Billy Timmins
Ceist:214 Mr. Timmins asked the Minister for Finance when the tax relief scheme for town renewal will expire; the conditions of the scheme; and if he will make a statement on the matter. [7668/02]
Written Answers. - Urban Renewal Schemes.
Billy Timmins
Ceist:215 Mr. Timmins asked the Minister for Finance his plans to extend the tax relief scheme for town renewal, in view of the fact that there has been a slow uptake of the scheme; and if he will make a statement on the matter. [7669/02]
I propose to take Questions Nos. 214 and 215 together.
The tax reliefs for the areas and sub-areas designated under the town renewal scheme were provided for under section 89(a) of the Finance Act, 2000. The scheme provides for capital allowances of 100% in respect of qualifying construction or refurbishment expenditure incurred on qualifying commercial buildings and capital allowances of up to 100% in respect of qualifying expenditure incurred on the construction or refurbishment of qualifying industrial buildings. In the case of lessors the relief is written off at 50% in year one and the remainder at 4% per annum. Owner-occupiers can qualify for similar relief but can also avail of free depreciation of 50%, which allows the owner to defer writing off the year one allowance if they so wish.
The reliefs outlined above were subject to European Commission approval in the context of State aid and were notified to the Commission in July 2000. Agreement was reached with the Commission in March of last year to allow the application of commercial and industrial incentives to the majority of projects under the town renewal scheme. Details of the new arrangements which are tailored to meet the Commission's requirements on State aids were announced by the Minister of State at the Department of the Environment and Local Government on 16 March 2001 and the reliefs were introduced with effect from 6 April 2001. In view of the delay in reaching agreement with the Commission on the commencement of the commercial and industrial element of the scheme, the termination date of the scheme has been extended from 31 March 2003 to 31 December 2003.
Incentives are available to small and medium enterprises, enterprises defined by the EU as having certain characteristics including a staff of fewer than 250 employees, with either an annual turnover not exceeding €40 million or an annual balance sheet total not exceeding €27 million. In detail, the range of projects that have been cleared to proceed from 6 April 2001 following discussions with the European Commission are:
All new build SME projects – such projects will be eligible for both commercial and industrial incentives: Refurbishment projects in the following categories:
(a) SME projects where the expenditure incurred is below €800,000 will qualify for the full range of commercial and industrial incentives;
(b) SME projects which involve both expenditure on refurbishment and the provision of an extension where the cost of the extension is at least 25% of the market value of the existing building. This category will also qualify for commercial and industrial incentives;
(c) Local retail SME projects excluding mail order and financial services. Incentives for office and industrial development other than those covered under (a) and (b) are therefore excluded.
Projects which qualify under any of the three refurbishment categories outlined above are eligible under the scheme. Refurbishment projects which do not fall within these categories have been the subject of ongoing discussions with the EU Commission. It should be noted in this connection that following the successful conclusion of the discussions that I have put down an amendment on Report Stage of the 2002 Finance Bill which will remove the conditions at (a), (b) and (c) above and accordingly enable all refurbishment projects to proceed where they meet the SME conditions.
Provision to allow the implementation of these arrangements was included on Report Stage of the Finance Bill, 2001. The provision also provided that capital allowances will not apply in respect of expenditure incurred, on or after 6 April 2001, on industrial and commercial premises in designated areas under this scheme where any part of that expenditure is met by way of grant assistance from State bodies or elsewhere. This amendment was made in order to ensure that the scheme complies with the European Commission's regional aid guidelines for the period to 2006 and similar amendments were made on Committee Stage in respect of the urban and rural renewal scheme.
The scheme also provides for relief in respect of expenditure incurred on the refurbishment, conversion or construction of residential property. In the case of rented residential property, relief is available against all Irish rental income in respect of 100% of qualifying expenditure incurred on the refurbishment, conversion or construction of qualifying property. Owner occupiers can also avail of relief of 100% over ten years against all income in respect of qualifying refurbishment-conversion expenditure incurred on qualifying residential property. In the case of con struction expenditure incurred on residential property, owner occupiers are entitled to relief at 50% of the qualifying expenditure over ten years against all income. These reliefs were not subject to European Commission approval and were introduced from 1 April 2000 and will run until the scheme's deadline of 31 December 2003.
As part of the Government's commitment to increasing the supply of residential accommodation provision is being made in the 2002 Finance Bill to allow for an increase in the number of sites in both the town renewal scheme and the urban renewal scheme that can qualify for residential investor relief in addition to owner occupier relief. Section 25 of the Bill amends both the Urban Renewal Act, 1998, and the Town Renewal Act, 2000, in order to allow the Minister for the Environment and Local Government to recommend to the Minister for Finance that certain areas be designated for the purposes of rented residential relief in relation to construction, conversion or refurbishment expenditure incurred on certain residential accommodation. The areas in question are certain areas that have already been recommended for residential owner-occupier relief. This amendment will apply in respect of expenditure incurred on or after 5 December 2001 and in certain cases for expenditure incurred prior to 5 December 2001 subject to conditions.
As the Deputy is aware the full range of reliefs available under the town renewal scheme have been in operation for less than one year. It is therefore premature at this stage to review the operation of the scheme or to ascertain the take up of these reliefs. In addition, it is also too early to give consideration to the possibility of extending the scheme's deadline beyond 31 December 2003.