Finance Act, 1986

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Number 13 of 1986

FINANCE ACT, 1986

ARRANGEMENT OF SECTIONS

PART I

Income Tax, Corporation Tax and Capital Gains Tax

Chapter I

Income Tax

Chapter II

Taxation of Farming Profits

Chapter III

Relief for Investment in Research and Development

Chapter IV

Interest Payments by Certain Deposit Takers

Chapter V

Urban Renewal: Relief from Income Tax and Corporation Tax

Chapter VI

Income Tax, Corporation Tax and Capital Gains Tax

Chapter VII

Corporation Tax

Chapter VIII

Capital Gains Tax

PART II

Customs and Excise

PART III

Value-Added Tax

PART IV

Stamp Duties

PART V

Capital Acquisitions Tax

Chapter I

Discretionary Trusts

Chapter II

General

PART VI

Miscellaneous

FIRST SCHEDULE

Amendment of Enactments

SECOND SCHEDULE

Approved Share Option Schemes

THIRD SCHEDULE

Tax Appropriate to the Profits or Gains from Farming

FOURTH SCHEDULE

Urban Renewal: Relief from Income Tax and Corporation Tax

PART I

Interpretation

PART II

Description of Custom House Docks Area

PART III

Description of Designated Areas of Dublin (other than the Custom House Docks Area)

PART IV

Description of Designated Areas of Cork

PART V

Description of Designated Area of Limerick

PART VI

Description of Designated Area of Waterford

PART VII

Description of Designated Area of Galway

FIFTH SCHEDULE

Rates of Excise Duty on Tobacco Products

SIXTH SCHEDULE

Rates of Excise Duty on Cider and Perry

SEVENTH SCHEDULE

Rates of Excise Duty on Spirits

EIGHTH SCHEDULE

Rates of Excise Duty on Wine and Made Wine

Number 13 of 1986

FINANCE ACT, 1986

AN ACT TO CHARGE AND IMPOSE CERTAIN DUTIES OF CUSTOMS AND INLAND REVENUE (INCLUDING EXCISE), TO AMEND THE LAW RELATING TO CUSTOMS AND INLAND REVENUE (INCLUDING EXCISE) AND TO MAKE FURTHER PROVISIONS IN CONNECTION WITH FINANCE. [27th May, 1986]

BE IT ENACTED BY THE OIREACHTAS AS FOLLOWS:

PART I

Income Tax, Corporation Tax and Capital Gains Tax

Chapter I

Income Tax

Amendment of section 2 (age exemption) of Finance Act, 1980.

1.— Section 2 of the Finance Act, 1980 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution in subsection (6) of “£6,300” for “£6,000” (inserted by the Finance Act, 1985 ), of “£7,350” for “£7,000” (inserted by the Finance Act, 1985 ), of “£3,150” for “£3,000” (inserted by the Finance Act, 1985 ) and of “£3,675” for “£3,500” (inserted by the Finance Act, 1985 ), and the said subsection (6), as so amended, is set out in the Table to this section.

TABLE

(6) In this section “the specified amount” means—

(a) in a case where the individual would, apart from this section, be entitled to a deduction specified in paragraph (a) of the said section 138, £6,300:

Provided that, if at any time during the year of assessment either the individual or his spouse was of the age of seventy-five years or upwards, “the specified amount” means £7,350;

(b) in any other case, £3,150:

Provided that, if at any time during the year of assessment the individual was of the age of seventy-five years or upwards, “the specified amount” means £3,675.

Alteration of rates of income tax.

2.— Section 2 of the Finance Act, 1984 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following Table for the Table to the said section:

“TABLE

PART I

PART II

”

Personal reliefs.

3.—(1) Where a deduction falls to be made from the total income of an individual for the year 1986-87 or any subsequent year of assessment in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subsection and the amount of the deduction would, but for this section, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2).

TABLE

(2) Section 2 of the Finance Act, 1981 , section 2 of the Finance Act, 1982 , and sections 3 and 4 of the Finance Act, 1985 , shall have effect subject to the provisions of this section.

(3) The First Schedule shall have effect for the purposes of supplementing subsection (1).

Amendment of section 141 (children) of Income Tax Act, 1967.

4.—The Income Tax Act, 1967 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following section for section 141:

“Incapacitated children.

141.—(1) If the claimant proves that he has living at any time during the year of assessment any child—

(a) who is under the age of 16 years and is permanently incapacitated by reason of mental or physical infirmity, or

(b) who, if over the age of 16 years at the commencement of that year, is permanently incapacitated by reason of mental or physical infirmity from maintaining himself and had become so permanently incapacitated before he had attained the age of 21 years or had become so permanently incapacitated after attaining the age of 21 years but while he had been in receipt of full-time instruction at any university, college, school or other educational establishment,

he shall, subject to the provisions of this section, be entitled in respect of each such child to a deduction of £600:

Provided that—

(i) a child who is under the age of 16 years shall be regarded as permanently incapacitated by reason of mental or physical infirmity only if the infirmity is such that there would be a reasonable expectation that, if the child were over the age of 16 years, he would be incapacitated from maintaining himself,

(ii) in the case of a child to whom paragraph (b) applies, the deduction shall be £600 or the amount expended by the claimant in the year of assessment on the maintenance of the child, whichever is the lesser, and

(iii) any deduction under this subsection shall be in substitution for, and not in addition to, any deduction to which the claimant might be entitled in respect of the same child under section 142.

(2) If the claimant proves that for the year of assessment he has the custody of and maintains at his own expense any child who, but for the fact that he is not a child of the claimant, would be such a child as is referred to in subsection (1) and that neither he nor any other individual is entitled to a deduction in respect of the same child under subsection (1) or under any of the other provisions of this Part, or, if any other individual is entitled to such a deduction, that that other individual has relinquished his claim thereto, he shall be entitled in respect of the child to the same deduction as if the child were a child of his.

(3) (a) The reference in subsection (1) to a child receiving full-time instruction at an educational establishment shall include a reference to a child undergoing training by any person (hereafter in this subsection referred to as ‘the employer’) for any trade or profession in such circumstances that the child is required to devote the whole of his time to the training for a period of not less than two years.

(b) For the purpose of a claim in respect of a child undergoing training the inspector may require the employer to furnish particulars with respect to the training of the child in such form as may be prescribed by the Revenue Commissioners.

(4) No deduction shall be allowed under this section in respect of any child who is entitled in his own right to an income exceeding £720 a year, except that, if the amount of the excess is less than the deduction which apart from this subsection would be allowable, a deduction reduced by that amount shall be allowed:

Provided that in calculating the income of the child for the purposes of the foregoing provision no account shall be taken of any income to which the child is entitled as the holder of a scholarship, bursary, or other similar educational endowment.

(5) If any question arises as to whether any person is entitled to an allowance under this section in respect of a child who is over the age of 21 years as being a child who had become permanently incapacitated by reason of mental or physical infirmity from maintaining himself after attaining that age but while in receipt of such full-time instruction as aforesaid, the Revenue Commissioners may consult the Minister for Education.

