(2)Paragraph (a) of section 34 shall not apply as respects eligible shares issued on or after the 3rd day of December, 1997, by a company to which this section applies and in respect of which the conditions in either subsection (5), (6) or (7) are met.
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(3)The provisions of Part 16 of the Principal Act which were in force immediately before the 3rd day of December, 1997, shall, as those provisions stand amended by paragraphs (b) and (c) of section 34 , apply as respects eligible shares issued on or after that day by a company to which this section applies and in respect of which the conditions in either subsection (5), (6) or (7) are met.
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(4)This section applies to a company which, or whose qualifying subsidiary, either carries on or intends to carry on one or more of the qualifying trading operations.
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(5)The conditions of this subsection referred to in subsection (2) are— (a) the eligible shares are issued by the company on or before the 5th day of April, 1998, and (b) the eligible shares are issued following a subscription on behalf of an individual by a person or persons having the management of a specified designated fund, and (c) the company proves to the satisfaction of the Revenue Commissioners that before the 3rd day of December, 1997, it had the intention of raising money, on or before the 5th day of April, 1998, under the principal provisions through the specified designated fund referred to in paragraph (b) of this subsection, and in determining whether they are satisfied that the company has complied with the requirements specified in paragraph (c) of this subsection the Revenue Commissioners shall have regard to the following— (i) (I) signed heads of agreement between the company and the fund, or (II) exchange of correspondence between the company and the fund showing a clear intention that the fund intended, on or before the 5th day of April, 1998, to subscribe for eligible shares in the company, (ii) a certificate by the auditor of the fund confirming that it is a specified designated fund, and (iii) any other information the Revenue Commisisoners deem necessary for the purpose.
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(6)The conditions of this subsection referred to in subsection (2) are— (a) the eligible shares are issued by the company on or before the 30th day of September, 1998, and (b) a relevant certificate or a combined certificate has been issued to the company by an authority before the 3rd day of December, 1997.
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(7)The conditions of this subsection referred to in subsection (2) are— (a) the eligible shares are issued by the company on or before the 30th day of September, 1998, and (b) the company proves to the satisfaction of the Revenue Commissioners that before the 3rd day of December, 1997, it had an intention to raise money under the principal provisions, and in determining whether they are so satisfied the Revenue Commissioners shall have regard to one or more of the following— (i) an application in writing made by the company to the Revenue Commissioners in the specified period for the opinion of the Revenue Commissioners as to whether the company would be a qualifying company for the purposes of the principal provisions, (ii) an application in writing made by the company to an authority in the specified period for a relevant certificate or a combined certificate, (iii) an application in writing made by the company to an industrial development agency in the specified period for a certificate referred to in section 489
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(2)(e) of the Principal Act, (iv) an application in writing made to a certifying agency, certifying Minister or County Enterprise Board in the specified period for a certificate under section 497 of the Principal Act, and (v) the publication in the specified period of a prospectus by, or on behalf of, the company, and (c) (i) in the case of a company which, or whose qualifying subsidiary, either carries on or intends to carry on a qualifying trading operation as is mentioned in subparagraph (i), (ii), (iii), (v), (viii), (ix), (xi) or (xiii) of paragraph (a) of section 496
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(2)of the Principal Act, that in the specified period the company or its qualifying subsidiary, as the case may be, had entered into a binding contract in writing— (I) to purchase or lease land or a building, (II) to purchase or lease plant or machinery, or (III) for the construction or refurbishment of a building, to be used in the carrying on of its qualifying trading operation, (ii) in the case of a company which, or whose qualifying subsidiary, either carries on or intends to carry on a qualifying trading operation as is mentioned in subparagraph (vii) of paragraph (a) of section 496
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(2)of the Principal Act, that in the specified period the company or its qualifying subsidiary, as the case may be, had entered into a binding contract in writing— (I) to purchase or lease greenhouses, (II) to purchase or lease plant or machinery, or (III) for the construction or refurbishment of greenhouses, to be used in the carrying on of its qualifying trading operation, (iii) in the case of a company which, or whose qualifying subsidiary, either carries on or intends to carry on a qualifying trading operation as is mentioned in subparagraph (xii) of paragraph (a) of section 496
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(2)of the Principal Act, that in the specified period the company or its qualifying subsidiary, as the case may be, had entered into a binding contract in writing for the production, publication, marketing or promotion of the qualifying recording or qualifying recordings which the company or its qualifying subsidiary, as the case may be, intends to produce, and the company proves to the satisfaction of the Revenue Commisisoners that the contract which it or its qualifying subsidiary, as the case may be, had entered into was integral to, or consistent with, the purpose for which it had intended to raise money under the principal provisions and that the consideration of the contract is equal to 25 per cent or more of the money which it is intended to so raise.
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(8)For the purposes of subsection (7)— (a) the date on which a contract was entered into by a company or, as the case may be, its qualifying subsidiary, and (b) the date on which a prospectus was published by, or on behalf of, a company, shall be confirmed in a certificate by the auditor of the company, or its qualifying subsidiary, as appropriate.
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Employee share schemes.
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36.—(1) The Principal Act is hereby amended— (a) in Chapter 1 of Part 17, by the insertion of the following section after section 511 : “Shares acquired from an employee share ownership trust.
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511A.—(1) Where, on or after the date of the passing of the Finance Act, 1998, the trustees of an approved scheme make an appropriation of shares to which section 510(3) applies to a participant and the conditions mentioned in subsection (2) are satisfied, then, for the purposes of this Chapter as it applies to those shares— (a) the period of retention shall end on, and (b) the release date shall be, the day following the day on which the shares were appropriated to the participant.
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(2)The conditions referred to in subsection (1) are that— (a) the shares concerned were transferred to the trustees of the approved scheme concerned by the trustees of an employee share ownership trust to which section 519 applies, (b) immediately prior to the transfer referred to in paragraph (a), the shares had been held in that employee share ownership trust for a period of not less than 3 years, and (c) the participant concerned was a beneficiary (within the meaning of paragraph 11 of Schedule 12) under that employee share ownership trust at all times during the period of 3 years ending on the date on which the shares were appropriated to him or her.”, (b) in Chapter 2 of Part 17, by the substitution in section 519 of the following subsection for subsection (7): “(7) The trustees of a trust to which this section applies shall not be chargeable to income tax in respect of income consisting of dividends in respect of securities held by the trust if, and to the extent that, the income is expended within the expenditure period (within the meaning of paragraph 13 of Schedule 12) by the trustees for one or more of the qualifying purposes referred to in that paragraph, but the trustees shall not be entitled to the setoff or payment of a tax credit under section 136 in respect of those dividends.”, (c) in Schedule 11, by the insertion in paragraph 4 of the following subparagraph after subparagraph (1): “(1A) (a) As respects a profit sharing scheme approved on or after the date of the passing of the Finance Act, 1998, the Revenue Commissioners must be satisfied— (i) that there are no features of the scheme (other than any which are included to satisfy the requirements of Chapter 1 of Part 17 and this Schedule) which have or would have the effect of discouraging any description of employees or former employees who fulfil the conditions in subparagraph (1) from participating in the scheme, and (ii) where the company concerned is a member of a group of companies, that the scheme does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of higher or the highest levels of remuneration. (b) In this subparagraph ‘a group of companies’ means a company and any other companies of which it has control.”, and (d) in Schedule 12— (i) in paragraph 1— (I) by the substitution of the following subparagraph for subparagraph (3): “(3) For the purposes of this Schedule, a company falls within the founding company's group at a particular time if—
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(a) it is the founding company, or (b) at that time, it is controlled by the founding company and the trust concerned referred to in paragraph 2(1) is expressed to extend to it.”, and (II) in subparagraph (4)(a), by the substitution of the following definition for the definition of “associate”: “‘associate’ has the meaning assigned to it by subsection (3) of section 433, subject to the reference to the employees in both places where it occurs in subparagraph (ii) of paragraph (c) of that subsection being construed as including a reference to former employees;”, (ii) by the substitution of the following paragraph for paragraph 2: “2. (1) On the application of a body corporate (in this Schedule referred to as ‘the founding company’) which has established an employee share ownership trust, the Revenue Commissioners shall approve of the trust as a qualifying employee share ownership trust if they are satisfied that the conditions in paragraphs 6 to 18 are complied with in relation to the trust.
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(2)(a) Where the founding company is a member of a group of companies, the Revenue Commissioners shall not approve of a trust under subparagraph (1) unless they are satisfied that the trust does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of higher or the highest levels of remuneration. (b) In this subparagraph ‘a group of companies’ means a company and any other companies of which it has control.”, (iii) in paragraph 11— (I) by the substitution of the following subparagraphs for subparagraph (2): “(2) The trust deed shall provide that a person is a beneficiary at a particular time (in this subparagraph referred to as ‘the relevant time’) if— (a) the person is at the relevant time an employee or director of a company within the founding company's group, (b) at each given time in a qualifying period the person was such an employee or director of a company falling within the founding company's group at that given time, (c) in the case of a director, at that given time the person worked as a director of the company concerned at the rate of at least 20 hours a week (disregarding such matters as holidays and sickness), and (d) the person is chargeable to income tax in respect of his or her office or employment under Schedule E. (2A) The trust deed may provide that a person is a beneficiary at a particular time if, but for subparagraph (2)(d), he or she would be a beneficiary within the rule which is included in the deed and conforms with subparagraph (2).”, (II) in subparagraph (4)(a), by the substitution for “subparagraph (3)” of “subparagraphs (2A) and (3)”, (III) in subparagraph (5), by the substitution for “subparagraph (2)” of “subparagraphs (2) and (2A)”, (IV) in subparagraph (7), by the substitution for “subparagraph (3) or (4)” of “subparagraph (2A), (3) or (4)”, and (V) in subparagraph (8), by the substitution for “subparagraph (2), (3) or (4)” of “subparagraph (2), (2A), (3) or (4)”.
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(2)(a) Paragraph (b) of subsection (1) shall apply as on and from the date of the passing of this Act. (b) Paragraph (d) of subsection (1) shall apply as respects employee share ownership trusts approved of under paragraph 2 of Schedule 12 of the Principal Act on or after the date of the passing of this Act.
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Payments to subcontractors in certain industries.
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37.—(1) Part 18 of the Principal Act is hereby amended in Chapter 2— (a) in subsection (1) of section 530, by the substitution of the following definition for the definition of “meat processing operations”: “‘meat processing operations’ means operations of any of the following descriptions— (a) the slaughter of cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese, (b) the catching of domestic fowl, turkeys, guinea-fowl, ducks or geese, (c) the division (including cutting or boning), sorting, packaging (including vacuum packaging), rewrapping or branding of, or the application of any other similar process to, the carcasses or any part of the carcasses (including meat) of slaughtered cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese, (d) the application of methods of preservation (including cold storage) to the carcasses or any part of the carcasses (including meat) of slaughtered cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese, (e) the loading or unloading of the carcasses or part of the carcasses (including meat) of slaughtered cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese at any establishment where any of the operations referred to in paragraphs (a), (c) and (d) are carried on, (f) the haulage of the carcasses or any part of the carcasses (including meat) of slaughtered cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese from any establishment where any of the operations referred to in paragraphs (a), (c) and (d) are carried on, (g) the cleaning down of any establishment where any of the operations referred to in paragraphs (a), (c) and (d) are carried on, (h) the grading, sexing and transport of day-old chicks of domestic fowl, turkeys, guinea-fowl, ducks or geese, (i) the haulage for hire of cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese or of any of the materials, machinery or plant for use, whether used or not, in any of the operations referred to in paragraphs (a) to (h).”, and (b) in paragraph (b) of section 531(1), by the substitution of the following for subparagraph (ii): “(ii) carrying on a business of meat processing operations in an establishment approved and inspected in accordance with the European Communities (Fresh Meat) Regulations, 1997 ( S.I. No. 434 of 1997 ) or, as the case may be, the European Communities (Fresh Poultry-meat) Regulations, 1996 ( S.I. No. 3 of 1996 ), or”.
