Quinn

I move amendment No. 60:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"38.—(1) Subject to subsection (2), the Minister for Finance may, after consultation with the Minister for the Environment, following a recommendation from the Executive Board (within the meaning of section 17 of the Dublin Docklands Development Authority Act, 1997) of the Dublin Docklands Development Authority (within the meaning of section 14 of the said Act), by order direct that

(a) the area or areas described in the order shall be a qualifying area

(i) for the purposes of one or more sections of this Chapter, and

(ii) in relation to section 40, for the purposes of that section, including or excluding the provisions of subsection (6) of that section as may be specified in the order, and

(b) as respects any such area so described in the order, the definition of ‘qualifying period' in section 37(1) shall be construed as a reference to such period as shall be specified in the order in relation to that area, but no such period specified in the order shall commence prior to the 1st day of July, 1997, or end after the 30th day of June, 2000.

(2) In considering the making of an order under subsection (1) in respect of an area and, in particular, for the purposes of determining whether that area should be a qualifying area for the purposes of one or more sections of this Chapter and, where the area is to be a qualifying area for the purposes of section 40, whether the relief to be provided by virtue of section 40 is or is not to be subject to subsection (6) of that section, the Minister shall have regard to the following criteria—

(a) the consistency in relation to the area, of the types of development for which relief is provided in one or more sections of this Chapter with the relevant provisions of the master plan for the Dublin Docklands Area prepared and adopted under section 24 of the Dublin Docklands Development Authority Act, 1997, which consistency shall be certified by the Executive Board of the Dublin Docklands Development Authority,

(b) the market conditions in the area in terms of the existing and projected supply of, and the existing and projected demand for, the type of development for which relief is provided in one or more sections of this Chapter,

(d) the nature and extent of any barriers to the regeneration of the area.

(3) Every order made by the Minister for Finance under subsection (1) shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the order is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 61:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"39.—(1) This section shall apply to a building or structure the site of which is wholly within a qualifying area and which is to be an industrial building or structure by reason of its use for a purpose specified in section 255(1)(a) of the Income Tax Act, 1967.

(2) Subject to subsection (4), section 254 of the Income Tax Act, 1967, shall apply in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a building or structure to which this section applies as if—

(a) in paragraph (a) of subsection (2A) of the said section 254, the reference to ‘before the 1st day of April, 1991' (as provided for in section 50 of the Finance Act, 1988) were a reference to ‘before the 1st day of July, 2000',

(b) paragraph (aa) (inserted by section 74 of the Finance Act, 1990) and paragraph (b) of subsection (2A) of the said section 254 were deleted, and

(3) Subject to subsection (4), section 25 of the Finance Act, 1978, shall apply in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a building or structure to which this section applies as if—

(a) paragraph (b) (as amended by section 76 of the Finance Act, 1990) of subsection (2) (inserted by section 48 of the Finance Act, 1988) of the said section 25 were deleted, and

(b) subsection (2A) (including the proviso to that subsection) of that section were deleted.

(4) In the case where capital expenditure is incurred in the qualifying period on the refurbishment of a building or structure to which this section applies, subsections (2) and (3) shall apply only if the total amount of the capital expenditure so incurred is not less than an amount which is equal to 10 per cent of the market value of the building or structure immediately before that expenditure is incurred.

(5) For the purposes only of determining, in relation to a claim for an allowance under section 254 of the Income Tax Act, 1967, or section 25 of the Finance Act, 1978, as applied by this section, whether and to what extent capital expenditure incurred on the construction or refurbishment of an industrial building or structure is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the building or structure actually carried out during the qualifying period shall, notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred, be treated as having been incurred in that period.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 62:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"40.—(1)(a) In this section—

‘qualifying multi-storey car park' means a building or structure consisting of 2 or more storeys wholly or mainly in use for the purpose of providing, for members of the public generally without preference for any particular class of person, on payment of an appropriate charge, parking space for mechanically propelled vehicles;

‘qualifying premises' means a building or structure the site of which is wholly within a qualifying area and which—

(i) apart from this section, is not an industrial building or structure within the meaning of section 255 of the Income Tax Act, 1967, and

(ii) (I) is in use for the purposes of a trade or profession, or

(II) whether or not it is so used, is let on bona fide commercial terms for such consideration as might be expected to be paid in a letting of the building or structure negotiated on an arms length basis,

but does not include a car park (other than a qualifying multi-storey car park) or any part of a building or structure in use as or as part of a dwelling-house.