(6) Where, for any year of assessment, two or more individuals are or would, but for the provisions of this subsection, be entitled under this section to relief in respect of the same child, the following provisions shall have effect, that is to say:—

(a) only one deduction under this section shall be allowed in respect of such child;

(b) where such child is maintained by one parent only, that parent only shall be entitled to claim such deduction;

(c) where such child is maintained jointly by both parents, each parent shall be entitled to claim such part of such deduction as is proportionate to the amount expended by him or her on the maintenance of such child; and

(d) in ascertaining for the purposes of this subsection whether a parent maintains a child and, if so, to what extent, any payment made by such parent for or towards the maintenance of such child which such parent is entitled to deduct in computing his or her total income for the purposes of this Act shall be deemed not to be a payment for or towards the maintenance of such child.

(7) In the preceding provisions of this section ‘child’ includes a stepchild and an illegitimate child whose parents have married each other after his birth and a child in respect of whom an adoption order under the Adoption Acts, 1952 to 1976, is in force.”.

Amendment of section 12 (relief for health expenses) of Finance Act, 1967.

5.— Section 12 of the Finance Act, 1967 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the insertion, in the definition of “dependant” in subsection (1), of the following after paragraph (b):

“and

(c) a child who, for the year of assessment—

(i) (I) is under the age of 16 years, or

(II) if over the age of 16 years at the commencement of the year of assessment, is receiving full-time instruction at any university, college, school or other educational establishment, and

(ii) is a child of the individual or, not being such a child, is in the custody of the individual and is maintained by the individual at his own expense for the whole or part of the year of assessment:

Provided that the provisions of subsections (3), (4), (5) and (7) of section 141 (inserted by the Finance Act, 1986) shall, with any necessary modifications, apply for the purposes of determining whether relief is to be granted under this section as they apply in determining whether a deduction is to be allowed under that section, except that in a case where the child's income exceeds the amount specified in the said subsection (4) relief under this section shall not be allowed;”.

Amendment of section 6 (special allowance in respect of P.R.S.I. for 1982-83) of Finance Act, 1982.

6.— Section 6 of the Finance Act, 1982 , shall have effect for the purpose of ascertaining the amount of income on which an individual referred to therein is to be charged to income tax for the year 1986-87, as if in subsection (2)—

(a) “1986-87” were substituted for “1982-83”, and

(b) “£286” were substituted for “£312”, in each place where it occurs.

Amendment of section 8 (permanent health benefit schemes) of Finance Act, 1979.

7.— Section 8 of the Finance Act, 1979 , is hereby amended by the insertion after subsection (5) of the following subsection:

“(6) (a) A policy of permanent health insurance, sickness insurance or other similar insurance issued in respect of an insurance made on or after the 6th day of April, 1986, shall be a permanent health benefit scheme within the meaning of this section if it conforms with a form which, at the time the policy is issued, is either—

(i) a standard form approved by the Revenue Commissioners as a standard form of permanent health benefit scheme; or

(ii) a form varying from a standard form so approved in no other respect than by making such alterations thereto as are, at the time the policy is issued, approved by the Revenue Commissioners as being compatible with a permanent health benefit scheme when made to that standard form and satisfying any conditions subject to which the alterations are so approved.

(b) In approving a policy as a standard form of permanent health benefit scheme in pursuance of paragraph (a), the Revenue Commissioners may disregard any provision of the policy which appears to them insignificant.”.

Relief for gifts to Cospóir.

8.—(1) In this section—

“Cospóir” means the National Sports Council (an Chomhairle Náisiúnta Spóirt) which was established by the Minister of State at the Department of Education on the 10th day of February, 1978;

“tax” means income tax or corporation tax, as the case may be.

(2) (a) This section applies to a gift of money which, on or after the 6th day of April, 1986, is made to the Minister for Education for the benefit of Cospóir and is not deductible in computing for the purposes of tax the profits or gains of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967 , apply.

(b) The Revenue Commissioners may consult with the Minister for Education in relation to any question which may arise in connection with paragraph (a).

(3) Where a person proves that he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (4) or, as the case may be, subsection (5) shall apply:

Provided that, in determining the net amount of the gift for the purposes of those subsections, the amount or value of any consideration received by the said person as a result of making the gift, whether received directly or indirectly from Cospóir or any other person, shall be deducted from the amount of the gift.

(4) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the net amount thereof shall, subject to subsection (5), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , the total income of the husband shall be calculated accordingly:

Provided that relief under this section shall not be given to a person for a year of assessment—

(a) if the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100, or

(b) to the extent to which the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, exceeds £10,000.

(5) Where a gift to which this section applies is made by a company—

(a) the net amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made, and

(b) the references in the proviso to subsection (4) to a year of assessment shall be construed as references to an accounting period of the company.

Tax treatment of directors of companies and employees granted rights to acquire shares or other assets.

9.—(1) (a) In this section, save where the context otherwise requires—

“company” has the meaning assigned to it by section 1 of the Corporation Tax Act, 1976 ;

“director” and “employee” have the meanings respectively assigned to them by section 13 (1) of the Finance Act, 1972 ;

“right” means a right to acquire any asset or assets including shares in any company;

“market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

“shares” includes securities (within the meaning of Part IX of the Corporation Tax Act, 1976 ) and stock.

(b) In this section—

(i) references to the release of a right include references to agreeing to the restriction of the exercise of the right;

(ii) any question whether a person is connected with another shall be determined in accordance with the provisions of section 157 of the Corporation Tax Act, 1976 ;

(iii) a person shall be regarded as acquiring a right as a director of a company or as an employee—

(I) if by reason of his office or employment it is granted to him, or to another person who assigns the right to him, and

(II) if section 76 (3) of the Income Tax Act, 1967 , does not apply in charging to tax the profits or gains of that office or employment,

and clauses (I) and (II) shall apply to a right granted by reason of a person's office or employment before he has commenced to hold it or after he has ceased to hold it as they would apply if he had commenced to hold the office or employment or had not ceased to hold the office or employment, as the case may be.

(2) Where a person realises a gain by the exercise of, or by the assignment or release of, a right obtained by that person on or after the 6th day of April, 1986, as a director of a company or employee, he shall be chargeable to tax under Schedule E for the year of assessment in which the gain is so realised on an amount equal to the amount of his gain, as computed in accordance with this section.

(3) Subject to subsection (5), where tax may by virtue of this section become chargeable in respect of any gain which may be realised by the exercise of a right, tax shall not be chargeable under any other provision of the Tax Acts in respect of the receipt of the right.

(4) The gain realised by—

(a) the exercise of any right at any time shall be taken to be the difference between the market value of the asset or assets, as the case may be, at the time of acquisition and the aggregate amount or value of the consideration, if any, given for the asset or assets and for the grant of the right, and

(b) the assignment or release of any right shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration, if any, given for the grant of the right,

and for this purpose the inspector may make a just apportionment of any entire consideration given for the grant of the right or for the grant of the right and for something besides:

Provided that neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with an office or employment, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection.

