Finance Act, 1999

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“Exchange of shares held as trading stock.

751A.—(1) In this section—

‘new holding’, in relation to original shares, and ‘original shares’ have, respectively, the same meanings as in section 584(1).

(2) Subsections (4) and (5) shall apply where a transaction to which this section applies occurs in relation to any original shares—

(a) to which a person carrying on a business consisting wholly or partly of dealing in securities is beneficially entitled, and

(b) which are such that a profit on their sale would form part of the trading profits of that business.

(3) This section applies to any transaction, being a disposal of original shares which, if the original shares were not such as are mentioned in subsection (2) would result in the disposal not being treated as a disposal by virtue of sections 584 to 587; but does not apply to any transaction in relation to which section 751B applies.

(4) Subject to subsection (5), in making any computation in accordance with the provisions of the Tax Acts applicable to trading profits chargeable to tax under Case I of Schedule D—

(a) the transaction to which this section applies shall be treated as not involving any disposal of the original shares, and

(b) the new holding shall be treated as the same asset as the original shares.

(5) Where, under a transaction to which this section applies, the person concerned receives or becomes entitled to receive any consideration in addition to the new holding, subsection (4) shall have effect as if the references to the original shares were references to the proportion of them which the market value of the new holding at the time of the transaction bears to the aggregate of that value and the market value at that time (or, if it is cash, the amount) of that consideration.

(6) Subsections (4) and (5) shall have effect with the necessary modifications in relation to any computation made for the purposes of section 707(4) in a case where the original shares held by the company concerned and the new holding are treated as the same asset by virtue of any of sections 584 to 587.

Exchange of Irish Government bonds.

751B.—(1) In this section—

‘chargeable period’ has the same meaning as in section 321(2);

‘the exchange’ in relation to an investor, means the exchange of old securities for new securities under the Exchange Programme in Irish Government bonds as designated by the National Treasury Management Agency;

‘investor’ means any person who as beneficial owner of securities exchanges them for new securities under the exchange;

‘last payment day’ in relation to old securities, means the last day, before the day on which the exchange takes place, on which interest is payable in respect of the old securities; and in a case where a payment of such interest may be made on a number of days, that interest shall be treated as payable on the first of those days; but if there has not been any day upon which interest in respect of old securities has been payable before the day on which the exchange takes place, the last payment day means the day of issue of the old securities;

‘old securities’ means the first-mentioned securities in the definition of ‘investor’;

‘new securities’ means the securities issued to an investor in exchange for old securities under the exchange;

‘securities’ means securities to which section 36 applies.

(2) (a) Subsections (3) and (5) shall apply as respects an investor who is a person carrying on a trade or business which consists wholly or partly of dealing in securities in respect of which any profits or gains are chargeable to tax under Case I of Schedule D.

(b) Subsection (6) shall apply as respects any investor other than an investor referred to in paragraph (a).

(3) There shall be computed for the chargeable period in which the exchange by an investor to whom this subsection applies takes place, an amount of tax (in this section referred to as ‘the deferred tax’) where the deferred tax is found by the formula—

(a) in a case where the investor is chargeable to tax in the chargeable period in respect of interest received in the chargeable period—

A - B - C, and

(b) in any other case—

A - B

where—

A   is the amount of tax which, apart from this section, would finally fall to be borne by the investor for that chargeable period;

B   is the amount of tax which, apart from this section, would finally fall to be borne by the investor for that chargeable period if the exchange were not taken into account in computing that tax, but, in a case to which paragraph (b) applies, includes the tax on interest which has accrued in respect of old securities from the beginning of that chargeable period, or the day on which the old securities were acquired by the investor, whichever is later, to the day on which the exchange took place; and

C   is the amount representing the tax on accrued interest for that chargeable period in respect of old securities which is included in A.

(4) For the purposes of subsection (3) the accrued interest in respect of old securities is the interest accrued on such securities from—

(a) the last payment day in respect of the old securities, or

(b) the day on which the old securities were acquired by an investor,

whichever is later.

(5) Where an investor to whom this section applies so elects, the amount of tax which, apart from this subsection, finally falls to be borne for the chargeable period in which the exchange takes place, shall be reduced by the amount of the deferred tax and the amount of the deferred tax shall be deemed to be an amount of tax which finally falls to be borne for the chargeable period (in this subsection referred to as ‘the later chargeable period’) in which the new securities are disposed of in addition to any tax, which apart from this subsection, finally falls to be borne for the later chargeable period and the provisions of Part 41 shall apply accordingly.

(6) (a) Subject to paragraph (b), the amount of capital gains tax, which apart from this subsection, would be chargeable on chargeable gains accruing to an investor to whom this subsection applies, on the disposal of old securities, after such chargeable gains have been reduced by any allowable losses under section 31, shall, if the investor so elects, be deemed to be an amount of capital gains tax chargeable on chargeable gains which are deemed to accrue to the investor in the chargeable period (in this subsection referred to as ‘the later chargeable period’) in which the new securities are disposed of (and not in any other chargeable period) in addition to any capital gains tax chargeable on chargeable gains accruing to the investor in the later chargeable period and the provisions of Part 41 shall apply accordingly.

(b) Section 815 shall apply to the disposal of the old securities to which paragraph (a) applies as if—

(i) there were inserted, in subsection (3)(b) of that section after ‘profits of the trade’, ‘unless the trade consists wholly or partly of a life business the profits of which are not assessed to corporation tax under Case I of Schedule D for that accounting period’, and

(ii) subsection (3)(c) of that section were deleted.

(7) The election referred to in subsections (5) and (6) shall be made within a period of two years after the end of the chargeable period in which the disposal of the old securities takes place.”.