Urban Renewal Scheme, 1999

Circular UR 10 /02

9 October, 2002

Consolidated Certification Guidelines for

Urban Renewal Scheme 1999

Dear Manager,

I refer to earlier Circulars UR 5/99, UR4/01, UR11/01, UR7/02 and UR8/02.

As you are aware, guidelines on certification under section 11 of the Urban Renewal Act, 1998 were issued in May 1999 for the purpose of specifying the manner in which local authorities or authorised companies should certify that a development is consistent with the objectives of an integrated area plan. Revised guidelines in respect of commercial/industrial incentives were issued in July, 2001 to take account of EU information requirements regarding Regional Aid Guidelines.

It has now been decided to update and consolidate all previous versions of the Certification Guidelines and also incorporate changes arising from the Finance Act, 2002, viz. : -

(a) the extension of the deadline for qualification for tax incentives under the Urban Renewal Scheme 1999 from 31 December, 2002 to 31 December, 2004 provided for by section 23 of the Finance Act, 2002

(b) the extension of residential investor (“Section 23” type) tax incentives under the Urban Renewal Scheme 1999 provided for by section 25 of the Finance Act, 2002

A copy of the guidelines is enclosed for your attention. These guidelines should be read in conjunction with all relevant Acts.

Compliance with requirements of EU State Aid Law

The implementation of the commercial/industrial elements of the scheme is also subject to specific conditions to ensure compliance with EU rules on State Aids and these have been included in these guidelines. (See also Section 372 K of the Taxes Consolidation Act, 1997, as inserted by the Finance Act, 2000 and amended by the Finance Acts 2001 and 2002 for complete details.)

In particular, please note that construction, conversion or refurbishment expenditure is excluded where it is incurred in respect of buildings or structures that are provided for the purpose of large investment projects the regional aid for which is limited under the "Multisectoral framework on regional aid for large investment projects" prepared by the European Commission (OJ No C107, 7.4.1998, p7). This Framework becomes relevant for commercial and industrial projects with a projected cost in excess of €50m.

The exemptions available under the Framework will most likely mean that few, if any, projects will need to be notified. However, local authorities are asked to identify to the Department commercial and industrial projects or mixed use schemes where the commercial and industrial element exceeds €50m for confirmation that no prior notification under the Framework is required. Local authorities should be aware that additional information may be required by this Department in relation to the number of jobs that will be created by the development when completed (i.e. construction jobs are not relevant for the purpose of this analysis) in order to make a decision in relation to notification under the Framework.

Any queries relating to this circular or the enclosed guidelines should be addressed to Nora Keneghan at (01) 8882418 (Email: ) or Gary Ryan at (01) 8882416 (Email: ).

Yours sincerely,

______

Pat Macken

Principal Officer

Urban and Village Development Section

To:Each City and County Manager

ccEach County Secretary and Town Clerk

Urban Renewal Scheme, 1999

Consolidated Certification Guidelines

October, 2002

Introduction

General rules on consistency (Letter of Certification requirement)

(a)Under section 11 of the Urban Renewal Act, 1998 (“the Act”) no relief from income tax or corporation tax may be granted under Chapter 7 (as inserted by section 76 of the Finance Act, 1998) or Chapter 11 (as inserted by section 24 of the Finance Act, 2002) of Part 10 of the Taxes Consolidation Act, 1997, in respect of the construction, refurbishment or conversion of a building, structure or house (hereinafter referred to as “the development”) unless the local authority or authorised company which prepared the integrated area plan concerned has certified in writing, in a manner specified by the Minister, that such development is consistent with the objectives of the integrated area plan. The certification process to be applied is outlined in paragraphs 1 to 5 of these guidelines.

Compliance with EU State Aid law (“Form A” requirement)

(b)The implementation of the commercial/industrial elements of the scheme is also subject to specific conditions agreed with the EU Commission in order to ensure compliance with EU State Aid law. It was agreed that the scheme could proceed within the following parameters -

(i)relief is denied to property developers where the property developer or a person connected with the property developer constructed or refurbished the building or structure involved,

(ii)there is no relief in the case of expenditure incurred by owner-occupier operators of industrial or commercial premises in use in the agriculture, coal, fishing and motor vehicle industries, and the transport, steel, shipbuilding, synthetic fibres and financial services sectors,

(iii)construction, conversion or refurbishment expenditure is excluded where it is incurred in respect of buildings or structures that are provided for the purpose of large investment projects the State Aid for which is limited under the "Multisectoral framework on regional aid (State Aid) for large investment projects" prepared by the European Commission (OJ No C107, 7.4.1998, p7). This Framework is only relevant in respect of commercial/industrial projects with a projected cost in excess of €50 million.

(iv)capital allowances under the scheme do not apply in respect of the expenditure incurred on industrial and commercial premises where any part of that expenditure is met by way of grant aid or any other form of aid granted by or through the State, any board established by statute, any public or local authority or any other agency of the State. The effect of this restriction is that persons may avail of either tax reliefs under the Urban Renewal Scheme or aid from a State body but not both.

