Finance Act 2007

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Amendment of Chapter 1 (transfer of assets abroad) of Part 33 of Principal Act.

44.— (1) Chapter 1 of Part 33 of the Principal Act is amended—

(a) in section 806—

(i) in subsection (1), in the definition of “associated operation” by inserting “and for the purposes of this definition it is immaterial whether the operation is effected before, after, or at the same time as the transfer;” after “any such assets;”,

(ii) in subsection (2)—

(I) by deleting “and” at the end of paragraph (b) and by substituting “transferred,” for “transferred.” at the end of paragraph (c), and

(II) by inserting the following after paragraph (c):

“(d) the income that becomes payable to, or has become income of, a person resident or domiciled out of the State that is referred to in subsection (3) or (5) or in section 807A(1) includes any income which becomes payable to, or has become income of, the person by virtue or in consequence of—

(i) the transfer,

(ii) one or more associated operations, or

(iii) the transfer and one or more associated operations,

and

(e) the income which an individual has power to enjoy, as referred to in subsection (4), includes any income which that individual has power to enjoy by virtue or in consequence of—

(i) the transfer,

(ii) one or more associated operations, or

(iii) the transfer and one or more associated operations.”,

(iii) in subsection (8) by substituting “Subject to section 807B, subsections (4) and (5)” for “Subsections (4) and (5)”,

(iv) in subsection (9), by substituting “subsection (8) or (10) or section 807B or 807C” for “subsection (8)”, and

(v) by inserting the following after subsection (9):

“(10) (a) In this subsection—

‘ commercial transaction ’ does not include—

(i) a transaction on terms other than those that would have been made between independent persons dealing at arm’s length, or

(ii) a transaction that would not have been entered into between independent persons dealing at arm’s length;

‘ independent persons ’ means persons who are not connected with each other (within the meaning of section 10);

‘ relevant transactions ’ means—

(i) the transfer, and

(ii) any associated operations.

(b) Subject to section 807B, subsections (4) and (5) shall not apply by reference to the relevant transactions where the individual shows in writing or otherwise to the satisfaction of the Revenue Commissioners—

(i) that it would not be reasonable to draw the conclusion, from all the circumstances of the case, that the purpose of avoiding liability to taxation was the purpose, or one of the purposes, for which the relevant transactions or any of them were effected, or

(ii) in a case where the condition in subparagraph (i) is not met, that—

(I) all the relevant transactions were genuine commercial transactions, and

(II) it would not be reasonable to draw the conclusion, from all the circumstances of the case, that any one or more of those transactions was more than incidentally designed for the purpose of avoiding liability to taxation.

(c) The intentions and purposes of any person who, whether or not for consideration—

(i) designs or effects the relevant transactions or any of them, or

(ii) provides advice in relation to the relevant transactions or any of them,

are to be taken into account in determining the purposes for which those transactions or any of them were effected.

(d) A relevant transaction is a commercial transaction only if it is effected—

(i) in the course of a trade or business, or

(ii) with a view to setting up and commencing a trade or business,

and, in either cases, for the purposes of such trade or business.

(e) For the purposes of paragraph (d), the making and managing of investments, or the making or managing of investments, is not a trade or business except to the extent that—

(i) the person by whom it is done, and

(ii) the person for whom it is done,

are independent persons dealing at arm’s length.

(f) Any associated operation that would not (apart from this paragraph) fall to be taken into account for the purposes of this subsection shall be taken into account for those purposes if, were it to be so taken into account, the conditions in paragraph (b) would be failed by reference to—

(i) that associated operation, or

(ii) that associated operation taken together with the transfer or any one or more other associated operations.”,

(b) by inserting the following after section 807A:

“Certain transitional arrangements in relation to transfer of assets abroad.

807B.— (1) In this section—

‘ new transaction ’ means a relevant transaction effected on or after the relevant date;

‘ old transaction ’ means a relevant transaction effected before the relevant date;

‘ relevant date ’ means 1 February 2007;

‘ relevant transactions ’ has the meaning assigned to it by section 806(10).

