Finance Act 2007

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Provisions relating to Chapter 2A (limitation on amount of certain reliefs used by certain high income individuals) of Part 15 of Principal Act.

18.— (1) Chapter 2A of Part 15 of the Principal Act is amended—

(a) in section 485C—

(i) in subsection (1)—

(I) by substituting “In this Chapter and in Schedules 25B and 25C,” for “In this Chapter and Schedule 25B,”,

(II) by substituting the following for the construction of “T” in the formula to the definition of “adjusted income”:

“T is the amount of the individual’s taxable income for the tax year determined on the basis that—

(a) this Chapter, other than section 485F, does not apply to the individual for the tax year, and

(b) if the individual, being a married person, is assessable to tax for the tax year otherwise than under section 1016, the provisions under which the individual is assessable are modified in accordance with paragraphs (i) to (vi) of section 485FA,”,

(III) by inserting the following after the definition of “excess relief”:

“ ‘ Revenue officer ’ means an officer of the Revenue Commissioners;”,

(IV) by substituting the following paragraphs for paragraph (b) of the definition of “ring-fenced income”:

“(b) income referred to in section 261B or 267M,

(c) income charged to tax in accordance with clause (I) or (II)(B) of section 730J(1)(a)(i) or section 730K(1)(b), and

(d) income charged to tax in accordance with section 747D(a)(i) or section 747E(1)(b);”,

and

(V) by substituting “any relief arising under, or by virtue of, any of the provisions” for “any of the reliefs” in the definition of “specified relief”,

(ii) by substituting the following paragraphs for paragraph (a) of subsection (3):

“(a) where, in relation to any tax year and the capital allowances to be given effect to in that year, any provision of the Tax Acts requires allowances (in this paragraph referred to as the ‘first-mentioned allowances’) for one period to be given effect to, or to be deemed to be given effect to, in priority to allowances for another period (in this paragraph referred to as the ‘second-mentioned allowances’), then—

(i) as respects the first-mentioned allowances, effect shall be given, or be deemed to be given, as the case may be, for an allowance which is not a specified relief in priority to any such allowance which is a specified relief and in priority to the second-mentioned allowances, and

(ii) as respects the second-mentioned allowances, effect shall be given, or be deemed to be given, as the case may be, for an allowance which is not a specified relief in priority to any such allowance which is a specified relief,

(ab) a deduction authorised by subsection (2) of section 97 shall be allowed in respect of a matter which is specifically referred to in that subsection in priority to a deduction authorised to be made under that subsection by virtue of a specified relief,

(ac) a deduction from total income shall be made in respect of a relief due for a tax year which is not a specified relief in priority to any such deduction due for the tax year which is a specified relief,”,

and

(iii) by substituting the following for subsection (4):

“(4) Schedules 25B and 25C shall have effect for the purposes of this Chapter.”,

(b) in section 485D(b) by substituting “the specified reliefs used by the individual in respect of the tax year” for “the specified reliefs used by the individual in the tax year”,

(c) by substituting “sections 485F and 485FA” for “section 485F” in the construction of “T” in the formula in section 485E,

(d) by inserting the following after section 485F:

“Adaptation of provisions relating to taxation of married persons.

485FA.— Where this Chapter applies to an individual or his or her spouse for a tax year, and—

(a) an election under section 1018 (including a deemed election under that section) to be assessed to tax in accordance with section 1017 has effect for the tax year,

(b) an application under section 1023 has effect for that year, or

(c) the provisions of section 1019(3) apply for that year,

in respect of the individual and his or her spouse, then the following provisions shall apply:

(i) the definition of ‘chargeable tax’ in section 3(1) shall apply as if the references to total income were references to taxable income;

(ii) subsection (1) of section 1017 shall apply as if the following paragraph was substituted for paragraph (a) of that subsection:

‘(a) the husband shall be assessed and charged to income tax, not only in respect of his taxable income (if any) for that year, but also in respect of his wife’s taxable income (if any) for any part of that year of assessment during which she is living with him and, for this purpose and for the purposes of the Income Tax Acts, the last-mentioned income shall be deemed to be his income,’;

(iii) the references to total income in—

(I) subsection (3),

(II) paragraph (a) of subsection (4) other than the references in subparagraph (ii) of that paragraph, and

(III) subsection (4)(b),

of section 1019 shall be construed as references to taxable income;

(iv) the reference to so assessed and charged for each subsequent year of assessment in section 1019(4)(a) shall be construed as a reference to—

(I) assessed and charged in respect of her taxable income (if any) and the taxable income (if any) of her husband for each subsequent year of assessment, where this Chapter applies for a tax year to either or both spouses, and

(II) assessed and charged in respect of her total income (if any) and the total income (if any) of her husband for each subsequent year of assessment, in any other case;

(v) the reference to so assessed to income tax for the year of assessment in which that notice or application is withdrawn and for each subsequent year of assessment in section 1019(4)(b) shall be construed as a reference to—

(I) assessed to income tax in respect of her own taxable income (if any) and the taxable income (if any) of her husband for the year of assessment in which that notice or application is withdrawn and for each subsequent year of assessment, where this Chapter applies for a tax year to either or both spouses, and

(II) assessed to income tax in respect of her own total income (if any) and the total income (if any) of her husband for the year of assessment in which that notice or application is withdrawn and for each subsequent year of assessment, in any other case;

and

(vi) where paragraph (a) or (c) apply to an individual and his or her spouse for a tax year, then to the extent that—

(I) the benefit flowing from such deductions as are specified in the provisions referred to in Part 1 of the Table to section 458 for the tax year exceeds the income tax chargeable on the individual’s income for the tax year, the balance shall be applied to reduce the income tax chargeable on the income of the individual’s spouse for that year, and

(II) the benefit flowing from such deductions exceed the income tax chargeable on the spouse’s income for that year, the balance shall be applied to reduce the income tax chargeable on the income of the individual for that year.

Requirement to provide estimates and information.

485FB.— (1) In this section—

‘ chargeable person ’ and ‘ specified return date for the chargeable period’ have the same meanings as in Part 41;

‘ prescribed form ’ means a form prescribed by the Revenue Commissioners or a form used under the authority of the Revenue Commissioners, and includes a form which involves the delivery of a statement by any electronic, photographic or other process approved of by the Revenue Commissioners.

(2) Where this Chapter applies to an individual for a tax year that individual shall, if not otherwise a chargeable person, be deemed to be a chargeable person for such year for the purposes of Part 41.

(3) Where this Chapter applies to an individual for a tax year that individual shall, in addition to the return required to be delivered under section 951, prepare and deliver to the Collector-General at the same time as, and together with, the return required under section 951 on or before the specified return date for the chargeable period a full and true statement in a prescribed form of the details required by the form in respect of—

(a) the amounts constituting the aggregate of the specified reliefs,

(b) the determination of those amounts, and

(c) the estimates required by subsection (4),

and of such further particulars in relation to this Chapter as may be required by the prescribed form.

(4) The estimates required by this subsection are estimates of—

(a) the individual’s taxable income for the year determined as if this Chapter, other than section 485F, did not apply to the individual for that year,

(b) the individual’s taxable income determined in accordance with section 485E, and

(c) the amount of tax that should be assessed on the individual as a consequence of the application of this Chapter,

which estimates shall be made to the best of the individual’s knowledge and belief.

(5) Where this Chapter applies to both a husband and a wife, not being persons to whom section 1016 applies, then separate statements under this section shall be required from both the husband and the wife and both statements shall be made on the same prescribed form (in this subsection referred to as a ‘combined statement’) and references in this section, other than in this subsection, to a statement required to be delivered under this section shall include references to a combined statement.

