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Thursday, 25th April 2024 |
| Urban Renewal Revives |
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The 1998 Urban Renewal Scheme, and the Rural Renewal Scheme were legislated for in the 1998 Finance Act but were immediately placed "on hold". Their introduction coincided with intensive EU interest in the Customs House Docks incentives. As a result, the EU seem to have taken an inordinately long time to rule on whether the schemes are acceptable under EU state aid rules. These rules relate to state aid for business, including tax breaks.
Both the Urban Renewal Scheme and the Rural Renewal Scheme contain provisions for tax breaks for residential accommodation, (owner occupied and rented). These residential elements are not subject to the state aid rules and accordingly were activated (from 1 June 1998 for Rural Renewal rented accommodation; from 6 April 1999 for Rural Renewal owner occupied accommodation; and from 1 March 1999 for all residential aspects of the 1998 Urban Renewal Scheme).
The outcome of the negotiations with the EU for tax breaks for commercial buildings was that double rent allowance and rates relief, although legislated for in 1998, will not be made available. The EU objected to these as being subsidies towards trading profits and they are accordingly not now being introduced. To compensate for this, expenditure on the construction, conversion, and refurbishment of commercial buildings which will attract capital allowances has been increased from 50% of that expenditure to 100%. As a result, owner occupiers of qualifying buildings and lessors of such buildings will be entitled to a first year allowance of 50% of the qualifying cost, and an annual allowance of 4% over 13 years.
The new Urban Renewal Scheme differs from previous models in that there are no predesignated areas to which the allowances apply. Rather large areas of towns and cities have been the subject of "integrated area plans". These plans outline Local Authorities hopes and objectives for the development of the area. Incentives will flow for any particular development of commercial buildings inside such an area only once the particular proposal for that building has been specifically approved by the Local Authority for the purpose of the reliefs. This is much more an a la carte tax incentive than the previous broad brush approach of designating whole areas and granting incentives for commercial development, subject only to planning permission. It remains to be seen whether the additional bureaucracy will be justified by improvements in the quality of the developments, and in sharper focusing of the relief on sites genuinely requiring it.
The approval of the Airport Enterprise Schemes seems to be confined to Cork airport.
Other major tax incentives available in the property area are the Park and Ride Scheme and the Student Accommodation Scheme. The Student Accommodation Scheme poses a problem. On the one hand, there is a wish by the Government to encourage the provision of accommodation close to third level institutions for students. To this end capital allowances have been provided in respect of the construction cost of approved projects. On the other hand, interest relief is denied in taxing the rent from such as it is residential accommodation. This is part of the Bacon Report programme for calming the housing market. It seems inconsistent to offer encouragement for an activity, while at the same time attempting to deter it. Hopefully the Department of Finance or the Revenue Commissioners will soon clarify this dilemma and rule that interest relief is available to student accommodation developments. Of its nature, a student accommodation project is not in direct competition with prospective home owners, for part of the housing stock.
One of the topics for the Finance Act 2000 will surely be the regime of capital allowances that will apply to public/private partnership projects. These are likely to be a key feature in a programme of investment in infrastructure, such as roads, bridges, rail network, etc. Given the urgency of infrastructural development Ireland cannot afford a similar lengthy Brussels clearance experience. |
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| Article appeared in the July 1999 issue.
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