Finance Act, 1995
|
Amendment of Chapter III (Income Tax: Relief for Investment in Corporate Trades) of Part I of Finance Act, 1984. |
17.—(1) Chapter III of Part I of the Finance Act, 1984 , is hereby amended— | |
(a) in section 11 (1)— | ||
(i) by the substitution of the following definition for the definition of “industrial development agency” (inserted by the Finance Act, 1990 ): | ||
“‘industrial development agency’ means Forbairt, the Industrial Development Agency (Ireland), the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta, as may be appropriate;”, | ||
(ii) by the deletion of the definition of “relevant company” (inserted by the Finance Act, 1993 ), | ||
(iii) by the substitution of the following definition for the definition of “relevant employment” (inserted by the Finance Act, 1993 ): | ||
“‘relevant employment’, in relation to a specified individual, means employment throughout the relevant period by the company in which the individual makes a relevant investment (being that individual's first such investment in that company) and where the individual is a full-time employee or full-time director of the company;”, | ||
(iv) by the substitution of the following definition for the definition of “relevant investment” (inserted by the Finance Act, 1993 ): | ||
“‘relevant investment’, in relation to a specified individual, means the amount, or the aggregate of the amounts, subscribed in a year of assessment by the individual for eligible shares in a qualifying company which carries on or intends to carry on relevant trading operations;”, | ||
(v) by the deletion of the definition of “relevant shares” (inserted by the Finance Act, 1993 ), | ||
(vi) by the substitution of the following definition for the definition of “relevant trading operations” (as amended by the Finance Act, 1994 ): | ||
“‘relevant trading operations’ has the meaning assigned to it by section 16A (inserted by the Finance Act, 1995);”, | ||
and | ||
(vii) by the substitution of the following definition for the definition of “specified individual” (as amended by the Finance Act, 1994 ): | ||
“‘specified individual’ has the meaning assigned to it by section 14A (inserted by the Finance Act 1995);”, | ||
(b) in section 12— | ||
(i) by the substitution of the following paragraphs for paragraph (iii) of the proviso (substituted by the Finance Act, 1993 ) to paragraph (c) of subsection (1): | ||
“(iii) for the purposes of qualifying trading operations such as are referred to in subparagraph (iie) (inserted by the Finance Act, 1995) of paragraph (a) of subsection (2) of section 16, the aforementioned evidence shall include the certificate referred to in subsection (3C) (as so inserted) of section 16, and | ||
(iv) for the purposes of relevant trading operations, the aforementioned evidence shall include the certificate referred to in section 16A (1) (inserted by the Finance Act, 1995),”, | ||
(ii) by the substitution of the following proviso for the second proviso (inserted by the Finance Act, 1993 ) to subsection (3): | ||
“Provided also that— | ||
(a) a specified individual may, in relation to a relevant investment made by such individual (being that individual's first such investment), elect, by notice in writing to the inspector, to have the relief due given as a deduction from such individual's total income for any one of the five years of assessment immediately prior to the year of assessment in which the eligible shares in respect of that investment are issued which such individual nominates for the purpose and, accordingly, subject to section 13 and paragraphs (c) and (d), for the purpose of granting such relief, but for no other purpose of this Chapter, the shares shall be deemed to have been issued in the year of assessment so nominated, and | ||
(b) where the specified individual makes a subsequent relevant investment (being that individual's second such investment)— | ||
(i) in the same company as that individual's first such investment, and | ||
(ii) within either the year of assessment following the end of the year of assessment in which that individual's first such investment was made or the year of assessment subsequent to that year, | ||
then, the specified individual may, in relation to that individual's second such investment, elect, by notice in writing to the inspector, to have the relief due given as a deduction from that individual's total income for any one of the five years of assessment immediately prior to the year of assessment in which the eligible shares in respect of that individual's first such investment were issued which that individual nominates for the purpose and, accordingly, subject to section 13 and paragraphs (c) and (d), for the purpose of granting such relief, but for no other purpose of this Chapter, the shares issued in respect of the second such investment shall be deemed to have been issued in that year of assessment, and | ||
(c) where any of the years of assessment following the year of assessment nominated under paragraph (a) or (b), as the case may be, precede the year of assessment in which the eligible shares in respect of the individual's first relevant investment are, in fact, issued, subsections (2A), (2B) and (2C) (inserted by the Finance Act, 1987 ) of section 13 shall operate to give relief in such years of assessment as may be nominated by that individual for that purpose, and | ||
