Finance Act, 1946

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Allowance for scientific research.

5.—(1) In this section—

the expression “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge;

the word “asset” includes a part of an asset;

the expression “expenditure on scientific research” does not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research.

(2) Where a person carrying on a trade either—

(a) incurs, on or after the 6th day of April, 1946, non-capital expenditure on scientific research relating to the trade, or

(b) pays, on or after that date, any sum to a body carrying on scientific research and approved for the purposes of this section by the Minister for Finance or to an Irish university, in order that such body or university may undertake scientific research relating to the trade,

then, the expenditure so incurred or the sum so paid shall be deducted as an expense in computing the profits or gains of the trade.

(3) Where—

(a) on or after the 6th day of April, 1946, a person incurs capital expenditure on scientific research, and

(b) either—

(i) he is then carrying on a trade to which such expenditure relates, or

(ii) he subsequently sets up and commences a trade which is related to such research, and

(c) he applies to the inspector of taxes for an allowance under this subsection in respect of the said expenditure, and

(d) he so applies—

(i) in case the expenditure was incurred by him while carrying on the trade, within twelve months after the end of the year of assessment in which it was incurred, or

(ii) in case the expenditure was incurred by him before the setting up and commencement of the trade, within twelve months after the end of the year of assessment in which the trade was set up and commenced,

then, subject to the provisions of this section, there shall be allowed as a deduction in charging the profits or gains of the trade for the year of assessment mentioned in whichever of subparagraphs (i) and (ii) of paragraph (d) of this subsection is applicable, and for each of the four following years of assessment, a sum equal to one-fifth of the amount of the expenditure.

(4) Where an asset, representing capital expenditure on scientific research, ceases at any time from any cause whatever to be used for such research, relating to the trade carried on by the person who incurred the expenditure, then—

(a) no allowance under this section in respect of that expenditure shall be made for any year of assessment after that in which the cessation takes place;

(b) if the total of the following, namely, the allowances already made under this section in respect of that expenditure and the value of the asset immediately before the cessation, is less than the said expenditure, there shall be allowed as a deduction in charging the profits or gains of the trade for the year of assessment in which the cessation takes place an additional allowance equal to the amount of the deficiency;

(c) if the said total exceeds the said expenditure, the amount of the excess or the total of the allowances so made, whichever is the less, shall be treated as a trading receipt of the trade accruing immediately before the cessation;

(d) in the application of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, to a claim in respect of the asset for any year of assessment after that in which the cessation takes place, the actual cost of the asset shall be treated as being reduced by the total of the allowances granted in respect of the asset under this section; and

(e) in the application of Rule 7 of the said Rules to any such claim, the cost of the asset shall be treated as being reduced by the said total.

(5) Where an allowance under this section is granted to a person for any year of assessment in respect of expenditure represented wholly or partly by assets, then, for that year of assessment—

(a) no deduction in respect of those assets shall be allowed to that person under Rule 6 or Rule 7 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, or under section 18 of the Finance Act, 1919 , or under section 3 of the Finance Act, 1942 (No. 14 of 1942), or under section 8 of the Finance Act, 1944 (No. 18 of 1944), and

(b) paragraph (2) of Rule 5 of the said Rules shall have effect as regards those assets as if the proviso to the said paragraph were omitted therefrom.

(6) Paragraph (3) of Rule 6 of the Rules applicable to Cases I and II of Schedule D of the Income Tax Act, 1918, and section 4 of the Finance Act, 1937 (No. 18 of 1937), shall apply in relation to an allowance under subsection (3) of this section as they apply in relation to deductions in respect of wear and tear of plant and machinery.

(7) For the purposes of this section expenditure shall not be regarded as incurred by a person in so far as it is, or is to be, met directly or indirectly out of moneys provided by the Oireachtas or by any person other than the first-mentioned person.

(8) The same expenditure shall not be taken into account for any of the purposes of this section in relation to more than one trade.