Tax Reliefs for Renewal and Improvement of Certain Resort Areas

14 мая 2014 | Author: | No comments yet »

Tax Reliefs for Renewal and Improvement of Certain Resort Areas — IT29

Introduction

The Finance Act 1995 introduced a new incentive scheme for certain resort areas which will operate for the three year period commencing on 1 July 1995 (the qualifying period).

The Scheme introduces the following incentives:

Capital Allowances for investment in the construction or refurbishment of the following types of buildings and facilities:

hotels, holiday camps and holiday cottages registered by Bord Failte.

registered or listed tourist accommodation (e.g. Bed and Breakfast accommodation) and other facilities approved by the Minister for Tourism (see Appendix 1 ).

Double Rent Deduction for lessees of buildings and facilities which qualify for the above incentives.

Relief for expenditure on construction, conversion and refurbishment of rented residential accommodation.

The resort areas covered by the scheme are Achill, Arklow, Ballybunion, Bettystown/ Laytown Mosney, Bundoran, Clogherhead, Clonakilty, Courtown, Enniscrone, Kilkee, Lahinch, Salthill, Tramore, Westport and Youghal.

Summary of Tax Incentives

Hotels, Holiday Camps and Holiday Cottages registered by Bord Failte

Expenditure on construction (site exclusive) of new buildings or refurbishment of existing facilities wholly within a qualifying resort area qualify for the following capital allowances:

Owner-occupier (trader)

50% initial allowance with a 5% annual allowance thereafter, or

75% free depreciation with a 5% annual allowance thereafter.

Free depreciation allows a taxpayer the option of increasing the amount of annual allowance for any year, subject to the aggregate amounts of the allowance so increased not exceeding the percentage of the expenditure available for free depreciation.

Lessor

50% initial allowance with a 5% annual allowance thereafter.

In the case of refurbishment work the refurbishment expenditure must amount to 20% or more of the (site exclusive) market value of the building prior to refurbishment.

Withdrawal of Relief

Tax allowances granted may be withdrawn in whole or in part if the premises is sold within 7 years in the case of hotels and holiday camps or 10 years in the case of holiday cottages.

Lessee — Double Rent Deduction

A double rent deduction for rent paid is allowed as an expense in arriving at the trading income for tax purposes of a lessee carrying on a trade or profession in a qualifying building or facility. It is confined to a maximum rental period of ten years.

To qualify, the lessor must be entitled to capital allowances under the Scheme, the lease must be entered into in the qualifying period and the letting must be a bona fide commercial letting.

In the case of a refurbished building or facility the refurbishment expenditure must amount to 20% or more of the (site exclusive) market value of the building or facility prior to refurbishment.

Qualifying Tourism Facilities


Expenditure on construction (site exclusive) or refurbishment of tourist accommodation facilities registered or listed by Bord Failte (other than those mentioned above) and other facilities approved by the Minister for Tourism (see Appendix 1 ) wholly within a qualifying resort area qualify for the following capital allowances:

Owner-occupier (trader)

50% initial allowance with a 5% annual allowance thereafter, or

75% free depreciation with a 5% annual allowance thereafter.

Lessor

50% initial allowance with a 5% annual allowance thereafter.

In the case of refurbishment work the refurbishment expenditure must amount to 20% or more of the (site exclusive) market value of the building or facility prior to refurbishment.

Any building used as a dwelling-house (other than those specifically provided for e.g. Bed and Breakfast accommodation) does not qualify for the incentives.

Withdrawal of Relief

Tax allowances granted may be withdrawn in whole or in part if a facility is sold within 11 years of construction or refurbishment. Allowances granted in respect of a tourism accommodation facility will be withdrawn if it ceases to be registered or listed with Bord Failte within 11 years of construction or refurbishment.

Lessee — Double Rent Deduction

A double rent deduction for rent paid is allowed as an expense in arriving at the trading income for tax purposes of a lessee carrying on a trade or profession in a qualifying building or facility. It is confined to a maximum rental period of ten years.

To qualify, the lessor must be entitled to capital allowances under the Scheme, the lease must be entered into in the qualifying period and the letting must be a bona fide commercial letting.

In the case of a refurbished building or facility the refurbishment expenditure must amount to 20% or more of the (site exclusive) market value of the building or facility prior to refurbishment.

Rented Residential Accommodation

Usually known as Section 23 relief it allows the lessor of a newly constructed house or apartment wholly within a resort area to write off against rental income (including income from other lettings) the cost of construction (excluding grants and site costs) of the house.

In the case of expenditure on the conversion of existing buildings into qualifying units or on the refurbishment of existing units in a building of two or more residential units, the deduction is the amount of the conversion or refurbishment cost.

Conditions to be met to qualify for the incentive

The total floor area must be within the following dimensions:

30-125 sq. metres in the case of an apartment in a building of two or more storeys, or

35-125 sq. metres in any other case,

A house or apartment will not qualify for the incentive unless:

it is used primarily for letting to tourists

it is occupied for no other purposes from April to October each year (lettings to non-tourists are permitted in the remaining months subject to maximum letting periods set out below)

a register of lessees containing specified information is maintained.

A house cannot be let to, or occupied by, any person for more than two consecutive months at any one time or for more than six months in any year.

Withdrawal of Relief

The tax deduction is withdrawn if the house or apartment etc. is sold or ceases to be let or otherwise ceases to be a qualifying premises within a period of 10 years.

Other Conditions

A house must also comply with certain Department of the Environment guidelines, mainly concerning design and construction, internal dimensions, facilities and amenities. Detailed information is available from the Department of the Environment, Heritage and Local Government .

Anti-Avoidance

There are anti-avoidance provisions to deal with transfers at undervalue, leases between connected persons and finance leases.

Appendix 1

List of Qualifying Registered or Listed Tourism Accommodation Facilities

Hotels

Guesthouses

Caravan and Camping Sites

Holiday Hostels

Youth Hostels

Holiday Camps

Holiday Cottages

Holiday Apartments

Bed and Breakfast Establishments.

Leisure/sports facilities (e.g. swimming, water sports, tennis, squash, golf, angling, equestrian)

Marina, mooring and breakwater facilities

Indoor/outdoor adventure and amusement centres/parks

English/Irish Language schools

Theme/Interpretative Centres/parks

Tourism Information facilities

Craft exhibition and demonstration centres

Entertainment facilities, e.g. theatres, bowling alleys, amusement arcades (excluding activities licensed under the 1956 Gaming and Lotteries Act)

Restaurants/cafes

Licensed premises, including existing retail outlets which are an integral part of and are located in the premises

Car hire operations

Car parks

Retail outlets which are an integral part of and located in tourist buildings qualifying under Section 47 and 48 of the 1995 Finance Act

Existing heritage buildings with public access (improvements to)

Existing activities listed under the 1956 Gaming and Lotteries Act (improvements to).

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