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Income tax: treatment of profits or gains and losses from dealing in residential development land.
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6.— Part 22 of the Principal Act is amended—
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(a) in section 644A by inserting the following after subsection (5):
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“(6) This section shall not apply to profits or gains arising to a person in the year of assessment 2009 or in any subsequent year of assessment.”,
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and
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(b) by inserting the following after section 644A:
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“Treatment of losses from dealing in residential development land.
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644AA.— (1) In this section—
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‘ adjusted income ’ for a tax year means a person’s income from all sources for the tax year after taking into account any allowance, charge, deduction or loss attributable to a specific source to which the person is entitled in taxing the income from the source or which is required to be made in taxing the person’s income from the source, but without taking into account any allowance, charge, deduction or loss to which the person is entitled, or which is required to be made, in taxing the person’s income from all sources;
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‘ adjusted profits or gains ’ in relation to a trade for a tax year means the amount, if any, of the profits or gains from the trade after taking into account any allowance, charge, deduction or loss to which a person is entitled in taxing the trade or which is required to be made in taxing the trade, and references to the adjusted profits or gains from the combined trade or from the non-specified trade shall be construed accordingly;
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‘ combined trade ’ means a trade comprising partly of a specified trade and partly of a non-specified trade;
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‘ non-specified trade ’, in relation to a combined trade, means the activities and operations of the combined trade that are the part of the trade that is not a specified trade;
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‘ relevant loss ’, in relation to a tax year, means—
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(a) in the case of a specified trade, the full amount of a loss sustained in the specified trade in the tax year, and
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(b) in the case of a combined trade, so much of the amount of a loss sustained in the combined trade in the tax year as is attributable to a specified trade;
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‘specified trade’ means, as the case may be, a trade, or the part of a combined trade, the profits or gains, if any, of which, for a tax year before the tax year 2009, were chargeable to tax in accordance with section 644A(3) (other than by virtue of subsection (5) of that section);
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‘ tax ’ means income tax;
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‘ tax year ’ means a year of assessment.
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(2) For the purposes of subsections (3) to (8), where a trade is a combined trade, the part of the trade which is a specified trade and the part of the trade which is a non-specified trade shall each be treated as a separate trade and where, in order to give effect to the provisions of subsections (3) to (8), an apportionment of the total amount receivable from sales made and services rendered in the course of a combined trade and of expenses incurred in that trade is required to be made, such apportionment shall be made in a manner that is just and reasonable.
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(3) Where, in respect of a tax year before the tax year 2009, a claim is made by a person (in this subsection and subsections (4) to (7) referred to as the ‘ claimant ’) in accordance with subsection (6) of section 381, which claim is in respect of, or includes, a relevant loss, then, notwithstanding subsection (1) of that section, unless the claim is made to and received by the Revenue Commissioners before 7 April 2009, that subsection shall not apply to so much of the loss as is a relevant loss and the claimant shall instead be entitled as regards the relevant loss to such repayment of tax as is provided for by subsection (4).
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(4) (a) In relation to the relevant loss referred to in subsection (3), the repayment of tax to which the claimant is entitled shall be such amount as is necessary to secure that the aggregate amount of tax for the tax year ultimately borne by the claimant does not exceed the amount which would have been borne by the claimant if the interim amount of tax payable by the claimant for the tax year had been reduced by the amount (in this section referred to as the ‘tax credit’) determined in accordance with subsection (5).
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(b) For the purposes of this subsection and subsections (6)(a) and (7)(a), the references to the ‘interim amount of tax payable by the claimant for the tax year’ shall be taken to mean the tax which would have been borne by that person for that tax year following any reduction in the income of that person for that tax year, to which the person is entitled in accordance with section 381(1), by—
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(i) so much of the amount of a loss arising in a combined trade as is attributable to the non-specified trade, and
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(ii) the amount of any other loss (other than the amount of the relevant loss).
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(5) The tax credit referred to in subsection (4) shall be an amount equivalent to the amount determined by the formula—
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A × 20
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100
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where A is the amount of the relevant loss.
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(6) (a) Notwithstanding section 382, to the extent that relief has not been fully given under subsection (4) in respect of a relevant loss due to the interim amount of tax payable by the claimant for the tax year being less than the tax credit provided by that subsection, the claimant may claim that the unused portion of the tax credit (in this section referred to as the ‘excess tax credit’) shall be carried forward and, insofar as may be, used to reduce the amount of tax payable on the profits or gains on which that person is assessed under Schedule D in respect of the combined trade for any subsequent tax year.
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(b) Any relief under this subsection shall be given as far as possible from the tax payable for the first subsequent tax year and, in so far as it cannot be so given, from the tax payable for the next tax year and so on.
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(7) (a) For the purposes of subsection (6)(a) but subject to paragraph (b), where in a subsequent tax year to which an excess tax credit is carried forward a person’s income comprises profits or gains from a combined trade and other income, the amount of tax payable on the profits or gains from the combined trade for the tax year shall be taken to be an amount equivalent to the amount determined by the formula—
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B × C
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D
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where—
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B is the interim amount of tax payable by the claimant for the tax year,
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C is the adjusted profits or gains from the combined trade for the tax year, and
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D is the claimant’s adjusted income for the tax year.
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(b) For the purposes of subsection (6)(a), where the tax year to which an excess tax credit is carried forward is a tax year before the tax year 2009, any excess tax credit shall be used to reduce—
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(i) firstly, the amount of tax, if any, payable in accordance with section 644A(3) on the profits or gains of the specified trade for that tax year, and
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(ii) secondly, where following the application of subparagraph (i), all or part of the excess tax credit remains unused, the amount of tax payable on the non-specified trade calculated in accordance with paragraph (a) but on the assumption that the following definition was substituted for the definition of C in the formula in that paragraph:
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‘C is the adjusted profits or gains from the non-specified trade for the tax year, and’.
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(8) (a) Where a claim under section 382 is made in respect of a relevant loss, or part of a relevant loss, sustained in a tax year before the tax year 2009 (other than a relevant loss to which a claimant is entitled to a repayment of tax under subsection (4)) then, notwithstanding subsection (1) of that section, unless the claim is made to and received by the Revenue Commissioners before 7 April 2009, that subsection shall not apply, and instead the claimant shall, in relation to the amount of the relevant loss to which the claim relates, be entitled to carry forward a tax credit determined in accordance with paragraph (b).
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(b) The amount of the tax credit referred to in paragraph (a) shall be an amount equivalent to the amount determined by the formula—
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E × 20
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100
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where E is the relevant loss, or the part of the relevant loss, in respect of which the claim under section 382 relates.
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(c) The amount of the tax credit a claimant is entitled to carry forward in accordance with paragraph (a) shall be treated as an excess tax credit of the kind referred to in subsection (6)(a).
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(9) (a) Where a claim to relief under section 385 is made in respect of a terminal loss sustained in a combined trade, then, for the purposes of subsection (1) of that section, unless the claim is made to and received by the Revenue Commissioners before 7 April 2009, that subsection shall apply in relation to so much of the terminal loss as is attributable to the period before 1 January 2009, as if the part of the combined trade which was a specified trade and the part of the combined trade which was a non-specified trade were each separate trades and sections 386 to 389 shall apply accordingly.
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(b) Where, in order to give effect to the provisions of paragraph (a), an apportionment of the total amount receivable from sales made and services rendered in the course of a combined trade and of expenses incurred in that trade is required to be made, such apportionment shall be made in a manner that is just and reasonable.”.
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