(b) Where part of a building or structure is a qualifying premises and part of it (in this paragraph referred to as the ‘second-mentioned part') is not a qualifying premises and the capital expenditure which has been incurred in the qualifying period on the construction or refurbishment of the second-mentioned part is not more than one-tenth of the total capital expenditure which has been incurred in that period on the construction or refurbishment of the building or structure, then, the building or structure and every part thereof shall be treated as a qualifying premises.

(2)(a) Subject to paragraph (b) and subsections (3) to (6), the provisions of the Tax Acts (other than section 39) relating to the making of allowances or charges in respect of capital expenditure incurred on the construction or refurbishment of an industrial building or structure shall, notwithstanding anything to the contrary in those provisions apply—

(i) as if a qualifying premises were, at all times at which it is a qualifying premises, a building or structure in respect of which an allowance is to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV, or Chapter I of Part XVI, of the Income Tax Act, 1967, by reason of its use for a purpose specified in section 255(1)(a) of that Act, and

(ii) where any activity carried on in the qualifying premises is not a trade, as if it were a trade.

(b) An allowance shall be given by reason of this subsection in respect of any capital expenditure incurred on the construction or refurbishment of a qualifying premises only in so far as that expenditure is incurred in the qualifying period.

(3) In the case where capital expenditure is incurred in the qualifying period on the refurbishment of a qualifying premises, subsection (2) shall apply only if the total amount of the capital expenditure so incurred is not less than an amount which is equal to 10 per cent. of the market value of the qualifying premises immediately before that expenditure is incurred.

(4) For the purposes of the application, by subsection (2), of section 254 of the Income Tax Act, 1967, and section 25 of the Finance Act, 1978, in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a qualifying premises—

(a) the said section 254 shall, notwithstanding section 22 of the Finance Act, 1991, apply as if—

(i) in paragraph (a) of subsection (2A) of the said section 254, the reference to ‘before the 1st day of April, 1991' (as provided for in section 50 of the Finance Act, 1988) were a reference to ‘before the 1st day of July, 2000',

(ii) paragraph (aa) (inserted by section 74 of the Finance Act, 1990) and paragraph (b) of subsection (2A) of the said section 254 were deleted, and

(iii) subsection (2B) (inserted by the said section 74) of the said section 254 were deleted,

and

(b) the said section 25 shall apply—

(i) as if paragraph (b) (as amended by section 76 of the Finance Act, 1990) of subsection (2) (inserted by section 48 of the Finance Act, 1988) were deleted, and

(ii) as if subsection (2A) (including the proviso to that subsection) of that section were deleted.

(5) Notwithstanding section 265(1) of the Income Tax Act, 1967, no balancing charge shall be made in relation to a qualifying premises by reason of any of the events specified in the said section 265(1) which occurs—

(a) more than 13 years after the qualifying premises were first used, or

(b) in a case where section 26 of the Finance Act, 1991, applies more than 13 years after the capital expenditure on refurbishment of the qualifying premises was incurred.

(6) (a) Notwithstanding subsections (2) to (5), any allowance or charge which, apart from this subsection, would be made by reason of subsection (2) in respect of capital expenditure which is incurred on the construction or refurbishment of a qualifying premises may be reduced to one-half of the amount which, apart from this subsection, would be the amount of that allowance or charge.

(b) Paragraph (a) shall apply, where, in respect of an area, the Minister for Finance, having had regard to the criteria set out in section 38(2), has specified in an order under that section that the area is a qualifying area for the purposes of this section and that the relief to apply is subject to this subsection.

(c) For the purposes of paragraph (a) the amount of an allowance or charge to be reduced to one-half thereof shall be computed as if—

(i) this subsection had not been enacted, and

(ii) effect had been given to all allowances taken into account in so computing that amount.

