486B Relief for investment in renewable energy generation

Summary

This section provides for a tax relief to encourage corporate investment in certain renewable energy projects. The technology categories to which the relief will apply are solar power, windpower, hydropower, and biomass. The relief applies from 18 March, 1999 (S.I. No. 65 of 1999) and will expire on 31 December 2014.

The principal features of the relief are as follows —

• A company which makes an investment in an energy project will be entitled to a deduction in calculating its profits for tax purposes. The investment must be in new ordinary shares in a company set up to undertake the renewable energy project.
• Qualifying projects will be individually approved by the Minister for Communications, Energy and Natural Resources by the issue of a certificate to the company concerned.
• Investment in respect of which relief can be given is capped in the case of any project at the lower of 50 per cent of all capital expenditure (excluding land and net of grants) on the project, or €9,525,000.
• The funds must be spent on the project within 2 years of receipt or the relief will be withdrawn.
• Investment by any one company or group of companies in more than one energy project in respect of which relief can be given is capped at €12,700,000 per annum.
• Unless the shares are held for at least 5 years by the investor company the relief will be withdrawn.

Details

Definitions

(1) “authorised officer” means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this section;

“commencement date” means the day on which section 62 of the Finance Act, 1998, comes into operation;

“the Minister” is the Minister for Communications, Energy and Natural Resources;

“new ordinary shares” means new ordinary shares forming part of the ordinary share capital of the company which for at least 5 years from the date of issue carry no preferential rights, etc above any other ordinary shares.

“qualifying company” means a company which is resident and incorporated in the State and not resident anywhere else and which exists solely to undertake a qualifying energy project.

“qualifying energy project” means a renewable energy project which has been certified by the Minister.

“qualifying period” means the period beginning on the commencement date and ending on 31 December 2014;

“relevant cost” means all capital expenditure on the project net of grant aid and excluding land costs;

“relevant deduction” means a deduction equal to a relevant investment. The upper limits of relief are specified in subsections (4) and (5).

“relevant investment” means an amount paid by a company on its own behalf to the qualifying company in the qualifying period for shares to enable the qualifying company to undertake the qualifying energy project and which is used for that purpose within 2 years. There can be no condition as to repayment.

“renewable energy project” means a renewable energy project, (including a project successful in the Third Alternative Energy Requirement Competition (AER II – 1997) initiated by the Minister) in one or more of the solar power, wind power, hydropower or biomass technology categories.

Certificates of eligibility

(2)(a) Upon receipt of an application, the Minister may give a certificate of eligibility to a company to enable it to undertake a qualifying energy project. The application must be in such form and contain such information as the Minister directs.

(2)(b) The certificate may be issued with such conditions as the Minister deems proper. These conditions are to be specified in the certificate.

(2)(c) The Minister may amend or revoke any condition in a certificate issued by giving notice in writing to the company and the certificate will apply as amended.

(2)(d) Additional conditions can subsequently be included in the certificate.

(2)(e) Failure to comply with any condition will result in —

1. withdrawal of relief, and
2. revocation, by notice in writing of the certificate.

The relief

(3) Provision is made for a claim for a deduction for tax purposes from total profits of the investor company for the accounting period in which the relevant investment is made and any losses thus created may be carried forward as a deduction against total profits in subsequent accounting periods.

(4)(a) The level of relevant investments by investor companies in respect of which relief can be given is limited to €12.7m in any 12 months period beginning on the commencement date or any anniversary of it. Where the subscription for shares exceeds €12.7m no relief is available in respect of the excess. For the purposes of determining the limits, subscriptions made by companies which at any time in the 12 months period are connected with each other will be aggregated.

(4)(b) Where there is more than one investment, the Inspector of Taxes or the Appeal Commissioners may allocate the relief to the various investor companies in proportion to the level of their respective investments.

(5) The level of relevant investments made in any one qualifying company in respect of which relief can be given is limited to the lesser of —

1. (5)(a) 50 per cent of the relevant cost of the project, or
2. (5)(b) €9,525,000.

(6)(a) The funds invested must be expended on the qualifying energy project within 2 years of the investment or relief will be withdrawn. Relief may also be withdrawn if a certificate is revoked or any other condition of the section is not complied with.

(6)(b) Relief will not be given and any relief already given will be withdrawn if any of the shares are disposed of by the investor company within 5 years.

(6)(c) References in (a) and (b) to a time is a reference to the time the payment is made.

(7) A claim for relief must be accompanied by a certificate issued by the qualifying company in a form prescribed by the Revenue Commissioners affirming adherence by the qualifying company to the conditions of the relief.

(8) Before the certificate is issued under subsection (7) the qualifying company must furnish the authorised officer with —

1. (8)(a) a statement that it complies or will comply with the conditions of the relief,
2. (8)(b) a copy of the certificate and any notice issued by the Minister.
3. (8)(c) such other information as the Revenue Commissioners require.

(9) The certificate to be issued under subsection (7) may not be issued —

1. (9)(a) without the authority of the authorised officer, or
2. (9)(b) where the limits of the investment which can avail of the relief have already been reached.

(10) The statement issued under subsection (8) should —

1. (10)(a) contain such information as the Revenue Commissioners may reasonably require,
2. (10)(b) be in a form as directed by the Revenue Commissioners, and
3. (10)(c) contain a declaration by the qualifying company that it is true.

(11) Where a qualifying company issues a certificate under subsection (7) or furnishes a statement under subsection (8) and where —

1. (11)(a) the certificate or statement is false or misleading due to fraud or neglect, or
2. (11)(b) the certificate was issued without the authority of the authorised officer, or the limits of the investment which can avail of the relief have already been reached,

then the company is liable to a penalty of €4,000, and no relief will be given under the section and any relief already given will be withdrawn.

Anti-avoidance

(12) Relief under the section will only be given where the investment has been made —

1. (12)(a) for bona fide commercial and not tax avoidance reasons,
2. (12)(b) to undertake a qualifying energy project, and
3. (12)(c) at arms length and where no scheme or arrangement of repayment or guarantee in relation to the investment has been put in place.

Withdrawal of relief

(13) Where relief is to be withdrawn under subsection (6) or (11) an assessment to corporation tax under Case IV of Schedule D will be made. This assessment will be made in respect of the accounting period(s) in which the relief was given and can be made at any time.

Bar on double relief

(14)(a) Where a company is entitled to relief under this section it cannot claim relief in respect of the same payments under any other provisions of the Tax Acts or the Capital Gains Tax Acts.

Capital gains tax treatment

(14)(b) If the shares which have been acquired and in respect of which a deduction under this section has been obtained are disposed of more than 5 years after their acquisition, then no account will be taken of the relief under this section in determining the base cost of those shares for capital gains tax purposes when the disposal takes place. However, provision is made to ensure that where there is a capital loss on disposal of the shares that loss is reduced by the lesser of the amount of —

1. that loss, and
2. the deduction allowed under this section.

Section 486B came into effect on 18 March, 1999 by order of the Minister for Finance (S.I. No. 65 of 1999).

Relevant Date: Finance Act 2019