(5) (a) Where such a right as is mentioned in subsection (2) is obtained as mentioned therein, and the right is capable of being exercised later than seven years after it is obtained, subsection (3) shall not prevent the charging of tax under any other provisions of the Tax Acts in respect of the receipt of the right; but where tax is charged under any of those provisions it shall be deducted from any tax which, under subsection (2), is chargeable by reference to the gain realised by the exercise, assignment or release of the right.

(b) For the purpose of any charge to tax enabled to be made by this subsection, the value of a right shall be taken to be not less than the market value at the time the right is obtained of the asset or assets which may be acquired by the exercise of the right or of any asset or assets for which the asset or assets so acquired may be exchanged, reduced by the amount or value (or, if variable, the least amount or value) of the consideration for which the asset or assets may be so acquired.

(6) Subject to subsection (7), a person shall, in the case of a right granted by reason of his office or employment, be chargeable to tax under this section in respect of a gain realised by another person—

(a) if the right was granted to that other person, or

(b) if the other person acquired the right otherwise than by or under an assignment made by way of a bargain at arm's length, or if the two are connected persons at the time when the gain is realised,

but in a case within paragraph (b) the gain realised shall be treated as reduced by the amount of any gain realised by a previous holder on an assignment of the right.

(7) A person shall not be chargeable to tax by virtue of subsection (6) (b) in respect of any gain realised by another person if the first-mentioned person was divested of the right by operation of law on his bankruptcy or otherwise, but the other person shall be chargeable to tax in respect of the gain under Case IV of Schedule D.

(8) If a right is assigned or released in whole or in part for a consideration which consists of or comprises another right, that other right shall not be treated as consideration for the assignment or release, but this section shall apply in relation to it as it applies in relation to the right assigned or released and as if the consideration for its acquisition did not include the value of the right assigned or released but did include the amount or value of the consideration given for the grant of the right assigned or released so far as that has not been offset by any valuable consideration for the assignment or release other than the consideration consisting of the other right.

(9) (a) If as a result of two or more transactions a person ceases to hold a right and he or a connected person comes to hold another right (whether or not acquired from the person to whom the other right was assigned) and any of those transactions was effected under arrangements to which two or more persons holding rights in respect of which tax may be chargeable under this section were parties, those transactions shall be treated for the purposes of subsection (8) as a single transaction whereby the one right is assigned for a consideration which consists of or comprises the other right.

(b) This subsection applies in relation to two or more transactions, whether they involve an assignment preceding, coinciding with, or subsequent to, an acquisition.

(10) If a gain chargeable to tax under subsection (2) or subsection (6) is realised by the exercise of a right, paragraph 3 of Schedule 1 of the Capital Gains Tax Act, 1975 , shall apply as if a sum equal to the amount of the gain so chargeable to tax formed part of the consideration given by the person acquiring the shares for their acquisition by him.

(11) (a) Where, in the year 1986-87 or any subsequent year of assessment, a person grants a right in respect of which tax may become chargeable under this section, or allots any shares or transfers any asset in pursuance of such a right, or gives any consideration for the assignment or release in whole or in part of such a right, or receives written notice of the assignment of such a right, he shall deliver particulars thereof in writing to the inspector not later than thirty days after the end of that year.

(b) Schedule 15 of the Income Tax Act, 1967 , is hereby amended by the insertion in column 2 of “Finance Act, 1986, section 9 (11) (a)”.

Approved share option schemes.

10.—(1) The provisions of this section shall apply where, on or after the 6th day of April, 1986, an individual obtains a right to acquire shares in a body corporate—

(a) by reason of his office or employment as a director or employee of that or any other body corporate; and

(b) in accordance with the provisions of a scheme approved under the Second Schedule .

(2) If the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved under the Second Schedule —

(a) tax shall not be chargeable under section 9 in respect of any gain realised by the exercise of the right,

(b) if, but for this paragraph, section 9 of the Capital Gains Tax Act, 1975 , would apply, that section shall not apply in calculating the consideration for the acquisition of the shares by him or for any corresponding disposal of them to him, and

(c) as respects shares to which subsection (3) applies, and which were acquired by an individual by the exercise of the right, the period of ownership of those shares for the purposes of subsection (3) of section 3 of the Capital Gains Tax Act, 1975 , shall be construed, notwithstanding subsection (4) of that section, as if the shares were acquired by the individual on the date on which he acquired the right.

(3) (a) This subsection applies to shares which are acquired pursuant to the exercise of a right to acquire shares in a company which, at the time the right was obtained, was a qualifying company.

(b) For the purposes of this subsection, a company is a qualifying company at any time if, throughout the period of twelve months ending at that time or, if the company commenced to trade during that period, throughout the period of twelve months commencing on the date the company so commenced to trade, it existed solely for the carrying on of a specified trade.

(4) For the purposes of subsection (3), “specified trade” means a trade which consists wholly or mainly of—

(a) the manufacture of goods (including activities which would, if the company carrying on the trade were to make a claim for relief in respect of the trade under Chapter VI of Part I of the Finance Act, 1980 , fall to be regarded for the purposes of that Chapter as the manufacture of goods), or

(b) exempted trading operations within the meaning of Part V (Profits from Trading within Shannon Airport) of the Corporation Tax Act, 1976 .

(5) For the purposes of subsections (3) and (4), a trade shall be regarded, as respects a period of twelve months, as consisting wholly or mainly of particular activities if, but only if, the total amount receivable by the company carrying on the trade from sales made or, as the case may be, in payment for services rendered in the course of those activities in the period of twelve months is not less than 75 per cent. of the total amount receivable by the company from all sales made or, as the case may be, in payment for all services rendered in the course of the trade in that period.

(6) Schedule 15 of the Income Tax Act, 1967 , is hereby amended by the insertion in Column 2 of “Finance Act, 1986, paragraph 14 of the Second Schedule ”.

Profit sharing schemes.

11.— Section 52 of the Finance Act, 1982 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following subsections for subsections (7) and (8):

“(7) In this Chapter ‘the release date’, in relation to any of a participant's shares, means the fifth anniversary of the date on which the shares were appropriated to him.

(8) Subject to section 56 (4), for the purposes of provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of his shares, any reference to ‘the appropriate percentage’ in relation to those shares shall be determined according to the time of that event, as follows:—

(a) if the event occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) does not apply, the appropriate percentage is 100 per cent.;

(b) if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) does not apply, the appropriate percentage is 75 per cent.; and

(c) if, in a case where at the time of the event the participant—

(i) has ceased to be an employee or director of a relevant company as mentioned in subsection (5) (a), or

(ii) has reached pensionable age, as defined in section 2 of the Social Welfare (Consolidation) Act, 1981 ,

the event occurs before the fifth anniversary of the date on which the shares were appropriated to him, the appropriate percentage is 50 per cent.”.

Relief for new shares purchased on issue by employees.

