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Dáil Éireann díospóireacht -
Wednesday, 15 May 1935

Vol. 56 No. 8

Resolution No. 6.—Income Tax.

I move:—

(1) That references in sub-paragraph (ii) of paragraph (a) of Clause 1 of Schedule D of the Income Tax Act, 1918, to annual profits or gains arising or accruing from any trade shall include profits or gains arising or accruing to any person from any building operation carried on by him or from the sale or the demise (otherwise than for a term not exceeding ten years without a fine) of any lands or hereditaments acquired by him either with the intention of selling or demising them or with a view to their development by the erection of buildings or the reconstruction of buildings or any other building operation.

(2) That the following Rule shall be added to the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, that is to say:—

"18. In the computation of profits assessable under this Schedule and arising from the demise of any lands or hereditaments there shall be included in such profits—

(a) any fine, premium, or other money, by whatever name called, included in the consideration for such demise, and

(b) the capitalised value of the rent reserved on such demise."

It has always been held that the Revenue Commissioners, in computing a builder's profits, may treat as income the amount received from the sale of houses and the capitalised value of the head rent received, and this practice was upheld by the Special Commissioners. In a recent case the Circuit Court Judge held otherwise, and this is to make the law clear on that point and to preserve the Revenue Commissioners' previous interpretation of it. The Resolution will only be effective for this year and in future; it will have no retrospective effect.

What was the decision? Is this dealing with the capitalisation of all profit ground rents?

And the Minister wants——

——to restore the position. The Minister wants to revert to the previous position.

But such position never obtained.

It obtained all right.

It is not reverting to any position—it is creating a position. For instance if a man creates a profit rent of £5 in one year, the Minister wants to capitalise that at shall we say 15 years' purchase and wants to declare that that is created income, in that year, of £75. Is not that the principle the Minister is after?

When will that man have got the £75?

We want to regard the difference between the capitalised value and what the man paid for that particular site as profit, in view of the fact that the builder is engaged in the business year after year.

If I pay £5 for a site, and build a house on it, and put a £10 ground rent on it, the Minister wants to capitalise the £5. Is not that the position? Supposing I build a house on it, and I do not sell, but rent it at £2 a week, does the Minister propose to capitalise the £2 a week?

No. That is quite a different case.

How can you have one and not the other?

We can argue that on the Report Stage.

I am telling the Minister, significant as his smile is, that he has not got me even yet.

And this is a subject on which the Deputy is an expert.

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