The measure to which the Deputy is referring was announced by me in the Budget in December 2011 and provided for in the Finance Act 2012. This was complemented, at that time, by the introduction of an additional 5% USC charge in the form of a property relief surcharge on the use of property reliefs by certain higher earning individuals. The broad intention of these two measures was to reduce the legacy of property reliefs in line with Government policy to develop a fairer tax code. Although almost all of these property and area-based incentive reliefs have been brought to an end by this stage, unused reliefs were being be carried forward year after year into the future at substantial cost to the Exchequer. The changes which I introduced were informed by an Economic Impact Assessment into this area which was conducted by my Department and the changes received broad cross party support at the time. The details of the measure curtailing property-based accelerated capital allowances are as follows:
- It only applies to the various accelerated property and area-based capital allowances schemes. The ordinary industrial buildings allowance or the wear and tear allowance for plant and machinery are unaffected.
- The measure applies potentially to any industrial building for which accelerated capital allowances have been claimed. It is not restricted to hotels.
- Importantly, it applies only to passive investors in these schemes or to those who are deemed in law not to be actively engaged in the trade. Persons who are actively engaged in their respective trades are not affected by this measure.
- With effect from January 2015, any unused capital allowances which are carried forward beyond the tax life of the building will be lost. This essentially means that if the tax life has ended anytime up to the end of 2014, then the unused allowances are lost in 2015. If, on the other hand, the tax life of a building ends in 2016 or 2017 or later, then it is at the end of that year that the unused allowances are lost.
My intention back in December 2011, when I announced 2015 as the operative date for this measure, was to give adequate notice to those who may potentially be affected to take steps to ensure that the impact on them is minimised. The practical impact of this measure will only begin to be felt in a little over a year’s time, at the earliest. I have no immediate plans at this time to review the policy before it has even come into effect and as far as I am concerned, the measure is proportionate and will be effective in bringing to an end the legacy of these property reliefs.