12.—(1) (a) In this section—

“director” has the same meaning as in Chapter III of Part V of the Income Tax Act, 1967 ;

“eligible employee” in relation to a qualifying company means—

(i) where the company is a trading company, a full-time director or full-time employee of the company, or

(ii) where the company is a holding company, a full-time director or full-time employee of the company or of a company which is its 75 per cent. subsidiary;

“eligible shares”, in relation to a qualifying company, means new shares forming part of the ordinary share capital of the company which—

(i) are issued on or after the 6th day of April, 1986,

(ii) are fully paid up,

(iii) throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed,

(iv) are not subject to any restrictions other than restrictions which attach to all shares of the same class, and

(v) are issued to and acquired by an eligible employee in relation to the company at not less than their market value at the time of issue;

“full-time director” and “full-time employee” have respectively the same meanings as in section 8 of the Finance Act, 1978 ;

“holding company” means a company whose business consists wholly or mainly of the holding of shares or securities of trading companies which are its 75 per cent. subsidiaries;

“market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

“ordinary share capital” has the meaning assigned to it by section 155 (5) of the Corporation Tax Act, 1976 ;

“qualifying company” means a company which is at the time the eligible shares are issued—

(i) incorporated in the State,

(ii) resident in the State and not resident elsewhere, and

(iii) (I) a trading company, or

(II) a holding company;

“trading company” means a company whose business consists wholly or mainly of the carrying on wholly or mainly in the State of a trade or trades.

(b) In this section “75 per cent. subsidiary”, in relation to a company, has the meaning assigned to it for the purposes of the Corporation Tax Acts by section 156 of the Corporation Tax Act, 1976 , as applied for the purposes of section 107 of that Act by subsections (6) and (7) of that section.

(c) References in this section to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this section as disposing of any shares which he is treated by virtue of paragraph 5 of Schedule 2 to the Capital Gains Tax Act, 1975 , as exchanging for other shares.

(d) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

(2) Subject to the subsequent provisions of this section, where, in the year 1986-87 or any subsequent year of assessment, an eligible employee in relation to a qualifying company subscribes for eligible shares in the qualifying company, he shall be entitled, in estimating the amount of his total income for the year of assessment in which the shares are issued, to have a deduction made of an amount equal to the amount of the subscription:

Provided that a deduction shall not be given to the extent to which the amount subscribed by an eligible employee for eligible shares issued to him in all years of assessment exceeds £750.

(3) Subsection (2) shall not apply as respects any amount subscribed for eligible shares if within the period of five years from the date of their acquisition—

(a) they are disposed of, or

(b) the eligible employee who made the subscription receives in respect of the shares any money or money's worth which does not constitute income in his hands for the purposes of income tax,

and there shall be made all such assessments, additional assessments or adjustments of assessments as are necessary to withdraw any relief from income tax already given under subsection (2) in respect of the amount subscribed:

Provided that where an event mentioned in paragraph (a) or (b) occurs after the fourth anniversary of the date on which the shares were issued to the eligible employee relief shall be withdrawn only to the extent of 75 per cent. of the amount which would otherwise be withdrawn.

(4) Except where the shares are in a company whose ordinary share capital, at the time of acquisition of the shares by the eligible employee, consists of shares of one class only the majority of the issued shares of the same class as the eligible shares must be shares other than—

(a) eligible shares, and

(b) shares held by persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the qualifying company or any of its 75 per cent. subsidiaries.

(5) In relation to shares in respect of which relief has been given under subsection (2) and not withdrawn, any question—

(a) as to which (if any) such shares issued to an eligible employee at different times a disposal relates, or

(b) whether a disposal relates to such shares or to other shares,

shall for the purposes of this section be determined as for the purposes of section 17 of the Finance Act, 1984 .

(6) Where there occurs in relation to any of the eligible shares of an eligible employee (hereinafter referred to as “the original holding”) a transaction which results in a new holding, as defined in paragraph 2 (1) (b) of Schedule 2 to the Capital Gains Tax Act, 1975 , being equated with the original holding for the purposes of capital gains tax, then for the purposes of subsection (3)—

(a) the new holding shall be treated as shares in respect of which relief under this section has been given,

(b) the transaction shall not be treated as involving a disposal of the original holding,

(c) the consideration for the disposal of the original holding to the extent that it consists of the new holding shall not be treated as money or money's worth, and

(d) a disposal of the whole or a part of the new holding shall be treated as a disposal of the whole or a corresponding part of the shares in respect of which relief has been given under this section.

(7) Any amount in respect of which relief is allowed under subsection (2) and not withdrawn shall be treated as a sum which, by reason of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975 , is to be excluded from the sums allowable under paragraph 3 of that Schedule.

(8) An eligible employee shall not be entitled to relief under subsection (2) in respect of any shares unless the shares are subscribed for and issued for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(9) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this section.

Amendment of provisions relating to relief for investment in corporate trades.

13.— Section 12 of the Finance Act, 1984 , is hereby amended by the substitution in subsection (11) of “any of the six years” for “either of the two years”, and the said subsection (11), as so amended, is set out in the Table to this section.

TABLE

(11) This section applies only where the shares concerned are issued in the year 1984-85 or any of the six years of assessment immediately following.

Taxation treatment of certain dividends.

14.—(1) A dividend which is paid on or after the 6th day of April, 1986, by a company resident in the State and which is a relevant distribution for the purposes of section 45 of the Finance Act, 1980 , shall be a qualifying dividend for the purposes of this section.

(2) Where an individual who is resident in the State and is not resident elsewhere claims and proves that for any year of assessment (being the year 1986-87 or any subsequent year of assessment) he is beneficially entitled to qualifying dividends he shall, for all the purposes of the Income Tax Acts, apart from this section, be entitled, in computing the amount of his total income for that year of assessment, to have the amount of his income for that year which is represented by the qualifying dividends reduced by 50 per cent. of that amount, but the amount of any tax credit to which he is entitled in respect of any qualifying dividend included in his income for that year shall be determined in accordance with section 45 (3) of the Finance Act, 1980 , as if this section had not been enacted:

Provided that the amount by which the income of an individual which is represented by qualifying dividends is reduced in accordance with this section for any year of assessment shall not exceed £7,000.

(3) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this section.

(4) Section 198 (1) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , is hereby amended by the insertion in paragraph (a) of the following subparagraph after subparagraph (viii):

“(ix) so far as it flows from relief under section 14 of the Finance Act, 1986, in the proportions in which they are beneficially entitled to the income from the qualifying dividends giving rise to the relief,”.

Chapter II

Taxation of Farming Profits

Farming: amendment of provisions relating to relief in respect of increase in stock values.

15.—(1) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended by the substitution of “1986” for “1985” (inserted by the Finance Act, 1985 )—

(a) in paragraph (iv) (inserted by the Finance Act, 1979 ) of the proviso to subsection (4) (a), and

(b) in each place where it occurs in subsections (7) and (9) (inserted by the Finance Act, 1984 ),

and the said paragraph (iv), the said subsection (7) (apart from the proviso) and the said subsection (9) (apart from the proviso), as so amended, are set out in the Table to this subsection.

TABLE

(iv) a deduction shall not be allowed under the provisions of this section in computing a company's trading income for any accounting period which ends on or after the 6th day of April, 1986.

