At present, investors in newly-built hotels are entitled to offset some or all of the construction costs against various parts of their income over a number of years. The types and quantities of income vary from project to project. These tax breaks stem from regulation under the Taxes Consolidation Act, the effects of which may taper off over next few years or be discontinued, due to pressure from the EU and the issue of creating an over supply of new hotels.

The summary below lists a number of options that might be available to existing hotel owners and developers who had planned to build hotels on the back of a tax investor equity where the capital allowance incentive is closed off in the next or in later budgets. Also hotels that have traded as such for the whole of the applicable tax life may become ripe for redevelopment and, subject to appropriate planning sanction, not be restricted to hotel use.

The most obvious alternative, subject to appropriate planning sanction, would be to complete further works to the property so that the living units of the hotel might be converted into individual apartments.

In tandem with the apartment proposal above, certain elements of the hotel could be used for other purposes. For example, the kitchen and food services area might be converted, subject to appropriate planning and licensing authority, to an independently-owned restaurant, again sold or let by way of a 35-year lease.

Some parts of the hotel might similarly be sold or let. For example, any gym, swimming pool or leisure centre might be converted to a privately-owned establishment. And other parts might productively be converted to an independent bar café or nightclub.

To make commercial sense, however, it might be necessary to sell these interests by way of long lease / freehold rather than a 35-year lease. Again, subject to appropriate planning permission, it might also be possible to convert or redesign the proposed hotel development to that of an office space.

The possibility of a small private hospital, hospice or nursing home might also be considered. Where a development has not yet occurred, such a use may still attract tax investor equity. Again, alterations from an already-constructed building will require appropriate planning and local authority or indeed government sanction and would have to be considered in great detail.

In terms of property located in or near high-density residential areas, other options might be explored such as a mixed apartment/ supermarket use (particularly if a brand name such as Dunnes Stores or Tesco could be attracted). Similarly, nearby property could be acquired and added to the original site for any one or more of the above development opportunities.

For further information please contact Gerry O'Hanlon.

Winter 2007/2008.