(6) (a) For the purposes of determining—

(i) the accuracy or otherwise of any details, particulars or estimates contained in the statement referred to in subsection (3), or

(ii) whether or not an individual who has not provided a statement under this section is an individual to whom this Chapter applies,

a Revenue officer may make such enquiries or take such actions within his or her powers as he or she considers necessary for the purposes of determining the matters set out in subparagraph (i) or (ii), including, in the case of subparagraph (ii), requiring by notice in writing the individual to furnish in writing to the officer within such time, not being less than 14 days, as may be provided by the notice, details of each provision in respect of which the individual is claiming tax relief for a tax year together with the amount of each separate claim and the particulars of each separate claim under that provision.

(b) Subparagraph (ii) of paragraph (a) shall only apply to an individual who has made a return under section 951 for a tax year and whose income, including income exempt from tax, from all sources and disregarding all deductions, allowances and other tax reliefs is equal to or greater than the threshold amount.

(7) Subsections (9) and (10) of section 951 shall apply to a statement required to be delivered under this section in the same way as they apply to a return required to be delivered under that section, and for this purpose a reference in those subsections to a return, other than a reference to the specified return date for the chargeable period, shall be construed as a reference to a statement under this section.

(8) Section 1052 shall apply to a failure by an individual to deliver a statement under this section or the details, amounts and particulars referred to in subsection (6) as it applies to a failure to deliver a return referred to in section 1052.”,

and

(e) in section 485G—

(i) by substituting the following for subparagraph (i) of subsection (2)(a):

“(i) for the purposes of Part 9 and that Part as applied for the purposes of any other provision of the Tax Acts, the amount of any specified relief used by the individual in the tax year shall be determined without regard to the application to the individual for that year of section 485E,”,

(ii) in subparagraph (iii) of subsection (2)(a) by substituting for “the amount of the individual’s excess relief for the year in which the balancing charge arises plus any excess relief carried forward to that year and not deducted or not fully deducted for that year” the following:

“the sum of—

(I) the amount of the individual’s excess relief for the year in which the balancing charge arises, and

(II) the amount of any excess relief carried forward to that year that is not deducted for that year,”,

(iii) by substituting the following for clause (I) of subsection (2)(b)(i):

“(I) the amount of the individual’s excess relief carried forward to the year in which the balancing charge arises and not deducted or not fully deducted for that year, before any reduction by reference to paragraph (a)(iii), and”,

and

(iv) by substituting the following for subsection (3):

“(3) (a) Where this Chapter applies to an individual for a tax year, then, to the extent that the individual’s taxable income determined in accordance with section 485E exceeds the amount of the profits, gains or income in respect of which the individual is chargeable under Schedules C, D, E and F the amount of the excess shall, notwithstanding any other provision of the Tax Acts, be deemed to be an amount of income chargeable to income tax under Case IV of Schedule D, but—

(i) the amount so chargeable shall not be reckoned in computing the individual’s total income for that year, and

(ii) this paragraph shall be disregarded for the purpose of determining—

(I) whether this Chapter should apply to an individual for a tax year, and

(II) the amount of “T” in the formula in the definition of ‘adjusted income’ in section 485C(1) and in the formula in section 485E.

(b) Any assessment to income tax to be made on an individual for a tax year shall, notwithstanding any other provision of the Tax Acts, include, in addition to any income, profits or gains of the individual otherwise chargeable to income tax, any amount chargeable to income tax on the individual by virtue of paragraph (a), and the provisions of the Tax Acts, including in particular those provisions relating to the assessment, collection and recovery of tax and the payment of interest on unpaid tax, shall apply as respects any amount chargeable to income tax by virtue of paragraph (a).