(7) Where in relation to an accounting period a company's opening stock value exceeds its closing stock value, the amount of the excess (in this section referred to as the company's “decrease in stock value”) shall, if the accounting period ends on a date before the 6th day of April, 1986, be treated in the computation of the company's trading income for the purposes of corporation tax, as a trading receipt of the company's trade for that accounting period:

(9) In the computation of a company's trading income for the purposes of corporation tax for any accounting period which ends on or after the 6th day of April, 1986, in which there is a decrease in stock value, there shall be treated as a trading receipt of the company's trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the company's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1986,

B is the aggregate amount of the company's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1986, and

C is the aggregate of the amounts which under this subsection are treated as trading receipts of the company's trade for preceding accounting periods:

(2) Section 12 of the Finance Act, 1976 , is hereby amended—

(a) by the substitution in subsection (3) of “1986-87” for “1985-86” (inserted by the Finance Act, 1985 ), and

(b) by the substitution of “1986” for “1985” (inserted by the Finance Act, 1985 ) in each place where it occurs in subsections (5) and (6) (inserted by the Finance Act, 1984 ),

and the said subsection (3), the said subsection (5) (apart from the proviso) and the said subsection (6) (apart from the proviso), as so amended, are set out in the Table to this subsection.

TABLE

(3) Any deduction allowed by virtue of this section in computing a person's trading profits for an accounting period shall not have effect for any purpose of the Income Tax Acts for any year of assessment prior to the year 1974-75 or later than the year 1986-87.

(5) In the computation of a person's trading profits for an accounting period in which there is a decrease in stock value and which ends on a date in the period from the 6th day of April, 1976, to the 5th day of April, 1986, the amount of that decrease shall be treated as a trading receipt of the trade for that accounting period:

(6) In the computation of a person's trading profits for any accounting period in which there is a decrease in stock value and which ends on or after the 6th day of April, 1986, there shall be treated as a trading receipt of the trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the person's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1986,

B is the aggregate amount of the person's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1986, and

C is the aggregate of the amounts which are treated as trading receipts of the person's trade for preceding accounting periods which ended on or after the 6th day of April, 1986:

(3) This section shall have effect only as respects a trade of farming.

Credit for farm tax.

16.—(1) Subject to the following provisions of this section, where, for the year 1986-87 or any subsequent year of assessment, an individual is chargeable to income tax in respect of profits or gains from farming and on any date within that year of assessment he is liable, in accordance with the provisions of section 9 of the Farm Tax Act, 1985 , for the payment of farm tax in respect of a taxable farm, the amount of income tax so chargeable shall be reduced by—

(a) where paragraph (a) of subsection (2) of the said section 9 applies, the amount of farm tax paid by him in that year of assessment in accordance with the provisions of that paragraph,

(b) where paragraph (b) of the said subsection (2) applies—

(i) if each person jointly and severally liable for payment of the farm tax under that paragraph pays his separate share of the farm tax, the amount of farm tax so paid by him in that year of assessment,

(ii) if each person so liable for payment does not pay his separate share of that farm tax, such portion of the total farm tax payable under that paragraph as may reasonably be regarded as borne by him in that year of assessment, and

(c) where paragraph (c) of the said subsection (2) applies—

(i) if each person jointly and severally liable under that paragraph for payment of the farm tax in respect of so much of the farm as is not apportioned under section 3 (2) of the said Act pays his separate share of that farm tax, the amount of that farm tax so paid by him in that year of assessment,

(ii) if each person so liable for payment of such farm tax does not pay his separate share of that farm tax, such portion of the total farm tax payable under that paragraph in respect of so much of the farm as is not so apportioned as may reasonably be regarded as borne by him:

Provided that—

(a) the amount of the reduction granted for any year of assessment under this subsection shall not exceed—

(i) the amount of the farm tax payable by the individual for the calendar year ending in the year of assessment, and

(ii) the tax appropriate to the profits or gains from farming in relation to the said individual for that year of assessment, and

(b) in determining the income chargeable to income tax for any year of assessment no sum shall be deducted in respect of farm tax.

(2) Subsection (1) shall apply in the case of a husband who is chargeable to tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , as if references to profits or gains from farming included any such profits or gains of his wife and references to farm tax paid or payable included references to farm tax paid or payable by his wife.

(3) For the purposes of subsection (1) the tax appropriate to the profits or gains from farming in relation to an individual for a year of assessment shall be determined in accordance with the Third Schedule .

(4) In this section “farm tax” and “taxable farm” have the meanings respectively assigned to them by section 1 (1) of the Farm Tax Act, 1985 .

Chapter III

Relief for Investment in Research and Development

Interpretation ( Chapter III ).

17.—(1) In this Chapter—

“associate” has the same meaning in relation to a person as it has by virtue of section 103 (3) of the Corporation Tax Act, 1976 , in relation to a participator;

“control”, except in section 20 (7), shall be construed in accordance with subsections (2) to (6) of section 102 of the Corporation Tax Act, 1976 ;

“director” shall be construed in accordance with section 103 (5) of the Corporation Tax Act, 1976 ;

“market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

“ordinary shares” means shares forming part of a company's ordinary share capital;

“the project period”, in relation to a qualifying research and development project, means the period commencing on the date on which the work in connection with the project commences to be carried out and ending on the date on which—

(a) all work in connection with the project has ceased, and

(b) all amounts of the type referred to in section 24 (b) relating to that project have been received by the qualifying research and development company which carried out the project;

“qualifying research and development project” means a project which—

(a) has as its sole object the development of new or improved industrial processes, methods or products, and

(b) is carried out wholly or mainly in the State;

“qualifying trade” means a trade which—

(a) consists wholly or mainly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980 ;

(b) is conducted on a commercial basis and is carried on with a view to the realisation of profits,

and references to a trade in this Chapter shall be construed without regard to so much of the definition of “trade” in section 1 (1) of the Income Tax Act, 1967 , as relates to adventures or concerns in the nature of a trade:

Provided that a trade which during a relevant period consists partly of the manufacture of goods within the said meaning and partly of other trading operations shall be regarded for the purposes of this definition as a trade which consists wholly or mainly of the manufacture of goods within the said meaning if, but only if, the total amount receivable in the relevant period from sales of such goods is not less than 75 per cent. of the total amount receivable by the company from all sales made and services rendered in the course of the trade in the relevant period;

“the relevant period” has the meaning assigned to it by section 18 (7);

and

“the relief” and “relief” mean relief under section 18 and references to the amount of the relief shall be construed in accordance with subsection (3) of that section.

(2) Section 157 of the Corporation Tax Act, 1976 , applies for the purposes of the provisions of this Chapter other than section 20 .

(3) References in this Chapter to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this Chapter as disposing of any shares which he is treated by virtue of paragraph 5 of Schedule 2 to the Capital Gains Tax Act, 1975 , as exchanging for other shares.

(4) References in this Chapter to the reduction of any amount include references to its reduction to nil.

The relief.

18.—(1) This Chapter has effect for affording relief from income tax where—

(a) an individual who qualifies for the relief subscribes for eligible shares in a qualifying research and development company, and

(b) those shares are issued to him for the purposes of raising money for a qualifying research and development project which is being carried out by the company or which it intends to carry out.

(2) In this Chapter “eligible shares” means new ordinary shares which, throughout the period of five years beginning on the date on which they are issued, carry no present or future preferential right to dividends or to a company's assets on its winding up and no present or future preferential right to be redeemed.

