Finance (No. 2) Act 1998

PART 1 Income Tax, Corporation Tax and Capital Gains Tax

1 Taxation of rents and certain other payments.

1.—(1) As on and from the 23rd day of April, 1998, Chapter 8 of Part 4 of the Taxes Consolidation Act, 1997, is hereby amended—

(a) in section 96(1), by the insertion of the following definitions after the definition of “rent”:

“‘rented residential premises’ means a residential premises in respect of which any person is entitled to a rent or receipts from any easements;

‘residential premises’ means any building or part of a building used or suitable for use as a dwelling and any outoffice, yard, garden or other land appurtenant to or usually enjoyed with that building or part of a building.”,

and

(b) in section 97, by the insertion of the following after subsection (2):

“(2A) Notwithstanding subsection (2) but subject to the other provisions of this section, a deduction shall not be authorised by paragraph (e) of that subsection by reference to interest on borrowed money employed on or after the 23rd day of April, 1998, in the purchase, improvement or repair of a premises which, at any time during the year, is a residential premises.

(2B) Subject to subsection (2C), subsection (2A) shall not apply in relation to interest on borrowed money employed—

(a) on or before the 31st day of December, 1998, in the purchase of a residential premises in pursuance of a contract which was evidenced in writing prior to the 23rd day of April, 1998, for the purchase of that premises,

(b) in the improvement or repair of a premises which on the 23rd day of April, 1998, or at any time during the 12 month period ending on that day, is or was a rented residential premises—

(i) in which the person chargeable had an estate or interest on that day, or

(ii) in respect of which the person chargeable is, or would be, entitled, by virtue of paragraph (a), to a deduction authorised by subsection (2)(e) by reference to interest on borrowed money employed in its purchase,

(c) in the purchase, improvement or repair of premises which is—

(i) a building or structure to which section 352 applies by virtue of the building or structure being a holiday cottage of the type referred to in section 268(3), or

(ii) a building or structure which is a qualifying premises within the meaning of section 353 by virtue of the building or structure being—

(I) a holiday apartment registered under Part III of the Tourist Traffic Act, 1939, or

(II) other self-catering accommodation specified in a list published under section 9 of the Tourist Traffic Act, 1957,

or

(iii) a qualifying premises within the meaning of section 356, 357 or 358,

(d) in the purchase, improvement or repair of any premises, other than premises to which paragraph (c) applies, the site of which is wholly within a qualifying rural area within the meaning of Chapter 8 of Part 10 of the Taxes Consolidation Act, 1997, or

(e) in the purchase, improvement or repair of premises, other than premises to which paragraphs (c) and (d) apply, where—

(i) the premises is a holiday cottage, holiday apartment or other self-catering accommodation either registered under Part III of the Tourist Traffic Act, 1939, or specified in a list published under section 9 of the Tourist Traffic Act, 1957,

(ii) an application for planning permission for the development of the premises was received by a planning authority before the 23rd day of April, 1998, and

(iii) the terms under which planning permission in respect of the development of the premises was granted by the planning authority contain the condition that the premises may not be used by any person for residential use in excess of 2 consecutive calendar months at any one time and such condition is in force during the year.

(2C) (a) For the purposes of subsections (2A) and (2B), borrowed money employed on or after the 23rd day of April, 1998, on the construction of a building or part of a building for use or suitable for use as a dwelling on land in which the person chargeable has an estate or interest shall, together with any borrowed money which that person employed in the acquisition of such land, be deemed to be borrowed money employed in the purchase of a residential premises.

(b) In any case where paragraph (a) applies, subsection (2B)(a) shall apply only where the money is employed on or before the 31st day of December, 1998, and the person chargeable—

(i) has before the 23rd day of April, 1998, either—

(I) an estate or interest in land, or

(II) entered into a contract evidenced in writing to acquire an estate or interest in land,

and

(ii) in respect of any building or part of any building for use or suitable for use as a dwelling to be contructed on that land, either—

(I) has entered into a contract evidenced in writing before the 23rd day of April, 1998, for the construction of that building or that part of that building, or

(II) if no such contract exists, satisfies the Revenue Commissioners that the foundation for that building or that part of that building was laid in its entirety before the 23rd day of April, 1998.

(2D) Where—

(a) any premises in respect of which the person chargeable is entitled to a rent or to receipts from any easement consists in part of residential premises and in part of premises which are not residential premises, and

(b) subsection (2A) applies,

then, the amount of the deduction which is authorised under subsection (2)(e) by reference to interest on borrowed money employed in the purchase, improvement or repair of those premises shall be the amount of interest on that part of the borrowed money which can, on a just and reasonable basis, be attributed to that part of the premises which are not residential premises.

(2E) Notwithstanding anything contained in this section, where a premises in respect of which the person chargeable is entitled to a rent or to receipts from any easement is at any time on or after the 23rd day of April, 1998, the sole or main residence of that person, a deduction shall not be authorised by subsection (2)(e) by reference to any interest payable for any year or part of a year commencing after the date on which the premises ceases to be the sole or main residence of that person.”.