(c) Where, but for this Chapter, no assessment to income tax would be made on an individual for a tax year, then a Revenue officer shall, notwithstanding any other provision of the Tax Acts, make an assessment to income tax on the individual to the best of the officer’s judgement of the amounts chargeable to income tax, including any amount chargeable by virtue of paragraph (a), and the provisions of the Tax Acts, including in particular those provisions relating to the assessment, collection and recovery of tax and the payment of interest on unpaid tax, shall apply as respects—

(i) any amount chargeable to income tax by virtue of paragraph (a), and

(ii) any assessment to income tax made on the individual by virtue of this paragraph.”.

(2) Schedule 25B to the Principal Act is amended—

(a) at reference number 13, in column (3), by substituting the following for subparagraph (iii) of paragraph (a):

“(iii) a building or structure which is deemed to be a building or structure in use for the purposes of a trade referred to in section 268(1)(g) by virtue of section 268(3B),

but there shall not be included in the aggregate any allowance referred to in section 272(3)(c)(iii),”,

(b) after the entry at reference number 15, to insert the following:

“

”,

(c) at reference number 38, in column (3), by substituting the following for paragraph (b):

“(b) the amount determined by the formula—

(G + E) — (D + R)

where—

G is the aggregate of the gross amount of each rent received by the individual for the tax year,

E is the individual’s total receipts from easements for the tax year,

D is the total amount of deductions authorised by section 97(2) to which the individual is entitled for the tax year apart from any deduction authorised by section 372AP or section 372AU, and

R is the amount determined under this Schedule as the amount of specified relief in respect of section 372AP, but the amount so determined shall not exceed the amount determined by the formula—

(G + E) — D

where G, E and D have the same meanings as they have in the first formula in this paragraph,”,

(d) at reference number 41, in column (3), by substituting “a specified relief” for “capital allowances, being allowances which are specified reliefs”,

(e) at reference number 43, in column (3), by substituting the following for the existing material:

“To the extent that the excess referred to in section 384 is referable to a specified relief, the amount of the excess or any portion of the excess that is so referable in respect of which the individual is given relief under that section for the tax year less any part of that excess for which relief cannot be given under that section for that year.”,

(f) at reference number 51, in column (3), by substituting “deducted from or set off against any income of the individual” for “deducted from the individual’s total income”, and

(g) at reference number 52, in column (3), by substituting “deducted from or set off against any income of the individual” for “deducted from the individual’s total income”.

(3) The Principal Act is amended by the insertion after Schedule 25B of the following:

“Section 485C.

SCHEDULE 25C

Determination of Amount of Relief to be Treated as Referable to Specified Reliefs as Respects Relief Carried Forward from Tax Year 2006 to Tax Year 2007

Determination of amount of capital allowances carried forward under section 304 which are referable to specified reliefs.

1. (1) Where, in relation to any trade or profession carried on by an individual, any allowances or part of any such allowances made under Part 9, including that Part as applied by any other provision of the Tax Acts, for the tax year 2006 to the individual in taxing the individual’s trade or profession—

(a) are, in accordance with section 304(4), added to the amount of the allowances to be made to the individual under that Part for the tax year 2007, or

(b) if there are no such allowances in 2007, are, in accordance with that section, deemed to be the allowances under that Part for that year,

then, the amount so added or so deemed (referred to in subparagraph (2) as the ‘relief forward’) which is to be treated as referable to specified reliefs shall be determined for the tax year 2007 in accordance with subparagraph (2).

(2) The amount referred to in subparagraph (1) is an amount determined in accordance with the formula—

RF x SR

TR

where—

RF is the relief forward,

SR is the aggregate of the amounts of the allowances made to the individual under Chapter 1 of Part 9 (being allowances made in respect of a specified relief or specified reliefs) in taxing the trade or profession of the individual in respect of the tax year 2006 and each of the 3 preceding tax years, other than any such allowances or part of such allowances which—

(a) were added to the allowances to be made for any of those years by section 304(4), or

(b) were deemed to be the allowances for any of those years by that section,

and

TR is the aggregate of the amounts of the allowances made to the individual under Part 9, including that Part as applied by any other provision of the Tax Acts, in taxing the trade or profession of the individual in respect of the tax year 2006 and each of the 3 preceding tax years, other than any such allowances or part of such allowances which—

(a) were added to the allowances to be made for any of those years by section 304(4), or

(b) which were deemed to be the allowances for any of those years by that section.

