Finance Act, 1981
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Chapter VI Income Tax and Corporation Tax: Relief for Certain Capital Expenditure | ||
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Deduction for certain expenditure on construction of rented residential accommodation. |
23.—(1) (a) In this section— | |
“certificate of reasonable cost” means a certificate granted by the Minister for the Environment for the purposes of this section, stating that the amount specified in the certificate in relation to the cost of construction of the house to which the certificate relates appears to him at the time of the granting of the certificate and on the basis of the information available to him at that time to be reasonable, and section 18 of the Housing (Miscellaneous Provisions) Act, 1979 , shall, with any necessary modifications, apply to a certificate of reasonable cost as if it were a certificate of reasonable value; | ||
“certificate of reasonable value” has the meaning assigned to it by section 18 of the Housing (Miscellaneous Provisions) Act, 1979 ; | ||
“house” includes any building or part of a building used or suitable for use as a dwelling and any out-office, yard, garden or other land appurtenant thereto or usually enjoyed therewith; | ||
“lease”, “lessee”, “lessor” and “premium” have the meanings assigned to them by Chapter VI of Part IV of the Income Tax Act, 1967 ; | ||
“qualifying lease”, in relation to a house, means a lease of the house the consideration for the grant of which consists— | ||
(i) solely of periodic payments all of which are, or fall to be treated as, amounts by way of rent for the purposes of Chapter VI of Part IV of the Income Tax Act, 1967 , or | ||
(ii) of payments of the kind mentioned in paragraph (i) together with a payment by way of premium which does not exceed 10 per cent. of the relevant cost of the house: | ||
Provided that the lease shall not be a qualifying lease if the terms of the lease contain any provisions enabling the lessee or any other person, directly or indirectly, at any time to acquire any interest in the house for a consideration which is less than that which might be expected to be given at that time for the acquisition of the interest if the negotiations for that acquisition were conducted in the open market at arm's length; | ||
“qualifying period” means the period commencing on the 29th day of January, 1981, and ending on the 31st day of March, 1984; | ||
“qualifying premises” means a house— | ||
(i) which is used solely as a dwelling, and | ||
(ii) the total floor area of which— | ||
(I) is not less than 30 square metres and not more than 75 square metres in the case where the house is a separate self-contained flat or maisonette in a building of two or more storeys, or | ||
(II) is not less than 35 square metres and not more than 125 square metres in any other case, and | ||
(iii) in respect of which there is in force either a certificate of reasonable cost the amount specified in which in respect of the cost of construction of the house to which the certificate relates is not less than the expenditure actually incurred on such construction or, if it is a new house provided for sale, a certificate of reasonable value wherein the amount for which the house to which the certificate relates is stated to represent reasonable value is not less than the net price paid for the house on the sale in respect of which the certificate is granted, and | ||
(iv) which, without having been used, is first let in its entirety under a qualifying lease and thereafter throughout the remainder of the relevant period (save for reasonable periods of temporary disuse between the ending of one qualifying lease and the commencement of another such lease) continues to be let under such a lease; | ||
“relevant cost”, in relation to a house, means, subject to subsection (3), an amount equal to the aggregate of— | ||
(i) the expenditure incurred on the acquisition of, or of rights in or over, any land on which the house is constructed, and | ||
(ii) the expenditure actually incurred on the construction of the house; | ||
“relevant period”, in relation to a qualifying premises, means the period of ten years beginning with the date of the first letting of the premises under a qualifying lease; | ||
“total floor area” means the total floor area of a house measured in the manner referred to in section 4 (2) (b) of the Housing (Miscellaneous Provisions) Act, 1979 . | ||
(b) (i) For the purposes of determining, in relation to any claim under subsection (2), whether and to what extent expenditure incurred on the construction of a qualifying premises is incurred during the qualifying period, only such an amount of that expenditure as is determined by | ||
the inspector, according to the best of his knowledge and judgment, to be properly attributable to work on the construction of the premises which was actually carried out during the qualifying period shall be treated as having been incurred during that period. | ||