(2) Section 71 of the Taxes Consolidation Act, 1997, is hereby amended by the substitution of the following after subsection (4):

“(4A) For the purposes of subsection (4), section 97 shall apply as if references to the 23rd day of April, 1998, in subsections (2A), (2B), (2C) and (2E) of that section, were references to the 7th day of May, 1998.”.

2 Restriction of relief in respect of loans applied in acquiring interest in companies and partnerships.

2.—Chapter 3 of Part 8 of the Taxes Consolidation Act, 1997, is hereby amended by the insertion of the following section after section 248—

“248A.—(1) In this section—

‘chargeable period’ has the same meaning as in section 321(2);

‘premises’ and ‘rented residential premises’ have the same meanings, respectively, as in section 96.

(2) Where—

(a) a loan, being a loan to which section 247, 248 or 253 applies, is applied on or after the 7th day of May, 1998, to defray money for any of the purposes specified in those sections, and

(b) the money so defrayed is used, in whole or in part, directly or indirectly—

(i) in the purchase, improvement or repair of a premises, or

(ii) in paying off a loan used in the purchase, improvement or repair of a premises,

then, the relief to be given for a chargeable period under those sections in respect of that loan shall, for any chargeable period in which the premises is at any time a rented residential premises, be reduced by the interest attributable to so much of the money used for the purposes specified in subparagraphs (i) and (ii) of paragraph (b).”.

3 Rate of capital gains tax on certain disposals of development land.

3.—The Taxes Consolidation Act, 1997, is hereby amended by the substitution for section 649A (inserted by section 65 of the Finance Act, 1998) of the following section:

“Relevant disposals: rate of charge.

649A.—(1) Notwithstanding subsection (3) of section 28, and subject to subsection (2), the rate of capital gains tax in respect of a chargeable gain accruing to a person on a relevant disposal shall be—

(a) subject to paragraph (b), in the case of a disposal on or after the 3rd day of December, 1997, 40 per cent, and

(b) in the case of a disposal, on or after the 6th day of April, 2002, of land which, in accordance with a development objective (as indicated in the development plan of the planning authority concerned), is for use solely or primarily for residential purposes, 60 per cent.

(2) (a) Subsection (1) shall not apply to a relevant disposal to which this subsection applies and accordingly, the rate of capital gains tax in respect of a chargeable gain on such a relevant disposal shall be the rate specified in subsection (3) of section 28.

(b) This subsection shall apply to a relevant disposal—

(i) to which section 650 refers, or

(ii) being a disposal, at any time in the period beginning on the 23rd day of April, 1998, and ending on the 5th day of April, 2002, of land—

(I) to a housing authority (within the meaning of section 23 of the Housing (Miscellaneous Provisions) Act, 1992), which land is specified in a certificate in writing given by the housing authority as land being required by the housing authority for the purposes of the Housing Acts, 1966 to 1997, or

(II) in respect of the whole of which, at the time at which the disposal is made, permission for residential development has been granted under section 26 of the Local Government (Planning and Development) Act, 1963, and such permission has not ceased to exist, other than a disposal—

(A) by any person (‘the disponer’) to a person who is connected with the disponer, or

(B) of land under a relevant contract in relation to the disposal.

(3) In this section—

‘development plan’ has the meaning assigned to it by the Local Government (Planning and Development) Act, 1963;

‘planning authority’ has the meaning assigned to it by section 2(2) of the Local Government (Planning and Development) Act, 1963;

‘relevant contract’, in relation to a disposal of land, means a contract or other arrangement under which the land is disposed of which is conditional on permission for development, other than permission for residential development, being granted under section 26 of the Local Government (Planning and Development) Act, 1963, in respect of the land;

‘residential development’ includes any development which is ancillary to the development and which is necessary for the proper planning and development of the area in question.”.

4 Amendment of section 372L (interpretation (Chapter 8)) of Taxes Consolidation Act, 1997.

4.—Section 372L (inserted by section 77 of the Finance Act, 1998) of the Taxes Consolidation Act, 1997, is hereby amended by the substitution of the following for the definition of “qualifying period”:

“‘qualifying period’ means—

(a) for the purposes of sections 372M, 372N and 372O, the period commencing on such day as the Minister for Finance may by order appoint and ending on the 31st day of December, 2001, and

(b) for the purposes of sections 372P, 372Q, 372R and 372S, the period commencing on the 1st day of June, 1998, and ending on the 31st day of December, 2001;”.

PART 2 Stamp Duties

5 Interpretation (Part 2).

5.—In this Part—

“the Act of 1891” means the Stamp Act, 1891;

“the Commissioners” means the Revenue Commissioners;

“the First Schedule” means the First Schedule (as amended by the Finance Act, 1970, and subsequent enactments) to the Act of 1891.

6 Commencement (Part 2).

6.—(1) Subject to subsection (2), this Part shall have effect as respects instruments executed on or after the 23rd day of April, 1998.

