AS EXPECTED, the Minister for Finance has introduced Committee Stage amendments to the 1997 Finance Bill to facilitate the new tax incentive scheme for the Dublin docklands area.

The period in terms of incurring expenditure which will qualify for tax relief is July 1st, 1997, to June 30th, 2000.

The areas which may benefit from the new tax incentive regime within the docklands will be a matter for the Minister for Finance to decide after consulting with the Minister for the Environment and following a recommendation from the new Dublin Docklands Development Authority.

Unlike previous tax designated area regimes, specific criteria have been laid out in the legislation which the Minister must take account of when making a decision whether to designate a particular area.

The development must be consistent with the master plan for the area, the market conditions for the type of development envisaged, and the significance of the area for the overall regeneration of the docklands.

In addition, the Minister, in making a designated order for a particular area, can specify the type of development which will qualify for tax relief - industrial and/or commercial and/or residential.

Accelerated capital allowances for the construction of certain industrial buildings (broadly, buildings used for manufacturing or other similar activity) have been introduced. In these cases, 100 per cent of qualifying expenditure will qualify for tax relief.

For lessors, the tax relief available will be 50 per cent in the first year and 4 per cent per annum thereafter. Owner/occupiers will be able to claim up to 100 per cent in the first year.

The same capital allowance regime will apply to refurbishment where expenditure of at least 10 per cent of the market value of the building is incurred.

Accelerated capital allowances have also been introduced for the construction or refurbishment of commercial premises, including multi-storey car-parks and offices.

By contrast, no tax allowances are currently available in respect of office developments in city designated areas including Dublin, with the exception of Temple Bar and the Custom House Docks.

The new capital allowances are the same as those for industrial buildings and structures. However, the Minister, in making a designation order, has the power to restrict the level of allowances to one-half of the allowances that would otherwise be available. Therefore, where the power is exercised, lessors would only be entitled to claim 25 per cent in the first year and 2 per cent per annum thereafter up to a maximum of 50 per cent.

Also, owner/occupiers will only be entitled to claim up to 50 per cent in the first year.

An investor will be in a position to sell a commercial premises after 13 years without suffering a clawback of tax allowances.

However, an owner of an industrial building will have to wait 25 years before being in a position to sell without suffering a clawback of tax allowances.

The logic for this distinction is not clear.

A double rent allowance for 10 years is available to lessees for rent paid under a lease of a building in respect of which capital allowances have been claimed under the new tax relief regime. Double rent allowance is not available where the lessor and the lessee are connected.

Hotels will not benefit from the new accelerated capital allowance regime. Relief will continue to be available at the rate of 15 per cent per annum and 10 per cent in the 7th year for construction/refurbishment expenditure.

As in the 1994 Designated Area Scheme, capital allowances or double rent allowance may be claimed in respect of a hotel, but not both.

Tax relief is also available in respect of the purchase of residential accommodation by owner-occupiers. The relief available is 5 per cent per annum for 10 years in respect of newly constructed homes and 10 per cent per annum, again for 10 years, in respect of refurbished residences.

Tax relief for residential accommodation has been restricted to owner-occupiers. Section 23 relief has not been introduced for the docklands. Consequently, there will be no opportunity for investors to purchase houses or apartments for letting in the docklands area.

This represents a clear policy departure from previous designated area schemes.