(c)The information required in order to assist in meeting EU reporting requirements in this regard must be provided on Form A at Appendix III. While the provision of this information is separate from that necessary to assess the consistency of the development with the integrated area plan, any final letter in regard to consistency cannot issue until this information is provided as outlined in paragraphs 1, 4 and 5.

Extension of the qualifying period (verification requirement)

(d)By virtue of section 23 of the Finance Act, 2002, the deadline for qualification for both commercial/industrial and residential tax incentives under the Urban Renewal Scheme, 1999 may, in certain circumstances, be extended from 31 December 2002 to 31 December 2004.

(e)This extension will apply where the relevant local authority gives a certificate in writing on or before 30 April 2003, to the person constructing or refurbishing a building or structure or part of a building or structure, the site of which is wholly within a qualifying area, stating that it is satisfied that not less than 15% of the total cost of constructing or refurbishing the building or structure or the part of the building or structure, as the case may be, and site thereof, had been incurred on or before 31 December 2002.

(f)Details of the information required by local authorities in order to certify compliance with the 15% expenditure requirement in respect of those wishing to avail of the extension of the deadline for qualification for tax incentives is outlined in Appendix I. It is important to note that the local authority is required to satisfy itself as to the veracity of the information provided by those wishing to avail of this extension before certification. While this process is separate from the assessment of consistency of the development with the integrated area plan, any final letter in regard to consistency cannot issue until this information is provided and certified as outlined in paragraphs 1, 4 and 5.

Extension of “Section 23” relief (verification requirement)

(g)By virtue of section 25 of the Finance Act, 2002 residential investor tax incentives are now available to areas already designated for residential owner-occupier incentives under the current Urban Renewal Scheme where qualifying expenditure is incurred on or in relation to a house on or after 5 December 2001.

(h)Expenditure incurred on or in relation to a house prior to 5 December 2001 may also qualify for residential investor relief where –

(i)a contract for the purchase of the house had not been evidenced in writing by any person prior to 5 December 2001, but

(ii)a contract for the purchase of the house is evidenced in writing on or before 1 September 2002.

(i)This change will not alter the existing designations as between refurbishment and new build. The respective residential investor incentive can only be applied on the basis of the existing residential owner-occupier refurbishment or new-build designation. Therefore -

(i)where residential owner-occupier (new build) was granted, residential investor (new build) will also apply, and

(ii)where residential owner-occupier (refurbishment) was granted, residential investor (refurbishment) will also apply.

(j)These provisions only apply to individual sub-areas designated under the scheme and not where incentives were approved on an “area-wide” basis in an integrated area plan.

(k)Details of the information required in respect of those wishing to avail of the extension of residential investor tax incentive is outlined in Appendix II. It is important to note that the local authority or authorised company is required to satisfy itself as to the veracity of the information provided by those wishing to avail of this extension. While this process is separate from the assessment of consistency of the development with the integrated area plan, any final letter in regard to consistency cannot issue until this information is provided and verified as outlined in paragraphs 1, 4 and 5.

Notification

(l)Those wishing to avail of any of the reliefs provided for in Chapter 7 and/or Chapter 11 of Part 10 of the Taxes Consolidation Act, 1997 should be advised of the certification arrangements set out in these guidelines at the earliest opportunity. They should also be urged to liaise with the certifying local authority or authorised company during the pre-construction phase of a development to ensure that there are no undue delays in processing applications for certification.

(m)The guidelines are issued without prejudice to the provisions of the Planning and Development Act, 2000, the Building Control Act, 1990, any regulations made under those Acts and the provisions of the relevant local authority’s Development Plan. It is recommended that applicants for certification be advised of the possible need to seek planning permission for their proposed developments.

Definitions

(n)All terms used in these guidelines have the same meaning as those given to them for the purposes of any relevant statutory provisions.

Certification Procedures

1. Application for Letter of Certification

A person wishing to avail of any of the reliefs provided for in Chapter 7 or Chapter 11 of Part 10 of the Taxes Consolidation Act, 1997 must make a formal written application for a Letter of Certification (a letter which certifies that the development concerned is consistent with the objectives of the integrated area plan) to the relevant local authority or authorised company as detailed beneath.

The application should include -

(i)in all cases -

-name, address and telephone/fax numbers of the developer,

-address of development for which certification is sought and the integrated area plan sub-area reference,

-relevant planning permission reference number(s), if applicable and date of issue,

-a copy of the commencement notice, if applicable, under the Building Control Act for the relevant development,

-such other documentation or information as the relevant local authority or authorised company may require for the purposes of its consideration of the certification application.

