Finance Act, 1981
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Provisions relating to transactions in land. |
29.—(1) This section is enacted to prevent the avoidance of tax by persons concerned with dealing in or developing land. | |
(2) (a) In relation to the computation for the purposes of income tax or corporation tax of the profits or gains or losses of any period ending on or after the 6th day of April, 1981, Part IV of the Finance (Miscellaneous Provisions) Act, 1968 , is hereby amended by the substitution of the following section for section 18: | ||
“Computation under Case I of Schedule D of profits or gains from dealing in or developing land. | ||
18.—(1) Where a business of dealing in or developing land is, or is to be regarded as, a trade within Schedule D or a part of such a trade, the provisions applicable to Case I of that Schedule shall, as respects the computation of the profits or gains of the business, have effect subject to the subsequent provisions of this section. | ||
(2) (a) Any consideration other than rent or an amount treated as rent under section 83 of the Income Tax Act, 1967 , for the disposal of an interest in any land, or in a part of any land, shall be treated as a consideration for the disposal of trading stock and shall accordingly be taken into account as a trading receipt. | ||
(b) Any interest in any land which is held by a person carrying on a trade (hereafter in this section referred to as the trader) and which has become trading stock of the trade shall thereafter, until the discontinuance of the trade, continue to be such trading stock. | ||
(c) Where the trader has acquired an interest in any land otherwise than for consideration in money or money's worth, he shall, subject to paragraph (d), be deemed to have purchased the interest for a consideration equal to its market value at the time of acquisition. | ||
(d) Where at the time of acquisition of an interest in any land the trade had not been commenced or the interest was not then appropriated as trading stock, the trader shall be deemed to have purchased the interest for a consideration equal to its market value at the time of its appropriation as trading stock. | ||
(e) Any consideration (other than receipts falling within section 81 (1) (b) of the Income Tax Act, 1967 , the profits or gains arising from which are, by virtue of that section, chargeable to tax under Case V of Schedule D) for the granting by the trader of any right in relation to the development of any land shall be taken into account as a trading receipt. | ||
(3) Account shall not be taken of any sum (hereafter in this subsection referred to as the relevant sum) which is paid or is payable at any time by the trader as consideration for the forfeiture or surrender of the right of any person to an annuity or other annual payment unless— | ||
(a) the annuity or other annual payment arises under— | ||
(i) a testamentary disposition, or | ||
(ii) a liability incurred for— | ||
(I) valuable and sufficient consideration all of which is required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person to whom that consideration is given, or | ||
(II) consideration given to a person who— | ||
(A) has not at any time carried on a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, and | ||
(B) is not and was not at any time connected with any of the following persons— | ||
(aa) the trader, | ||
(bb) a person who is or was at any time connected with the trader, and | ||
(cc) any other person who, in the course of a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, holds or held an interest in land upon which the annuity or other annual payment was charged or reserved, | ||
or | ||
(b) the relevant sum is required to be brought into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the relevant sum is payable. | ||
(4) Where— | ||
(a) a sum (hereafter in this subsection referred to as the said sum) is payable— | ||
(i) by a person (hereafter in this subsection referred to as the relevant person) who is not the trader, | ||
(ii) as consideration for the forfeiture or surrender of the right of any person to an annuity or other annual payment, and | ||
(b) the said sum is not required to be brought into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the said sum is payable, and | ||
(c) the trader incurs expenditure (hereafter in this subsection referred to as the cost) in acquiring any interest in land upon which the annuity or other annual payment had been reserved or charged, | ||
then— | ||
(I) the trader shall be treated as having expended in acquiring that interest an amount equal to the amount which would have been expended if the right had not been forfeited or surrendered, and | ||
(II) the excess of the cost over the amount determined in accordance with subparagraph (I) shall be treated for the purposes of subsection (3) as having been payable by the trader as consideration for the forfeiture or surrender of that right, | ||
and for the purposes of this subsection all such apportionments and valuations shall be made as appear to the inspector or, on appeal, to the Appeal Commissioners, to be just and reasonable: | ||
Provided that this subsection shall not apply where the relevant person carries on a trade of dealing in or developing land and pays the said sum in the course of carrying on that trade.”. | ||
(b) Any provision of section 18 of the Finance (Miscellaneous Provisions) Act, 1968 , which applies in relation to the computation of the profits or gains or losses of any period ending before the 6th day of April, 1981, but which, by reason of this section, does not apply in relation to the computation of the profits or gains or losses of any period ending on or after that date, shall, in particular, not apply in relation to the determination of the value of the trading stock of a trade at the commencement of any period ending on or after that date. | ||
(3) Part IV of the Finance (Miscellaneous Provisions) Act, 1968 , is hereby amended by the substitution of the following sections for sections 20, 21 and 22: | ||
“Tax to be charged under Case IV on gains from certain disposals of land. | ||
20.—(1) This section shall not apply to— | ||
(a) a gain realised before the 6th day of April, 1981, or | ||
(b) a gain accruing to an individual which, by virtue of section 25 (private residence) of the Capital Gains Tax Act, 1975 , is exempt from capital gains tax, or which would be so exempt but for the provisions of subsection (10) of that section. | ||
