The Minister for Finance, Mr McCreevy, has thwarted an attempt by a group of business- men to get around restrictions to prevent the abuse of €55 million in capital allowances attached to AIB's building in the IFSC in Dublin.

The group, believed to comprise four wealthy individuals, was planning to use a scheme that would circumvent the restrictions on capital allowances introduced in the Finance Bill in February.

But yesterday the Minister for Finance moved to close that particular loophole with immediate effect.

The new restriction will be incorporated in the 2004 Budget and Finance Bill.

Other variations of these or similar arrangements have also come to the Minister's attention which will also be closed off with immediate effect in forthcoming legislation, the Department of Finance said yesterday.

The schemes had been designed to allow high-net-worth individuals to save millions of euro every year on their personal taxes. The AIB building remains on the market with a price tag of €80 -€90 million.

An AIB spokesman said the building had been put on the market for business reasons and had nothing to do with the legislative incentives attached to commercial property.

"It is still on the market regardless of the available incentives and the price will remain the same," he said.

The Minister had initially been alerted to a scheme being promoted by tax advisers, estate agents and private bankers to consortiums of potential buyers for the AIB building in January.

The Irish Times highlighted that tax allowances in excess of €55 million over 12 years would have been available to the investors who bought the building, yielding potential annual tax savings of €4.5 million.

Section 13 of the Finance Bill stipulated that where a building, on which capital allowances had been claimed, was subsequently sold to individual investors, they would be entitled to set these tax allowances solely against their rental income from that building.

Following the tightening of the use of these allowances, a new scheme was devised whereby the building would be purchased by a company owned by the group of investors.

They would then borrow the funds necessary to fund the property purchase securing the loan against their shares in the company.

By structuring the deal in this way, the consortium could have legitimately offset the interest paid on their personal loans against all of their income.

In this scheme, the capital allowances would be used by the company rather than the individuals, and set off against rental income.

The rent roll would have been estimated at close to the amount of capital allowances, yielding no tax liability whatsoever for the investors.

"The tax consequences of the arrangements which have come to light would be broadly similar to those which would have applied if investors had been entitled to set the capital allowances related to the building against all their income," the Department said.

A number of other buildings were expected to come on the market attracting investors to similar tax-based schemes.

When he moved to close off the initial loophole in January, the Minister said the Exchequer must be protected from "such contrived and unacceptable tax arbitrage".