(ii)in addition to sub-paragraph (i) above, where a person is availing of relief on expenditure incurred after 6 April 2001 on the development of a qualifying commercial or industrial building or structure, a statement indicating that no grant aid has been or will be received in respect of such development (this must be done by completing Form A at Appendix III) and any further information as may be necessary to enable compliance with the reporting requirements of the European Commission,

(iii)in addition to sub-paragraph (i) above, where a person is availing of the extension of the deadline to 31 December 2004 for qualification for tax incentives provided for by section 23 of the Finance Act, 2002 -

-the letter issued by the local authority which certified that 15% of the total project costs had been incurred on or before 31 December, 2002, or

-if before the 30 April 2003, the information required to allow the local authority to make such a determination,

and

(iv)in addition to sub-paragraph (i) above, where a person is availing of the extension of residential investor incentive provided for by section 25 of the Finance Act, 2002,

-the letter in which the local authority or authorised company stated it was satisfied, based on the information provided, that the residential investor incentive (provided for by section 25 of the Finance Act, 2002) applies as respects expenditure incurred on or in relation to a house or

-the information required to allow the local authority or authorised company to make such a determination

Where a person requires “first-stage” notification, as outlined at paragraph 3 beneath, an application providing the information above, as appropriate, should be made prior to the commencement of the relevant development.

2.Assessment of consistency with integrated area plan

The local authority or authorised company must satisfy itself that the relevant development or part thereof is consistent with the objectives of the integrated area plan concerned, by applying the following criteria -

(i) the development has been completed,

(ii)the development has been carried out in support of the objectives of the integrated area plan,

(iii)the development complies with any specific conditions set out in the integrated area plan in relation to development in the area to which the plan relates or in relation to development in any part or parts of that area,

(iv)the use or uses proposed for the building, structure or house are consistent with the uses for which the area in which the building, structure or house is located, has been declared to be a qualifying area for the purposes of one or more sections of Chapter 7 or Chapter 11 of Part 10 of the Taxes Consolidation Act, 1997, and

(v)the design of the building or structure takes account of the nature and character of the area in which it is located and complies with any other design standards set out in the integrated area plan.

3.“First-stage” notification

While the local authority may only decide whether any particular development, or part thereof, is or is not consistent with the objectives of the integrated area plan after the development has been completed, where the local authority or authorised company is of the opinion that the development will, when completed, comply with the criteria in paragraph 2, and where the incentives concerned otherwise apply, it may confirm such in writing where requested to do so. However, such confirmation should clearly specify all other conditions which will have to be complied with before the final Letter of Certification can issue as outlined in paragraph 4.

4.Issue of Letter of Certification

(a)The local authority or authorised company should, upon notification of the completion of the development, issue a Letter of Certification within one month of such notification, certifying that the development is consistent with the objectives of the integrated area plan subject to -

(i)it being satisfied that the development meets the criteria outlined in paragraph 2, and

(ii)all appropriate information being provided as outlined in paragraph 1 and, where necessary, the local authority or authorised company satisfying itself as to the veracity of the information provided.

(b)Certification may, where appropriate, relate only to that portion of the development being undertaken in relation to an entire building or structure which the local authority or authorised company considers to be consistent with the objectives of the integrated area plan.

1. Refusal to issue Letter of Certification

(a) A Letter of Certification cannot issue where -

(i)the local authority or authorised company is of the view that the conditions outlined in paragraph 4(a)(i) have not been met. In this case, the local authority or authorised company should, within one month of the receipt of the application or additional information required, advise the person concerned that it is of that view, and that the person has one month in which to make representations on the matter before a final decision is made.

Where it is decided to refuse certification, the notification to this effect must include the grounds upon which the local authority or authorised company made that decision and, where appropriate, outline the alterations necessary to make the development consistent with the objectives of the integrated area plan.

(ii)the conditions outlined in paragraph 4(a)(ii) have not been met. In this case, the local authority or authorised company should immediately inform the person concerned that the Letter of Certification cannot issue until the outstanding matters are resolved.

Appendix 1

Verification of expenditure in respect of the extension of the qualifying period provided for by section 23(1) of the Finance Act, 2002

A.Where a person wishes to avail of the extension of the deadline for qualification for tax incentives provided for by section 23 of the Finance Act, 2002, he or she must make a formal application to this effect to the local authority.

B.The application should include the following information (where such information has not already been provided in obtaining “First stage” certification as detailed at paragraph 3, or otherwise) -

-name, address and telephone/fax numbers of the developer,

-address of development for which certification is sought and the integrated area plan sub-area reference,

-relevant planning permission reference number(s), if applicable and date of issue,

-a copy of the commencement notice, if applicable, under the Building Control Act for the relevant development,

-a comprehensive submission, certified by a Quantity Surveyor, Valuer or similar, providing details of the site and development costs incurred by the date of application or 31 December 2002 whichever is the earlier and the total project costs,

-the name and address of the Quantity Surveyor, Valuer or similar used,

-such other documentation or information as the relevant local authority may require for the purposes of its consideration of the certification application.

C.Where, on the basis of the information provided, the local authority is satisfied that at least 15% of the total project costs have been incurred on or before 31 December 2002, it shall issue a letter to the person concerned to that effect as soon as possible, or in any event not later than 30 April 2003. A copy of this letter should also be forwarded to Urban and Village Development Section, Department of the Environment and Local Government.