(3) The relief in respect of the amount subscribed by an individual for any eligible shares shall be given as a deduction of that amount from his total income for the year of assessment in which the shares are issued, and references in this Chapter to the amount of the relief are references to the amount of that deduction.

(4) The relief shall be given on a claim and shall not be allowed—

(a) unless and until the company has carried out for a period of not less than four months, or for the project period if that is shorter, the qualifying research and development project for which the money was raised by the issue of the shares in respect of which relief is claimed, and

(b) if the company is not carrying out that qualifying research and development project at the time when the shares are issued, unless the company begins to carry it out within two years after that time.

(5) A claim for the relief may be allowed at any time after the qualifying research and development project has been carried out by the company for the period referred to in subsection (4) (a) if the conditions for the relief are then satisfied; but no claim shall be allowed before the 1st day of January, 1987.

(6) In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.

(7) In this Chapter “the relevant period”, in relation to relief in respect of any eligible shares issued by a qualifying research and development company for the purpose of raising money for a qualifying research and development project, means—

(a) as respects sections 20 and 25 the period beginning on the incorporation of the qualifying sponsoring company on behalf of which the research and development company carries out, or intends to carry out, the qualifying research and development project (or, if the qualifying sponsoring company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending on the earlier of the following dates, that is to say—

(i) the date which is five years after the issue of the shares, and

(ii) the date on which the project period (hereafter in this subsection referred to as “the relevant project period”) in relation to the qualifying research and development project for which the money raised by the issue of the shares was, or is to be, expended comes to an end,

(b) as respects section 21 the period which corresponds to the relevant project period or to the period beginning on the date on which the shares were issued and ending on the date which is five years after the issue of the shares, whichever period comes to an end first, and

(c) as respects section 22 the period beginning on the date the shares were issued and ending on the later of the following dates, that is to say—

(i) the date which is three years after the commencement of the relevant project period, and

(ii) the date on which the relevant project period comes to an end.

(8) Where by reason of its being wound up, or dissolved without winding up, the company carries out the qualifying research and development project for a period of less than that referred to in subsection (4) (a), the said subsection (4) (a) shall have effect as if it referred to that lesser period but only if it is shown that the winding up or dissolution was for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

(9) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this Chapter.

(10) Subject to the provisions of section 30 , no account shall be taken of the relief, in so far as it is not withdrawn, in determining whether any sums are excluded by virtue of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975 , from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(11) This section applies only where the shares concerned are issued in the year 1986-87 or any of the four years of assessment immediately following that year.

Limits on relief.

19.—(1) The relief shall not be given in respect of any amounts subscribed by an individual for eligible shares issued to him by any qualifying research and development company in any year of assessment unless the amount or total amount subscribed by him for the eligible shares issued to him by the company in that year is £200 or more:

Provided that in the case of an individual who is a husband assessed to tax for a year of assessment in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , any amount subscribed by his spouse for eligible shares issued to her in that year of assessment by the company shall, for the purposes of determining whether this subsection applies, be deemed to have been subscribed by him for eligible shares issued to him by the company.

(2) The relief shall not be given to the extent to which the amount or total amount subscribed by an individual for eligible shares issued to him in any year of assessment (whether or not by the same company) exceeds £25,000.

(3) Section 198 (1) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , is hereby amended by the insertion in paragraph (a) of the following subparagraph after subparagraph (ix) (inserted by section 14 ):

“(x) so far as it flows from relief under Chapter III of Part I of the Finance Act, 1986, in the proportions in which they subscribed for the eligible shares giving rise to the relief,”.

Individuals qualifying for relief.

20.—(1) (a) An individual qualifies for the relief if he subscribes on his own behalf for the eligible shares in a qualifying research and development company and is not at any time in the relevant period connected with a qualifying sponsoring company on behalf of which the qualifying research and development company carries out a qualifying research and development project.

(b) For the purposes of this section any question whether an individual is connected with a qualifying sponsoring company shall be determined in accordance with the following provisions of this section.

(2) An individual is connected with a qualifying sponsoring company if he, or an associate of his, is—

(a) an employee of the company or of a partner of the company,

(b) a partner of the company, or

(c) subject to subsection (3), a director of the company or of another company which is a partner of that company.

(3) An individual is not connected with a qualifying sponsoring company by reason only that he, or an associate of his, is a director of the company or of another company which is a partner of that company unless he or his associate (or a partnership of which he or his associate is a member) receives a payment from either company during the period of five years beginning on the date on which the shares are issued or is entitled to receive such a payment in respect of that period or any part of it; but for that purpose there shall be disregarded—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by him or his associate in the performance of his duties as such director,

(b) any interest which represents no more than a reasonable commercial return on money lent to either company,

(c) any dividend or other distribution paid or made by either company which does not exceed a normal return on the investment,

(d) any payment for the supply of goods to either company which does not exceed their market value, and

(e) any reasonable and necessary remuneration which—

(i) is paid for services rendered to either company in the course of a trade or profession (not being secretarial or managerial services or services of a kind provided by the company itself),

and

(ii) is taken into account in computing the profits or gains of the trade or profession under Case I or II of Schedule D or would be so taken into account if it fell in a period on the basis of which those profits or gains are assessed under that Schedule.

(4) An individual is connected with a qualifying sponsoring company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent. of—

(a) the issued ordinary share capital of the company, or

(b) the loan capital and issued share capital of the company, or

(c) the voting power in the company.

(5) For the purposes of subsection (4) (b) and section 21 (7) (b) the loan capital of a company shall be treated as including any debt, other than a debt referred to in subsection (9), incurred by the company—

(a) for any money borrowed or capital assets acquired by the company, or

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).

(6) An individual is connected with a qualifying sponsoring company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstance, entitle him to receive more than 30 per cent. of the assets of the company which would at that time be available for distribution to equity holders of the company, and for the purposes of this subsection—

(a) the persons who are equity holders of the company, and

(b) the percentage of the assets of the company to which the individual would be entitled,

shall be determined in accordance with sections 109 and 111 of the Corporation Tax Act, 1976 , taking references in the said section 111 to the first company as references to an equity holder and references to a winding up as including references to any other circumstance in which assets of the company are available for distribution to its equity holders.

(7) An individual is connected with a qualifying sponsoring company if he has control of it within the meaning of section 158 of the Corporation Tax Act, 1976 .

(8) For the purposes of this section an individual shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire; and there shall be attributed to any person any rights or powers of any other person who is an associate of his.

(9) In determining, for the purposes of this section, whether an individual is connected with a qualifying sponsoring company, no debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall be treated as loan capital of the company if the debt arose in the ordinary course of that business.

Qualifying research and development company.

21.—(1) A company (hereafter in this section and in section 23 referred to as a “research and development company”) is a qualifying research and development company if it is incorporated in the State and complies with the requirements of this section and of section 23 .

(2) The research and development company shall, throughout the relevant period—

(a) be resident in the State and not resident elsewhere, and

(b) exist solely for the carrying out of a qualifying research and development project.