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(2)This section shall apply as on and from the 6th day of October, 1998.
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Amendment of section 659 (farming: allowances for capital expenditure on the construction of farm buildings, etc. for control of pollution) of Principal Act.
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38.—
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Section 659
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of the Principal Act is hereby amended in subsection (3) by the substitution of the following paragraph for paragraph (a): “(a) as respects the first year of the writing-down period referred to in subsection (2), where the capital expenditure was incurred— (i) before the 6th day of April, 1998, an amount equal to 50 per cent of that expenditure or £10,000, whichever is the lesser, or (ii) on or after the 6th day of April, 1998, an amount equal to 50 per cent of that expenditure or £15,000, whichever is the lesser,”.
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Amendment of section 667 (special provisions for qualifying farmers) of Principal Act.
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39.—
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Section 667
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of the Principal Act is hereby amended in paragraph (b) of subsection (2)— (a) in subparagraph (i), by the substitution of “years of assessment, or” for “years of assessment,”, and (b) by the substitution of the following for subparagraphs (ii) and (iii): “(ii) on or after the 6th day of April, 1995, and before the 6th day of April, 1999, for the year of assessment in which the individual becomes a qualifying farmer and for each of the 3 immediately succeeding years of assessment.”.
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Amendment of section 680 (annual allowance for mineral depletion) of Principal Act.
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40.—
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Section 680
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(2)of the Principal Act is hereby amended— (a) by the insertion after “qualifying mine” of “at any time”, and (b) by the substitution for “date” of “time”.
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Amendment of section 681 (allowance for mine rehabilitation expenditure) of Principal Act.
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41.—Subsection (1)(a) of section 681 of the Principal Act is hereby amended by the insertion in the definition of “qualifying mine” after “limestone,” of “fireclay, coal,”.
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Amendment of section 734 (taxation of collective investment undertakings) of Principal Act.
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42.—
\n
Section 734
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of the Principal Act, is hereby amended in paragraph (a) of subsection (1) by the substitution for paragraph (ii) of the definition of “specified company” of the following paragraph: “(ii) (I) not more than 25 per cent of the share capital of which is owned directly or indirectly by persons resident in the State, or (II) all of the share capital of which is owned directly by another company resident in the State and not more than 25 per cent of the share capital of that other company is owned directly or indirectly by persons resident in the State,”.
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Taxation of shares issued in place of cash dividends.
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43.—(1) The Principal Act is hereby amended— (a) in section 816 by the substitution for subsections (1) to (3) of the following subsections— “(1) In this section— ‘company’ means any body corporate; ‘quoted company’ means a company whose shares, or any class of whose shares— (a) are listed in the official list of the Irish Stock Exchange or on any other stock exchange, or (b) are quoted on the market known as the Developing Companies Market, or the market known as the Exploration Securities Market, of the Irish Stock Exchange or on any similar or corresponding market of any other stock exchange; ‘share’ means share in the share capital of a company and includes stock and any other interest in the company.
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(2)Where any person as a consequence of the exercise (whether before, on or after the declaration of a distribution of profits by a company) of an option to receive in respect of shares in the company either a sum in cash or additional share capital of the company, receives such additional share capital, then, an amount equal to the amount which that person would have received if that person had received the distribution in cash instead of such share capital shall for the purposes of the Tax Acts— (a) where the company is resident outside the State, be deemed to be income received by the person from the company, and such income shall be treated as income from securities and possessions outside the State and be assessed and charged to tax under Case III of Schedule D, (b) where the company is resident in the State and is a quoted company— (i) be treated as a distribution made by the company, and (ii) be deemed to be a distribution received by the person, and (c) where the company is resident in the State and is not a quoted company, be deemed to be profits or gains of the person, being profits or gains not within any other Case of Schedule D and not charged by virtue of any other Schedule, and be assessed and charged to tax under Case IV of Schedule D.
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(3)Where a company is treated under subsection (2)(b)(i) as making a distribution to a person, section 152 shall apply with any necessary modifications as if the distribution were a dividend to which subsection (1) of that section applies.”, (b) in section 4 (as amended by section 51 ) in the definition of “distribution” in subsection (1) by the substitution for “sections 436 and 437” of “sections 436 and 437, and subsection (2)(b) of section 816”, (c) in section 20(1), paragraph 1 of Schedule F by the substitution for “sections 436 and 437” of “sections 436 and 437, and subsection (2)(b) of section 816”, and (d) in section 130(1) by the substitution for “sections 436 and 437” of “sections 436 and 437, and subsection (2)(b) of section 816”.
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(2)This section shall apply as respects shares issued by a company on or after the 3rd day of December, 1997.
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Amendment of section 843 (capital allowances for buildings used for third level educational purposes) of Principal Act.
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44.—
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Section 843
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of the Principal Act is hereby amended in subsection (1)— (a) by the substitution of the following definition for the definition of “approved institution”: “‘approved institution’ means— (a) an institution of higher education within the meaning of section 1 of the Higher Education Authority Act, 1971 , or (b) an institution in the State in receipt of public funding which provides courses to which a scheme approved by the Minister for Education and Science under the Local Authorities (Higher Education Grants) Acts, 1968 to 1992, applies;”, and (b) by the substitution, in the definition of “qualifying premises”, of the following subparagraph for subparagraph (ii) of paragraph (b): “(ii) is let to an approved institution,”.
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Amendment of Part 41 (self assessment) of Principal Act.
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45.—(1) Part 41 of the Principal Act is hereby amended— (a) in section 950(1), by the substitution, in the definition of “specified return date for the chargeable period”, of the following paragraph for paragraph (a): “(a) where the chargeable period is a year of assessment, the 31st day of January in the year of assessment following that year; but as respects— (i) such year of assessment (not being earlier than the year 1998–99) as the Minister for Finance shall by order appoint, and (ii) each year of assessment following the year to which subparagraph (i) relates, the 30th day of November following the year of assessment,”, and (b) in section 958— (i) in subsection (2)— (I) by the substitution of the following paragraphs for paragraphs (a) and (b): “(a) where the chargeable period is a year of assessment for income tax and subject to subsection (10), on or before the 1st day of November in the year of assessment; but as respects— (i) such year of assessment (not being earlier than the year 1999-2000) as the Minister for Finance shall by order appoint, and (ii) each year of assessment following the year to which subparagraph (i) relates, the 30th day of November in the year of assessment, (b) where the chargeable period is a year of assessment for capital gains tax, on or before the 1st day of November following the year of assessment; but as respects— (i) such year of assessment (not being earlier than the year 1998-1999) as the Minister for Finance shall by order appoint, and (ii) each year of assessment following the year to which subparagraph (i) relates, the 30th day of November following the year of assessment, or”, and (II) by the substitution of “the 1st day of November in the year of assessment, the 30th day of November in the year of assessment, the 1st day of November following the year of assessment, the 30th day of November following the year of assessment” for “the 1st day of November in the year of assessment, the 1st day of November following the year of assessment”, (ii) in subsection (3) (b), the substitution of the following subparagraph for subparagraph (ii): “(ii) if the chargeable period is a year of assessment for capital gains tax, on or before the specified return date for the chargeable period or, if later, not later than one month from the date on which the assessment is made; but as respects— (I) such year of assessment (not being earlier than the year 1998–1999) as the Minister for Finance shall by order appoint, and (II) each year of assessment following the year to which clause (I) relates,
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on or before the specified return date for the chargeable period, and”, (iii) in subsection (4)(b), by the substitution of the following subparagraph for subparagraph (i): “(i) (I) 90 per cent of the tax payable by the chargeable person for the chargeable period, or (II) in the case of an assessment to capital gains tax made on a chargeable person for the chargeable period, being the year 1998-99 or any subsequent year of assessment, the tax payable by the chargeable person for the chargeable period,”, and (iv) in subsection (10)— (I) in paragraph (a), by the substitution of the following for the words from “on or before the 9th day of December” to the end of the paragraph: “on or before— (i) in the case of the years 1997-98 and 1998-99, the 9th day of December, and (ii) in the case of the year 1999-2000 and any subsequent year of assessment, the 9th day of March, in the year of assessment to which the preliminary tax relates by virtue of subsection (2)(a).”, (II) in paragraph (b), by the substitution of the following for the words from “throughout the calendar year” to the end of the paragraph: “throughout— (i) in the case of the years 1997-98 and 1998-99, the calendar year or a part of that year in which the due date for the payment of that preliminary tax in accordance with subsection (2)(a) falls, and (ii) in the case of the year 1999-2000 or any subsequent year of assessment, that year, and the Collector-General shall debit the bank account of that person with such instalments on the 9th day of each month in that calendar year or a part of that calendar year or, as the case may be, in that year.”, and (III) by the substitution of the following paragraph for paragraph (c): “(c) (i) In the case of the years 1997-98 and 1998-99, the Collector-General may at any time, notwithstanding paragraph (b), agree to alter the amount of preliminary tax to be debited to the bank account of the chargeable person in accordance with this subsection. (ii) In the case of the year 1999-2000 or any subsequent year of assessment, the Collector-General may, in any particular case, in order to facilitate the payment of preliminary tax in accordance with this subsection, agree to vary the number of equal monthly instalments to be collected in a year or, after one or more monthly instalments have been paid in that year, agree to an increase or decrease in the amount to be collected in subsequent instalments in that year; but, a chargeable person shall not be treated as having paid an amount of preliminary tax in accordance with this subsection unless—
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(I) the number of monthly instalments paid by that person in the year of assessment is not less than 10, and (II) not less than 70 per cent of the amount of the preliminary tax payable by that person for that year is paid by instalments on or before the 31st day of December, in that year.”.
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(2)Every order made by the Minister for Finance under this section shall be laid before Dáil Éireann as soon as may be after it is made.
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Amendment of section 787 (nature and amount of relief for qualifying premiums) of Principal Act.
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46.—
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Section 787
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of the Principal Act is hereby amended, in subsection (7), by the substitution of “on or before the specified return date for the chargeable period (within the meaning of Part 41)” for “on or before the 31st day of January in the year following the year of assessment”.
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Amendments of Principal Act in consequence of a change in the currency of certain states.
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47.—(1) The provisions of the Principal Act referred to in Schedule 2 shall apply subject to the amendments specified in that Schedule (being amendments the purposes of which are, amongst other things, to make provision in consequence of a change in the currency of certain states).
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(2)This section shall come into operation on such day or days as the Minister for Finance may appoint by order or orders either generally or with reference to any particular provision of Schedule 2 and different days may be so appointed for different such provisions.
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Amendment of Principal Act in consequence of convention with United States of America relating to double taxation, etc.
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48.—(1) Subject to subsection (2), the provisions of the Principal Act referred to in Schedule 3 shall apply subject to the amendments specified in that Schedule.
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(2)(a) Subject to paragraph (b), this section shall apply as on and from the times at which the Convention set out in the Schedule to the Double Taxation Relief (Taxes on Income and Capital Gains) (United States of America) Order, 1997 ( S.I. No. 477 of 1997 ), has effect in accordance with paragraph 2 of Article 29 of that Convention. (b) Where, in relation to a person, paragraph 3 of Article 29 of the said Convention applies in respect of the period specified in that paragraph, the Principal Act shall apply in relation to the person in respect of that period as if subsection (1) had not been enacted.
