Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

739LC Exclusion for third-party debt

Details

(1) This section provides that where income is treated as arising to an IREF under section 739LA or 739LAA and some or all of the amount arises as a result of third-party debt then the amount of income on which the IREF is charged to income tax may be reduced by an amount which would reflect the position had the specified debt constituted solely of the third-party debt.

(2)(a) For this section, subject to subsection (4), third-party debt means –

  1. any loan advanced by an enterprise to an IREF apart from an associate of the IREF,
  2. where the full amount of that loan is employed, subject to paragraph (c), in the purchase, development, improvement or repair of a premises, and
  3. the loan is not subject to any arrangements referred to in subsection (3).

A loan which meets the conditions of (i) and (iii) above and was used to repay a loan which satisfied the condition of (ii) will also be considered a third-party loan for the purposes of this section.

(2)(b) Amounts advanced to or payable by a partnership of which the IREF is a partner will be considered as being advanced to the IREF or payable by the IREF for the purposes of this section.

(2)(c) The condition outlined in subsection (2)(a)(ii) is considered to be met in the following instances –

  1. Any money borrowed at or about the time of purchase of a premises shall be treated as having been employed in the purchase of those premises and
  2. Amounts used in the purchase a of property from an associate of the IREF shall only be treated as third-party debt if immediately before the purchase that associate carried out significant development work on that property, that is development which exceeds 30% of the market value of the property at the date of the development commencing and the property is purchased by the IREF for the purposes of property rental.

(3) The arrangements referred to in subsection (2)(a)(iii) include the following –

  1. Arrangements in which interest is payable by an IREF to another enterprise such that the exclusion for third-part debt applies only because the IREF and that enterprise are not associated, and interest is payable by some other enterprise not associated with the IREF to an enterprise which is associated.
  2. Arrangements in which interest is payable by an IREF to another non-associated enterprise and that non-associated enterprise has been advanced money by a different enterprise which is associated with the IREF or has received a deposit from a different enterprise associated with the IREF.
  3. Arrangements entered into in relation to an IREF and the effect of those arrangements is that any amount has been advanced or made available indirectly an associate of an IREF to the IREF or interest is paid indirectly by an IREF to an associate.
  4. Arrangements in which associates of an IREF advance or make available amounts to an IREF which they are not associated and associates of that IREF advance or make available amounts to the first mentioned IREF and those IREFs or associates are acting together.

(4) A third-party debt loan will not cease to be considered as such where the lender becomes an associate of the IREF solely due to the enforcement of a security granted as a genuine condition of the loan.

Relevant Date: Finance Act 2019