(d) to the extent that the amount of the relief which would be due in respect of the individual's first relevant investment or second relevant investment, as the case may be, has not been given in accordance with the foregoing provisions, it shall, subject to the provisions of subsections (2A), (2B) and (2C) (inserted by the Finance Act, 1987 ) of section 13, be given for the year of assessment in which the eligible shares in respect of the first such investment or the second such investment, as the case may be, are, in fact, issued or, if appropriate, a subsequent year of assessment, and | ||
(e) this proviso shall apply in respect of not more than two, and only two, relevant investments made by a specified individual on or after the passing of the Finance Act, 1995.”, | ||
(iii) by the substitution of “relevant trading operations” for “the trade” in subsection (4) (a) (i), | ||
(iv) by the insertion of the following subsection after subsection (6): | ||
“(6A) In the case of a claim allowed before a specified individual commences a relevant employment with the company in which the individual has made a relevant investment (being that individual's first such investment), the relief shall be withdrawn if the specified individual fails to commence such employment— | ||
(a) within the year of assessment in which the investment is made, or | ||
(b) if later, within six months of the date of— | ||
(i) where the investment consists of the subscription of only one amount for eligible shares, that subscription, or | ||
(ii) where the investment consists of the subscription of more than one amount for eligible shares, the last such subscription.”, | ||
(v) by the insertion of the following subsection after subsection (10): | ||
“(10A) Where an individual is entitled to relief under this section in respect of a subscription by him for eligible shares in a company he shall not be entitled to relief in respect of that subscription under section 12 of the Finance Act, 1986 .”, | ||
and | ||
(vi) by the insertion of the following proviso to subsection (11): | ||
“Provided that for the purposes of a relevant investment this subsection shall apply and have effect as if ‘the 5th day of April, 1998’ were substituted for ‘the 5th day of April, 1996’.”, | ||
(c) in subsections (2A) and (2B) of section 13, by the substitution of the following proviso for each of the provisos thereto: | ||
“Provided that this subsection shall not apply or have effect— | ||
(i) in the case of a relevant investment, for any year of assessment subsequent to the year 1997-98, and | ||
(ii) in any other case, for any year of assessment subsequent to the year 1995-96.”, | ||
(d) by the insertion of the following section after section 14: | ||
“Specified individual. | ||
14A.—(1) An individual is a specified individual if the individual qualifies for relief in respect of a relevant investment and complies with the requirements of this section. | ||
(2) The individual, in each of the three years of assessment preceding the year of assessment immediately preceding the year of assessment in which that individual makes a relevant investment (being that individual's first such investment), shall not have been in receipt of income chargeable to tax otherwise than under— | ||
(a) Schedule E, or | ||
(b) Case III of Schedule D in respect of profits or gains from an office or employment held or exercised outside the State, | ||
in excess of the lesser of— | ||
(i) the aggregate of the amounts, if any, of that individual's income chargeable to tax under Schedule E and under Case III of Schedule D as aforesaid, or | ||
(ii) £15,000: | ||
Provided that this subsection shall not apply to an individual who makes a subscription for eligible shares in a qualifying company which carries on or intends to carry on such qualifying trading operations as are referred to in subparagraph (iib) (inserted by the Finance Act, 1995) of paragraph (a) of subsection (2) of section 16. | ||
(3) The individual shall, throughout the relevant period, possess at least 15 per cent, of the issued share capital of the company in which that individual makes a relevant investment. | ||
(4) (a) Subject to subsections (5) and (6), the individual at the specified date, in relation to that individual's first relevant investment in a company, or within the period of 12 months immediately preceding that date, either directly or indirectly, shall not possess or have possessed, or shall not be or have been entitled to acquire, more than 15 per cent, of— | ||
(i) the issued ordinary share capital, or | ||
(ii) the loan capital (within the meaning of section 14 (5)) and the issued share capital, or | ||
(iii) the voting power, | ||
of any company other than the company in which that individual makes that relevant investment or a company to which subsection (5) relates. | ||
(b) For the purposes of paragraph (a) and subsections (5) and (6) ‘specified date’, in relation to a relevant investment in a company, means— | ||
