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Chapter 5
Corporation Tax
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Amendment of section 835AY of Principal Act (interest limitation)
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47. (1) Part 35D of the Principal Act is amended in section 835AY—
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(a) in subsection (1)—
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(i) by the substitution of the following definition for the definition of “finance cost element of non-finance lease payments”:
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“ ‘finance cost element of non-finance lease payments’, in respect of a company and an accounting period, means—
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(a) subject to paragraph (b), the portion of the deductible lease payment in that accounting period calculated as follows:
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P × (A – B) /A
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where—
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P is the deductible lease payment,
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A is the total expected cost of the lease, over the course of the life of the lease on the date the lease was entered into, and
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B is the value of the right of use asset recognised in the accounts under international accounting standards, or would be so recognised if accounts were prepared in accordance with international accounting standards, on the date the lease was entered into,
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but where the terms of the lease are amended during the life of the lease such that either of A or B are amended, then, for the accounting period in which that amendment was made and all successive accounting periods, A and B shall be calculated as if a new lease was entered into at the date of amendment, or
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(b) where section 299 applies in respect of a relevant lease (within the meaning of section 299(1A)), the amount calculated in accordance with section 299(3)(c)(i) in respect of the relevant lease;”,
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(ii) by the substitution of the following definition for the definition of “finance element of finance lease payments”:
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“ ‘finance element of finance lease payments’, in respect of a company and an accounting period, means—
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(a) subject to paragraphs (b) and (c), the portion of the deductible, or taxable, finance lease payment, as the case may be, in that accounting period calculated as follows:
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P × (A/B)
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where—
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P is the deductible, or taxable, finance lease payment, as the case may be,
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A is the expected total finance cost, or finance income, as the case may be, which will be recognised in the accounts under generally accepted accounting practice over the course of the life of the lease on the date the lease was entered into, and
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B is the total expected cost of the lease, or income of the lease, as the case may be, over the course of the life of the lease on the date the lease was entered into,
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but where the terms of the lease are amended during the life of the lease such that either of A or B are amended, then, for the accounting period in which that amendment was made and all successive accounting periods, A and B shall be calculated as if a new lease was entered into at the date of amendment,
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(b) where a claim is made under section 80A(2), in respect of a relevant short-term lease (within the meaning of section 80A), the amount calculated in accordance with section 80A(2)(a) in respect of the relevant short-term lease, or
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(c) where section 299 applies in respect of a relevant lease (within the meaning of section 299(1A))—
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(i) in respect of a lessee, the amount calculated in accordance with section 299(3)(c)(i) in respect of the relevant lease, or
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(ii) in respect of a lessor, the amount calculated in accordance with section 299(4)(a) in respect of the relevant lease;”,
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and
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(iii) by the substitution of the following definition for the definition of “finance income element of non-finance lease payments”:
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“ ‘finance income element of non-finance lease payments’, in respect of a company and an accounting period, means—
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(a) subject to paragraph (b), the portion of the taxable lease payment in that accounting period calculated as follows:
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P × (A – B) /A
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where—
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P is the taxable lease payment,
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A is the total expected income of the lease, over the course of the life of the lease on the date the lease was entered into, and
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B is the value of the leased asset recognised in the accounts under generally accepted accounting practice on the date the lease was entered into less the expected depreciated value of the leased asset at the end of the lease, determined in accordance with the accounting policy in the financial statements for the year in which the lease is entered into,
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but where the terms of the lease are amended during the life of the lease such that either of A or B are amended, then, for the accounting period in which that amendment was made and all successive accounting periods, A and B shall be calculated as if a new lease was entered into at the date of amendment, or
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(b) where section 299 applies in respect of a relevant lease (within the meaning of section 299(1A)), the amount calculated in accordance with section 299(4)(b) in respect of the relevant lease;”,
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and
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(b) by the insertion of the following subsection after subsection (3):
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“(4) (a) Subject to paragraph (b), where a disallowable amount or total spare capacity is calculated in a currency (in this paragraph referred to as the ‘first-mentioned currency’) other than the currency of the State, and is carried forward to a subsequent accounting period as—
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(i) deemed borrowing cost pursuant to section 835AAD, or
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(ii) total spare capacity pursuant to section 835AAE,
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the disallowable amount or total spare capacity carried forward, as the case may be, shall be expressed in the first-mentioned currency for the purposes of the calculations required under this Part.
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(b) Where in an accounting period there is a change in the currency (in this paragraph referred to as the ‘old currency’) in which a company calculates interest equivalent, or a portion thereof, and the company calculates interest equivalent or a portion thereof in another currency (in this paragraph referred to as the ‘new currency’), the amount, if any, carried forward into that accounting period as—
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(i) deemed borrowing cost pursuant to section 835AAD, or
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(ii) total spare capacity pursuant to section 835AAE,
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shall be expressed in terms of the new currency for the purposes of the calculations required under this Part by reference to the average representative rate of exchange of the old currency for the new currency in the accounting period in which the deemed borrowing cost or total spare capacity, as the case may be, arose.
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(c) In this subsection, ‘representative rate of exchange’ has the same meaning as in section 402.”.
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(2) Subsection (1) shall apply in respect of an accounting period commencing on or after 1 January 2025.
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