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Amendment of Part 26 (life assurance companies) of Principal Act.
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49.—(1) Part 26 of the Principal Act is hereby amended by the substitution in both section 723(6) and section 738 (2)(c) of “the rate per cent of corporation tax specified in section 21(1)” for “the rate per cent of corporation tax specified in section 21(1)(b)”.
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(2)This section shall apply as on and from the 6th day of April, 1997.
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Amendment of section 1013 (limited partnerships) of Principal Act.
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50.—(1) Section 1013 of the Principal Act is hereby amended— (a) in subsection (1)— (i) by the insertion before the definition of “the aggregate amount” of the following definition— “‘active partner’, in relation to a partnership trade, means a partner who works for the greater part of his or her time on the day-to-day management or conduct of the partnership trade;”, and (ii) in the definition of “limited partner”— (I) in paragraph (b), by the substitution of “reimbursed by some other person,” for “reimbursed by some other person, or”, (II) in paragraph (c), by the substitution of “incurred for the purposes of the trade, or” for “incurred for the purposes of the trade;”, and (III) by the insertion after paragraph (c) of the following paragraph: “(d) a person who carries on the trade as a general partner in a partnership otherwise than as an active partner where the activities of the trade include the activity of— (i) producing, distributing, or the holding of or of an interest in, films or video tapes, or (ii) exploring for, or exploiting, oil or gas resources;”, (b) in subsection (2)(a)— (i) in subparagraph (I), by the substitution of “gains arising from the trade,” for “gains arising from the trade, or”, (ii) in subparagraph (II), by the substitution of “profits or gains arising from the trade, or” for “profits or gains arising from the trade”, and (iii) by the insertion after subparagraph (II) of the following subparagraph: “(III) where the individual is a limited partner in relation to a trade by virtue of paragraph (d) of the definition of ‘limited partner’ and the relevant year of assessment is the year of assessment 1997-98 or any subsequent year of assessment, subject to subsection (2A), only against income consisting of profits or gains arising from the trade,”, and (c) by the insertion after subsection (2) of the following subsection: “(2A) Subparagraph (III) of subsection (2) (a) shall not apply to— (a) interest paid on or before the 27th day of February, 1998, (b) an allowance to be made in respect of expenditure incurred on or before the 27th day of February, 1998, or (c) a loss sustained in the year of assessment 1997-98 which would have been the loss sustained in that year if— (i) that year of assessment had ended on the 27th day of February, 1998, and (ii) the loss were determined only by reference to accounts made up in relation to the trade for the period commencing on the 6th day of April, 1997, or if later, the date the trade was set up and commenced, and ending on the 27th day of February, 1998, and not by reference to accounts made up for any other period.”.
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(2)This section shall apply as on and from the 28th day of February, 1998.
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Reduction in tax credits in respect of distributions.
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51.—(1)
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Section 4
\n
of the Principal Act is hereby amended, with effect as on and from the 3rd day of December, 1997, in subsection (1) by the substitution for the definition of “standard credit rate” of the following definition: “‘standard credit rate’ for a year of assessment means— (a) for the year of assessment 1997-98— (i) 21 per cent where it has application in relation to a distribution made or treated as having been made by a company before the 3rd day of December, 1997, and (ii) 11 per cent where it has application in relation to a distribution made or treated as having been made by a company on or after the 3rd day of December, 1997, and (b) for the year of assessment 1998-99, 11 per cent, and, accordingly, ‘standard credit rate per cent’ for the year of assessment 1997-98 means 21 or 11, as the case may be, and for the year of assessment 1998-99 means 11;”.
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(2)Schedule 4 shall have effect for the purpose of supplementing subsection (1).
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Abolition of tax credits.
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52.—The provisions of the Principal Act referred to in Schedule 5 shall apply subject to the amendments specified in that Schedule (being amendments the purposes of which are to provide for the abolition of tax credits as respects distributions made on or after the 6th day of April, 1999).
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Amendment of definition of specified qualifying shares.
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53.—The Principal Act is hereby amended, in sections 723(1), 737(1) and 838(1), by the substitution, in the definition of “specified qualifying shares”, of “£200,000,000” for “£100,000,000”.
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Amendment of section 198 (certain interest not to be chargeable) of Principal Act.
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54.—Chapter 1 of Part 7 of the Principal Act is hereby amended in section 198 — (a) by renumbering the existing provision as subsection (1) of that section, and (b) by the addition of the following: “(2) In relation to interest paid in respect of a relevant security (within the meaning of section 246), subsection (1) shall apply— (a) as if there were deleted from subsection (2) of section 445 ‘, and any certificate so given shall, unless it is revoked under subsection (4), (5) or (6), remain in force until the 31st day of December, 2005’, and (b) as if there were deleted from subsection (2) of section 446 ‘, and any certificate so given shall, unless it is revoked under subsection (4), (5) or (6), remain in force until the 31st day of December, 2005’.”.
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Chapter 4
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Corporation Tax Rate of corporation tax.
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55.—(1)
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Section 21
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of the Principal Act is hereby amended in subsection (1): (a) in paragraph (a) by the substitution for “March, 1997, and” of “March, 1997,”, and (b) by the substitution for paragraph (b) of the following paragraphs: “(b) 36 per cent for that part of the financial year 1997 beginning on the 1st day of April, 1997, and ending on the 31st day of December, 1997, and (c) 32 per cent for the financial year 1998 and each subsequent financial year.”.
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(2)Schedule 6 shall have effect for the purpose of supplementing this section.
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Amendment of section 22 (reduced rate of corporation tax for certain income) of Principal Act.
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56.—
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Section 22
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of the Principal Act is hereby amended in subsection (1)— (a) in paragraph (a), by the substitution for subparagraphs (I) and (II) of the following subparagraphs: “(I) as respects accounting periods ending before the 1st day of April, 1997, 30 per cent, (II) as respects accounting periods ending on or after the 1st day of April, 1997, and before the 1st day of January, 1998, 28 per cent, and (III) as respects accounting periods ending on or after the 1st day of January, 1998, 25 per cent.”, and (b) by the substitution for paragraph (b) of the following paragraph: “(b) For the purposes of paragraph (a)— (i) where an accounting period of a company begins before the 1st day of April, 1997, and ends on or after that day, it shall be divided into 2 parts, one beginning on the day on which the accounting period begins and ending on the 31st day of March, 1997, and the other beginning on the 1st day of April, 1997, and ending on the day on which the accounting period ends, and both parts shall be treated for the purposes of this section as if they were separate accounting periods of the company, and (ii) where an accounting period of a company, including a period treated under subparagraph (i) as an accounting period, begins before the 1st day of January, 1998, and ends on or after that day, it shall be divided into 2 parts, one beginning on the day on which the accounting period begins and ending on the 31st day of December, 1997, and the other beginning on the 1st day of January, 1998, and ending on the day on which the accounting period ends, and both parts shall be treated for the purposes of this section as if they were separate accounting periods of the company.”.
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Amendment of section 713 (investment income reserved for policyholders) of Principal Act.
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57.—(1)
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Section 713
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(3)of the Principal Act is hereby amended— (a) by the substitution of “specified in section 21(1)” for “specified in section 21(1)(b)”, and (b) by the substitution of “in respect of the part specified in subsection (6) of the unrelieved profits” for “in respect of the part specified in subsection (5) of the unrelieved profits”.
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(2)This section shall apply as on and from the 6th day of April, 1997.
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Credit unions.
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58.—(1) The Principal Act is hereby amended by the insertion, after section 219, of the following section: “Income of credit unions.
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219A.—(1) In this section ‘the Act’ means the Credit Union Act, 1997 .
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(2)Income arising to a credit union which is— (a) registered as such under the Act, or (b) deemed to be so registered by virtue of section 5(3) of the Act, shall, with effect from the date of the registration or the deemed registration, as the case may be, of the credit union under the Act, be exempt from corporation tax.”.
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(2)
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Section 212
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of the Principal Act is hereby repealed.
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Amendment of section 449 (credit for foreign tax not otherwise credited) of Principal Act.
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59.—
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Section 449
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of the Principal Act is hereby amended, in subsection (1), in the definition of “relevant foreign tax”— (a) in paragraph (c), by the deletion of “and”, (b) in paragraph (d), by the substitution for “Schedule 24;” of “Schedule 24, and”, and (c) by the addition, after paragraph (d), of the following paragraph: “(e) which is not treated under Schedule 24 as reducing the amount of any income;”.
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Relief for double taxation.
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60.—The Principal Act is hereby amended as respects accounting periods ending on or after the 1st day of April, 1998, in Schedule 24— (a) by the substitution for— “Relief from Income Tax and Corporation Tax by Means of Credit in Respect of Foreign Tax Interpretation 1. (1) In this Schedule, except where the context otherwise requires—” of “Relief from Income Tax and Corporation Tax by Means of Credit in Respect of Foreign Tax
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Part 1
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Interpretation 1. (1) In this Schedule, except where the context otherwise requires—”, (b) in paragraph 1(1), by the substitution for the definition of “foreign tax” of the following definition: “‘foreign tax’ means— (a) in the case of any territory in relation to which arrangements have the force of law, any tax chargeable under the laws of that territory for which credit may be allowed under the arrangements, and (b) in any other case, any tax chargeable in respect of which credit may be allowed by virtue of subparagraph (3) of paragraph 9A.”, (c) by the insertion, after paragraph 9, of the following paragraphs: “Part 2 Unilateral Relief 9A. (1) To the extent appearing from the following provisions of this paragraph, relief (in this paragraph referred to as ‘unilateral relief’) from corporation tax in respect of profits represented by dividends shall be given in respect of tax payable under the law of any territory other than the State by allowing that tax as a credit against corporation tax, notwithstanding that there are not for the time being in force any arrangements providing for such relief.
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(2)Unilateral relief shall be such relief as would fall to be given under this Schedule if arrangements with the government of the territory in question containing the provisions in subparagraphs (3) to (5) were in force, and a reference in this Schedule to credit under arrangements shall be construed as a reference to unilateral relief.
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(3)Subject to Part 1 and to subparagraph (5), credit for tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company resident in the territory to a company resident in the State shall be allowed against corporation tax attributable to the profits represented by the dividend.
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(4)For the purposes of subparagraph (3)— (a) ‘tax paid under the law of a territory other than the State in relation to a relevant dividend paid by a company’ means— (i) tax which is directly charged on the dividend, whether by charge to tax, deduction of tax at source or otherwise, and the whole of which tax neither the company nor the recipient would have borne if the dividend had not been paid, and (ii) tax paid in respect of its profits under the law of the territory by the company paying the dividend in so far as that tax is properly attributable to the proportion of the profits represented by the dividend, (b) ‘relevant dividend’ means a dividend paid by a company resident in a territory other than the State to a company resident in the State which either directly or indirectly owns, or is a subsidiary of a company which directly or indirectly owns, not less than 25 per cent of the ordinary share capital of the company paying the dividend; for the purposes of this subparagraph one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first company.
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(5)Credit shall not be allowed by virtue of subparagraph (3)— (a) for tax paid under the law of a territory where there are arrangements with the government of the territory, (b) for any tax which is relevant foreign tax within the meaning of section 449, or (c) for any tax in respect of which credit may be allowed under section 831.