(i) where the investment consists of the subscription of only one amount for eligible shares, the date of that subscription, or | ||
(ii) where that investment consists of the subscription of more than one amount for eligible shares, the date of the last such subscription. | ||
(5) This subsection relates to a company which during a period of 5 years ending on the specified date, in relation to an individual's first relevant investment in a company— | ||
(a) was not entitled to any assets, other than cash on hands or a sum of money on deposit within the meaning of section 230 of the Finance Act, 1992 , not exceeding £100, and | ||
(b) did not carry on a trade, profession, business or other activity including the making of investments, and | ||
(c) did not pay charges on income within the meaning of section 10 of the Corporation Tax Act, 1976 . | ||
(6) (a) An individual shall not be regarded as failing to satisfy the requirements of subsection (4) merely by reason of the fact that the individual does not satisfy those requirements in relation to one, and only one, company (other than the company in which the individual makes that individual's first relevant investment or a company to which subsection (5) relates)— | ||
(i) which exists wholly or mainly for the purpose of carrying on trading operations other than trading operations consisting of dealing in shares, securities, land, currencies, futures or traded options, and | ||
(ii) where the total amount receivable by that company from sales made and services rendered in the course of that company's trading operations did not exceed £100,000 in each of that company's three accounting periods immediately preceding the accounting period of that company in which the specified date occurs in relation to that individual's first relevant investment. | ||
(b) For the purposes of paragraph (a)— | ||
(i) a company shall be regarded as a company which carries on wholly or mainly such trading operations as are referred to in paragraph (a) (i) if, but only if, in each of the three accounting periods referred to in paragraph (a) (ii) the total amount receivable from sales made or services rendered in the course of such trading operations is not less than 75 per cent, of the total amount receivable by the company from all sales made and services rendered in the course of the trade, and | ||
(ii) ‘accounting period’ means an accounting period determined in accordance with the provisions of section 9 of the Corporation Tax Act, 1976 . | ||
(7) An individual shall not be regarded as ceasing to comply with subsection (3) if that individual does so by reason of the company in which the individual makes a relevant investment being wound up or dissolved without winding up before the end of the relevant period but only if it is shown that the winding up or dissolution is 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 was the avoidance of tax.”, | ||
(e) in section 15— | ||
(i) by the insertion after subsection (3A) of the following subsection: | ||
“(3B) (a) A company, whose trade consists of the cultivation of horticultural produce within the meaning of subsection (2C) (inserted by the Finance Act, 1995) of section 16, shall not be a qualifying company unless and until it has shown to the satisfaction of the Revenue Commissioners that it has submitted to, and has had approved of by, the Minister for Agriculture, Food and Forestry (hereafter in this subsection referred to as ‘the Minister’) a three year development and marketing plan in respect of the company's trade, which plan is primarily designed and formulated to increase the exportation of such produce or to displace the importation of such produce. | ||
(b) In considering whether to approve of such a plan, the Minister shall have regard only to such guidelines in relation to such approval as may, from time to time, be agreed between the Minister and the Minister for Finance and those guidelines may, without prejudice to the generality of the foregoing, set out— | ||
(i) the extent to which the company's interest in land and buildings (other than greenhouses) may form part of its total assets, and | ||
(ii) specific requirements which have to be met in order to comply with either of the objectives mentioned in paragraph (a), and | ||
(iii) the extent to which the money raised through the issue of eligible shares should be used to identify new markets and to develop new or existing markets for the company's produce.”, | ||
and | ||
(ii) by the substitution of “a company in which a relevant investment is made by a specified individual (being that individual's first such investment in that company)” for “a relevant company” in subsection (8), | ||
(f) in section 16— | ||
(i) in paragraph (a) of subsection (2)— | ||
(I) by the substitution of the following clause for clause (I) of subparagraph (ii) (substituted by the Finance Act, 1990 ): | ||
“(I) (A) a grant towards the employment of persons was made by Forbairt or the Industrial Development Agency (Ireland) under section 12 (2) of the Industrial Development Act, 1993 , or | ||
(B) shares in the qualifying company concerned were purchased or taken by Forbairt or the Industrial Development Agency (Ireland) in accordance with the provisions of section 31 of the Industrial Development Act, 1986 , or”, | ||
