Finance Act 2010
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Specified financial transactions. |
39.— The Principal Act is amended by inserting the following after Part 8— | |
“PART 8A | ||
Specified Financial Transactions | ||
Chapter 1 | ||
Interpretation | ||
Interpretation. | ||
267N.— (1) For the purpose of this Part— | ||
‘asset’ has the same meaning as in section 532; | ||
‘charges on income’ has the same meaning as in section 243; | ||
‘credit return’ means— | ||
(a) in the case of a credit transaction within the meaning of paragraph (a) or (b) of the definition of ‘credit transaction’, the excess of the consideration accruing to the finance undertaking from the borrower in respect of the asset over the consideration paid or payable by the finance undertaking for that asset, and | ||
(b) in the case of a credit transaction within the meaning of paragraph (c) of the definition of ‘credit transaction’, the excess of the consideration (including any consideration paid or payable for the use of the asset during the period of the arrangement) accruing to the finance undertaking from the borrower in respect of the interest of the finance undertaking in the asset over the consideration paid or payable by the finance undertaking for that asset; | ||
‘credit transaction’ means— | ||
(a) an arrangement whereby a finance undertaking acquires an asset for the purpose of disposing of the full interest in that asset to a borrower in circumstances where— | ||
(i) the consideration paid or payable by the borrower exceeds the consideration paid or payable by the finance undertaking for the asset, | ||
(ii) all or part of that consideration is not required to be paid until a date later than the date of the disposal, and | ||
(iii) the excess of the consideration paid or payable to the finance undertaking by the borrower in respect of the asset over the consideration paid or payable by the finance undertaking for the asset is equivalent to the return on a loan of money at interest, | ||
(b) an arrangement whereby a finance undertaking acquires an asset and— | ||
(i) immediately disposes of its full interest in that asset to a borrower for a consideration which exceeds the consideration paid or payable by the finance undertaking for the asset, | ||
(ii) the borrower acquires and immediately disposes of the full interest in that asset to another person for a consideration which is at least 95 per cent of the consideration paid or payable by the finance undertaking for the acquisition of that asset, | ||
(iii) all or part of the consideration for the acquisition of the asset by the borrower is not required to be paid by the borrower until a date later than the date of the purchase of the asset, and | ||
(iv) the excess of the consideration paid or payable to the finance undertaking by the borrower in respect of the asset over the consideration paid or payable by the finance undertaking for the asset is equivalent to the return on a loan of money at interest, | ||
or | ||
(c) an arrangement whereby— | ||
(i) a finance undertaking and a borrower jointly acquire an asset, or | ||
(ii) a finance undertaking acquires an interest in an asset from a borrower, in circumstances where the borrower retains an interest in that asset, | ||
on terms whereby— | ||
(I) the borrower— | ||
(A) in the circumstances referred to in subparagraph (i) has exclusive use of the asset immediately and, in the circumstances referred to in subparagraph (ii), retains exclusive use of the asset immediately, as the case may be, | ||
(B) is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including any increase in the value of the asset), and | ||
(C) agrees to make payments to the finance undertaking amounting to the aggregate of the consideration paid or payable by the finance undertaking for the acquisition of its interest in the asset and any consideration paid or payable by the borrower for the use of the asset during the period of the arrangement, | ||
(II) the excess of the consideration (including any consideration paid or payable for the use of the asset during the period of the arrangement) accruing to the finance undertaking from the borrower in respect of the interest of the finance undertaking in the asset over the consideration paid or payable by the finance undertaking for the asset is equivalent to the return on a loan of money at interest, and | ||
(III) the finance undertaking’s interest in the asset passes either immediately or by the end of a specified period of time, to the borrower for a consideration which exceeds the consideration paid by the finance undertaking for the asset; | ||
‘deposit transaction’ means a transaction whereby— | ||
(a) a person deposits a sum of money with a relevant deposit taker on terms under which it or any part of it may be repaid, either on demand or at a time or in circumstances agreed by or on behalf of the person making the deposit and the relevant deposit taker, | ||
(b) the relevant deposit taker makes or credits a payment or a series of payments (in this Part referred to as the ‘deposit return’) over a period of time to the person— | ||