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(6)Where— (a) unilateral relief may be given in respect of a dividend, and (b) it appears that the assessment to corporation tax made in respect of the dividends is not made in respect of the full amount thereof, or is incorrect having regard to the credit, if any, which falls to be given by way of unilateral relief, any such assessment may be made or amended as is necessary to ensure that the total amount of the dividend is assessed, and the proper credit, if any, is given in respect thereof.
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(7)In this Schedule in its application to unilateral relief, references to tax payable or paid under the law of a territory outside the State include only references to taxes which are charged on income or capital gains and which correspond to corporation tax and capital gains tax.
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Dividends Paid Between Related Companies: Relief for Irish and Third Country Taxes 9B. (1) Where a foreign company pays a dividend to an Irish company and the foreign company is related to the Irish company, then for the purpose of allowing credit under any arrangements against corporation tax in respect of the dividend, there shall, subject to Part 1, be taken into account as if it were tax payable under the law of the territory in which the foreign company is resident— (a) any income tax or corporation tax payable in the State by the foreign company in respect of its profits, and (b) any tax which, under the law of any other territory, is payable by the foreign company in respect of its profits.
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(2)Where the foreign company has received a dividend from a third company and the third company is related to the foreign company and is connected with the Irish company, then, subject to subparagraph (4), there shall be treated for the purposes of subparagraph (1) as tax paid by the foreign company in respect of its profits any underlying tax payable by the third company, to the extent that it would be taken into account under this Schedule if the dividend had been paid by a foreign company to an Irish company and arrangements had provided for underlying tax to be taken into account.
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(3)Where the third company has received a dividend from a fourth company and the fourth company is related to the third company and is connected with the Irish company, then, subject to subparagraph (4), tax payable by the fourth company shall similarly be treated for the purposes of subparagraph (2) as tax paid by the third company, and so on for successive companies each of which is related to the one before and is connected with the Irish company.
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(4)Subparagraphs (2) and (3) are subject to the following limitations— (a) no tax shall be taken into account in respect of a dividend paid by an Irish company except corporation tax payable in the State and any tax for which that company is entitled to credit under this Schedule, and (b) no tax shall be taken into account in respect of a dividend paid by a foreign company to another such company unless it could have been taken into account under this Schedule had the other company been an Irish company.
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(5)(a) In this paragraph— ‘foreign company’ means a company resident outside the State; ‘Irish company’ means a company resident in the State; ‘underlying tax’, in relation to a dividend, means tax borne by the company paying the dividend on the relevant profits (within the meaning of paragraph (8)) in so far as it is properly attributable to the proportion of the relevant profits represented by the dividend. (b) For the purposes of this paragraph— (i) a company is related to another company if that other company— (I) owns directly or indirectly, or (II) is a subsidiary of a company which owns directly or indirectly, not less than 25 per cent of the ordinary share capital of the first-mentioned company, (ii) one company is a subsidiary of another company if the other company owns, directly or indirectly, not less than 50 per cent of the ordinary share capital of the first-mentioned company, and (iii) a company is connected with another company if that other company— (I) owns directly or indirectly, or (II) is a subsidiary of a company which owns directly or indirectly, not less than 10 per cent of the ordinary share capital of the first-mentioned company.”, and (d) in paragraph 10, by the substitution for— “Miscellaneous 10. Credit shall not be allowed” of “Part 3 Miscellaneous 10. Credit shall not be allowed”.
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Corporate donations to eligible charities.
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61.—Chapter 3 of Part 15 of the Principal Act is hereby amended by the insertion after section 486 of the following section: “Corporate donations to eligible charities.
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486A.—(1) In this section— ‘authorisation’ shall be construed in accordance with subsection (2); ‘eligible charity’ means any body in the State that is the holder of an authorisation that is in force; ‘qualifying donation’ shall be construed in accordance with subsection (8).
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(2)Subject to subsection (3), the Revenue Commissioners may, on application to them in such form as they may determine, or in a form to the like effect, by a body in the State, and on the furnishing by the body to the Revenue Commissioners of such information as they may reasonably require for the purpose of their functions under this section, issue to the body a document (‘an authorisation’) stating that the body is an eligible charity for the purposes of this section.
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(3)An authorisation shall not be issued to a body unless it shows to the satisfaction of the Revenue Commissioners that— (a) it is a body of persons or a trust established for charitable purposes only, (b) the income of the body is applied for charitable purposes only, (c) before the date of the making of the application concerned under subsection (2), it has been granted exemption from tax for the purposes of section 207 for a period of not less than 3 years, (d) it provides such other information to the Revenue Commissioners as they may require for the purposes of their functions under this section, and (e) it complies with such conditions, if any, as the Minister for Justice, Equality and Law Reform may, from time to time, specify for the purposes of this section.
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(4)An eligible charity shall publish such information in such manner as the Minister for Finance may reasonably require, including audited accounts of the charity comprising— (a) an income and expenditure account or a profit and loss account, as appropriate, for its most recent accounting period, and (b) a balance sheet as at the last day of that period.
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(5)Notwithstanding any obligations as to secrecy or other restriction upon disclosure of information imposed by or under any statute or otherwise, the Revenue Commissioners may make available to any person the name and address of an eligible charity.
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(6)Subject to subsection (7), an authorisation shall have effect for such period, not exceeding 5 years, as the Revenue Commissioners may determine and specify therein.
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(7)Where the Revenue Commissioners are satisfied that an eligible charity has ceased to comply with subsection (3) or (4), they shall, by notice in writing served by registered post on the charity, withdraw the authorisation of the charity and the withdrawal shall apply and have effect from such date, subsequent to the date of the notice, as is specified therein.
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(8)For the purposes of this section, a donation to an eligible charity is a qualifying donation if— (a) it is made by a company, (b) it is made on or after the 6th day of April, 1998, and (c) it satisfies the requirements of subsection (9).
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(9)A donation made by a company in an accounting period of the company satisfies the requirements of this subsection if— (a) it takes the form of the payment of one or more sums of money, (b) it is not subject to a condition as to repayment, (c) neither the company nor any person connected with it receives a benefit in consequence of making the donation, (d) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the eligible charity, otherwise than by way of gift, from the donor company or a person connected with it, (e) but for subsection (10)— (i) it would not be deductible in computing for the purposes of corporation tax the profits or gains of a trade or profession, and (ii) it would not be an expense of management deductible in computing the total profits of a company, and (f) it is not income to which section 792 applies.
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(10)Where a company makes a qualifying donation in any accounting period and claims relief from tax by reference thereto, the amount thereof shall, for the purposes of corporation tax, be treated as— (a) a deductible trading expense of a trade carried on by the company, or (b) an expense of management deductible in computing the total profits of the company, for that accounting period.
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(11)A claim under this section shall be made with the return required to be delivered under section 951 for the accounting period in which the qualifying donation is made.
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(12)Relief under this section shall not be given— (a) in respect of a qualifying donation made by a company in any accounting period to an eligible charity— (i) if the amount of the qualifying donation, or the aggregate of the amount of qualifying donations made by the company in the period, does not exceed £250, or (ii) to the extent to which the amount of the qualifying donation, or the aggregate of the amount of qualifying donations, aforesaid, exceeds £10,000, or (b) to the extent to which the aggregate of the amount of all qualifying donations made by a company in any accounting period to more than one eligible charity, exceeds the lesser of— (i) £50,000, or (ii) 10 per cent of the profits, before account is taken of the relief under this section, of the company for the accounting period.
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(13)Where a qualifying donation is made by a company in an accounting period of the company which is less than 12 months, the amounts of £10,000 and £50,000 specified in subsection (12) shall be proportionately reduced.”.
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Relief for investment in renewable energy generation.
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62.—(1) Chapter 3 of Part 15 of the Principal Act is hereby amended by the insertion after section 486A (inserted by section 61 ) of the following section: “Relief for investment in renewable energy generation.
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486B.—(1) In this section— ‘authorised officer’ means an officer of the Revenue Commissioners authorised by them in writing for the purposes of this section; ‘commencement date’ means the day on which section 62 of the Finance Act, 1998, comes into operation; ‘the Minister’ means the Minister for Public Enterprise; ‘new ordinary shares’ means new ordinary shares forming part of the ordinary share capital of a qualifying company which, throughout the period of five years commencing on the date such shares are issued, carry no present or future preferential right to dividends, or to a company's assets on its winding up, and no present or future preferential right to be redeemed; ‘qualifying company’ means a company which— (a) is incorporated in the State, (b) is resident in the State and not resident elsewhere, and (c) exists solely for the purposes of undertaking a qualifying energy project; ‘qualifying energy project’ means a renewable energy project in respect of which the Minister has given a certificate under subsection (2) which has not been revoked under that subsection; ‘qualifying period’ means the period commencing on the commencement date and ending on the day before the third anniversary of that date; ‘relevant cost’ in relation to a qualifying energy project means the amount of the capital expenditure incurred or to be incurred by the qualifying company for the purposes of undertaking the qualifying energy project reduced by an amount equal to such part of that expenditure as— (a) is attributable to the acquisition of, or of rights in or over, land, and (b) has been or is to be met directly or indirectly by the State or by any person other than the qualifying company; ‘relevant deduction’ means, subject to subsections (4) and (5), a deduction of an amount equal to a relevant investment; ‘relevant investment’ means a sum of money which is— (a) paid in the qualifying period by a company on its own behalf to a qualifying company in respect of new ordinary shares in the qualifying company and is paid by the company directly to the qualifying company, (b) paid by the company for the purposes of enabling the qualifying company to undertake a qualifying energy project, and (c) used by the qualifying company within 2 years of the receipt of that sum for those purposes, but does not include a sum of money paid to the qualifying company on terms which provide that it will be repaid, and a reference to the making of a relevant investment shall be construed as a reference to the payment of such a sum to a qualifying company;
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‘renewable energy project’ means a renewable energy project (including a project successful in the Third Alternative Energy Requirement Competition (AER III— 1997) initiated by the Minister) in one or more of the following categories of technology— (a) solar power, (b) windpower, (c) hydropower, and (d) biomass.
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(2)(a) (i) The Minister, on the making of an application by a qualifying company, may give a certificate to the qualifying company stating, in relation to a renewable energy project to be undertaken by the company, that the renewable energy project is a qualifying energy project for the purposes of this section. (ii) An application under this section shall be in such form, and shall contain such information, as the Minister may direct. (b) A certificate given by the Minister under paragraph (a) shall be subject to such conditions as the Minister may consider proper and specifies in the certificate. (c) The Minister may amend or revoke any condition (including a condition amended by virtue of this paragraph) specified in such a certificate; the Minister shall give notice in writing to the qualifying company concerned of the amendment or revocation and, on such notice being given, this section shall apply as if— (i) a condition so amended and the amendment of which is specified in the notice was specified in the certificate, and (ii) a condition so revoked and the revocation of which is specified in the notice was not specified in the certificate. (d) A reference in paragraph (c) to the amendment of a condition specified in a certificate includes a reference to the addition of any matter, by way of a further condition, to the terms of the certificate. (e) Where a company fails to comply with any of the conditions specified in a certificate issued to it under paragraph (a)— (i) that failure shall constitute the failure of an event to happen by reason of which relief is to be withdrawn under subsection (6), and (ii) the Minister may, by notice in writing served by registered post on the company, revoke the certificate.
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(3)Subject to this section, where in an accounting period a company makes a relevant investment, it shall, on making a claim in that behalf, be given a relevant deduction from its total profits for the accounting period; but, where the amount of the relevant deduction to which the company is entitled under this section in an accounting period exceeds its profits for that accounting period, an amount equal to that excess shall be carried forward to the succeeding accounting period and the amount so carried forward shall be treated for the purposes of this section as if it were a relevant investment made in that succeeding accounting period.
