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12 1988

FINANCE ACT, 1988

Chapter V

Capital Allowances

Amendment of section 251 (initial allowances for machinery and plant) of Income Tax Act, 1967.

43. Section 251 (as amended by section 20 of the Finance Act, 1985 ) of the Income Tax Act, 1967 , is hereby amended—

(a) by the insertion in subsection (4), after paragraph (b), of the following paragraph:

“(bb) (i) in relation to capital expenditure incurred on or after the 1st day of April, 1988, and before the 1st day of April, 1989, as if ‘three-fourths’ were substituted for ‘one-fifth’ in subsection (1), and

(ii) in relation to capital expenditure incurred on or after the 1st day of April, 1989, and before the 1st day of April, 1991, as if ‘one-half’ were substituted for ‘one-fifth’ in subsection (1).”,

and

(b) by the insertion after subsection (6) of the following subsection:

“(7) Where an allowance in respect of capital expenditure incurred on or after the 1st day of April, 1988, on the provision of new machinery or plant is made under this section, section 11 of the Finance Act, 1967 , and section 26 of the Finance Act, 1971 , shall not have effect in relation to an allowance which falls to be made under section 241 of the Income Tax Act, 1967 , for wear and tear of the said machinery or plant.”.

Amendment of section 254 (industrial building allowance) of Income Tax Act, 1967.

44. Section 254 (as amended by section 20 of the Finance Act, 1985 ) of the Income Tax Act, 1967 , is hereby amended by the insertion after subsection (6) of the following subsection:

“(7) Where an allowance in respect of capital expenditure incurred on or after the 1st day of April, 1988, on the construction of a building or structure is made under this section, no increase in any allowance under section 264 of the Income Tax Act, 1967 , by virtue of the provisions of section 25 of the Finance Act, 1978 , shall be made in relation to that capital expenditure.”.

Amendment of section 265 (balancing allowances and balancing charges) of Income Tax Act, 1967.

45. Section 265 (as amended by section 20 of the Finance Act, 1985 ) of the Income Tax Act, 1967 , is hereby amended—

(a) by the insertion in subsection (1) after paragraph (c) of the following paragraph:

“(d) where consideration (other than rent or an amount treated as rent under section 83 of the Income Tax Act, 1967 ) is received by the person entitled to the relevant interest in respect of an interest which is subject to that relevant interest,”,

(b) by the substitution for subsection (2) of the following subsection:

“(2) Where there are no sale, insurance, salvage or compensation moneys, or consideration of the type referred to in paragraph (d) of subsection (1), or where the residue of the expenditure immediately before the event exceeds those moneys or that consideration, a balancing allowance shall be made and the amount thereof shall be the amount of the said residue or, as the case may be, of the excess thereof over the said moneys or the said consideration.”,

and

(c) by the substitution for subsection (3) of the following subsection:

“(3) If the sale, insurance, salvage or compensation moneys, or consideration of the type referred to in paragraph (d) of subsection (1), exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess, or, where the residue is nil, to the said moneys or the said consideration.”.

Amendment of section 11 (wear and tear allowances for certain machinery and plant in undeveloped areas) of Finance Act, 1967.

46. Section 11 (inserted by the Corporation Tax Act, 1976 ) of the Finance Act, 1967 , is hereby amended by the substitution for subsection (2) of the following subsection:

“(2) (a) Subject to the provisions of this section, where for any chargeable period an allowance falls to be made under section 241 of the Income Tax Act, 1967 , for wear and tear of any qualifying machinery or plant, the allowance shall, subject to subsection (6) of that section, be increased by such amount as is specified by the person to whom the allowance is to be made; and, in relation to a case in which this subsection has had effect, any reference in the Income Tax Acts to an allowance made under the said section 241 shall be construed as a reference to that allowance as increased under this subsection.