(d) Nothing in this subsection shall affect the operation of section 265(5) of the Income Tax Act, 1967.

(7) For the purposes only of determining, in relation to a claim for an allowance by virtue of subsection (2), whether and to what extent capital expenditure incurred on the construction or refurbishment of a qualifying premises is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the premises actually carried out during the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred) be treated as having been incurred in that period.

(8) Where, by virtue of subsection (2), an allowance is given under Chapter II of Part XV of, or Chapter I of Part XVI of, the Income Tax Act, 1967, in respect of any capital expenditure incurred on the construction or refurbishment of a qualifying premises, relief shall not be given in respect of that expenditure under the said Chapter II or the said Chapter I by virtue of any provision of the Tax Acts other than subsection (2).".

Amendment agreed to.

Mr. Quinn

I move amendment No. 63:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"41.—(1)(a) In this section—

‘qualifying lease' means a lease in respect of a qualifying premises granted in the qualifying period on bona fide commercial terms by a lessor to a lessee not connected with the lessor, or with any other person who is entitled to a rent in respect of the qualifying premises, whether under that lease or any other lease;

‘qualifying premises' means, subject to paragraph (b) and subsection (5)(a), a building or structure the site of which is wholly within a qualifying area and—

(i) (I) which is a building or structure in use for a purpose specified in section 255(1)(a) of the Income Tax Act, 1967, and in respect of which capital expenditure is incurred in the qualifying period for which an allowance is to be made, or will by virtue of section 19 (as amended by section 23 of the Finance Act, 1991) of the Finance Act, 1970, be made, for the purposes of income tax or corporation tax, as the case may be, under section 254 of the Income Tax Act, 1967, or section 25 of the Finance Act, 1978, as applied by section 39,

(II) in respect of which an allowance is to be made, or will by virtue of section 19 (as amended by section 23 of the Finance Act, 1991) of the Finance Act, 1970, be made, for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV of, or Chapter I of Part XVI of, the Income Tax Act, 1967, by reason of section 40, or

(III) which is a building or structure in use for the purposes specified in section 255(1)(d) of the Income Tax Act, 1967, and in respect of the construction or refurbishment of which capital expenditure is incurred in the qualifying period for which an allowance would, but for subsection (6), be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV of, or Chapter I of Part XVI of, the Income Tax Act, 1967,

and

(ii) which is let on such terms as are referred to in paragraph (a)(ii)(II) of the definition of ‘qualifying premises' in section 40.

(b) Where capital expenditure is incurred in the qualifying period on the refurbishment of a building or structure in respect of which an allowance is to be made, or will by virtue of section 19 of the Finance Act, 1970, be made, or in respect of which an allowance would but for subsection (6) be made, for the purposes of income tax or corporation tax, as the case may be, under any of the provisions referred to in paragraph (a), the building or structure shall not be regarded as a qualifying premises unless the total amount of the expenditure so incurred is not less than an amount equal to 10 per cent. of the market value of the building or structure immediately before that expenditure is incurred.

(2) For the purposes of this section, so much of a period, being a period when rent is payable by a person in relation to a qualifying premises under a qualifying lease, shall be a relevant rental period as does not exceed—

(a) 10 years, or

(b) the period by which 10 years exceeds—

(i) any preceding period, or

(ii) if there is more than one preceding period, the aggregate of

for which rent was payable by that person or any other person or any other person in relation to that premises under a qualifying lease.

(3) Subject to subsection (4), where, in the computation of the amount of the profits or gains of a trade or profession, a person is apart from this section entitled to any deduction (in this subsection referred to as ‘the first-mentioned deduction') on account of rent in respect of a qualifying premises occupied by such person for the purposes of that trade or profession which is payable by such person for a relevant rental period in relation to that qualifying premises under a qualifying lease, such person shall be entitled in that computation to a further deduction (in this subsection referred to as the ‘second-mentioned deduction') equal to the amount of the first-mentioned deduction but, where the first-mentioned deduction is on account of rent which is payable by such person to a connected person, such person shall not be entitled in that computation to the second-mentioned deduction.

