TAX concessions which allow investors to reduce their total income tax bills by investing in hotels may be removed in today's Budget.

Under current tax rules, individuals with high incomes can reduce their liability for income tax by investing in hotels and writing off that capital investment against their total income.

Market sources, said the Minister for Finance, would move to ring fence this concession to reduce the cost to the Exchequer in tax revenue foregone.

Mr Quinn is expected to bring in a restriction which would allow the investors to set off the amount invested in the hotel only against the rental or other income they get from the hotel.

Under current rules they can set off the capital sum they have invested in the hotel against income from all sources over a seven-year period.

The current tax concessions have helped to underpin the boom in hotel building with high income investors often getting together in groups to buy or build hotels.

For example, a group of 10 investors getting together to buy a hotel for £1 million would each put in £100,000. About 90 per cent of this investment would qualify for relief - only the capital outlay qualify for relief so labour costs or the amount of builders profit would be excluded.

Then, each investor is able to write off his investment at a rate of 15 per cent per annum for six years with the balance of 10 per cent in the seventh year.

Investors often buy hotels and lease them to an operator. However, the tax liability on the rental income is often minimal because costs can be set off against this income.

So each investor would be able to set off about £13,500 every year for six years against his total income, including income from employment and from other investments.