(b) As respects any machinery or plant provided for use on or after the 1st day of April, 1988, any allowance made under section 241 of the Income Tax Act, 1967 , and increased under paragraph (a) of this subsection, in respect of that machinery or plant, whether claimed in one chargeable period or more than one such period, shall not, in the aggregate, exceed—

(i) if the machinery or plant is provided for use before the 1st day of April, 1989, 75 per cent., or

(ii) if the machinery or plant is provided for use on or after the 1st day of April, 1989, 50 per cent.,

of the capital expenditure incurred on the provision of that machinery or plant.”.

Amendment of section 26 (increase of wear and tear allowances for certain machinery and plant) of Finance Act, 1971.

47. Section 26 (inserted by the Corporation Tax Act, 1976 ) of the Finance Act, 1971 , is hereby amended by the substitution for subsection (2) of the following subsection:

“(2) (a) Subject to the provisions of this section, where for any chargeable period an allowance falls to be made under section 241 of the Income Tax Act, 1967 , for wear and tear of any qualifying machinery or plant, the allowance shall, subject to subsection (6) of that section, be increased by such amount as is specified by the person to whom the allowance is to be made; and, in relation to a case in which this subsection has had effect, any reference in the Income Tax Acts to an allowance made under the said section 241 shall be construed as a reference to that allowance as increased under this subsection.

(b) As respects any machinery or plant provided for use on or after the 1st day of April, 1988, any allowance made under section 241 of the Income Tax Act, 1967 , and increased under paragraph (a) of this subsection, in respect of that machinery or plant, whether claimed in one chargeable period or more than one such period, shall not, in the aggregate, exceed—

(i) if the machinery or plant is provided for use before the 1st day of April, 1989, 75 per cent., or

(ii) if the machinery or plant is provided for use on or after the 1st day of April, 1989, 50 per cent.,

of the capital expenditure incurred on the provision of that machinery or plant.”.

Amendment of section 25 (increase of writing-down allowances for certain industrial buildings) of Finance Act, 1978.

48. Section 25 (as amended by section 25 of the Finance Act, 1979 ) of the Finance Act, 1978 , is hereby amended by the substitution for subsection (2) of the following subsection:

“(2) (a) Where for any chargeable period an allowance falls to be made under the said section 264 in respect of qualifying expenditure, the allowance shall, subject to subsection (4) of that section, be increased by such amount as is specified by the person to whom the allowance is to be made and, in relation to a case in which this subsection has had effect, any reference in the Income Tax Acts to an allowance made under the said section 264 shall be construed as a reference to that allowance as increased under this section.

(b) As respects any qualifying expenditure incurred on or after the 1st day of April, 1988, any allowance made under section 264 of the Income Tax Act, 1967 , and increased under paragraph (a) of this subsection, in respect of that expenditure, whether claimed in one chargeable period or more than one such period, shall not, in the aggregate, exceed—

(i) if the qualifying expenditure is incurred before the 1st day of April, 1989, 75 per cent., or

(ii) if the qualifying expenditure is incurred on or after the 1st day of April, 1989, 50 per cent.,

of the amount of that qualifying expenditure.”.

Amendment of section 25 (allowance for expenditure on multi-storey car-parks) of Finance Act, 1981.

49. Section 25 (as amended by section 51 of the Finance Act, 1986 ) of the Finance Act, 1981 , is hereby amended by the substitution in subsection (1) of “1991” for “1988”.

Continuation of certain allowances.

50. —The provisions (inserted by the Corporation Tax Act, 1976 , and amended by section 20 of the Finance Act, 1985 ) of the Income Tax Act, 1967 , specified in the Table to this section shall have effect as if the references to the 1st day of April, 1988 (as provided for in section 20 of the Finance Act, 1985 ) were references to the 1st day of April, 1991.

TABLE

Subsection (2A) (a) of section 254 (industrial building allowance),

Paragraph (ii) of the proviso to subsection (1) and paragraph (ii) of the proviso to subsection (3) of section 264 (annual allowances),

Paragraph (iii) of the proviso to subsection (1) of section 265 (balancing allowances and balancing charges).

Application of certain allowances in relation to certain areas and certain expenditure.