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(4)Where in any period of 12 months ending on the day before an anniversary of the commencement date, the amount or the aggregate amount of the relevant investments made, or treated as made, by a company, or by the company and all companies which at any time in that period would be regarded as connected with the company, exceeds £10,000,000— (a) no relief shall be given under this section in respect of the amount of the excess, and (b) where there is more than one relevant investment, the inspector or, on appeal, the Appeal Commissioners shall make such apportionment of the relief available as shall be just and reasonable to allocate to each relevant investment a due proportion of the relief available and, where necessary, to grant to each company concerned an amount of relief proportionate to the amount of the relevant investment or the aggregate amount of the relevant investments made by it in the period.
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(5)Relief under this section shall not be given in respect of a relevant investment which is made at any time in a qualifying company if, at that time, the aggregate of the amounts of that relevant investment and all other relevant investments made in the qualifying company at or before that time exceeds an amount equal to— (a) 50 per cent of the relevant cost of the project, or (b) £7,500,000, whichever is the lesser.
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(6)(a) A claim to relief under this section may be allowed at any time after the time specified in paragraph (c) in respect of the payment of a sum to a qualifying company if— (i) that payment, if it is used, within 2 years of its being paid, by the qualifying company for the purposes of a qualifying energy project, will be a relevant investment, and (ii) all the conditions specified in this section for the giving of the relief are or will be satisfied, but the relief shall be withdrawn if, by reason of the happening of any subsequent event including the revocation by the Minister of a certificate under subsection (2) or the failure of an event to happen which at the time the relief was given was expected to happen, the company making the claim was not entitled to the relief allowed. (b) Where a company has made a relevant investment by means of a subscription for new ordinary shares of a qualifying company and any of those shares are disposed of at any time within 5 years after the time specified in paragraph (c), a claim to relief under this section shall not be allowed in respect of the amount subscribed for those shares, and if any such relief has been given, it shall be withdrawn. (c) The time referred to in paragraph (a) and paragraph (b) is the time when the payment in respect of which relief is claimed has been made.
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(7)A claim for relief in respect of a relevant investment in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, in so far as they apply to the company and the qualifying energy project, are or will be satisfied in relation to that relevant investment.
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(8)Before issuing a certificate for the purposes of subsection (7), a qualifying company shall furnish the authorised officer with— (a) a statement to the effect that it satisfies or will satisfy the conditions for the relief in so far as they apply in relation to the company and the qualifying energy project, (b) a copy of the certificate, including a copy of any notice given by the Minister specifying the amendment or revocation of a condition specified in that certificate, under subsection (2) in respect of the qualifying energy project, and (c) such other information as the Revenue Commissioners may reasonably require.
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(9)A certificate to which subsection (7) relates shall not be issued— (a) without the authority of the authorised officer, or (b) in relation to a relevant investment in respect of which relief may not be given by virtue of subsection (5).
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(10)Any statement under subsection (8) shall— (a) contain such information as the Revenue Commissioners may reasonably require, (b) be in such form as the Revenue Commissioners may direct, and (c) contain a declaration that it is correct to the best of the company's knowledge and belief.
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(11)Where a qualifying company has issued a certificate for the purposes of subsection (7) or furnished a statement under subsection (8) and either— (a) the certificate or statement is false or misleading in a material respect and is so false or misleading due to fraud or neglect, or (b) the certificate was issued in contravention of subsection (9), then— (i) the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, not exceeding £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the like manner as in summary proceedings for the recovery of any fine or penalty under any Act relating to the excise, and (ii) no relief shall be given under this section in respect of the matter to which the certificate or statement relates and, if any such relief has been given, it shall be withdrawn.
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(12)A company shall not be entitled to relief in respect of a relevant investment unless the relevant investment— (a) has been made for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, (b) has been or will be used for the purposes of undertaking a qualifying energy project, and (c) is made at the risk of the company and neither the company nor any person who would be regarded as connected with the company is entitled to receive any payment in money or money's worth or other benefit directly or indirectly borne by or attributable to the qualifying company, other than a payment made on an arm's length basis for goods or services supplied or a payment out of the proceeds of exploiting the qualifying energy project to which the company is entitled under the terms subject to which the relevant investment is made.
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(13)Where any relief has been given under this section which is subsequently found not to have been due or is to be withdrawn by virtue of subsection (6) or (11), that relief shall be withdrawn by making an assessment to corporation tax, under Case IV of Schedule D, for the accounting period or accounting periods in which relief was given and, notwithstanding anything in the Tax Acts, such an assessment may be made at any time.
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(14)(a) Subject to paragraph (b), where a company is entitled to relief under this section in respect of any sum or any part of a sum, or would be so entitled on duly making a claim in that behalf, as a relevant deduction from its total profits for any accounting period, it shall not be entitled to any relief for that sum or that part of a sum, in computing its income or profits, or as a deduction from its income or profits, for any accounting period under any other provision of the Tax Acts or the Capital Gains Tax Acts. (b) Where a company has made a relevant investment by means of a subscription for new ordinary shares of a qualifying company and none of those shares is disposed of by the company within five years of their acquisition by that company, then, the sums allowable as deductions from the consideration (‘the consideration concerned’) in the computation for the purpose of capital gains tax of the gain or loss accruing to the company on the disposal of those shares shall be determined without regard to any relief under this section which the company has obtained, or would be entitled, on duly making a claim in that behalf, to obtain, except that, where those sums exceed the consideration concerned, they shall be reduced by an amount equal to the lesser of— (i) the amount of the relevant deduction allowed to the company under this section in respect of the subscription for those shares, and (ii) the amount of the excess.”.
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(2)This section shall come into operation on such day as the Minister for Finance appoints by order.
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Amendment of section 88 (deduction for gifts to Enterprise Trust Ltd.) of Principal Act.
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63.—
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Section 88
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of the Principal Act is hereby amended in subsection (3)(b)— (a) by the deletion of subparagraph (ii), and (b) by the substitution of “£3,000,000” for “£1,500,000” in subparagraph (iii).
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Amendment of section 715 (annuity business: separate charge on profits) of Principal Act.
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64.—(1)
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Section 715
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of the Principal Act is hereby amended in subsection (2) by the substitution for paragraph (a) of the following paragraph: “(a) (i) subject to subparagraphs (ii), (iii) and (iv), subsection (1) of section 710 shall apply with the necessary modifications and in particular shall apply as if there were deleted from that subsection all references to policyholders other than holders of policies referable to pension business, (ii) where apart from this subparagraph any profits would be excluded in making the computation solely by virtue of that part being reserved for holders of policies referable to pension business, that part shall not be so excluded, (iii) in relation to investments of any fund representing the amount of the liabilities of the company to policyholders in respect of its pension business or general annuity business, as the case may be, (I) any increase in value of those investments (whether realised or unrealised) shall be taken into account as a receipt, and (II) any decrease in value of those investments (whether realised or unrealised) shall be taken into account as an expense, to the extent that the increase or decrease, as the case may be, is included in the value of those liabilities as valued by the actuary to the company, and (iv) where the profits of an assurance company for an accounting period (in this subparagraph referred to as ‘the first accounting period’) are computed in accordance with subparagraph (iii) and the profits of the most recent preceding accounting period are not so computed, the increase or decrease in the value of investments referred to in subparagraph (iii) shall as respects the first accounting period be computed by reference to the cost of the investments at the time they were acquired by the company and such increase or decrease shall be treated as a receipt or as an expense, as the case may be.”.
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(2)This section shall apply as respects an accounting period of a company ending on or after the 4th day of March, 1998.
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Chapter 5
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Capital Gains Tax Capital gains: rates of charge.
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65.—(1) The Principal Act is hereby amended— (a) in section 28, by the substitution in subsection (3) of “20 per cent” for “40 per cent”, (b) in section 594, by the insertion after paragraph (e) of subsection (2) of the following paragraph: “(f) Notwithstanding subsection (3) of section 28, the rate of capital gains tax in respect of a relevant gain accruing to a person shall be 40 per cent”, and (c) in Chapter 2 of Part 22, by the insertion after section 649 of the following section: “Relevant disposals: rate of charge.
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649A.—Notwithstanding subsection (3) of section 28, the rate of capital gains tax in respect of chargeable gains accruing to a person on relevant disposals, other than a relevant disposal to which section 650 refers, shall be 40 per cent.”.
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(2)Subsection (1) shall apply— (a) as respects paragraphs (a) and (c), in relation to disposals made on or after the 3rd day of December, 1997, and (b) as respects paragraph (b), in relation to disposals made on or after the 12th day of February, 1998.
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Amendment of Part 27 (unit trusts and offshore funds) of Principal Act.
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66.—The Principal Act is hereby amended in Part 27 by the insertion after Chapter 2 of the following Chapter: “CHAPTER 3 Offshore funds: supplementary provisions Capital gains tax: rate of charge.
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747A.—(1) In this section ‘material interest’, ‘non-qualifying fund’ and ‘offshore fund’ shall have the same meaning as is assigned to them in Chapter 2 of this Part.
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(2)This section shall apply to a disposal, on or after the 12th day of February, 1998, by a person of an asset, if at the time of the disposal— (a) the asset constitutes a material interest in an offshore fund which is not nor was at any material time a non-qualifying offshore fund, or (b) the asset constitutes an interest in a company resident in the State or in a unit trust scheme, the trustees of which are at that time resident in the State and at a material time on or after the 1st day of January, 1991, the company or unit trust scheme was an offshore fund other than a non-qualifying offshore fund and the asset constituted a material interest in that fund.
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(3)Subsections (2) to (7) of section 741 shall apply for the purposes of this section as if references in those subsections to a non-qualifying offshore fund were references to an offshore fund.
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(4)Notwithstanding subsection (3) of section 28, the rate of capital gains tax in respect of chargeable gains accruing to a person on the disposal of an asset to which this section applies shall be 40 per cent.”.
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Amendment of section 538 (disposals where assets lost or destroyed or become of negligible value) of Principal Act.
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67.—(1)
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Section 538
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of the Principal Act is hereby amended by the insertion after subsection (2) of the following subsection: “(2A) (a) Where as a result of the dissolution of a body corporate, property of the body corporate becomes property of the State by virtue of Part III of the State Property Act, 1954 , and the Minister for Finance, in accordance with that Part of that Act, waives the right of the State to that property in favour of a person who holds or has held shares in the body corporate, then, notwithstanding section 31 and subject to paragraph (c), any allowable loss (in this subsection referred to as a ‘claimed loss’) accruing to the person by virtue of a claim made under subsection (2) in respect of those shares shall not be allowable as a deduction from chargeable gains in any year of assessment earlier than the year of assessment in which the property is disposed of by the person and any necessary adjustments may be made by way of assessment or additional assessment to give effect to this paragraph. (b) Paragraph (a) shall apply in relation to a body corporate which has no share capital as if references to shares included references to any interest in the body corporate possessed by members of the body corporate. (c) For the purposes of paragraph (a)— (i) where in a year of assessment there is a part disposal (within the meaning of section 534) of property, only so much of the claimed loss shall be allowable as a deduction from chargeable gains in that year of assessment as bears to the amount of the claimed loss the same proportion as the market value, when acquired, of the part of the property which is disposed of bears to the market value of the whole of that property when acquired, (ii) the year of assessment in which property is disposed of by a person, where the disposal, being a disposal to the husband or wife of the person, is a disposal to which section 1028(5) applies, shall mean the year of assessment in which the property is subsequently disposed of by the person's wife or husband, as the case may be, where the subsequent disposal is a disposal to which section 1028(5) does not apply.”.
