Capital Gains Tax Act, 1975
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SCHEDULE 2 Companies and Shareholders | ||
Sections 11 and 51. | ||
Capital distributions by companies | ||
1.—(1) Where a person receives or becomes entitled to receive in respect of shares in a company any capital distribution from the company (other than a new holding as defined in paragraph 2), he shall be treated as if he had in consideration of that capital distribution disposed of an interest in the shares. | ||
(2) In this paragraph “capital distribution” means any distribution from a company, including a distribution in the course of dissolving or winding up the company, in money or money's worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax. | ||
Reorganisation or reduction of share capital | ||
2.—(1) This paragraph shall apply in relation to any reorganisation or reduction of a company's share capital, and in this paragraph— | ||
(a) references to a reorganisation of a company's share capital include— | ||
(i) any case where persons are, whether for payment or not, allotted shares in or debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in the company or of any class of shares in the company; and | ||
(ii) any case where there are more than one class of shares and the rights attached to shares of any class are altered; and | ||
(b) “original shares” means shares held before and concerned in the reorganisation or reduction of capital, and “new holding” means, in relation to any original shares, the shares in and debentures of the company which as a result of the reorganisation or reduction of capital represent the original shares (including such, if any, of the original shares as remain). | ||
(2) Subject to the following subparagraphs, a reorganisation or reduction of a company's share capital shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it but the original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset acquired as the original shares were acquired. | ||
(3) Where, on a reorganisation or reduction of a company's share capital, a person gives or becomes liable to give any consideration for his new holding or any part of it, that consideration shall, in relation to any disposal of the new holding or any part of it, be treated as having been given for the original shares, and if the new holding or part of it is disposed of with a liability attaching to it in respect of that consideration, the consideration given for the disposal shall be adjusted accordingly: | ||
Provided that there shall not be treated as consideration given for the new holding or any part of it— | ||
(a) any surrender, cancellation or other alteration of the original shares or of the rights attached thereto, or | ||
(b) any consideration consisting of any application in paying up the new holding or any part of it, of assets of the company, or of any dividend or other distribution declared out of those assets but not made, | ||
but, where in relation to an issue of share capital, section 56 of the Finance Act, 1974 , applies, there shall be allowed as consideration given for the new holding which includes that share capital the sum in cash which he would have received if he had not exercised the option to receive additional share capital instead of a sum in cash. | ||
(4) Where, on a reorganisation or reduction of a company's share capital, a person receives (or is deemed to receive), or becomes entitled to receive, any consideration, other than the new holding, for the disposal of an interest in the original shares, and in particular— | ||
(a) where under paragraph 1 he is to be treated as if he had in consideration of a capital distribution disposed of an interest in the original shares, or | ||
(b) where he receives (or is deemed to receive) consideration from other shareholders in respect of a surrender of rights derived from the original shares, | ||
he shall be treated as if the new holding resulted from his having for that consideration disposed of an interest in the original shares (but without prejudice to the original shares and the new holding being treated in accordance with subparagraph (2) as the same asset). | ||
(5) Where, for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of any part of the new holding, it is necessary to apportion the cost of acquisition of any of the original shares between the part which is disposed of and the part which is retained, the apportionment shall be made by reference to market value at the date of the disposal (with such adjustment of the market value of any part of the new holding as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned); and any corresponding apportionment for the purposes of subparagraph (4) shall be made in like manner. | ||
(6) Notwithstanding subparagraph (5)— | ||
(a) where a new holding— | ||
(i) consists of more than one class of shares in or debentures of the company and one or more of those classes is of shares or debentures which, at any time not later than the end of the period of three months beginning with the date on which the reorganisation or reduction of capital took effect, or of such longer period as the Revenue Commissioners may by notice in writing allow, had quoted market values on a recognised stock exchange in the State or elsewhere, or | ||
(ii) consists of more than one class of rights of unit holders and one or more of those classes is of rights the prices of which were published regularly by the managers of the scheme at any time not later than the end of that period of three months (or longer if so allowed), and | ||
(b) where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of the whole or any part of any class of shares or securities or rights of unit holders forming part of a new holding of the kind referred to in clause (a) it is necessary to apportion costs of acquisition between the part that is disposed of and the part that is retained, | ||
then the cost of acquisition of the new holding shall first be apportioned between the entire classes of shares or debentures or rights of which it consists by reference to market value on the first day (whether that day fell before the reorganisation or reduction of capital took effect or later) on which market values or prices were quoted or published for the shares, debentures or rights as mentioned in clause (a) or (b) (with such adjustment of the market value of any class as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned) and for the purposes of this subparagraph the day on which a reorganisation of share capital involving the allotment of shares or debentures or unit holders' rights takes effect is the day following the day on which the right to renounce any allotment expires. | ||