51. —(1) This section applies to—

(a) machinery or plant or an industrial building provided for use for the purposes of trading operations which are relevant trading operations within the meaning of section 39A (inserted by the Finance Act, 1981 ) or section 39B (inserted by the Finance Act, 1987 ) of the Finance Act, 1980 ;

(b) a premises which is a qualifying premises, within the meaning of section 42 of the Finance Act, 1986 ;

(c) machinery or plant or an industrial building—

(i) the expenditure on the provision of which was incurred under a binding contract entered into on or before the 27th day of January, 1988, or

(ii) which is provided for the purposes of a project approved by an industrial development agency on or before the 31st day of December, 1988;

and

(d) machinery or plant provided before the 1st day of April, 1991, for the purposes of a trade or part of a trade of hotel-keeping carried on in a building or structure or part thereof (including machinery or plant provided by a lessor to a lessee for use in such a trade or part thereof) where a binding contract for the provision of the said building or structure was entered into after the 27th day of January, 1988, and before the 1st day of June, 1988.

(2) Section 251 (as amended by the Finance Act, 1988) of the Income Tax Act, 1967 , shall have effect in relation to capital expenditure incurred on the provision of machinery or plant to which this section applies as if paragraph (bb) of subsection (4) and subsection (7) were deleted and as if “1991” were substituted for “1988” in subsection (4) (d).

(3) Section 11 (as amended by the Finance Act, 1988) of the Finance Act, 1967 , and section 26 (as amended by the Finance Act, 1988) of the Finance Act, 1971 , shall have effect in relation to an allowance which falls to be made under section 241 of the Income Tax Act, 1967 , for wear and tear of any machinery or plant to which this section applies as if—

(a) paragraph (b) of subsection (2) of the said section 11, and

(b) paragraph (b) of subsection (2) of the said section 26,

were deleted.

(4) Section 254 (as amended by the Finance Act, 1988) of the Income Tax Act, 1967 , and section 25 (as amended by the Finance Act, 1988) of the Finance Act, 1978 , shall have effect in relation to capital expenditure on the construction of an industrial building or a premises to which this section applies as if—

(a) subsection (7) of the said section 254, and

(b) paragraph (b) of subsection (2) of the said section 25,

were deleted.

(5) Section 265 of the Income Tax Act, 1967 , shall have effect as respects the relevant interest in a building or structure to which subsection (1) (d) applies as if section 45 had not been enacted.

(6) In this section “industrial development agency” means the Industrial Development Authority, Shannon Free Airport Development Company Limited or Údarás na Gaeltachta.

Farming.

52. —(1) Section 22 (as amended by section 15 of the Finance Act, 1983 ) of the Finance Act, 1974 , is hereby amended—

(a) as respects expenditure incurred on or after the 1st day of April, 1989, by the insertion in subsection (2) after “fences” of “roadways, holding yards, drains or land reclamation”, and the said subsection (2) (apart from the proviso) as so amended, is set out in the Table to this subsection,

and

(b) by the substitution for paragraph (b) in the proviso to subsection (2) of the following paragraph:

“(b) the maximum farm buildings allowance to be made under this section for any chargeable period—

(i) in relation to capital expenditure incurred before the 1st day of April, 1989, shall not exceed three-tenths of that capital expenditure, and

(ii) in relation to capital expenditure incurred on or after the 1st day of April, 1989, shall not exceed one-half of that capital expenditure.”.

TABLE

(2) Where a person to whom this section applies incurs, for the purpose of a trade of farming land occupied by him, any capital expenditure on the construction of farm buildings (excluding a building or part of a building used as a dwelling), fences, roadways, holding yards, drains or land reclamation, or other works, there shall be made to him during a writing-down period of ten years beginning with the chargeable period related to that expenditure, writing-down allowances (in this section referred to as “farm building allowances”) in respect of that expenditure and such allowances shall be made in taxing the trade:

(2) Section 14 of the Finance Act, 1977 , is hereby amended by the insertion in subsection (1) after “the 6th day of April, 1977,” of “and before the 1st day of April, 1989,”.

(3) Section 26 of the Finance Act, 1980 , shall not have effect for any chargeable period commencing after the 5th day of April, 1989.