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(2)This section shall apply as respects a waiver of the right of the State to property on or after the 12th day of February, 1998.
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Amendment of section 547 (disposals and acquisitions treated as made at market value) of Principal Act.
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68.—(1)
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Section 547
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of the Principal Act is hereby amended by the insertion of the following subsection after subsection (1): “(1A) (a) Notwithstanding subsection (1), where, by virtue of section 31 of the State Property Act, 1954 , the Minister for Finance waives, in favour of a person, the right of the State to property, the person's acquisition of the property shall for the purposes of the Capital Gains Tax Acts be deemed to be for a consideration equal to the amount (including a nil amount) of the payment of money made by the person as one of the terms of that waiver.”.
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(2)This section shall apply as respects the acquisition of an asset on or after the 12th day of February, 1998.
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Amendment of Chapter 3 (assets held in fiduciary or representative capacity, inheritances and settlements) of Part 19 of Principal Act.
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69.—(1) Chapter 3 of Part 19 of the Principal Act is hereby amended, by the insertion of the following section after section 577 — “Relinquishing of a life interest by the person entitled.
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577A.—Where by virtue of section 576(1) the assets forming part of any settled property are deemed to be disposed of and immediately reacquired by the trustee on the occasion when a person becomes absolutely entitled to the assets as against the trustee, then, in case that occasion is the relinquishing of a life interest (within the meaning of section 577) by the person entitled to that interest, the trustee shall be given such relief as would be given under sections 598 and 599 to the person who relinquished the life interest— (a) if the person had become absolutely entitled to the assets as against the trustee at the commencement of the life interest and had continued to be so entitled throughout the period (in this section referred to as the ‘life interest period’) that the life interest subsisted, and (b) as if any expenditure of the kind referred to in paragraph (b) of section 552(1) that was incurred on the assets during the life interest period by the trustee had been incurred by the person.”.
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(2)This section shall apply as respects a disposal deemed to be made on or after the 12th day of February, 1998.
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Repeal of section 592 (reduced rate of capital gains tax on certain disposals of shares by individuals) of Principal Act.
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70.—(1)
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Section 592
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of the Principal Act is hereby repealed.
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(2)This section shall apply as respects disposals made on or after the 3rd day of December, 1997.
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Amendment of section 597 (replacement of business and other assets) of Principal Act.
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71.—(1)
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Section 597
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of the Principal Act is hereby amended, in subsection (3), by the substitution for paragraph (c) of the following paragraphs: “(c) goodwill, (d) any financial assets owned by a body of persons referred to in paragraph (f) of subsection (2); for the purposes of this paragraph ‘financial assets’ means shares of any company and stocks, bonds and obligations of any government, municipal corporation, company or other body corporate.”.
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(2)This section shall apply as respects disposals made on or after the passing of this Act.
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Amendment of section 598 (disposals of business or farm on “retirement”) of Principal Act.
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72.—(1)
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Section 598
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of the Principal Act is hereby amended in subsection (1)— (a) in the definition of “qualifying assets”— (i) by the substitution for paragraph (i) of the following: “(i) the chargeable business assets of the individual which apart from tangible moveable property he or she has owned for a period of not less than 10 years ending with the disposal and which have been his or her chargeable business assets throughout the period of 10 years ending with that disposal,”, (ii) by the substitution, in paragraph (ii), of “for a period of not less than 5 years, and” for “for a period of not less than 5 years;”, and (iii) by the insertion after paragraph (ii) of the following: “(iii) land used for the purposes of farming carried on by the individual which he or she owned and used for that purpose for a period of not less than 10 years ending with the transfer of an interest in that land for the purposes of complying with the terms of the Scheme;”, and (b) by the insertion after the definition of “qualifying assets” of the following: “‘the Scheme’ means the scheme known as the Scheme of Early Retirement From Farming introduced by the Minister for Agriculture and Food for the purpose of implementing Council Regulation (EEC) No. 2079/92 of 30 June 1992* ;”.
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(2)This section shall apply as respects a disposal of an asset on or after the 6th day of April, 1998.
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Amendment of section 652 (non-application of reliefs on replacement of assets in case of relevant disposals) of Principal Act.
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73.—(1)
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Section 652
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of the Principal Act is hereby amended by the insertion of the following subsections after subsection (3)— “(3A) (a) In this subsection— ‘greyhound race’, ‘greyhound race track’ and ‘greyhound race track licence’ have the same meanings respectively as in section 2 of the Greyhound Industry Act, 1958 ; ‘assets of an authorised greyhound race track’ means assets of a greyhound race track which is an authorised greyhound race track where the assets are used for the provision of appropriate facilities or services to hold greyhound races or to accommodate persons associated with greyhound racing, including members of the public; ‘authorised greyhound race track’ means a greyhound race track in respect of which a greyhound race track licence has been granted, and that licence has not been revoked. (b) Subject to paragraph (c), subsection (1) shall not apply to consideration obtained for a relevant disposal where— (i) throughout a period of 5 years ending with the time of disposal the old assets, and (ii) the new assets within the meaning of section 597, are assets of an authorised greyhound race track. (c) Section 597 shall apply in relation to assets of an authorised greyhound race track as if— (i) references in subsections (4) and (5) of that section to new assets ceasing to be used for the purposes of a trade included a reference to new assets ceasing to be assets of an authorised greyhound race track, and (ii) subsection (11)(b) had not been enacted. (3B) Subsection (1) shall not apply to consideration obtained for a relevant disposal effected by an order made under section 28
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(1)of the Dublin Docklands Development Authority Act, 1997 .”.
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(2)This section shall apply in respect of relevant disposals made on or after the 6th day of April, 1998.
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Amendment of section 980 (deduction from consideration on disposal of certain assets) of Principal Act.
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74.—
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Section 980
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of the Principal Act is hereby amended, as respects disposals made on or after the passing of this Act, in subsection (3), by the substitution of “£150,000” for “£100,000”.
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Amendment of section 1028 (married persons) of Principal Act.
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75.— Section 1028 of the Principal Act is hereby amended, as respects the year of assessment 1998-99 and subsequent years of assessment, by the deletion of subsection (4).
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Chapter 6
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Income Tax and Corporation Tax: Reliefs for Renewal and Improvement of Certain Urban and Rural Areas Amendment of Part 10 (income tax and corporation tax: reliefs for renewal and improvement of certain urban areas, certain resort areas and certain islands) of Principal Act.
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76.—Part 10 of the Principal Act is hereby amended by the insertion after Chapter 6 of the following: “CHAPTER 7 Qualifying areas Interpretation and application (Chapter 7).
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372A.—(1) In this Chapter— ‘lease’, ‘lessee’, ‘lessor’, ‘premium’ and ‘rent’ have the same meanings respectively as in Chapter 8 of Part 4; ‘market value’, in relation to a building, structure or house, means the price which the unencumbered fee simple of the building, structure or house would fetch if sold in the open market in such manner and subject to such conditions as might reasonably be calculated to obtain for the vendor the best price for the building, structure or house, less the part of that price which would be attributable to the acquisition of, or of rights in or over, the land on which the building, structure or house is constructed; ‘multi-storey car park’ means a building or structure consisting of 2 or more storeys wholly or mainly in use for the purpose of providing, for members of the public generally without preference for any particular class of person, on payment of an appropriate charge, parking space for mechanically propelled vehicles; ‘qualifying area’ means an area or areas specified as a qualifying area under section 372B; ‘qualifying period’ means, subject to section 372B, the period commencing on the 1st day of August, 1998, and ending on the 31st day of July, 2001; ‘refurbishment’, in relation to a building or structure and other than for the purposes of sections 372H and 372I, means any work of construction, reconstruction, repair or renewal, including the provision or improvement of water, sewerage or heating facilities, carried out in the course of the repair or restoration, or maintenance in the nature of repair or restoration, of the building or structure.
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(2)This Chapter shall apply if the Oireachtas passes an Act which refers to this Chapter and provides for the renewal of certain urban areas and the submission of plans (to be known as ‘Integrated Area Plans’) to the Minister for the Environment and Local Government which have been drawn up by local authorities or companies established by local authorities (being local authorities as referred to in such Act) in respect of an area or areas identified by such an authority or company on the basis of criteria prepared by that Minister, including physical and socioeconomic renewal of such an area or areas.
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Qualifying areas.
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372B.— (1) The Minister for Finance may, on the recommendation of the Minister for the Environment and Local Government (which recommendation shall take into consideration an Integrated Area Plan submitted by a local authority or a company established by a local authority to that Minister in respect of an area identified by it), by order direct that— (a) the area or areas described (being wholly located within the boundaries of the area to which the Integrated Area Plan relates) in the order shall be a qualifying area for the purposes of one or more sections of this Chapter, (b) where such an area or areas is or are to be a qualifying area for the purposes of section 372D, one or more of the categories of building or structure mentioned in subsection (2) shall or shall not be a qualifying premises within the meaning of that section, and (c) as respects any such area so described in the order, the definition of ‘qualifying period’ in section 372A shall be construed as a reference to such period as shall be specified in the order in relation to that area; but no such period specified in the order shall commence before the 1st day of August, 1998, or end after— (i) in the case of sections 372C, 372D and 372E, the 31st day of December, 1999, and (ii) in any other case, the 31st day of July, 2001.
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(2)The categories of building or structure referred to in subsection (1)(b) shall be— (a) buildings or structures which consist of office accommodation, (b) multi-storey car parks, and (c) any other buildings or structures and in respect of which not more than 10 per cent of the capital expenditure incurred in the qualifying period on their construction or refurbishment relates to the construction or refurbishment of office accommodation.
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(3)Every order made by the Minister for Finance under subsection (1) shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the order is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.
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(4)Notwithstanding an order under subsection (1), the granting of relief by virtue of any provision of this Chapter shall be subject to such other requirements as may be specified in or under the Act referred to in section 372A(2).
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Accelerated capital allowances in relation to construction or refurbishment of certain industrial buildings or structures.
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372C.—(1) This section shall apply to a building or structure the site of which is wholly within a qualifying area and which is to be an industrial building or structure by reason of its use for a purpose specified in section 268(1)(a).
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(2)Subject to subsection (4), section 271 shall apply in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a building or structure to which this section applies as if— (a) in subsection (1) of that section the definition of ‘industrial development agency’ were deleted, (b) in subsection (2) (a) (i) of that section ‘to which subsection (3) applies’ were deleted, (c) subsection (3) of that section were deleted, (d) the following subsection were substituted for subsection (4) of that section: ‘(4) An industrial building allowance shall be of an amount equal to 25 per cent of the capital expenditure mentioned in subsection (2).’, and (e) in subsection (5) of that section ‘to which subsection (3)(c) applies’ were deleted.
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(3)Subject to subsection (4), section 273 shall apply in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a building or structure to which this section applies as if— (a) in subsection (1) of that section the definition of ‘industrial development agency’ were deleted, (b) the following paragraph were substituted for paragraph (b) of subsection (2) of that section: ‘(b) As respects any qualifying expenditure, any allowance made under section 272 and increased under paragraph (a) in respect of that expenditure, whether claimed for one chargeable period or more than one such period, shall not in the aggregate exceed 50 per cent of the amount of that qualifying expenditure.’, and (c) subsections (3) to (7) of that section were deleted.
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(4)In the case where capital expenditure is incurred in the qualifying period on the refurbishment of a building or structure to which this section applies, subsections (2) and (3) shall apply only if the total amount of the capital expenditure so incurred is not less than an amount equal to 10 per cent of the market value of the building or structure immediately before that expenditure was incurred.