(4) Where a person holds an interest in a qualifying premises out of which interest a qualifying lease is created, directly or indirectly, in respect of the qualifying premises and in respect of rent payable under the qualifying lease a claim for a further deduction under this section is made, and either such person or another person connected with such person—

(a) takes under a qualifying lease a qualifying premises (in this subsection referred to as ‘the second-mentioned premises') occupied by such person or such other person, as the case may be, for the purposes of a trade or profession, and

(b) is apart from this section entitled, in the computation of the amount of the profits or gains of that trade or profession, to a deduction on account of rent in respect of the second-mentioned premises, then, unless such person or such other person, as the case may be, shows that the taking on lease of the second-mentioned premises was not undertaken for the sole or main benefit of obtaining a further deduction on account of rent under the provisions of this section, such person or such other person, as the case may be, shall not be entitled in the computation of the amount of the profits or gains of that trade or profession to any further deduction on account of rent in respect of the second-mentioned premises.

(5) (a) A building or structure in use for the purposes specified in section 255(1)(d) of the Income Tax Act, 1967, shall not be a qualifying premises for the purposes of this section unless the person to whom an allowance under Chapter II of Part XV, or Chapter I of Part XVI, of that Act would but for subsection (6) be made for the purposes of income tax or corporation tax, as the case may be, in respect of the capital expenditure incurred in the qualifying period on the construction or refurbishment of the building or structure, elects by notice in writing to the appropriate inspector (within the meaning of section 9 of the Finance Act, 1988) to disclaim all allowances under the said Chapter II and the said Chapter I in respect of the said capital expenditure.

(b) An election under paragraph (a) shall be included in the return required to be made by the person concerned under section 10 of the Finance Act, 1988, for the first year of assessment or the first accounting period, as the case may be, for which an allowance would, but for subsection (6), have been made to that person under the said Chapter II or the said Chapter I in respect of the said capital expenditure.

(d) A person who has made an election under paragraph (a) shall furnish a copy of that election to any person (in this paragraph referred to as ‘the second-mentioned person') to whom the person grants a qualifying lease in respect of the qualifying premises and the second-mentioned person shall include the said copy in the return required to be made by the second-mentioned person under section 10 of the Finance Act, 1988, for the year of assessment or accounting period, as the case may be, in which rent is first payable by the second-mentioned person under the qualifying lease in respect of the qualifying premises.

(6) Where a person who has incurred capital expenditure in the qualifying period on the construction or refurbishment of a building or structure in use for the purposes specified in section 255(1)(d) of the Income Tax Act, 1967, makes an election under paragraph (a) of subsection (5), then, notwithstanding any other provision of the Tax Acts—

(a) no allowance under Chapter II of Part XV, or Chapter I of Part XVI, of the Income Tax Act, 1967, shall be made to the person in respect of that capital expenditure,

(b) on the occurrence, in relation to the building or structure, of any of the events referred to in section 265(1) of the Income Tax Act, 1967, the residue of expenditure (within the meaning of section 266 of that Act) in relation to that capital expenditure shall be deemed to be nil, and

(c) section 19 (as amended by section 23 of the Finance Act, 1991) of the Finance Act, 1970, shall not apply in the case of any person who buys the relevant interest (within the meaning of section 268 of the Income Tax Act, 1967) in the building or structure.

(7) For the purposes of determining, in relation to paragraph (i)(III) of the definition of ‘qualifying premises' in subsection (1)(a) and subsections (5) and (6), whether and to what extent capital expenditure incurred on the construction or refurbishment of a building or structure is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the building or structure actually carried out in the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred) be treated as having been incurred in that period.