(i) out of any profit resulting from the use of that money, and | ||
(ii) in proportion to the money deposited by the person; | ||
‘finance company’ means a company whose income consists of either or both of the following— | ||
(a) income from the leasing of plant and machinery, and | ||
(b) income from the carrying on of specified financial transactions; | ||
‘financial institution’ has the same meaning as in section 891B; | ||
‘finance undertaking’ means a finance company or a financial institution; | ||
‘investment certificate’ means a security which— | ||
(a) is issued by a qualifying company to a person in order to establish the claim of that person over the rights and obligations represented by the certificate, | ||
(b) entitles the owner to an amount equivalent to a share in the profits or losses derived from an asset held by the qualifying company which issued the certificate, in proportion to the number and value of the certificates owned, | ||
(c) is issued to the public, and | ||
(d) is wholly or partly treated in accordance with generally accepted accounting practice as a financial liability of the qualifying company which issued the certificate; | ||
‘investment return’ means— | ||
(a) the excess (if any) of the consideration paid by the qualifying company on redemption of an investment certificate over the consideration paid in respect of that certificate by the beneficial owner to whom the certificate was first issued, and | ||
(b) any other payments (if any) made from time to time by the qualifying company to the beneficial owner from profits or gains derived by the qualifying company from the asset and in consideration of the holding of the investment certificate; | ||
‘ investment transaction ’ means a transaction whereby a person acquires investment certificates and receives an investment return; | ||
‘loan’ means any loan or advance or any other arrangement whatever by virtue of which an amount equivalent to interest is paid or payable; | ||
‘ owner ’, in relation to any security, means at any time the person who would be entitled, if the securities were redeemed at that time by the issuer, to the proceeds of the redemption, and ‘owned’ shall be construed accordingly; | ||
‘public’ means individuals generally, companies generally, or individuals and companies generally; | ||
‘ qualifying company ’ means a company which— | ||
(a) is resident in the State, | ||
(b) issues investment certificates to investors, and | ||
(c) redeems the investment certificates after a specified period of time; | ||
‘relevant deposit’, ‘relevant deposit taker’ and ‘relevant interest’ have, respectively, the meanings assigned to them by section 256; | ||
‘specified financial transaction’ means— | ||
(a) a credit transaction, | ||
(b) a deposit transaction, or | ||
(c) an investment transaction, | ||
but a transaction shall not be a specified financial transaction if the terms of the transaction are not such as would reasonably have been expected if the parties to the transaction were independent persons acting at arm’s length. | ||
(2) Any reference in this Part to consideration— | ||
(a) paid or payable by a borrower or a finance undertaking shall be construed as a reference to the aggregate of amounts paid or payable by the borrower or finance undertaking, as the case may be, | ||
(b) shall not include any amount in respect of which a borrower or a finance undertaking may claim— | ||
(i) a deduction under section 12 of the Value-Added Tax Act 1972 , or | ||
(ii) a refund of value-added tax under an order under section 20(3) of that Act, | ||
and | ||
(c) shall not include any amount chargeable by a finance undertaking in respect of fees, charges or similar payments. | ||
Chapter 2 | ||
Credit Return | ||
Treatment of credit return. | ||
267O.— (1) Subject to section 130, a credit return shall be treated for all the purposes of the Tax Acts as if it were interest paid or payable, as the case may be, on a loan made by the finance undertaking to the borrower, or a security issued by the borrower to the finance undertaking, as the case may be, and the return shall be chargeable to tax accordingly. | ||
(2) The amount of the credit return shall not be regarded as expenditure on an asset for the purpose of an allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9. | ||
(3) The amount of the credit return shall not be regarded as expenditure on an asset for the purpose of section 552. | ||
Treatment of credit transaction. | ||
267P.— (1) A reference to a loan in section 122 or in Part 8 shall be deemed to include a reference to a credit transaction. | ||
(2) Acquisitions and disposals of an asset by the finance undertaking for the purpose of a credit transaction, within the meaning of paragraph (a) or (b) of the definition of ‘credit transaction’ in section 267N shall, where the finance undertaking is carrying on a trade which consists of or includes specified financial transactions, be regarded as made in the course of that trade. | ||
(3) The borrower shall not be treated as having incurred a loss, for any purpose of the Tax Acts, on the disposal of the asset in the circumstances referred to in paragraph (b)(ii) of the definition of ‘credit transaction’ in section 267N. | ||