(2) For the purposes of applying subsection (3) of this section and subsections (8) and (10) of section 806—

(a) if all the relevant transactions are old transactions, section 806(8) shall apply,

(b) if all the relevant transactions are new transactions, section 806(10) shall apply,

(c) if any one or more of the relevant transactions are old transactions and any one or more of the relevant transactions are new transactions, sections 806 and 807A shall apply subject to subsection (3).

(3) (a) Where—

(i) the conditions in section 806(8) are failed by reference to the old transactions or any of them, or

(ii) the conditions in section 806(10)(b) are failed by reference to the new transactions or any of them,

then, subject to paragraph (b), sections 806 and 807A apply as they would have applied apart from any exemption by virtue of this section or by virtue of section 806(8) or section 806(10).

(b) Where paragraph (a) applies by virtue only of subparagraph (ii) of that paragraph—

(i) for the purposes of subsection (4) or (5)(b) of section 806 any income arising before the relevant date shall not be brought into account as income of the person resident or domiciled out of the State,

(ii) for the purposes of section 807A—

(I) (A) where a benefit is received by an individual in a year of assessment ending after the relevant date, and

(B) relevant income (within the meaning of section 807A(3)) of years of assessment up to and including that year falls to be determined,

then years of assessment ending before the relevant date are to be brought into account as well as years of assessment ending after that date, and

(II) a benefit received by an individual in the year of assessment 2007 is to be left out of account to the extent that, on a time apportionment basis, it fell to be enjoyed in any part of the year that falls before the relevant date.

Supplementary provisions in relation to section 806 — apportionment in certain cases.

807C.— (1) In this section—

‘ appropriate exemption ’ means an exemption by virtue of subsection (8)(b) or (10)(b)(ii) of section 806;

‘ exempt year of assessment ’ means a year of assessment referred to in subsection (2)(b) in respect of which there was no earlier year of assessment where—

(a) the individual was liable to tax by virtue of section 806, or

(b) the individual would have been liable to tax by virtue of section 806 if there had been any deemed income of such individual under that section;

‘ relevant transactions ’ has the meaning assigned to it by section 806(10).

(2) This section applies where an individual is liable to income tax by virtue of section 806 for a year of assessment and—

(a) the individual is so liable by virtue of the conditions in section 806(10)(b)(ii) not being met,

(b) since the making of the transfer there have been one or more years of assessment where the circumstances were such that, so far as relating to such of the relevant transactions as were effected before the end of the year of assessment concerned, the individual—

(i) was not liable to tax by virtue of section 806 because an appropriate exemption applied, or

(ii) would not have been liable to tax by virtue of section 806 if there had been any deemed income of such individual under that section because an appropriate exemption would have applied,

and

(c) the income by reference to which the individual is so liable is attributable—

(i) partly to relevant transactions by reference to which the appropriate exemption applied for the last exempt year of assessment, and

(ii) partly to associated operations not falling within subparagraph (i) (in this section referred to as ‘chargeable operations’).

(3) Where this section applies, the liability of the individual shall be reduced as if it fell to be determined by reference to so much of the income as appears to the Revenue Commissioners, or such officer as the Revenue Commissioners may appoint, to be justly and reasonably attributable to chargeable operations in all the circumstances of the case.

(4) The facts and matters that may be taken into account in determining for the purposes of subsection (3) whether income may be regarded as justly and reasonably attributable to chargeable operations include whether, and to what extent, the chargeable operations or any of them directly or indirectly affect—

(a) the character, description or amount of any income of any person,

(b) any person’s power to enjoy any income, or

(c) the character, description or amount of any income which a person has power to enjoy.”,

(c) in section 807A(7), by substituting “Subsections (8), (9) and (10)” for “Subsections (8) and (9)”, and

(d) in section 808, in subsections (2) and (3)(b), by substituting “sections 806, 807, 807A, 807B, 807C and 809” for “sections 806, 807, 807A and 809” in each place where it occurs.

(2) This section has effect as respects relevant transactions (within the meaning of section 806(10)(a) of the Principal Act) on or after 1 February 2007.