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Section 23

Sunday Business Post’s article suggests that there may be amendments in the Finance Bill to changes in Section 23 reliefs:
The controversial changes made to the Section 23 tax relief scheme in the budget could be amended to allow a more gradual wind-down of some of the scheme’s reliefs.

Minister for Finance Brian Lenihan is to consider submissions on the issue, which could result in amendments being made to next month’s Finance Bill. Lenihan told Fianna Fáil deputies he would take submissions, following pressure from small investors who insist they will be bankrupted by the sudden withdrawal of reliefs in the budget.

Michael Ahern of Fianna Fáil, the chairman of the Oireachtas Finance Committee, said he was confident that Lenihan would instigate some changes in the bill, due to come before the Dáil after the Christmas recess.

‘‘I believe that people who entered into contracts based on the taxation position of the time should be given a reasonable time to ensure that they are not made bankrupt, and I would support that very strongly. ‘‘I believe that the minister will bring an amendment in the Finance Bill,” said Ahern.

The budget restricted tax relief to income from the Section 23 property itself, instead of all rental income.

Despite the National Recovery Plan referring to the ‘‘phased’’ abolition of the legacy tax reliefs, this measure was to come into place yesterday.

However, it has now been proposed that there be a gradual reduction in the percentage of reliefs allowable from other properties, or a capped sum to be used against other rental income.

Fianna Fáil TD Chris Andrews said: ‘‘Everyone recognises the objective of scrapping the reliefs, but it’s the speed of the withdrawal that’s the issue, because people have made commitments based on the reliefs.

‘‘These are not the big guys or the Nama people, because the big guys used up their Section 23 allowances in the first year, whereas the smaller investors are doing it over ten years.”

Another TD told The Sunday Business Post that ‘‘everybody has been getting submissions on Section 23 – it’s probably the most prominent issue in terms of representations on the Finance Bill’’.

A spokesman for Lenihan said he was unable to confirm whether changes would be made to Section 23 reliefs in the Finance Bill.

The matter would be up for consideration when the government returned after the Christmas recess, he said.

The changes to Section 23 reliefs and certain capital allowance reliefs are likely to affect major projects such as hospitals, nursing homes and creches.

Some tax-based schemes, primarily in the tourism sector, are already close to financial collapse.

But the government will also take a hit, as property investors who put money into student accommodation are expected to recoup the losses from the state, due to clauses in their leases.
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