(ii) Where, by virtue of subsection (4), expenditure on the construction of any premises includes expenditure on the development of any land, subparagraph (i) shall have effect, with any necessary modifications, as if the references therein to the construction of any premises were references to the development of such land. | ||
(iii) Any amount which, by virtue of subparagraph (i) or (ii), is determined by the inspector may be amended by the Appeal Commissioners or by the Circuit Court on the hearing, or the rehearing, of an appeal against that determination. | ||
(c) For the purposes of this section, other than for the purposes mentioned in paragraph (b) (i), expenditure incurred on the construction of a qualifying premises shall be deemed to have been incurred on the date of the first letting of the premises under a qualifying lease. | ||
(d) A person shall be regarded for the purposes of this section as connected with another person if he would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 . | ||
(2) Where a person, having made a claim in that behalf, proves that he has incurred expenditure on the construction of a qualifying premises, he shall be entitled, in computing for the purposes of subsection (4) of section 81 of the Income Tax Act, 1967 , the amount of a surplus or deficiency in respect of the rent from the said premises, to a deduction of so much (if any) of the expenditure as falls to be treated under any of the provisions of this section as having been incurred by him in the qualifying period and all the provisions of Chapter VI of Part IV of the said Act shall apply as if the said deduction were a deduction authorised by the provisions of subsection (5) of the said section 81: | ||
Provided that where any premium or other sum which is payable, directly or indirectly, under a qualifying lease, or otherwise under the terms subject to which the lease is granted, to or for the benefit of the lessor or to or for the benefit of any person connected with the lessor, or any part of such premium or sum, is not, or is not treated as, an amount by way of rent for the purposes of the said section 81, the expenditure falling to be treated as having been incurred in the qualifying period on the construction of the qualifying premises to which the qualifying lease relates shall be deemed, for the purposes of this subsection, to be reduced by the lesser of— | ||
(a) the amount of the said premium or sum, or as the case may be, the said part of such premium or sum, and | ||
(b) the amount which bears to the amount mentioned in paragraph (a) the same proportion as the amount of the expenditure actually incurred on the construction of the qualifying premises which falls to be treated under subsection (1) (b) as having been incurred in the qualifying period bears to the whole of the expenditure incurred on the said construction. | ||
(3) (a) Where a qualifying premises forms part of a building or is one of a number of buildings in a single development, or forms part of a building which is itself one of a number of buildings in a single development, there shall be made such apportionment as is necessary— | ||
(i) of the expenditure incurred on the construction of the said building or buildings, and | ||
(ii) of the amount which would be the relevant cost in relation to the said building or buildings if the building or buildings, as the case may be, were a single qualifying premises, | ||
for the purposes of determining the expenditure incurred on the construction of the qualifying premises and the relevant cost in relation to the qualifying premises. | ||
(b) Any apportionment required by this paragraph shall be made by the inspector according to the best of his knowledge and judgment. | ||
(c) An apportionment made under paragraph (a) may be amended by the Appeal Commissioners or by the Circuit Court on the hearing, or the rehearing, of an appeal against any deduction granted on the basis of the apportionment. | ||
(4) In this section references to the construction of any premises shall be construed as including references to the development of the land on which the premises are constructed or which is used in the provision of gardens, grounds, access or amenities in relation to the premises and, without prejudice to the generality of the foregoing, as including, in particular— | ||
(a) demolition or dismantling of any building on the land, | ||
(b) site clearance, earth moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works, | ||
(c) walls, power-supply, drainage, sanitation and water supply, and | ||
(d) the construction of any outhouses or other buildings or structures for use by the occupants of the premises or for use in the provision of amenities for the occupants. | ||
(5) Where a house is a qualifying premises and at any time during the relevant period in relation to the premises either of the following events occurs: | ||
(a) the house ceases to be a qualifying premises, or | ||
(b) the ownership of the lessor's interest in the house passes to any other person but the house does not cease to be a qualifying premises, | ||