(8) Section 33 (as amended by section 49(5) of the Finance Act, 1995) of the Finance Act, 1990, is hereby amended—

(a) in subsection (1), by the substitution ‘of section 49 of the Finance Act, 1995, or section 41 of the Finance Act, 1997' for ‘or section 49 of the Finance Act, 1995', and

(b) in subsection (2)(a), by the substitution of the following definition for the definition of ‘qualifying premises':

‘"qualifying premises" means a qualifying premises within the meaning of section 45 of the Finance Act, 1986, section 42 of the Finance Act, 1994, section 49 of the Finance Act, 1995 or section 41of the Finance Act, 1997;'.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 64:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"42.—(1) In this section—

‘qualifying expenditure', in relation to an individual, means an amount equal to the amount of the expenditure incurred by the individual on the construction or, as the case may be, refurbishment of a qualifying premises which is a qualifying owner-occupied dwelling in relation to the individual after deducting from that amount of expenditure any sum in respect of or by reference to that expenditure, or in respect of or by reference to the qualifying premises or the construction or, as the case may be, refurbishment work in respect of which it was incurred, which the individual has received, or is entitled to receive, directly or indirectly, from the State, any board established by statute or any public or local authority;

‘qualifying owner-occupied dwelling', in relation to an individual, means a qualifying premises which is first used, after the qualifying expenditure has been incurred, by such an individual as that individual's only or main residence;

‘qualifying premises', in relation to the incurring of qualifying expenditure, means, subject to subsections (2) and (3) of section 43, a house—

(a) the site of which is wholly within a qualifying area,

(b) which is used solely as a dwelling,

(c) in respect of which, if it is not a new house (for the purposes of section 4 of the Housing (Miscellaneous Provisions) Act, 1979) provided for sale, there is in force a certificate of reasonable cost the amount specified in which in respect of the cost of construction or, as the case may be, refurbishment of the house to which the certificate relates is not less than the expenditure actually incurred on such construction or refurbishment, as the case may be, and

(d) the total floor area of which is not less than 38 square metres and not more than 125 square metres;

‘refurbishment', in relation to a building, means either or both of the following, that is to say:

(a) the carrying out of any works of construction, reconstruction, repair or renewal, and

(b) the provision or improvement of water, sewerage or heating facilities,

where the carrying out of such works, or the provision of such facilities, is certified by the Minister for the Environment, in any certificate of reasonable cost granted by that Minister in relation to any house contained in the building, to have been necessary for the purposes of ensuring the suitability as a dwelling of any house in the building and whether or not the number of houses in the building, or the shape or size of any such house, is altered in the course of such refurbishment.

(2) Subject to subsection (3), where an individual, having made a claim in that behalf, proves to have incurred qualifying expenditure in a year of assessment, the individual shall be entitled, for that year of assessment and for any of the 9 subsequent years of assessment in which the qualifying premises in respect of which the individual incurred the qualifying expenditure is the only or main residence of the individual, to have a deduction made from the individual's total income of an amount equal to—

(a) in the case where the qualifying expenditure has been incurred on the construction of the qualifying premises, 5 per cent. of the amount of that expenditure, or

(b) in the case where the qualifying expenditure has been incurred on the refurbishment of the qualifying premises, 10 per cent. of the amount of that expenditure.

(3) Where qualifying expenditure in relation to a qualifying premises is incurred by two or more persons, each of those persons shall be treated as having incurred the expenditure in the proportions in which they actually bore the expenditure and the expenditure shall be apportioned accordingly.

(4) Section 137 of the Income Tax Act, 1967, is hereby amended in Part I of the Table to that section by the addition of ‘section 42 of the Finance Act, 1997'.

(5) Section 43 shall apply for the purposes of supplementing this section.".

Amendment agreed to.

Mr. Quinn

I move amendment No. 65:

In page 48, before section 37, but in Chapter II, to insert the following new section:

"43.—(1) In section 42—

‘certificate of reasonable cost' means a certificate granted by the Minister for the Environment for the purposes of section 42, stating that the amount specified in the certificate in relation to the cost of construction or refurbishment of, the house to which the certificate relates appears to the Minister at the time of the granting of the certificate and on the basis of the information available to the Minister at that time to be reasonable, and section 18 of the Housing (Miscellaneous Provisions) Act, 1979, shall, with any necessary modifications, apply to a certificate of reasonable cost as if it were a certificate of reasonable value within the meaning of that section;

‘house' includes any building or part of a building used or suitable for use as a dwelling and any out-office, yard, garden or other land appurtenant thereto or usually enjoyed therewith:

‘total floor area' means the total floor area of a house measured in the manner referred to in section 4 (2) (b) of the Housing (Miscellaneous Provisions) Act, 1979.