(7) Where a person receives or becomes entitled to receive in respect of any shares or debentures in a company a provisional allotment of shares in or debentures of the company and he disposes of his rights, paragraph 1 shall apply as if the amount of the consideration for the disposal were a capital distribution received by him from the company in respect of the first-mentioned shares, and as if that person had, instead of disposing of the rights, disposed of an interest in those shares. | ||
(8) If under Part II of Schedule 1 it is to be assumed that, at a time after a person received or became entitled to receive in respect of any shares in or debentures of a company a provisional allotment of shares in or debentures of the company and before the disposal of his rights, the said person sold and immediately re-acquired the shares in respect of which the rights were created, subparagraph (7) shall have effect as if the same assumption applied as respects the rights. | ||
(9) References in this paragraph to a reduction of share capital do not include the paying off of redeemable share capital, and where shares in a company are redeemable by the company otherwise than by the issue of shares or debentures (with or without other consideration) and otherwise than in a liquidation, the shareholder shall be treated as disposing of the shares at the time of the redemption. | ||
Conversion of securities | ||
3.—(1) Paragraph 2 shall apply with any necessary adaptations in relation to the conversion of securities as it applies in relation to the reorganisation or reduction of a company's share capital. | ||
(2) In this paragraph— | ||
“conversion of securities” includes— | ||
(a) a conversion of securities of a company into shares in the company, | ||
(b) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash, and | ||
(c) any exchange of securities effected in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any shares or securities and the issue of securities or other securities instead; | ||
“security” includes any loan stock or similar security whether of any government or of any public or local authority or of any company and whether secured or unsecured but excluding securities falling within section 19. | ||
Company amalgamations by exchange of shares | ||
4.—(1) Subject to paragraph 5, where a company issues shares or debentures to a person in exchange for shares in or debentures of another company, paragraph 2 shall apply with any necessary adaptations as if the two companies were the same company and the exchange were a reorganisation of its share capital. | ||
(2) This paragraph shall apply only where the company issuing the shares or debentures has or in consequence of the exchange will have control of the other company, or where the first-mentioned company issues the shares or debentures in exchange for shares as the result of a general offer made to members of the other company or any class of them (with or without exceptions for persons connected with the first-mentioned company) the offer being made in the first instance on a condition such that if it were satisfied the first-mentioned company would have control of the other company. | ||
Company reconstruction and amalgamations | ||
5.—(1) Where under any arrangement between a company and the persons holding shares in or debentures of the company or any class of such shares or debentures, being an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation, another company issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of the first-mentioned shares or debentures, but the first-mentioned shares or debentures are either retained by those persons or cancelled, then those persons shall be treated as exchanging the first-mentioned shares or debentures for those held by them in consequence of the arrangement (any shares or debentures retained being for this purpose regarded as if they had been cancelled and replaced by a new issue) and accordingly paragraph 4 (other than subparagraph (2)) shall apply to such exchange of shares or debentures. | ||
(2) Subparagraph (1) shall apply in relation to a company which has no share capital as if references to shares in or debentures of a company included references to any interests in the company possessed by members of the company and paragraphs 2 and 4 shall apply accordingly. | ||
(3) In this paragraph “scheme of reconstruction or amalgamation” means a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and references to shares or debentures being retained include their being retained with altered rights or in an altered form whether as the result of reduction, consolidation, division or otherwise. | ||
Transfer of business to a company | ||
6.—(1) This paragraph shall apply for the purposes of this Act where a person who is not a company transfers to a company a business as a going concern, together with the whole of the assets of the business, or together with the whole of those assets other than cash, and the business is so transferred wholly or partly in exchange for shares (in this paragraph referred to as the new assets) issued by the company to the person transferring the business. | ||
(2) The amount determined under subparagraph (4) shall be deducted from the aggregate (in this paragraph referred to as the gain on the old assets) of the net chargeable gains. | ||
(3) For the purpose of computing any chargeable gain accruing on the disposal of any new asset— | ||
(a) the amount determined under subparagraph (4) shall be apportioned between the new assets as a whole, and | ||
(b) the sums allowable as a deduction under paragraph 3 (1) (a) of Schedule 1 shall be reduced by the amount apportioned to the new asset under clause (a), | ||
and if the shares which comprise the new assets are not all of the same class, the apportionment between the shares under clause (a) shall be in accordance with their market values at the time they were acquired by the transferor. | ||
(4) The amount referred to in subparagraphs (2) and (3) (a) shall be such portion of the gain on the old assets as bears the same proportion to the total of such gains as the cost of the new assets bears to the value of the whole of the consideration received by the transferor in exchange for the business and for the purposes of this subparagraph “the cost of the new assets” means any sums which would be allowable as a deduction under paragraph 3 (1) (a) of Schedule 1 if the new assets were disposed of as a whole in circumstances giving rise to a chargeable gain. | ||
(5) In this paragraph “net chargeable gains” means chargeable gains less allowable losses. | ||
(6) References in this paragraph to the business, in relation to shares or consideration received in exchange for the business, include references to such assets of the business as are referred to in subparagraph (1). |