(3) Without prejudice to the generality of subsection (2) but subject to subsection (4), a research and development company ceases to comply with subsection (2) if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the Companies Act, 1963 , any other act is done for the like purpose) or the company is dissolved without winding up.

(4) A research and development company shall not be regarded as ceasing to comply with subsection (2) if it does so by reason of being wound up or dissolved without winding up and it is shown that the winding up or dissolution was for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

(5) The research and development company's issued share capital may not, at any time in the relevant period, include any shares which are not eligible shares.

(6) (a) The research and development company may not at any time in the relevant period—

(i) control (or together with any person connected with it control) another company or be under the control of another company (or of another company and any person connected with that other company), or

(ii) be a 51 per cent. subsidiary of another company or itself have a 51 per cent. subsidiary,

and no arrangements may be in existence at any time in that period by virtue of which the company could fall within subparagraph (i) or (ii).

(b) In this subsection “51 per cent. subsidiary”, in relation to any company, has the meaning assigned to it, for the purposes of the Corporation Tax Acts, by section 156 of the Corporation Tax Act, 1976 .

(7) Any qualifying sponsoring company in respect of which the research and development company carries out a qualifying research and development project may not in the relevant period, directly or indirectly, possess or be entitled to acquire more than 49 per cent. of—

(a) the issued ordinary share capital of the research and development company, or

(b) the loan capital and issued share capital of the research and development company, or

(c) the voting power in the research and development company.

(8) Where at any time a research and development company is or may become entitled to receive any amount by reason of its having carried out a qualifying research and development project it shall, at that time, be treated as existing for the carrying out of that project.

Qualifying sponsoring company.

22.—(1) A company is a qualifying sponsoring company if it is incorporated in the State and complies with the requirements of this section.

(2) The company shall, throughout the relevant period—

(a) be resident in the State and not resident elsewhere, and

(b) exist wholly for the purpose of carrying on wholly or mainly in the State one or more qualifying trades.

(3) As respects any qualifying research and development project, a company shall be a qualifying sponsoring company only if it provides satisfactory evidence and it appears to the satisfaction of the Revenue Commissioners after such consultation, if any, as may seem to them necessary with such person or body of persons as in their opinion may be of assistance to them that any benefits accruing to the company from the qualifying research and development project will be applied by the company wholly or mainly for the purposes of a qualifying trade or trades carried on by the company.

(4) Without prejudice to the generality of subsection (2) but subject to subsection (5), a company ceases to comply with subsection (2) if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the Companies Act, 1963 , any other act is done for the like purposes) or the company is dissolved without winding up.

(5) A company shall not be regarded as ceasing to comply with subsection (2) if it does so by reason of being wound up or dissolved without winding up and it is shown that the winding up or dissolution was for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

Carrying out of a qualifying research and development project.

23.—(1) Subject to the requirements of this section, a research and development company shall be regarded as carrying out a qualifying research and development project only if it carries out that project on behalf of a qualifying sponsoring company.

(2) A qualifying research and development project is carried out on behalf of a qualifying sponsoring company only if it is carried out in such circumstances that the benefits of the project accrue wholly or mainly to that company.

(3) A research and development company shall be regarded, for the purposes of this section, as carrying out a qualifying research and development project on behalf of a qualifying sponsoring company if, and only if—

(a) any money expended by the research and development company in the course of carrying out that project is so expended at the risk of that research and development company and, without prejudice to the generality of the foregoing, for this purpose money shall not be regarded as expended at the risk of a research and development company if the qualifying sponsoring company on behalf of which the qualifying research and development project is carried out, or any person connected with that qualifying sponsoring company, is or may become, directly or indirectly, liable—

(i) for any expenditure incurred or any losses sustained by the research and development company in the carrying out of the qualifying research and development project, or

(ii) to acquire any shares or assets of the research and development company for a price which is greater than the market value of the shares or assets when acquired, and

(b) it provides satisfactory evidence and it appears to the Revenue Commissioners after such consultation, if any, as may seem to them necessary with such person or body of persons as in their opinion may be of assistance to them and subject to such conditions as to the verification of the purposes for which money is actually expended as they may impose, either on the research and development company or the qualifying sponsoring company, that all money raised by the research and development company from subscriptions for eligible shares by individuals who qualify for relief in respect of such shares was used, is being used or is intended to be used, for a qualifying research and development project.

(4) References to the carrying out of a qualifying research and development project by a research and development company include references to the carrying out of such a project, or of any work comprised in such a project, by any other person, including the qualifying sponsoring company, under a contract between that person and the research and development company.

(5) Notwithstanding paragraph (b) of subsection (3), where the Revenue Commissioners are satisfied that any money which appeared to them under the terms of the said paragraph (b) to be intended for use for a qualifying research and development project was not used for such a project and was not intended for such use, they may give notice in writing to that effect to the research and development company and thereupon the company shall be deemed not to be carrying out and never to have carried out the qualifying research and development project.

Taxation of a qualifying research and development company.

24.—The carrying out of a qualifying research and development project by a qualifying research and development company shall be deemed, for all the purposes of the Tax Acts other than the purposes of section 22 , to be the carrying on of a trade (hereafter in this section referred to as “the manufacturing trade”), separate from any other trade which the company may at any time carry on, which consists wholly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980 , and, notwithstanding anything to the contrary in the Tax Acts or elsewhere—

(a) any amount expended by the company in the course of the carrying out of a qualifying research and development project and for which an allowance, relief or deduction would not otherwise be available, directly or indirectly, under the Tax Acts on the basis that the carrying out of the qualifying research and development project is the carrying on of a trade, shall be deemed to be an amount expended for the purposes of the manufacturing trade, and

(b) any amount received by the company, no matter in what form and no matter how described, by reason of the carrying out of, or in consequence of the carrying out of, or otherwise in connection with the carrying out of, the qualifying research and development project shall be deemed to be a trading receipt of the manufacturing trade for the accounting period in which it is received,

and the manufacturing trade shall be deemed to be carried on by the company so long as it is entitled to receive any amount referred to in paragraph (b).

Disposal of shares.

25.—(1) Where an individual disposes of any eligible shares before the end of the relevant period, then—

(a) in a case where the disposal is otherwise than by way of a bargain made at arm's length, he shall not be entitled to any relief in respect of those shares, and

(b) in any other case, the amount of relief to which he is entitled in respect of those shares shall be reduced by the amount or value of the consideration which he receives for them.

(2) Subsection (1) shall not apply to a disposal made by a wife to her husband at a time when she is treated as living with him for income tax purposes as provided in section 192 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , or to a disposal made at such a time by him to her; but where shares issued to one of them have been transferred to the other by a transaction inter vivos—

(a) that subsection shall apply on the disposal of the shares by the transferee to a third person, and

(b) if at any time the wife ceases to be treated as living with her husband for the aforementioned purposes, and any of those shares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.

(3) Where an individual holds ordinary shares of any class in a qualifying research and development company and the relief has been given in respect of some shares of that class but not others, any disposal by him of ordinary shares of that class in the company shall be treated for the purposes of this section as relating to those in respect of which relief has been given under this Chapter rather than to others.