(II) by the substitution of “relevant investment made” for “subscription for relevant shares issued” in subparagraph (iia) (inserted by the Finance Act, 1994 ), and | ||
(III) by the insertion of the following subparagraphs after subparagraph (iia) (inserted by the Finance Act, 1994 ): | ||
“(iib) in respect of a relevant investment made on or after the passing of the Finance Act, 1995, and notwithstanding the provisions of subparagraph (ii), the rendering of relevant trading operations within the meaning of section 39B of the Finance Act, 1980 (inserted by the Finance Act, 1987 ), which are carried on for the purposes of, or in connection with, trading operations on an exchange facility established in the Custom House Docks Area as defined in section 41 of the Finance Act, 1986 , | ||
(iic) in respect of a relevant investment made on or after the passing of the Finance Act, 1995, the rendering of such services as are referred to in subparagraph (ii) in respect of which an industrial development agency has provided financial support of not less than £2,000 towards the undertaking of a feasibility study by a person approved of by the agency into the potential commercial viability of the services to be rendered, | ||
(iid) in respect of a subscription for eligible shares made on or after the passing of the Finance Act, 1995, research and development activities within the meaning of subsection (2B), | ||
(iie) in respect of a subscription for eligible shares made on or after the passing of the Finance Act, 1995, the cultivation of horticultural produce within the meaning of subsection (2C),”, | ||
(ii) by the substitution of the following paragraph for paragraph (III) of the second proviso (inserted by the Finance Act, 1989 ) to subsection (2): | ||
“(III) the carrying on of financial activities (other than such financial activities as are included in the activities referred to in subparagraph (iib) (inserted by the Finance Act, 1995) of paragraph (a)),”, | ||
and | ||
(iii) by the insertion of the following subsections after subsection (2A): | ||
“(2B) (a) For the purposes of subsection (2) (a) (iid), ‘research and development activities’ means systematic, investigative or experimental activities which— | ||
(i) are carried on wholly or mainly in the State, and | ||
(ii) involve innovation or technical risk, and | ||
(iii) are carried on for the purpose of— | ||
(I) acquiring new knowledge with a view to that knowledge having a specific commercial application, or | ||
(II) creating new or improved materials, products, devices, processes or services, | ||
and other activities that are carried on wholly or mainly in the State for a purpose directly related to the carrying on of activities of the kind referred to in subparagraph (iii): | ||
Provided that activities that are carried on by way of— | ||
(A) market research, market testing, market development, sales promotion or consumer surveys, | ||
(B) quality control, | ||
(C) prospecting, exploring or drilling for minerals, petroleum or natural gas for the purpose of determining the size or quality of any deposits, | ||
(D) the making of cosmetic modifications or stylistic changes to products, processes or production methods, | ||
(E) management studies or efficiency surveys, or | ||
(F) research in social sciences, arts or humanities, | ||
shall not be research and development activities. | ||
(b) For the purposes of paragraph (a) systematic, investigative or experimental activities or other activities shall be regarded as carried on wholly or mainly in the State if, and only if, not less than 75 per cent. of the total amount expended in the course of such activities in the relevant period is expended in the State. | ||
(2C) For the purposes of subsection (2), the cultivation of horticultural produce means the cultivation, in a greenhouse or greenhouses within the State, of plants used for food or for the production of food or ornament or of herbaceous plants, and includes the technical procedures, in relation to such cultivation, necessary for the production and preparation for market of flowers, decorative foliage, fruit, nursery stock, herbs and vegetable crops (including potatoes and seed potatoes), in respect of which greenhouse or greenhouses a certificate has been issued by the Minister for Agriculture, Food and Forestry certifying that— | ||
(a) the construction, improvement or repair of the greenhouse or greenhouses concerned, or | ||
(b) the installation or improvement of irrigation or heating facilities in the greenhouse or greenhouses concerned, | ||
may be eligible to be grant-aided under a scheme of assistance administered by the Minister.”, | ||
(g) by the insertion of the following section after section 16— | ||
“Relevant trading operations. | ||
16A.—(1) For the purposes of this Chapter ‘relevant trading operations’ means qualifying trading operations (other than such operations as are referred to in subparagraph (iiib) (inserted by the Finance Act, 1990 ) of paragraph (a) of subsection (2) of section 16 ) in respect of which a certifying agency or a certifying Minister, as the case may be, (hereafter in this section referred to as ‘the authority’) has given a certificate under subsection (2). | ||