Determination of amount of losses carried forward under section 382 which are referable to specified reliefs.

2. (1) Where, in relation to any trade or profession carried on by an individual, a loss is carried forward from the tax year 2006 to the tax year 2007 in accordance with section 382, then the amount of the loss so carried forward (in subparagraph (2) referred to as the ‘relief forward’) to be treated as referable to specified reliefs shall, for the purposes of Schedule 25B, be determined for the tax year 2007 in accordance with subparagraph (2).

(2) The amount referred to in subparagraph (1) is the amount determined in accordance with the formula—

RF x SR

TR

where—

RF is the amount of the relief forward,

SR is the sum of—

(DR + SA)

where—

DR is the aggregate of the amounts of the further deductions the individual was entitled to under sections 324, 333, 345, 354 and paragraph 13 of Schedule 32 in respect of the trade or profession for the tax year 2006 and the 3 preceding tax years, but the amount in respect of each year to be included in the aggregate shall not exceed an amount determined by the formula—

(L — CA)

where—

L is the amount of the loss for that year in respect of which the individual was entitled to make a claim under section 381 in respect of that trade or profession, and

CA is the amount of any claim made in that year by the individual in respect of that trade or profession by virtue of the provisions of Chapter 2 of Part 12,

and

SA is the aggregate of the amounts of the allowances made to the individual under Chapter 1 of Part 9, including that Chapter as applied by any other provision of the Tax Acts, (being allowances made in respect of a specified relief or specified reliefs) in taxing the trade or profession of the individual in respect of the tax year 2006 and each of the 3 preceding tax years, other than any such allowances or part of such allowances which—

(a) were added to the allowances to be made for any of those years by section 304(4), or

(b) were deemed to be the allowances for any of those years by that section,

but the allowances made to the individual in respect of any year shall only be included in the aggregate if a claim was made in respect of those allowances for that year by virtue of the provisions of Chapter 2 of Part 12,

TR is the sum of—

(TL + TA)

where—

TL is the aggregate of the amounts of losses eligible for relief under section 381 in respect of that trade or profession for the tax year 2006 and each of the 3 preceding tax years less the amount of any claim made in any of those years by the individual in respect of that trade or profession by virtue of the provisions of Chapter 2 of Part 12, and

TA is the aggregate of the amounts of the allowances made to the individual under Part 9, including that Part as applied by any other provision of the Tax Acts, in taxing the trade or profession of the individual in respect of the tax year 2006 and each of the 3 preceding tax years, other than any such allowances or part of such allowances which—

(a) were added to the allowances to be made for any of those years by section 304(4), or

(b) which were deemed to be the allowances for any of those years by that section,

but the allowances made to the individual in respect of any year shall only be included in the aggregate if a claim was made in respect of those allowances for that year by virtue of the provisions of Chapter 2 of Part 12.

Determination of the amount of capital allowances made in charging income under Case V of Schedule D and carried forward under section 305 that is referable to specified reliefs.

3. (1) Where—

(a) the balance of any allowances or part of such allowances made under Chapter 1 of Part 9, including that Chapter as applied by any other provision of the Tax Acts, for the tax year 2006 to an individual in charging income under Case V of Schedule D, or

(b) if an election is made in accordance with section 305(1)(b) in respect of those allowances or part of those allowances, the balance of the excess in respect of that year referred to in section 305(1)(b)(ii),

is, in accordance with section 305(1), available for deduction from or set off against the individual’s income chargeable under Case V of Schedule D for the tax year 2007, then the amount of the balance or, as the case may be, the amount of the balance of the excess (in subparagraph (2) referred to as the ‘relief forward’) which is to be treated as referable to specified reliefs shall be determined for the tax year 2007 in accordance with subparagraph (2).

