Dáil Éireann díospóireacht -
Tuesday, 23 Nov 1993

Vol. 436 No. 1

Written Answers. - Urban Renewal Scheme.

Michael Bell

Ceist:

53 Mr. Bell asked the Minister for Finance if his attention has been drawn to the fact that the normal tax allowances may not apply to the urban renewal scheme where planning permission is secured for light industrial developments in urban areas; his views on the fact that under the terms of the original scheme, capital allowances for buildings and structures could only be claimed in respect of buildings and structures which qualified as industrial buildings for tax purposes, which included factories, hotels, multi-storey car parks and other such projects; and his views on the fact that this list was extended to include commercial buildings, that is, offices, shops, car parks, warehouses, sports and leisure complexes, cinemas, theatres, concert halls and gyms.

Minister for Finance (Mr. B. Ahern)

Under the urban renewal scheme, section 42 of the Finance Act, 1986 which deals with the allowance in relation to construction of certain commercial premises, defines a qualifying premises for the purpose of the section as, inter alia,“a building or structure the site of which is wholly within a designated area and which... apart from this section is not an industrial building or structure within the meaning of section 255 (1) of the Income Tax Act, 1967...” Section 255 (1) of the Income Tax Act, 1967 defines an “industrial building or structure” as, inter alia, “a building or structure in use... for the purposes of a trade carried on in a mill, factory or other similar premises... or ...the trade of hotel-keeping”.

The effect of these provisions is to ensure that only buildings other than those defined in section 255 (1) of the Income Tax Act, 1967 are granted the industrial buildings allowance under section 42 of the Finance Act, 1986. Accordingly, light industrial developments in designated areas would not be granted the industrial buildings allowance under section 42 of the Finance Act, 1986 but could be granted the level of relief available under section 255 of the Income Tax Act, 1967.

When the urban renewal reliefs were first introduced in 1986, the rates for the industrial buildings allowance were similar for buildings granted relief under both section 42 of the Finance Act, 1986 and section 255 of the Income Tax Act, 1967. At that time, both types of developments were granted free depreciation. However, since 1988, as part of the Government's tax reform policy, there has been a progressive reduction in the rates of industrial buildings allowance available in respect of industrial buildings or structures. The reduction in allowances for industrial buildings nationwide was a necessary step towards broadening the tax base and reducing levels of income and corporation tax. Thus, the current position is that the industrial buildings annual allowance — 4 per cent for 25 years — is available for industrial buildings or structures whether they are in a designated area or not while free depreciation remains available for commercial developments in areas designated for urban renewal.

Section 42 of the Finance Act, 1986 does not define or list the types of developments covered by it but merely indicates that no relief is available under the section in respect of developments covered by section 255 of the Income Tax Act, 1967 where a list of industrial buildings and structures is provided. This has been the position since the legislation was first enacted in 1986.