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(5)Notwithstanding section 274(1), no balancing charge shall be made in relation to a building or structure to which this section applies by reason of any of the events specified in that section which occurs— (a) more than 13 years after the building or structure was first used, or (b) in a case where section 276 applies, more than 13 years after the capital expenditure on refurbishment of the building or structure was incurred.
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(6)For the purposes only of determining, in relation to a claim for an allowance under section 271 or 273 as applied by this section, whether and to what extent capital expenditure incurred on the construction or refurbishment of an industrial building or structure is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or, as the case may be, the refurbishment of the building or structure actually carried out during the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred) be treated as having been incurred in that period.
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Capital allowances in relation to construction or refurbishment of certain commercial premises.
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372D.—(1) In this section, ‘qualifying premises’ means a building or structure the site of which is wholly within a qualifying area and which— (a) apart from this section is not an industrial building or structure within the meaning of section 268, and (b) (i) is in use for the purposes of a trade or profession, or (ii) whether or not it is so used, is let on bona fide commercial terms for such consideration as might be expected to be paid in a letting of the building or structure negotiated on an arm's length basis, but does not include any part of a building or structure in use as or as part of a dwelling house.
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(2)(a) Subject to paragraph (b) and subsections (3) to (6), the provisions of the Tax Acts (other than section 372C) relating to the making of allowances or charges in respect of capital expenditure incurred on the construction or refurbishment of an industrial building or structure shall, notwithstanding anything to the contrary in those provisions, apply— (i) as if a qualifying premises were, at all times at which it is a qualifying premises, a building or structure in respect of which an allowance is to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter 1 of Part 9 by reason of its use for a purpose specified in section 268(1)(a), and (ii) where any activity carried on in the qualifying premises is not a trade, as if it were a trade. (b) An allowance shall be given by virtue of this subsection in respect of any capital expenditure incurred on the construction or refurbishment of a qualifying premises only in so far as that expenditure is incurred in the qualifying period.
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(3)In the case where capital expenditure is incurred in the qualifying period on the refurbishment of a qualifying premises, subsection (2) shall apply only if the total amount of the capital expenditure so incurred is not less than an amount equal to 10 per cent of the market value of the qualifying premises immediately before that expenditure was incurred.
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(4)For the purposes of the application, by subsection (2), of sections 271 and 273 in relation to capital expenditure incurred in the qualifying period on the construction or refurbishment of a qualifying premises— (a) section 271 shall apply as if— (i) in subsection (1) of that section the definition of ‘industrial development agency’ were deleted, (ii) in subsection (2)(a)(i) of that section ‘to which subsection (3) applies’ were deleted, (iii) subsection (3) of that section were deleted, (iv) the following subsection were substituted for subsection (4) of that section: ‘(4) An industrial building allowance shall be of an amount equal to 50 per cent of the capital expenditure mentioned in subsection (2).’, and (v) in subsection (5) of that section ‘to which subsection (3)(c) applies’ were deleted, and (b) section 273 shall apply as if— (i) in subsection (1) of that section the definition of ‘industrial development agency’ were deleted, and (ii) subsections (2)(b) and (3) to (7) of that section were deleted.
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(5)Notwithstanding section 274(1), no balancing charge shall be made in relation to a qualifying premises by reason of any of the events specified in that section which occur— (a) more than 13 years after the qualifying premises was first used, or (b) in a case where section 276 applies, more than 13 years after the capital expenditure on refurbishment of the qualifying premises was incurred.
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(6)(a) Notwithstanding subsections (2) to (4), any allowance or charge which apart from this subsection would be made by virtue of subsection (2) in respect of capital expenditure incurred on the construction or refurbishment of a qualifying premises shall be reduced to one-half of the amount which apart from this subsection would be the amount of that allowance or charge. (b) For the purposes of paragraph (a), the amount of an allowance or charge to be reduced to one-half shall be computed as if— (i) this subsection had not been enacted, and (ii) effect had been given to all allowances taken into account in so computing that amount. (c) Nothing in this subsection shall affect the operation of section 274(8).
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(7)For the purposes only of determining, in relation to a claim for an allowance by virtue of subsection (2), whether and to what extent capital expenditure incurred on the construction or refurbishment of a qualifying premises is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the premises actually carried out during the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred) be treated as having been incurred in that period.
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Double rent allowance in respect of rent paid for certain business premises.
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372E.—(1) In this section— ‘qualifying lease’ means, subject to subsection (8), a lease in respect of a qualifying premises granted in the qualifying period on bona fide commercial terms by a lessor to a lessee not connected with the lessor, or with any other person entitled to a rent in respect of the qualifying premises, whether under that lease or any other lease; ‘qualifying premises’ means, subject to subsection (5)(a), a building or structure— (a) (i) the site of which is wholly within a qualifying area and which is a building or structure in use for a purpose specified in section 268(1)(a), and in respect of which capital expenditure is incurred in the qualifying period for which an allowance is to be made, or will by virtue of section 279 be made, for the purposes of income tax or corporation tax, as the case may be, under section 271 or 273, as applied by section 372C, (ii) the site of which is wholly within a qualifying area and in respect of which an allowance is to be made, or will by virtue of section 279 be made, for the purposes of income tax or corporation tax, as the case may be, under Chapter 1 of Part 9 by virtue of section 372D, or (iii) the site of which is wholly within a qualifying area and which is a building or structure in use for the purposes specified in section 268(1)(d), and in respect of the construction or refurbishment of which capital expenditure is incurred in the qualifying period for which an allowance would but for subsection (6) be made for the purposes of income tax or corporation tax, as the case may be, under Chapter 1 of Part 9, and (b) which is let on bona fide commercial terms for such consideration as might be expected to be paid in a letting of the building or structure negotiated on an arm's length basis, but, where capital expenditure is incurred in the qualifying period on the refurbishment of a building or structure in respect of which an allowance is to be made, or will by virtue of section 279 be made, or in respect of which an allowance would but for subsection (6) be made, for the purposes of income tax or corporation tax, as the case may be, under any of the provisions referred to in paragraph (a), the building or structure shall not be regarded as a qualifying premises unless the total amount of the expenditure so incurred is not less than an amount equal to 10 per cent of the market value of the building or structure immediately before that expenditure is incurred.
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(2)For the purposes of this section, so much of a period, being a period when rent is payable by a person in relation to a qualifying premises under a qualifying lease, shall be a relevant rental period as does not exceed— (a) 10 years, or (b) the period by which 10 years exceeds— (i) any preceding period, or (ii) if there is more than one preceding period, the aggregate of those periods, for which rent was payable by that person or any other person in relation to that premises under a qualifying lease.
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(3)Subject to subsection (4), where in the computation of the amount of the profits or gains of a trade or profession a person is apart from this section entitled to any deduction (in this subsection referred to as ‘the first-mentioned deduction’) on account of rent in respect of a qualifying premises occupied by such person for the purposes of that trade or profession which is payable by such person for a relevant rental period in relation to that qualifying premises under a qualifying lease, such person shall be entitled in that computation to a further deduction (in this subsection referred to as ‘the second-mentioned deduction’) equal to the amount of the first-mentioned deduction but where the first-mentioned deduction is on account of rent payable by such person to a connected person, such person shall not be entitled in that computation to the second-mentioned deduction.
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(4)Where a person holds an interest in a qualifying premises out of which interest a qualifying lease is created directly or indirectly in respect of the qualifying premises and in respect of rent payable under the qualifying lease a claim for a further deduction under this section is made, and either such person or another person connected with such person— (a) takes under a qualifying lease a qualifying premises (in this subsection referred to as ‘the second-mentioned premises’) occupied by such person or such other person, as the case may be, for the purposes of a trade or profession, and (b) is apart from this section entitled, in the computation of the amount of the profits or gains of that trade or profession, to a deduction on account of rent in respect of the second-mentioned premises, then, unless such person or such other person, as the case may be, shows that the taking on lease of the second-mentioned premises was not undertaken for the sole or main benefit of obtaining a further deduction on account of rent under this section, such person or such other person, as the case may be, shall not be entitled in the computation of the amount of the profits or gains of that trade or profession to any further deduction on account of rent in respect of the second-mentioned premises.
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(5)(a) A building or structure in use for the purposes specified in section 268(1)(d) shall not be a qualifying premises for the purposes of this section unless the person to whom an allowance under Chapter 1 of Part 9 would but for subsection (6) be made for the purposes of income tax or corporation tax, as the case may be, in respect of the capital expenditure incurred in the qualifying period on the construction or refurbishment of the building or structure elects by notice in writing to the appropriate inspector (within the meaning of section 950) to disclaim all allowances under that Chapter in respect of that capital expenditure. (b) An election under paragraph (a) shall be included in the return required to be made by the person concerned under section 951 for the first year of assessment or the first accounting period, as the case may be, for which an allowance would but for subsection (6) have been made to that person under Chapter 1 of Part 9 in respect of that capital expenditure. (c) An election under paragraph (a) shall be irrevocable. (d) A person who has made an election under paragraph (a) shall furnish a copy of that election to any person (in this paragraph referred to as ‘the second-mentioned person’) to whom the person grants a qualifying lease in respect of the qualifying premises, and the second-mentioned person shall include the copy in the return required to be made by the second-mentioned person under section 951 for the year of assessment or accounting period, as the case may be, in which rent is first payable by the second-mentioned person under the qualifying lease in respect of the qualifying premises.
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(6)Where a person who has incurred capital expenditure in the qualifying period on the construction or refurbishment of a building or structure in use for the purposes specified in section 268(1)(d) makes an election under subsection (5)(a), then, notwithstanding any other provision of the Tax Acts— (a) no allowance under Chapter 1 of Part 9 shall be made to the person in respect of that capital expenditure, (b) on the occurrence, in relation to the building or structure, of any of the events referred to in section 274(1), the residue of expenditure (within the meaning of section 277) in relation to that capital expenditure shall be deemed to be nil, and (c) section 279 shall not apply in the case of any person who buys the relevant interest (within the meaning of section 269) in the building or structure.
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(7)For the purposes of determining, in relation to paragraph (a)(iii) of the definition of ‘qualifying premises’ and subsections (5) and (6), whether and to what extent capital expenditure incurred on the construction or refurbishment of a building or structure is incurred or not incurred in the qualifying period, only such an amount of that capital expenditure as is properly attributable to work on the construction or refurbishment of the building or structure actually carried out in the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is or is to be treated as incurred) be treated as having been incurred in that period.
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(8)(a) In this subsection— ‘current value’, in relation to minimum lease payments, means the value of those payments discounted to their present value at a rate which, when applied at the inception of the lease to— (i) those payments, including any initial payment but excluding any payment or part of any payment for which the lessor will be accountable to the lessee, and (ii) any unguaranteed residual value of the qualifying premises, excluding any part of such value for which the lessor will be accountable to the lessee, produces discounted present values the aggregate amount of which equals the amount of the fair value of the qualifying premises; ‘fair value’, in relation to a qualifying premises, means an amount equal to such consideration as might be expected to be paid for the premises on a sale negotiated on an arm's length basis less any grants receivable towards the purchase of the qualifying premises; ‘inception of the lease’ means the earlier of the time the qualifying premises is brought into use or the date from which rentals under the lease first accrue; ‘minimum lease payments’ means the minimum payments over the remaining part of the term of the lease to be paid to the lessor, and includes any residual amount to be paid to the lessor at the end of the term of the lease and guaranteed by the lessee or by a person connected with the lessee; ‘unguaranteed residual value’, in relation to a qualifying premises, means that part of the residual value of that premises at the end of a term of a lease, as estimated at the inception of the lease, the realisation of which by the lessor is not assured or is guaranteed solely by a person connected with the lessor. (b) A finance lease, that is— (i) a lease in respect of a qualifying premises where, at the inception of the lease, the aggregate of the current value of the minimum lease payments (including any initial payment but excluding any payment or part of any payment for which the lessor will be accountable to the lessee) payable by the lessee in relation to the lease amounts to 90 per cent or more of the fair value of the qualifying premises, or (ii) a lease which in all the circumstances is considered to provide in substance for the lessee the risks and benefits associated with ownership of the qualifying premises other than legal title to that premises, shall not be a qualifying lease for the purposes of this section.