(2) The amount referred to in subparagraph (1) is an amount determined in accordance with the formula—

RF x SR

TR

where—

RF is the amount of the relief forward,

SR is the aggregate of the amounts of the allowances (being allowances made in respect of a specified relief or specified reliefs) made to the individual under Chapter 1 of Part 9, including that Chapter as applied by any other provision of the Tax Acts, in charging the individual’s income for the tax year 2006 and each of the 3 preceding tax years under Case V of Schedule D, and

TR is the aggregate of the amounts of the allowances made to the individual under Chapter 1 of Part 9, including that Chapter as applied by any other provision of the Tax Acts, in charging the individual’s income for the tax year 2006 and each of the 3 preceding tax years under Case V of Schedule D.

Determination of the amount of the excess carried forward under section 384 which is referable to specified reliefs.

4. (1) Where, in accordance with section 384, an excess such as is referred to in that section is carried forward from the tax year 2006 to the tax year 2007 and is available to be deducted from or set off against the amount of the individual’s profits or gains chargeable to tax under Case V of Schedule D, then the amount of the excess so carried forward (in subparagraph (2) referred to as the ‘relief forward’) which is to be treated as referable to specified reliefs shall, for the purposes of Schedule 25B, be determined for the tax year 2007 in accordance with subparagraph (2).

(2) The amount referred to in subparagraph (1) is an amount determined in accordance with the formula—

RF x SR

TR

where—

RF is the amount of the relief forward,

SR is the aggregate of the amounts of the deductions the individual was entitled to deduct under sections 372AP and 372AU, for the tax year 2006 and each of the 3 preceding tax years, and

TR is the aggregate of the amounts of the deductions the individual was entitled to deduct under section 97(2), including deductions authorised under that section by virtue of sections 372AP and 372AU, for the tax year 2006 and each of the 3 preceding tax years.

Right to seek a different apportionment basis.

5. (1) If an individual is not satisfied with the determination of any amount under paragraphs 1 to 4 he or she may apply by notice in writing to the Revenue Commissioners for the amount to be replaced by an amount determined by reference to such longer or shorter continuous period before the tax year 2006, but always including that tax year, that in the opinion of the individual gives a more just and reasonable result.

(2) Where an application is made under subparagraph (1), the Revenue Commissioners shall issue a determination in writing to the individual either accepting the amount or amounts on the basis proposed by the individual, setting out an amount which is just and reasonable determined by reference to some other time period or confirming the amount determined under paragraphs 1 to 4.

(3) If an individual is not satisfied with the determination of the Revenue Commissioners under subparagraph (2), he or she may by notice in writing given to the Revenue Commissioners within 30 days of the receipt of the determination under subparagraph (2) appeal to the Appeal Commissioners.

(4) The Appeal Commissioners shall hear and determine an appeal made to them under subparagraph (3) as if it were an appeal against an assessment to income tax and the provisions of the Income Tax Acts relating to such appeals and to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.

(5) In considering an application under subparagraph (1) or an appeal under subparagraph (3) neither the Revenue Commissioners nor the Appeal Commissioners shall have any regard to an application or appeal that—

(a) requires specified reliefs to have been given effect to before reliefs that are not specified reliefs, unless a provision of the Tax Acts authorises such priority, or

(b) subject to subparagraphs (1) to (4), requires that an amount be determined otherwise than is provided for by this Schedule.

(6) Where an amount determined under paragraph 1, 2, 3 or 4 is replaced by an amount determined in accordance with this paragraph (in this paragraph referred to as the ‘new amount’), the new amount shall be deemed to be the amount determined under paragraph 1, 2, 3 or 4, as the case may be.”.

(4) This section applies for the year of assessment 2007 and subsequent years of assessment.