Taxes Consolidation Act 1997 section 409B

Income tax: restriction on use of capital allowances on certain hotels, etc

Section 409B restricts individual passive investors in certain hotels and holiday camps from offsetting excess capital allowances against income other than rental income, with transitional provisions for projects already under way at 3 December 1997.

• Capital allowances on specified buildings — broadly, hotels and holiday camps — may only be set by passive individual investors against rental income; any excess is carried forward against future rental income and cannot shelter other income.
• The restriction does not apply to individual owner-operators or active partners, to hotels in counties Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon or Sligo (outside designated seaside resort areas), or to investments made by companies.
• An anti-avoidance rule prevents a passive partner in a partnership from using allowances on a specified building to create or increase a trading loss in his or her several trade.
• Transitional relief exempts qualifying projects where foundations were laid, or 5 per cent of refurbishment cost was incurred, before 3 December 1997, and expenditure is incurred under a binding written contract concluded before that date or, in certain circumstances, before 1 May 1998.