(2) In this section and in section 21— | ||
‘capital amount’ means any amount, in money or money's worth, which, apart from this section, does not fall to be included in any computation of income for the purposes of the Tax Acts, and other expressions which include the word ‘capital’ shall be construed accordingly; | ||
‘chargeable period’ means an accounting period of a company or a year of assessment; | ||
‘land’ includes any interest in land and references to the land include references to all or any part of the land; | ||
‘share’ includes stock; | ||
references to property deriving its value from land include references to— | ||
(i) any shareholding in a company, or any partnership interest, or any interest in settled property, deriving its value or the greater part of its value directly or indirectly from land, and | ||
(ii) any option, consent or embargo affecting the disposition of land. | ||
(3) This section shall apply in any case where— | ||
(a) land, or any property deriving its value from land, is acquired with the sole or main object of realising a gain from disposing of the land, | ||
(b) land is held as trading stock, or | ||
(c) land is developed by a company with the sole or main object of realising a gain from disposing of the land when developed, | ||
and any gain of a capital nature is obtained from the disposal of the land— | ||
(i) by the person acquiring, holding or developing the land, or by a person connected with that person, or | ||
(ii) where any arrangement or scheme is effected as respects the land which enables the gain to be realised directly or indirectly by any transaction, or by any series of transactions, by any person who is a party to, or concerned in, the arrangement or scheme, | ||
and this subsection shall apply whether the said gain is obtained by any such person for himself or for any other person. | ||
(4) Where this section applies, the whole of any such gain as is mentioned in subsection (3) shall, for all the purposes of the Tax Acts, be treated— | ||
(a) as being income which arises at the time when the gain is realised and which constitutes profits or gains chargeable to tax under Case IV of Schedule D for the chargeable period in which the gain is realised, and | ||
(b) subject to the following provisions of this section, as being income of the person by whom the gain is realised. | ||
(5) For the purposes of this section land shall be treated as disposed of if, by any one or more transactions, or by any arrangement or scheme, whether concerning the land or property deriving its value from the land, the property in the land, or control over the land, is effectually disposed of, and references in subsection (3) to the acquisition or development of land or property with the sole or main object of realising a gain from disposing of the land shall be construed accordingly. | ||
(6) For the purposes of this section— | ||
(a) where, whether by a premature sale or otherwise, a person directly or indirectly makes available to another person the opportunity of realising a gain, the gain of that other person shall be treated as having been obtained for him by the person first mentioned in this subsection, and | ||
(b) any number of transactions may be regarded as constituting a single arrangement or scheme if a common purpose is discerned in them, or if there is other sufficient evidence of a common purpose. | ||
(7) In applying this section account shall be taken of any method, direct or indirect, by which— | ||
(a) any property or right is transferred or transmitted to another person, or | ||
(b) the value of any property or right is enhanced or diminished, | ||
and, accordingly, the occasion of the transfer or transmission of any property or right, by whatever method, and the occasion when the value of any property or right is enhanced, may be treated as an occasion on which tax becomes chargeable under this section. | ||
(8) Subsection (7) shall apply in particular— | ||
(a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration, | ||
(b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted to any person by assigning— | ||
(i) share capital or other rights in a company, | ||
(ii) rights in a partnership, or | ||
(iii) an interest in settled property, | ||
(c) to the creation of any option or consent or embargo affecting the disposition of any property or right, and to the consideration given for the option, or for the giving of the consent or the release of the embargo, and | ||
(d) to the disposal of any property or right on the winding up, dissolution or termination of any company, partnership or trust. | ||
(9) For the purposes of this section such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land, and allowing only such expenses as are attributable to the land disposed of, and in applying this subsection— | ||
(a) where an interest in land is acquired and the reversion is retained on disposal, account may be taken of the way in which the profits or gains under Case I of Schedule D of a person dealing in land are computed in such a case, and | ||
(b) account may be taken of the adjustments to be made in computing such profits or gains under section 84 (2) and 85 (4) of the Income Tax Act, 1967 . | ||
(10) Subsection (3) (c) shall not apply to so much of any gain as is fairly attributable to the period, if any, before the intention to develop the land was formed, and which would not fall under paragraph (a) or (b) of that subsection; and in applying this subsection account shall be taken of the treatment under Case I of Schedule D of a person who appropriates land as trading stock. | ||
(11) If all or any part of the gain accruing to any person is derived from value, or an opportunity of realising a gain, provided directly or indirectly by some other person (whether or not put at the disposal of the person first mentioned in this subsection), subsection (4) (b) shall apply to the gain, or that part of it, with the substitution of that other person for the person by whom the gain was realised. | ||
(12) Where there is a disposal of shares in— | ||
(a) a company which holds land as trading stock, or | ||
(b) a company which owns directly or indirectly 90 per cent. or more of the ordinary share capital of another company which holds land as trading stock, | ||
