409B Income tax: restriction on use of capital allowances on certain hotels, etc.

(1) In this section—

“active partner”, in relation to a partnership trade, has the same meaning as in section 409A;

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

“specified building” means a building or structure which is or is deemed to be an industrial building or structure by reason of its use for a purpose specified in section 268(1)(d) but does not include—

(a) any such building or structure (not being a building or structure in use as a holiday camp referred to in section 268(3))—

(i) the site of which is wholly within any of the administrative counties of Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo but not within a qualifying resort area within the meaning of Chapter 4 of Part 10, and

(ii) in which the accommodation and other facilities provided meet a standard specified in guidelines issued by the Minister for Tourism, Sport and Recreation with the consent of the Minister for Finance,

and

(b) a building or structure which is deemed to be such a building or structure by reason of its use as a holiday cottage of the type referred to in section 268(3).

(2) Subject to subsection (4), section 305(1)(b) shall not apply in relation to any allowance to be made to an individual for a year of assessment 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.

(3) Subject to subsection (4), 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 the amount of the profits or gains of the individual’s several trade in the year of loss before that section is applied.

(4) 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, or

(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

(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

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

(5) For the purposes of subsection (4)—

(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.

(6) Where an individual has entered into an obligation to which subsection (4) 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 (4) in relation to that expenditure.

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