(2) (a) A house shall not be a qualifying premises for the purposes of section 42, in so far as it applies to expenditure other than expenditure on refurbishment, unless it complies with such conditions, if any, as may be determined by the Minister for the Environment from time to time for the purposes of section 4 of the Housing (Miscellaneous Provisions) Act, 1979, in relation to standards of construction of houses and the provision of water, sewerage and other services in houses.

(b) A house shall not be a qualifying premises for the purposes of section 42, in so far as it applies to expenditure on refurbishment, unless it complies with such conditions, if any, as may be determined by the Minister for the Environment from time to time for the purposes of section 5 of the Housing (Miscellaneous Provisions) Act, 1979, in relation to standards for improvements of houses and the provision of water, sewerage and other services in houses.

(c) A house shall not be a qualifying premises for the purposes of section 42, unless the house or, in a case where the house is one of a number of houses in a single development, the development of which it is a part complies with such guidelines as may, from time to time, be issued by the Minister for the Environment, with the consent of the Minister for Finance, for the purposes of furthering the objectives of the Urban Renewal Act, 1986, and, without prejudice to the generality of the foregoing, such guidelines may include provisions in relation to all or any one or more of the following:

(i) the design and the construction of, conversion into, refurbishment of, or, as the case may be, construction or refurbishment of, houses,

(ii) the total floor area and dimensions of rooms within houses, measured in such manner as may be determined by the Minister for the Environment,

(iii) the provision of ancillary facilities and amenities in relation to houses, and

(iv) the balance to be achieved between houses of different types and sizes within a single development of two or more houses or within such a development and its general vicinity having regard to the housing existing or proposed in that vicinity.

(3) A house shall not be a qualifying premises for the purposes of section 42, unless persons authorised in writing by the Minister for the Environment for the purposes of that section are permitted to inspect the house at all resonable times upon production, if so requested by a person affected, of their authorisations.

(4) For the purposes of section 42, references in that section to the construction or refurbishment of any premises shall be construed as including references to the development of the land on which the premises is situated or which is used in the provision of gardens, grounds, access or amenities in relation to the premises and, without prejudice to the generality of the foregoing, as including, in particular—

(a) demolition or dismantling of any building on the land.

(b) site clearance, earth moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works,

(d) the construction of any outhouses or other buildings or structures for use by the occupants of the premises or for use in the provision of amenities for the occupants.

(5) (a) For the purposes of determining, in relation to any claim under section 42 (2), whether and to what extent expenditure incurred on the construction or refurbishment of a qualifying premises is incurred or not incurred during the qualifying period, only such an amount of that expenditure as is properly attributable to work on the construction or refurbishment of the premises which was actually carried out during the qualifying period shall, notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred, be treated, as having been incurred during that period.

(b) Where, by virtue of subsection (4), expenditure on the construction or refurbishment of a qualifying premises includes expenditure on the development of any land, paragraph (a) shall have effect, with any necessary modifications, as if the references therein to the construction or refurbishment of the qualifying premises were references to the development of such land.

(6) For the purposes of section 42, other than for the purposes mentioned in subsection (5) (a), expenditure incurred on the construction or refurbishment of a qualifying premises shall be deemed to have been incurred on the earliest date after the expenditure was actually incurred that the premises is in use as a dwelling.

(7) An appeal to the Appeal Commissioners shall lie on any question arising under this section or under section 42, other than a question on which an appeal lies under section 18 of the Housing (Miscellaneous Provisions) Act, 1979, in like manner as an appeal would lie against an assessment to income tax or corporation tax and the provisions of the Tax Acts relating to appeals shall apply accordingly.".

Amendment agreed to.

Section 37 agreed to.

Section 38 agreed to.

Amendments Nos. 66 and 66a not moved.

Section 39 agreed to.

Select Committee on Finance and General Affairs debate - Wednesday, 23 Apr 1997

SECTION 31.

Mr. McDowell

Select Committee on Finance and General Affairs debate -
Wednesday, 23 Apr 1997