(4) The finance undertaking shall not be entitled to any allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9, in respect of expenditure incurred on assets acquired for the purpose of entering into a credit transaction. | ||
(5) Where an asset is acquired by a borrower under a credit transaction, in the circumstances referred to in paragraph (c)(i) of the definition of ‘credit transaction’ in section 267N, the borrower shall be deemed to have acquired the full interest in that asset for the purpose of claiming any allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9. | ||
(6) The disposal of the borrower’s interest in the asset to the financial undertaking, in the circumstances referred to in paragraph (c)(ii) of the definition of ‘credit transaction’ in section 267N, shall not be construed as an event giving rise to an allowance or charge, as the case may be, within the meaning of section 274 or 288. | ||
(7) The acquisition of an asset by the borrower, in the circumstances referred to in paragraph (c)(III) of the definition of ‘credit transaction’ in section 267N, shall not be construed as expenditure on an asset for the purpose of claiming any allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9. | ||
(8) Except in respect of a claim to any allowance referred to in subsection (5), no part of the consideration paid or payable by the borrower to the finance undertaking, other than an amount equal to the credit return, may be treated by the borrower as an amount which may be deducted in the computation of the profits or gains to be charged to tax under Schedule D. | ||
Chapter 3 | ||
Deposit Return | ||
Treatment of deposit return. | ||
267Q.— Subject to section 130, a deposit return shall be treated for all the purposes of the Tax Acts as if it were relevant interest paid on a deposit of money and for this purpose— | ||
(a) Chapter 4 of Part 8 shall apply to the deposit return as if it were relevant interest on a relevant deposit, and | ||
(b) the relevant deposit taker shall not be regarded as carrying on a trade in partnership with the beneficial owner of the deposit for the purposes of Part 43 merely by virtue of the deposit arrangement. | ||
Chapter 4 | ||
Investment Certificates and Returns | ||
Treatment of investment return. | ||
267R.— Subject to section 130, the Tax Acts shall apply to an investment return as if that investment return were interest on a security and the return shall be chargeable to tax accordingly. | ||
Treatment of certificate owner. | ||
267S.— (1) For the purposes of the Tax Acts, the owner of the investment certificate shall not be regarded as having a legal or beneficial interest in the assets held by the qualifying company. | ||
(2) Income, profits, gains or losses arising from or attributable to the assets held by the qualifying company (including any increase or decrease in the value of the asset) shall be income, profits, gains or losses, as the case may be, of the qualifying company and the qualifying company shall be chargeable to corporation tax accordingly. | ||
(3) The owner of the investment certificate shall not be entitled to an allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9 in respect of expenditure on the assets held by the qualifying company. | ||
Chapter 5 | ||
Reporting | ||
Reporting. | ||
267T.— Part 38 in so far as it relates to the reporting of interest payments shall apply to a deposit return, a credit return or an investment return as if that return were an interest payment. | ||
Chapter 6 | ||
Application | ||
Application. | ||
267U.— (1) This Part shall apply to a specified financial transaction between a finance undertaking or a qualifying company, as the case may be, and another person where the finance undertaking or the qualifying company, as the case may be, makes an election in writing to the inspector (within the meaning of section 950). | ||
(2) An election under this section— | ||
(a) shall be made in a form approved by the Revenue Commissioners and containing such particulars relating to the finance undertaking or the qualifying company, as the case may be, and the transaction as may be specified in that form, and | ||
(b) may be made either in respect of an individual transaction or in respect of a series of transactions of a similar nature. | ||
(3) Where an election is made in accordance with this section— | ||
(a) this Part shall apply to that transaction or series of transactions, and | ||
(b) the finance undertaking or the qualifying company, as the case may be, shall notify any borrower or owner, as the case may be, who is a party to a specified financial transaction, that the transaction is a specified financial transaction. | ||
Transactions to avoid tax. | ||
267V.— This Part shall not apply to any transaction unless that transaction has been undertaken for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is avoidance of liability to income tax, corporation tax, capital gains tax, value-added tax, stamp duty or capital acquisitions tax.”. |