409A Income tax: restriction on use of capital allowances on certain industrial buildings and other premises.

(1) In this section—

“active partner”, in relation to a partnership trade, means a partner who works for the greater part of his or her time on the day-to-day management or conduct of the partnership trade;

“industrial development agency” means the Industrial Development Agency (Ireland);

“partnership trade” and “several trade” have the same meanings, respectively, as in Part 43;

“specified building” means—

(a) a building or structure which is or is to be an industrial building or structure by reason of its use or its deemed use for a purpose specified in section 268(1), and

(b) any other building or structure in respect of which an allowance is to be made, or will by virtue of section 279 be made, for the purposes of income tax under Chapter 1 of Part 9 by virtue of Part 10 or section 843 ^[3]>or 843A^<[3],

but does not include a building or structure—

(i) which is or is deemed to be an industrial building or structure by reason of its use for the purposes specified in section 268(1)(d), or

(ii) to which section 355(1)(b) applies.

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(2) Subject to subsection (5), in relation to any allowance to be made to an individual under Chapter 1 of Part 9 for any year of assessment in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building, section 305 shall apply as if the following were substituted for subsection (1)(b) of that section:

“(b) Notwithstanding paragraph (a), where an allowance referred to in that paragraph is available primarily against income of the specified class and the amount of the allowance is greater than the amount of the person’s income of that class for the first-mentioned year of assessment, the person may, by notice in writing given to the inspector not later than 2 years after the end of the year of assessment, elect that the excess or £25,000, whichever is the lower, shall be deducted from or set off against the person’s other income for that year of assessment, and it shall be deducted from or set off against that income and tax shall be discharged or repaid accordingly and only the balance, if any, of the allowance shall be deducted from or set off against the person’s income of the specified class for succeeding years.”.

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(2) Subject to subsection (5), in relation to any allowance to be made to an individual under Chapter 1 of Part 9 for any year of assessment in respect of capital expenditure incurred on or after 3 December 1997, on a specified building, section 305 shall apply as if the following were substituted for subsection (1)(b) of that section:

(b) (i) Notwithstanding paragraph (a), where an allowance referred to in that paragraph is available primarily against income of the specified class and the amount of the allowance is greater than the amount of the person’s income of that class for the first-mentioned year of assessment (after deducting or setting off any allowances for earlier years), then the person may, by notice in writing given to the inspector not later than 2 years after the end of the year of assessment, elect that the excess or ^[6]>£18,500^<[6][6]>€31,750^<[6], whichever is the lower, shall be deducted from or set off—

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(I) against the individual’s other income for that year of assessment, or

(II) where the individual, or, being a husband or wife, the individual’s spouse, is assessed to tax in accordance with section 1017, firstly, against the individual’s other income for that year of assessment and, subsequently, against the income of the individual’s husband or wife, as the case may be, for that year of assessment.

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(I) against the individual’s other income for that year of assessment,

(II) where the individual, or, being a husband or wife, the individual’s spouse, is assessed to tax in accordance with section 1017, firstly, against the individual’s other income for that year of assessment and, subsequently, against the income of the individual’s husband or wife, as the case may be, for that year of assessment, or

(III) where the individual, or the individual’s civil partner, is assessed to tax in accordance with section 1031C, firstly, against the individual’s other income for that year of assessment and, subsequently, against the income of the individual’s civil partner for that year of assessment.

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(ii) Where an election is made in accordance with subparagraph (i), the excess or ^[6]>£18,500^<[6][6]>€31,750^<[6], whichever is the lower, shall be deducted from or set off against the income referred to in clause (I) or (II) of that subparagraph, as the case may be, and tax shall be discharged or repaid accordingly and only the balance, if any, of the amount of the allowance referred to in paragraph (a) over all the income referred to in the said clause (I) or (II), as the case may be, for that year of assessment shall be deducted from or set off against the person’s income of the specified class for succeeding years.’.

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(3) Subject to subsection (5), where—

(a) any allowance or allowances under Chapter 1 of Part 9 is or are to be made for a year of assessment to an individual, being an individual who is a partner in a partnership trade, in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building, and

(b) that allowance or those allowances is or are to be made in taxing the individual’s several trade,

then, unless in the basis period for the year of assessment in respect of which that allowance or those allowances is or are to be made the individual is an active partner in relation to the partnership trade, the amount of any such allowance or allowances which is to be taken into account for the purposes of section 392(1) shall not exceed an amount determined by the formula—

A + ^[7]>£25,000^<[7][8]>[7]>£18,500^<[7]<[8][8]>€31,750^<[8]

where A is the amount of the profits or gains of the individual’s several trade in the year of loss before section 392(1) is applied.

(4) Where an individual is a partner in 2 or more partnership trades, then, for the purposes of subsection (3), those partnership trades in relation to which the individual is not an active partner shall, in relation to that individual, be deemed to be a single partnership trade and the individual’s several trades in relation to those partnership trades shall be deemed to be a single several trade.

(5) This section shall not apply to an allowance to be made to an individual under Chapter 1 of Part 9 in respect of capital expenditure incurred on or after the 3rd day of December, 1997, on a specified building where before that date—

(a) (i) in the case of construction, the foundation for the specified building was laid in its entirety,

(ii) in the case of a refurbishment project, work to the value of 5 per cent of the total cost of that refurbishment project was carried out, or

(iii) a project for which the specified building is to be provided had been approved for grant assistance by an industrial development agency but only where that approval was given within a period of 2 years preceding that date,

or

(b) (i) an application for planning permission for the work represented by that expenditure on the specified building had (in so far as such permission is required) been received by a planning authority before the 3rd day of December, 1997, or

(ii) the individual can prove, to the satisfaction of the Revenue Commissioners, that a detailed plan had been prepared for the work represented by that expenditure and that detailed discussions had taken place with a planning authority in relation to the specified building before the 3rd day of December, 1997, and that this can be supported by means of an affidavit or statutory declaration duly made on behalf of the planning authority concerned,

and that expenditure is incurred under an obligation entered into by the individual in relation to the specified building before—

(i) the 3rd day of December, 1997, or

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(ii) ^[1]>the 1st day of May, 1998, pursuant to negotiations which were in progress before the 3rd day of December, 1997.^<[1][1]>(I) the 1st day of May, 1998, except in the case of a specified building to which clause (II) applies, or^<[1]

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(II) the 1st day of August, 1998, in the case of a specified building in respect of which an allowance is to be made, or will by virtue of section 279 be made, for the purposes of income tax under Chapter 1 of Part 9 by virtue of Chapter 1 of Part 10,

pursuant to negotiations which were in progress before the 3rd day of December, 1997.

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(ii)the 1st day of May, 1998, pursuant to negotiations which were in progress before the 3rd day of December, 1997.

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(6) For the purposes of subsection (5)—

(a) an obligation shall be treated as having been entered into before a particular date only if, before that date, there was in existence a binding contract in writing under which that obligation arose, and

(b) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress before a particular date unless preliminary commitments or agreements in writing in relation to that obligation had been entered into before that date.

(7) Where an individual has entered into an obligation to which subsection (5) relates to incur capital expenditure on a specified building on or after the 3rd day of December, 1997, and that individual dies before any part of that expenditure has been incurred, another individual who—

(a) undertakes in writing to honour the obligation entered into by the deceased individual, and

(b) incurs that part of the capital expenditure on the specified building which would otherwise have been incurred by the deceased individual,

shall be deemed to have complied with the requirements of subsection (5) in relation to that expenditure.

(8) This section shall, with any necessary modifications, apply in relation to a profession as it applies in relation to a trade.