and all the land so held is disposed of in the normal course of its trade by the company which held it, and so as to procure that all opportunity of profit in respect of the land arises to that company, then, notwithstanding subsection (3) (i), this section shall not apply to any gain accruing to the holder of shares as being a gain on property deriving value from that land (but without prejudice to any liability under subsection (3) (ii)). | ||
(13) In ascertaining for the purposes of this section, the intentions of any person, the objects and powers of any company, partners or trustees, as set out in any memorandum or articles of association or other document, shall not be conclusive. | ||
(14) For the purposes of ascertaining whether and to what extent the value of any property or right is derived from any other property or right, value may be traced through any number of companies, partnerships and trusts, and the property held by any company, partnership or trust shall be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is just and reasonable. | ||
(15) In applying this section— | ||
(a) any expenditure or receipt or consideration or other amount may be apportioned by such method as is just and reasonable, and | ||
(b) all such valuations shall be made as may be necessary to give effect to the provisions of the section. | ||
(16) For the purposes of this section partners, or the trustees of settled property, or personal representatives, may be regarded as persons distinct from the individuals or other persons who are for the time being partners or trustees or personal representatives. | ||
(17) This section shall apply to a person, whether resident in the State or not, if all or any part of the land in question is situated in the State. | ||
Provisions supplementary to section 20. | ||
21.—(1) (a) Where a person (hereafter in this subsection referred to as the first-mentioned person) is assessed to tax under section 20 and that assessment to tax arises in consequence of and in respect of consideration receivable by another person (hereafter in this subsection referred to as the second-mentioned person)— | ||
(i) the first-mentioned person shall be entitled to recover from the second-mentioned person any part of that tax which the first-mentioned person has paid, and | ||
(ii) if any part of that tax remains unpaid at the expiration of six months from the date when it became due and payable, it shall be recoverable from the second-mentioned person as though he were the person so assessed, but without prejudice to the right to recover the tax from the first-mentioned person, | ||
and for the purposes of subparagraph (i), the inspector shall on request furnish a certificate specifying the amount of income in respect of which tax has been paid, and the amount of tax so paid; and the certificate shall be evidence, until the contrary is proved, of any facts stated therein. | ||
(b) For the purposes of this subsection any amount which by virtue of section 20 is treated as the income of a person shall, notwithstanding any other provision of the Tax Acts, be treated as the highest part of his income. | ||
(2) If it appears to the Revenue Commissioners that any person entitled to any consideration or other amount chargeable to tax under section 20 is not resident in the State, they may direct that section 434 of the Income Tax Act, 1967 (interest, etc., not payable out of taxed profits), shall apply to any payment forming part of that amount as if the payment were an annual payment charged with tax under Schedule D, but without prejudice to the final determination of the liability of that person, including any liability under subsection (1) (a) (ii). | ||
(3) Section 20 shall have effect subject to any provision of the Tax Acts deeming income to be income of a particular person. | ||
(4) Where, by virtue of section 20 (3) (c), any person is charged to tax on the realisation of a gain, and, by virtue of subsection (10) of that section, the computation of the gain proceeded on the footing that the land or some other property was appropriated at any time as trading stock, that land or other property shall be treated on that footing also for the purposes of paragraph 15 of Schedule 1 to the Capital Gains Tax Act, 1975 (appropriations to and from stock in trade). | ||
(5) Where, by virtue of section 20 (11), the person charged to tax is a person other than the person for whom the capital amount was obtained or the person by whom the gain was realised, and the tax has been paid, then, for the purposes of paragraphs 2 and 4 of Schedule 1 to the Capital Gains Tax Act, 1975 (profits taxable as income to be excluded from tax on capital gains), the person for whom the capital amount was obtained or the person by whom the gain was realised, as may be appropriate, shall be regarded as having been charged to the tax so paid. | ||
Power to obtain information. | ||
22.—(1) The inspector may by notice in writing require any person to furnish him within such time as may be specified in the notice (not being less than thirty days) with such particulars as the inspector thinks necessary for the purposes of sections 20 and 21. | ||
(2) The particulars which a person is obliged to furnish under this section, if he is required by notice so to do, include particulars— | ||
(a) as to transactions or arrangements with respect to which he is, or was, acting on behalf of others, and | ||
(b) as to transactions or arrangements which, in the opinion of the inspector, should properly be examined for the purposes of sections 20 and 21 notwithstanding that, in the opinion of the person to whom the notice is given, no liability to tax arises under those sections, and | ||
(c) as to whether the person to whom the notice is given has taken, or is taking, any, and if so what, part in any, and if so what, transactions or arrangements of a description specified in the notice. | ||
(3) Notwithstanding anything in subsection (2) a solicitor shall not be deemed for the purposes of subsection (2) (c) to have taken part in any transaction or arrangements by reason only that he has given professional advice to a client in connection with the transaction or arrangements, and shall not, in relation to anything done by him on behalf of a client, be compellable under this section, except with the consent of his client, to do more than state that he is or was acting on behalf of a client, and give the name and address of his client.”. | ||
(4) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion in column 2 thereof of “ Finance (Miscellaneous Provisions) Act, 1968 , section 22”. |