Finance Act, 1994

Double rent allowance in respect of rent paid for certain business premises.

42.—(1) In this section—

“qualifying lease” means a lease in respect of a qualifying premises granted in the qualifying period on bona fide commercial terms by a lessor to a lessee who is not connected with the lessor, or with any other person who is entitled to a rent in respect of the qualifying premises, whether under that lease or any other lease;

“qualifying premises” means, subject to subsection (5) (a), a building or structure the site of which is wholly within a designated area and—

(a) (i) which is a building or structure in use for a purpose specified in section 255 (1) (a) of the Income Tax Act, 1967 , and in respect of which capital expenditure is incurred in the qualifying period for which an allowance falls, or will, by virtue of section 19 (as amended by section 23 of the Finance Act, 1991 ) of the Finance Act, 1970 , fall, to be made for the purposes of income tax or corporation tax, as the case may be, under section 254 of the Income Tax Act, 1967 , or section 25 of the Finance Act, 1978 , as applied by section 40 , or

(ii) in respect of which an allowance falls, or will, by virtue of the said section 19, fall, to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV of, or Chapter I of Part XVI of, the Income Tax Act, 1967 , by reason of section 41 , or

(iii) which is a building or structure in use for the purposes specified in section 255 (1) (d) of the Income Tax Act, 1967 , and in respect of the construction or refurbishment of which capital expenditure is incurred in the qualifying period for which an allowance would, but for subsection (6), fall to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV of, or Chapter I of Part XVI of, the Income Tax Act, 1967 ,

and

(b) which is let on such terms as are referred to in paragraph (b) (ii) of the definition of “qualifying premises” in the said section 41 :

Provided that where capital expenditure is incurred in the qualifying period on the refurbishment of a building or structure in respect of which an allowance falls, or will, by virtue of the said section 19, fall, or in respect of which an allowance would but for subsection (6) fall, to be made for the purposes of income tax or corporation tax, as the case may be, under any of the provisions referred to in paragraph (a) of this definition, the building or structure shall not be regarded as a qualifying premises unless the total amount of the expenditure so incurred is not less than an amount which is equal to 10 per cent. of the market value of the building or structure immediately before the said expenditure is incurred.

(2) For the purposes of this section, so much of a period, being a period when rent is payable by a person in relation to a qualifying premises under a qualifying lease, shall be a relevant rental period as does not exceed—

(a) 10 years, or

(b) the period by which 10 years exceeds—

(i) any preceding period, or

(ii) if there is more than one preceding period, the aggregate of preceding periods,

for which rent was payable by that person or any other person in relation to that premises under a qualifying lease.

(3) Subject to subsection (4), where, in the computation of the amount of the profits or gains of a trade or profession, a person is, apart from this section, entitled to any deduction (hereafter in this subsection referred to as “the first-mentioned deduction”) on account of rent in respect of a qualifying premises occupied by such person for the purposes of that trade or profession which is payable by such person for a relevant rental period in relation to that qualifying premises under a qualifying lease, such person shall be entitled in that computation to a further deduction equal to the amount of the first-mentioned deduction.

(4) Where a person holds an interest in a qualifying premises out of which interest a qualifying lease is created, directly or indirectly, in respect of the qualifying premises and in respect of rent payable under the qualifying lease a claim for a further deduction under this section is made, and either such person or another person who is connected with such person—

(a) takes under a qualifying lease a qualifying premises (hereafter in this subsection referred to as “the second-mentioned premises”) which is occupied by such person or such other person, as the case may be, for the purposes of a trade or profession, and

(b) is, apart from this section, entitled, in the computation of the amount of the profits or gains of that trade or profession, to a deduction on account of rent in respect of the second-mentioned premises,

then, unless such person or such other person, as the case may be, shows that the taking on lease of the second-mentioned premises was not undertaken for the sole or main benefit of obtaining a further deduction on account of rent under the provisions of this section, such person or such other person, as the case may be, shall not be entitled in the computation of the amount of the profits or gains of that trade or profession to any further deduction on account of rent in respect of the second-mentioned premises.

(5) (a) A building or structure in use for the purposes specified in section 255 (1) (d) of the Income Tax Act, 1967 , shall not be a qualifying premises for the purposes of this section unless the person to whom an allowance under Chapter II of Part XV, or Chapter I of Part XVI, of that Act would but for subsection (6) fall to be made for the purposes of income tax or corporation tax, as the case may be, in respect of the capital expenditure incurred in the qualifying period on the construction or refurbishment of the building or structure, elects by notice in writing to the appropriate inspector (within the meaning of section 9 of the Finance Act, 1988 ) to disclaim all allowances under the said Chapter II and the said Chapter I in respect of the said capital expenditure.

(b) An election under paragraph (a) shall be included in the return required to be made by the person concerned under section 10 of the Finance Act, 1988 , for the first year of assessment or the first accounting period, as the case may be, for which an allowance would, but for subsection (6), have fallen to be made to that person under the said Chapter II or the said Chapter I in respect of the said capital expenditure.

(c) An election under paragraph (a) shall be irrevocable.

(d) A person who has made an election under paragraph (a) shall furnish a copy of that election to any person (hereafter in this paragraph referred to as “the second-mentioned person”) to whom the person grants a qualifying lease in respect of the qualifying premises and the second-mentioned person shall include the said copy in the return required to be made by the second-mentioned person under section 10 of the Finance Act, 1988 , for the year of assessment or accounting period, as the case may be, in which rent is first payable by the second-mentioned person under the qualifying lease in respect of the qualifying premises.

(6) Where a person who has incurred capital expenditure in the qualifying period on the construction or refurbishment of a building or structure in use for the purposes specified in section 255 (1) (d) of the Income Tax Act, 1967 , makes an election under paragraph (a) of subsection (5), then, notwithstanding any other provision of the Tax Acts—

(a) no allowance under Chapter II of Part XV, or Chapter I of Part XVI, of the Income Tax Act, 1967 , shall be made to the person in respect of the said capital expenditure,

(b) on the occurrence, in relation to the building or structure, of any of the events referred to in section 265 (1) of the Income Tax Act, 1967 , the residue of expenditure (within the meaning of section 266 of that Act) in relation to the said capital expenditure shall be deemed to be nil, and

(c) the provisions of section 19 (as amended by section 23 of the Finance Act, 1991 ) of the Finance Act, 1970 , shall not apply or have effect in the case of any person who buys the relevant interest (within the meaning of section 268 of the Income Tax Act, 1967 ) in the building or structure.

(7) For the purposes of determining, in relation to paragraph (a) (iii) of the definition of “qualifying premises” in subsection (1) and subsections (5) and (6), whether and to what extent capital expenditure incurred on the construction or refurbishment of a building or structure is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the building or structure which was actually carried out in the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is, or is to be treated as, incurred) be treated as having been incurred in that period.

(8) Section 33 of the Finance Act, 1990 , is hereby amended—

(a) in subsection (1), by the insertion after “ section 45 of the Finance Act, 1986 ” of “, or section 42 of the Finance Act, 1994”, and

(b) in subsection (2) (a), by the substitution of the following definition for the definition of “qualifying premises”:

“‘qualifying premises’ means a qualifying premises within the meaning of section 45 of the Finance Act, 1986 , or section 42 of the Finance Act, 1994;”.