Tax Incentives

Capital Allowances will be available on the residential units by virtue of the provision of Section 268(3A) Taxes Consolidation Act 1997. The rate of Capital Allowances available to an investor is 15% per annum for the first 6 years and 10% in year 7.
Qualifying expenditure incurred in 2007 and 2008 will be subject to a cap. Where the capital expenditure is incurred on or before 1st May 2007, capital allowances can be claimed as
follows:

- On 75% of the expenditure incurred in the period from 24th March 2007 to 31st December 2007
- On 50% of the expenditure incurred in the seven month period ended 31 July 2008.

It is anticipated that all expenditure incurred on these units will be incurred on or before 31st December 2007.
The Capital Allowances are available firstly for offset from the investor's share of Irish Rental Income from the residential unit. The balance of capital allowances can then be deducted from the Investor's total Irish Source of Rental Income assessable for that year. Any further excess capital allowances can be offset against Total Income (including PAYE Income) to a maximum of €31,750 per annum for an individual. Unused capital allowances may be carried forward for offset against Irish Source Rental Income arising in subsequent years.

The tax life of the residential unit will be 15 years. The tax life is the period after which the units can be sold without incurring a claw back of the Capital Allowances. Capital Allowances are also available in respect of expenditure incurred on furnishing the residential units at a rate of 12.5% per annum for 8 years. These allowances are available for offset against all Irish Source Rental Income. Any unused capital allowances may be carried forward for offset against Irish Rental Income in subsequent years.

Investment Structure

Investors who acquire a residential unit from the developer will lease their unit, by way of short lease, to the Nursing Home operator. The Nursing Home will then lease these units to persons who are medically certified as requiring such accommodation by reason of old age or infirmity over the tax life. The marketing and leasing of the units will be undertaken by the Nursing Home operator and it will be the operator's responsibility to manage the units and provide services to the occupants. The lease rent is subject to an Annual Management Fee.

Qualifying Conditions

In order for the residential units to qualify for Capital Allowances the following conditions must also be satisfied:
- The units must be operated or managed by a registered nursing home and an on site caretaker must be provided.
- The nursing home must provide back-up medical care, including nursing care when required to the occupants of the units.
- The units must be leased only to those who are certified by a medical practitioner as requiring such accommodation by reason of old age or infirmity.
Finance Act 2007 provides that the spouse of an aged or infirm person may live in a qualifying unit in circumstances where that spouse would not be deemed aged or infirm from a medical point of view.
- A day care centre must be provided on site although this itself will not qualify for Capital Allowances. This must comply with the local Health Service Executive requirements.

All of these services will be provided in conjunction with Millrace Nursing Home which is adjacent to the residential units.

 

Year	Industrial Building Allowance	Fit Out Allowances	Total	Annual Tax Saving at 46.5%
	€	€	€	€
1	42,000	1,875	43,875	20,402
2	42,000	1,875	43,875	20,402
3	42,000	1,875	43,875	20,402
4	42,000	1,875	43,875	20,402
5	42,000	1,875	43,875	20,402
6	42,000	1,875	43,875	20,402
7	28,000	1,875	29,875	13,892
8	-	1,875	1,875	872
	280,000	15,000	295,000	137,175

Exit Mechanism

At the end of the 15 year tax life, the purchaser of the residential unit will have the option of continuing to let the unit to
the Operating Company, let it privately to an elderly or infirmed person, occupy it themselves if they are elderly or sell it on
the open market.

Interest Relief

Interest relief is available on borrowings to acquire the residential unit at the tax payer's marginal rate of tax against all Irish Source Rental Income.

Stamp Duty

Stamp duty is payable on the cost of the residential unit exclusive of VAT.