(2) Sections 11, 12 and 14 shall not apply as respects any instrument executed prior to the 1st day of January, 1999, where the instrument contains a statement in such form as the Commissioners may specify, certifying that the instrument was executed in pursuance of a contract which was evidenced in writing prior to the 23rd day of April, 1998.

(3) The furnishing of an incorrect certificate for the purposes of subsection (2) shall be deemed to constitute the delivery of an incorrect statement for the purposes of section 94 of the Finance Act, 1983.

7 Amendment of First Schedule.

7.—The First Schedule is hereby amended—

(a) by the substitution of the Heading set out in Part 1 of the Schedule for the Heading (as amended by the Finance Act, 1997) “CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance”, and

(b) by the substitution of the subparagraphs set out in Part 2 of the Schedule for subparagraph (a) of paragraph (3) (inserted by the Finance Act, 1997) of the Heading “LEASE”.

8 Amendment of section 4 (instruments to be separately charged with duty in certain cases) of Act of 1891.

8.—Section 4 of the Act of 1891 is hereby amended by the insertion of the following paragraph after paragraph (b):

“(c) Without prejudice to the generality of paragraphs (a) and (b), where the consideration (other than rent) for the sale or lease of any property is partly attributable to residential property and partly attributable to property which is not residential property the instrument of conveyance or transfer or lease shall be chargeable to ad valorem stamp duty on the basis that it is a separate conveyance or transfer or lease of residential property to the extent that that consideration is attributable to residential property and also a separate conveyance or transfer or lease of property which is not residential property to the extent that that consideration is attributable to property which is not residential property.”.

9 Amendment of section 58 (direction as to duty in certain cases) of Act of 1891.

9.—Section 58 of the Act of 1891 is hereby amended by the substitution of the following subsection for subsection (1A) (inserted by the Finance Act, 1997):

“(1A) Where—

(a) any property which consists partly of an interest in residential property is sold to any person and the sale (hereinafter in this subsection referred to as ‘the first-mentioned sale’) does not form part of a larger transaction or of a series of transactions, or

(b) the sale to any person of property consisting in whole or in part of such an interest forms part of a larger transaction or of a series of transactions,

the consideration attributable to the first-mentioned sale and the aggregate consideration (other than rent) attributable to that larger transaction or series of transactions, as the case may be, shall be apportioned, on such basis as is just and reasonable, as between that interest in residential property and the other property or part concerned, and that aggregate consideration shall likewise be apportioned as between each other such interest (if any) comprised in that larger transaction or series of transactions and the other property or parts concerned, and notwithstanding the amount or value of the consideration set forth in any instrument—

(i) the consideration so apportioned to that interest shall be deemed to be the amount or the value of the consideration for the sale which is attributable to that interest and the consideration so apportioned to the aggregate of all such interests comprised in that larger transaction or series of transactions shall be deemed to be the amount or value of that aggregate consideration which is attributable to residential property, and

(ii) the consideration so apportioned to the other property or part or parts concerned shall be deemed to be the amount or value of the consideration for the sale, or of that aggregate consideration, as the case may be, which is attributable to property which is not residential property.”.

10 Amendment of section 77 (directions as to duty in certain cases) of Act of 1891.

10.—Section 77 of the Act of 1891 is hereby amended by the substitution of the following subsection for subsection (6) (inserted by the Finance Act, 1997):

“(6) Where—

(a) any property which consists partly of an interest in residential property is leased to any person and that lease (hereinafter in this subsection referred to as ‘the first-mentioned lease’) does not form part of a larger transaction or of a series of transactions, or

(b) the lease to any person of property consisting in whole or in part of such an interest forms part of a larger transaction or of a series of transactions,

the consideration attributable to the first-mentioned lease and the aggregate consideration (other than rent) attributable to that larger transaction or series of transactions, as the case may be, shall be apportioned, on such basis as is just and reasonable, as between that interest in residential property and the other property or part concerned, and that aggregate consideration shall likewise be apportioned as between each other such interest (if any) comprised in that larger transaction or series of transactions and the other property or parts concerned, and notwithstanding the amount or value of the consideration set forth in any instrument—

(i) the consideration so apportioned to that interest shall be deemed to be the amount or the value of the consideration for the lease which is attributable to that interest and the consideration so apportioned to the aggregate of all such interests comprised in that larger transaction or series of transactions shall be deemed to be the amount or value of that aggregate consideration which is attributable to residential property, and

(ii) the consideration so apportioned to the other property or part or parts concerned shall be deemed to be the amount or value of the consideration for the lease, or of that aggregate consideration, as the case may be, which is attributable to property which is not residential property.”.

11 Amendment of section 49 (exemption of certain instruments from stamp duty) of Finance Act, 1969.

11.—Section 49 of the Finance Act, 1969, is hereby amended—

(a) by the substitution of the following subsection for subsection (1):

“(1) Subject to subsection (2B) of this section, an instrument giving effect to the purchase of a dwellinghouse or apartment upon the erection thereof shall be exempt from all stamp duties.”,

(b) in subsection (2B) (inserted by the Finance Act, 1996) by the substitution in paragraph (a) of the following subparagraphs for subparagraph (i):