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Rented residential accommodation: deduction for certain expenditure on construction.
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372F.—(1) In this section— ‘qualifying lease’, in relation to a house, means, subject to section 372J(2), a lease of the house the consideration for the grant of which consists— (a) solely of periodic payments all of which are or are to be treated as rent for the purposes of Chapter 8 of Part 4, or (b) of payments of the kind mentioned in paragraph (a), together with a payment by means of a premium which does not exceed 10 per cent of the relevant cost of the house; ‘qualifying premises’ means, subject to subsections (3), (4)(a), (4)(c) and (5) of section 372J, a house— (a) the site of which is wholly within a qualifying area, (b) which is used solely as a dwelling, (c) the total floor area of which is not less than 38 square metres and not more than 125 square metres, (d) in respect of which, if it is not a new house (for the purposes of section 4 of the Housing (Miscellaneous Provisions) Act, 1979 ) provided for sale, there is in force a certificate of reasonable cost, the amount specified in which in respect of the cost of construction of the house is not less than the expenditure actually incurred on such construction, and (e) which without having been used is first let in its entirety under a qualifying lease and thereafter throughout the remainder of the relevant period (except for reasonable periods of temporary disuse between the ending of one qualifying lease and the commencement of another such lease) continues to be let under such a lease; ‘relevant cost’, in relation to a house, means, subject to subsection (4), an amount equal to the aggregate of— (a) the expenditure incurred on the acquisition of, or of rights in or over, any land on which the house is constructed, and (b) the expenditure actually incurred on the construction of the house; ‘relevant period’, in relation to a qualifying premises, means the period of 10 years beginning on the date of the first letting of the premises under a qualifying lease.
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(2)Subject to subsection (3), where a person, having made a claim in that behalf, proves to have incurred expenditure on the construction of a qualifying premises— (a) such person shall be entitled, in computing for the purposes of section 97(1) the amount of a surplus or deficiency in respect of the rent from the qualifying premises, to a deduction of so much (if any) of that expenditure as is to be treated under section 372J(7) or under this section as having been incurred by such person in the qualifying period, and (b) Chapter 8 of Part 4 shall apply as if that deduction were a deduction authorised by section 97(2).
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(3)(a) This subsection shall apply to any premium or other sum which is payable, directly or indirectly, under a qualifying lease or otherwise under the terms subject to which the lease is granted, to or for the benefit of the lessor or to or for the benefit of any person connected with the lessor. (b) Where any premium or other sum to which this subsection applies, or any part of such premium or such other sum, is not or is not treated as rent for the purposes of section 97, the expenditure to be treated as having been incurred in the qualifying period on the construction of the qualifying premises to which the qualifying lease relates shall be deemed for the purposes of subsection (2) to be reduced by the lesser of— (i) the amount of such premium or such other sum or, as the case may be, that part of such premium or such other sum, and (ii) the amount which bears to the amount mentioned in subparagraph (i) the same proportion as the amount of the expenditure actually incurred on the construction of the qualifying premises which is to be treated under section 372J(7) as having been incurred in the qualifying period bears to the whole of the expenditure incurred on that construction.
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(4)Where a qualifying premises forms a part of a building or is one of a number of buildings in a single development, or forms a part of a building which is itself one of a number of buildings in a single development, there shall be made such apportionment as is necessary— (a) of the expenditure incurred on the construction of that building or those buildings, and (b) of the amount which would be the relevant cost in relation to that building or those buildings if the building or buildings, as the case may be, were a single qualifying premises, for the purposes of determining the expenditure incurred on the construction of the qualifying premises and the relevant cost in relation to the qualifying premises.
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(5)Where a house is a qualifying premises and at any time during the relevant period in relation to the premises either of the following events occurs— (a) the house ceases to be a qualifying premises, or (b) the ownership of the lessor's interest in the house passes to any other person but the house does not cease to be a qualifying premises, then, the person who before the occurrence of the event received or was entitled to receive a deduction under subsection (2) in respect of expenditure incurred on the construction of the qualifying premises shall be deemed to have received on the day before the day of the occurrence of the event an amount as rent from the qualifying premises equal to the amount of the deduction.
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(6)(a) Where the event mentioned in subsection (5)(b) occurs in the relevant period in relation to a house which is a qualifying premises, the person to whom the ownership of the lessor's interest in the house passes shall be treated for the purposes of this section as having incurred in the qualifying period an amount of expenditure on the construction of the house equal to the amount which under section 372J(7) or under this section (apart from subsection (3)(b)) the lessor was treated as having incurred in the qualifying period on the construction of the house; but, in the case of a person who purchases such a house, the amount so treated as having been incurred by such person shall not exceed the relevant price paid by such person on the purchase. (b) For the purposes of this subsection and subsection (7), the relevant price paid by a person on the purchase of a house shall be the amount which bears to the net price paid by such person on that purchase the same proportion as the amount of the expenditure actually incurred on the construction of the house which is to be treated under section 372J(7) as having been incurred in the qualifying period bears to the relevant cost in relation to that house.
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(7)(a) Subject to paragraph (b), where expenditure is incurred on the construction of a house and before the house is used it is sold, the person who purchases the house shall be treated for the purposes of this section as having incurred in the qualifying period expenditure on the construction of the house equal to the lesser of— (i) the amount of such expenditure which is to be treated under section 372J(7) as having been incurred in the qualifying period, and (ii) the relevant price paid by such person on the purchase; but, where the house is sold more than once before it is used, this subsection shall apply only in relation to the last of those sales. (b) Where expenditure is incurred on the construction of a house by a person carrying on a trade or part of a trade which consists, as to the whole or any part of the trade, of the construction of buildings with a view to their sale and the house, before it is used, is sold in the course of that trade or, as the case may be, that part of that trade— (i) the person (in this paragraph referred to as ‘the purchaser’) who purchases the house shall be treated for the purposes of this section as having incurred in the qualifying period expenditure on the construction of the house equal to the relevant price paid by the purchaser on the purchase (in this paragraph referred to as “the first purchase”), and (ii) in relation to any subsequent sale or sales of the house before the house is used, paragraph (a) shall apply as if the reference to the amount of expenditure which is to be treated as having been incurred in the qualifying period were a reference to the relevant price paid on the first purchase.
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(8)Section 372J shall apply for the purposes of supplementing this section.
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Rented residential accommodation: deduction for certain expenditure on conversion.
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372G.—(1) In this section— ‘conversion expenditure’ means, subject to subsection (2), expenditure incurred on— (a) the conversion into a house of a building— (i) the site of which is wholly within a qualifying area, and (ii) which has not been previously in use as a dwelling, and (b) the conversion into 2 or more houses of a building— (i) the site of which is wholly within a qualifying area, and (ii) which before the conversion had not been in use as a dwelling or had been in use as a single dwelling, and references in this section and in section 372J to ‘conversion’, ‘conversion into a house’ and ‘expenditure incurred on conversion’ shall be construed accordingly; ‘qualifying lease’, in relation to a house, means, subject to section 372J(2), a lease of the house the consideration for the grant of which consists— (a) solely of periodic payments all of which are or are to be treated as rent for the purposes of Chapter 8 of Part 4, or (b) of payments of the kind mentioned in paragraph (a), together with a payment by means of a premium which does not exceed 10 per cent of the market value of the house at the time the conversion is completed and, in the case of a house which is a part of a building and is not saleable apart from the building of which it is a part, the market value of the house at the time the conversion is completed shall for the purposes of this paragraph be taken to be an amount which bears to the market value of the building at that time the same proportion as the total floor area of the house bears to the total floor area of the building; ‘qualifying premises’ means, subject to subsections (3), (4)(b), (4)(c) and (5) of section 372J, a house— (a) which is used solely as a dwelling, (b) the total floor area of which is not less than 38 square metres and not more than 125 square metres, (c) in respect of which there is in force a certificate of reasonable cost the amount specified in which in respect of the cost of conversion in relation to the house is not less than the expenditure actually incurred on such conversion, and (d) which without having been used subsequent to the incurring of the expenditure on the conversion is first let in its entirety under a qualifying lease and thereafter throughout the remainder of the relevant period (except for reasonable periods of temporary disuse between the ending of one qualifying lease and the commencement of another such lease) continues to be let under such a lease; ‘relevant period’, in relation to a qualifying premises, means the period of 10 years beginning on the date of the first letting of the premises under a qualifying lease.
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(2)For the purposes of this section, expenditure incurred on the conversion of a building shall be deemed to include expenditure incurred in the course of the conversion on either or both of the following— (a) the carrying out of any works of construction, reconstruction, repair or renewal, and (b) the provision or improvement of water, sewerage or heating facilities, in relation to the building or any out office appurtenant to or usually enjoyed with the building, but shall not be deemed to include— (i) any expenditure in respect of which any person is entitled to a deduction, relief or allowance under any other provision of the Tax Acts, or (ii) any expenditure attributable to any part (in this section referred to as a “non-residential unit”) of the building which on completion of the conversion is not a house.
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(3)For the purposes of subsection (2)(ii), where expenditure is attributable to a building in general and not directly to any particular house or non-residential unit comprised in the building on completion of the conversion, such an amount of that expenditure shall be deemed to be attributable to a non-residential unit as bears to the whole of that expenditure the same proportion as the total floor area of the non-residential unit bears to the total floor area of the building.
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(4)Subject to subsection (5), where a person, having made a claim in that behalf, proves to have incurred conversion expenditure in relation to a house which is a qualifying premises— (a) such person shall be entitled, in computing for the purposes of section 97(1) the amount of a surplus or deficiency in respect of the rent from the qualifying premises, to a deduction of so much (if any) of the expenditure as is to be treated under section 372J(7) or under this section as having been incurred by such person in the qualifying period, and (b) Chapter 8 of Part 4 shall apply as if that deduction were a deduction authorised by section 97(2).
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(5)(a) This subsection shall apply to any premium or other sum which is payable, directly or indirectly, under a qualifying lease or otherwise under the terms subject to which the lease is granted, to or for the benefit of the lessor or to or for the benefit of any person connected with the lessor. (b) Where any premium or other sum to which this subsection applies, or any part of such premium or such other sum, is not or is not treated as rent for the purposes of section 97, the conversion expenditure to be treated as having been incurred in the qualifying period in relation to the qualifying premises to which the qualifying lease relates shall be deemed for the purposes of subsection (4) to be reduced by the lesser of— (i) the amount of such premium or such other sum or, as the case may be, that part of such premium or such other sum, and (ii) the amount which bears to the amount mentioned in subparagraph (i) the same proportion as the amount of the conversion expenditure actually incurred in relation to the qualifying premises which is to be treated under section 372J(7) as having been incurred in the qualifying period bears to the whole of the conversion expenditure incurred in relation to the qualifying premises.