(2) Subject to the following provisions of this section, the authority may, in respect of qualifying trading operations carried on or to be carried on by a company, give a certificate to the company certifying that the authority is satisfied, on the basis of such information as is supplied to the authority by the company or which the authority may reasonably require the company to furnish, that the carrying on of such qualifying trading operations by the company is, or will be, a bona fide new venture which, having regard to— | ||
(a) the potential for the creation of additional sustainable employment, and | ||
(b) the desirability of minimising the displacement of existing employment, | ||
may be eligible— | ||
(i) in the case of such qualifying trading operations as are referred to in subparagraph (iic) (inserted by the Finance Act, 1995) of paragraph (a) of subsection (2) of section 16, based on guidelines agreed, with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Culture and the Gaeltacht or the Minister for Enterprise and Employment (as may be appropriate in the circumstances), for the payment of the grants or the financial assistance referred to in subparagraph (ii) (as amended by the Finance Act, 1995) of paragraph (a) of subsection (2) of section 16 within a reasonable period after the completion of the feasibility study carried out in relation to the trading operations concerned in accordance with the provisions of the said subparagraph (iic), and | ||
(ii) in any other case but subject to subsection (4), based on guidelines agreed— | ||
(I) with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Culture and the Gaeltacht or the Minister for Enterprise and Employment or the Minister for Tourism and Trade (as may be appropriate in the circumstances), or | ||
(II) between the certifying Minister and the Minister for Finance, | ||
to be grant aided under a scheme of assistance administered by the authority. | ||
(3) The carrying on of such qualifying trading operations as are referred to in subsection (2) by a company shall not be regarded as not being a bona fide new venture by reason only that they were carried on as, or as part of, a trade by another person at any time before the issue of the eligible shares in respect of which relief is claimed. | ||
(4) A certificate to which subsection (2) relates may be given by— | ||
(a) the Industrial Development Agency (Ireland) in respect of such qualifying trading operations as are referred to in section 16 (2) (a) (iib) (inserted by the Finance Act, 1995), or | ||
(b) the Minister for Agriculture, Food and Forestry in respect of such qualifying trading operations as are referred to in section 16 (2) (a) (iiia) (inserted by the Finance Act, 1988 ), | ||
without regard to whether such operations are eligible to be grant-aided but, in considering whether to give such a certificate, the agency or the Minister, as the case may be, shall have regard to such guidelines in relation to the giving of such a certificate as may be agreed— | ||
(i) with the consent of the Minister for Finance, between the agency and the Minister for Enterprise and Employment, or | ||
(ii) between the Minister for Agriculture, Food and Forestry and the Minister for Finance. | ||
(5) Bord Fáilte Éireann shall not give a certificate to which subsection (2) relates in a case where the value of a company's interests in land and buildings (excluding fixtures and fittings) is or is intended to be greater than one-half the value of its assets as a whole. | ||
(6) An authority shall not give a certificate to which subsection (2) relates unless the company concerned undertakes in writing to furnish the authority when requested to do so with such details in relation to the carrying on of the qualifying trading operations as the authority may specify.”, | ||
(h) in section 22 (1) (a) (i) by the substitution of “relevant trading operations” for “the trade”, and | ||
(i) in section 23 (7) by the substitution of the following paragraph for paragraph (e): | ||
“(e) in the case of relief withdrawn by virtue of— | ||
(i) a specified individual failing or ceasing to hold a relevant employment, or | ||
(ii) an individual ceasing to be a specified individual, | ||
the date of the failure or the cessation, as the case may be.”. | ||
(2) (a) Subparagraph (i) of paragraph (a) and subparagraph (i) (I) of paragraph (f) of subsection (1) shall apply and have effect, and shall be deemed to have always applied and had effect, as respects a subscription for eligible shares made on or after the 1st day of January, 1994. | ||
(b) Subparagraph (v) of paragraph (b) of subsection (1) shall apply and have effect as respects a subscription for eligible shares made on or after the 12th day of April, 1995. | ||
(c) Paragraphs (a) (other than subparagraph (i)), (b) (other than subparagraph (v)), (c), (d), (e), (f) (other than subparagraph (i) (I)), (g), (h) and (i) of subsection (1) shall apply and have effect as respects a subscription for eligible shares made on or after the passing of this Act. |