the person who, before the occurrence of the event, received or was entitled to receive a deduction under subsection (2) in respect of expenditure incurred on the construction of the qualifying premises shall be deemed to have received on the day before the day of the occurrence an amount by way of rent from the qualifying premises equal to the amount of the deduction. | ||
(6) (a) Where the event mentioned in subsection (5) (b) occurs in the relevant period in relation to a house which is a qualifying premises, the person to whom the ownership of the lessor's interest in the said house passes shall be treated as having incurred in the qualifying period an amount of expenditure on the construction of the said house equal to the amount which, under any of the provisions of this section apart from the proviso to subsection (2), the said lessor was treated as having incurred in the qualifying period on the construction of the said house: | ||
Provided that, in the case of a person who purchases such a house, the amount so treated as having been incurred by him shall not exceed the relevant price paid by him on the sale. | ||
(b) For the purposes of this subsection and subsection (7), the relevant price paid by a person on the sale of a house is the amount which bears to the net price paid by him on that sale the same proportion as the amount of the expenditure actually incurred on the construction of the house which falls to be treated under subsection (1) (b) as having been incurred in the qualifying period bears to the relevant cost in relation to that house. | ||
(7) (a) Subject to paragraph (b), where expenditure is incurred on the construction of a house and before the house is used it is sold, the person who buys the house shall be treated for the purposes of this section as having incurred in the qualifying period expenditure on the construction of the house equal to the amount of such expenditure which falls to be treated under subsection (1) (b) as having been incurred in the qualifying period or the relevant price paid by him on the sale, whichever is the lower: | ||
Provided that where the house is sold more than once before it is used, the provisions of this subsection shall have effect only in relation to the last of those sales. | ||
(b) Where expenditure is incurred on the construction of a house by a person carrying on a trade or part of a trade which consists, as to the whole or any part thereof, of the construction of buildings with a view to their sale and the house, before it is used, is sold in the course of that trade or, as the case may be, that part of that trade, the person who buys the house shall be treated, for the purposes of this section, as having incurred in the qualifying period expenditure on the construction of the house equal to the relevant price paid by him on the said sale (hereafter in this paragraph referred to as “the first sale”) and, in relation to any subsequent sale or sales of the house before the house is used, paragraph (a) shall have effect as if the reference to the amount of expenditure which falls to be treated as having been incurred in the qualifying period were a reference to the said relevant price paid on the first sale. | ||
(8) A house shall not be a qualifying premises if it is occupied as a dwelling by any person who is connected with the person who is entitled, in relation to the expenditure incurred on the construction of the house, to a deduction under subsection (2), and the terms of the qualifying lease in relation to the house are not such as might have been expected to be included in the lease if the negotiations for the lease had been at arm's length. | ||
(9) A house shall not be a qualifying premises unless— | ||
(a) it complies with such conditions, if any, as may be determined by the Minister for the Environment from time to time for the purposes of section 4 of the Housing (Miscellaneous Provisions) Act, 1979 , in relation to standards of construction of houses and the provision of water, sewerage and other services therein, and | ||
(b) persons authorised in writing by the Minister for the Environment for the purposes of this section are permitted to inspect it at all reasonable times upon production, if so requested by a person affected, of their authorisations. | ||
(10) Paragraph 5 of Schedule 1 to the Capital Gains Tax Act, 1975 , shall have effect as if a deduction under subsection (2) were a capital allowance and as if any amount by way of rent deemed to have been received by a person under subsection (5) were a balancing charge. | ||
(11) An appeal to the Appeal Commissioners shall lie on any question arising under this section or under section 24 , other than a question on which an appeal lies under section 18 of the Housing (Miscellaneous Provisions) Act, 1979 , in like manner as an appeal would lie against an assessment to income tax or corporation tax and the provisions of the Tax Acts relating to appeals shall apply and have effect accordingly. |