(4) Where relief has been given to an individual in respect of shares of any class in a qualifying research and development company which have been issued to him at different times, any disposal by him of shares of that class shall be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

(5) Where shares in respect of which the relief was given have by virtue of any such allotment as is mentioned in subparagraph (1) (a) (i) of paragraph 2 of Schedule 2 to the Capital Gains Tax Act, 1975 (not being an allotment for payment) fallen to be treated under subparagraph (2) of that paragraph as the same asset as a new holding—

(a) the new holding shall be treated for the purposes of subsection (3) as shares in respect of which the relief has been given, and

(b) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares.

(6) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

(7) Where a qualifying research and development company is wound up or dissolved, it shall, for the purposes of this section, in the case of any individual, be treated as a disposal before the end of the relevant period of the individual's eligible shares in the company for an arm's length price equal to the amount to which the individual is entitled on the winding up or dissolution in respect of any money subscribed for eligible shares in so far as that money has not been used for a qualifying research and development project.

Prevention of misuse.

26.—An individual is not entitled to relief in respect of any shares unless the shares were subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

Claims.

27.—(1) A claim for the relief in respect of eligible shares issued by a qualifying research and development company in any year of assessment shall be made—

(a) not earlier than the 1st day of January, 1987, or, if later, the end of the period mentioned in section 18 (4) (a), and

(b) not later than two years after the end of that year of assessment or, if the period mentioned in section 18 (4) (a) ended after the end of that year, not later than two years after the end of that period.

(2) A claim for relief in respect of eligible shares in a qualifying research and development company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, so far as applying to the qualifying research and development company, the qualifying sponsoring company and the qualifying research and development project, are satisfied in relation to those shares.

(3) Before issuing a certificate for the purposes of subsection (2) a qualifying research and development company shall furnish the inspector with a statement to the effect that it satisfies the conditions for relief, so far as they apply in relation to the company, the qualifying sponsoring company and the qualifying research and development project, and has done so at all times since the beginning of the relevant period.

(4) No such certificate shall be issued without the authority of the inspector or where the qualifying research and development company or the qualifying sponsoring company, or a person connected with either company, has given notice to the inspector under section 29 (2).

(5) Any statement under subsection (3) shall contain such information as the Revenue Commissioners may reasonably require, shall be in such form as the Revenue Commissioners may direct and shall contain a declaration that it is correct to the best of the qualifying research and development company's knowledge and belief.

(6) Where a qualifying research and development company has issued a certificate for the purposes of subsection (2) or furnished a statement under subsection (3) and—

(a) the certificate or statement was made fraudulently or negligently, or

(b) the certificate was issued in contravention of subsection (4),

the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the same manner as in summary proceedings for recovery of any fine or penalty under any Act relating to the excise.

(7) For the purpose of regulations made under section 127 of the Income Tax Act, 1967 , no regard shall be had to the relief unless a claim for it has been duly made and admitted.

(8) For the purposes of section 550 of the Income Tax Act, 1967 , tax charged by an assessment—

(a) shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief, but

(b) shall, unless paid earlier or due and payable later, be regarded as paid, to the extent that relief from tax is due under this Chapter, on the date of the making of the claim on which the relief is given,

and section 551 of that Act shall not apply in consequence of any discharge or repayment for giving effect to the relief.

Assessments for withdrawing relief.

28.—(1) Where any relief has been given which is subsequently found not to have been due, it shall be withdrawn by the making of an assessment to tax under Case IV of Schedule D for the year of assessment for which the relief was given.

(2) Where any relief given in respect of shares for which either a husband or his wife has subscribed and which were issued while he was assessed in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , falls to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them and at the time of the disposal the husband is not so assessable, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that reduction under section 198 (1) or (2) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , or any allocation of a repayment of tax under section 195A (inserted by the Finance Act, 1983 ) of the Income Tax Act, 1967 .

(3) Subject to the following provisions of this section, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within ten years after the end of the year of assessment in which that event occurs.

(4) No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his death.

(5) Where a person has, by a disposal or disposals to which section 25 (1) (b) applies, disposed of all the ordinary shares issued to him by a qualifying research and development company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when he is connected with the qualifying sponsoring company within the meaning of section 20 .

(6) Subsection (3) is without prejudice to the proviso to section 186 (2) (a) of the Income Tax Act, 1967 .

(7) In its application to an assessment made by virtue of this section, section 550 of the Income Tax Act, 1967 , shall have effect as if the date on which the tax charged by the assessment becomes due and payable were—

(a) in the case of relief withdrawn by virtue of section 20 , 21 , 22 or 23 in consequence of any event after the grant of the relief, the date of that event,

(b) in the case of relief withdrawn by virtue of section 25 (1) in consequence of a disposal after the grant of the relief, the date of the disposal,

(c) in the case of relief withdrawn by virtue of section 26 —

(i) so far as effect has been given to the relief in accordance with regulations under section 127 of the Income Tax Act, 1967 , the 5th day of April in the year of assessment in which effect was so given, and

(ii) so far as effect has not been so given, the date on which the relief was granted.

(8) For the purposes of subsection (7) the date on which the relief is granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.

Information.

29.—(1) Where an event occurs by reason of which any relief given to an individual falls to be withdrawn by virtue of section 20 or 25 , the individual shall, within sixty days of his coming to know of the event, give a notice in writing to the inspector containing particulars of the event.

(2) Where an event occurs by reason of which any relief in respect of any shares in a company falls to be withdrawn by virtue of section 21 , 22 , 23 or 26 —

(a) the qualifying research and development company or the qualifying sponsoring company, as the case may be, and

(b) any person connected with that company who has knowledge of that matter,

shall within sixty days of the event or, in the case of a person within paragraph (b), of his coming to know of it, give a notice in writing to the inspector containing particulars of the event.

(3) If the inspector has reason to believe that a person has not given a notice which he is required to give under subsection (1) or (2) in respect of any event, the inspector may by notice in writing require that person to furnish him within such time (not being less than sixty days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Chapter.

(4) Where relief is claimed in respect of shares in a qualifying research and development company and the inspector has reason to believe that it may not be due by reason of any such arrangement or scheme as is mentioned in section 21 (6) or 26 , he may by notice in writing require any person concerned to furnish him within such time (not being less than sixty days) as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed, and

(b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

(5) References in subsection (4) to the person concerned are, in relation to section 26 , references to the claimant and, in relation to section 21 (6) and 26 , references to the qualifying research and development company or the qualifying sponsoring company, as the case may be, and to any person controlling that company.

(6) Where relief has been claimed in respect of shares in a qualifying research and development company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by him or on his behalf are or were held on behalf of any person other than himself and, if so, the name and address of that person.

(7) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a qualifying research and development company that relief has been given or claimed in respect of a particular number or proportion of its shares.

(8) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion—

(a) in column 2 of “Finance Act, 1986, section 29 (3) and (4)”; and

(b) in column 3 of “Finance Act, 1986, section 29 (1) and (2)”.

Capital gains tax.

30.—(1) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to—

(a) the amount of that relief, or

(b) the excess,

whichever is the less, but the foregoing provisions of this subsection shall not apply to a disposal falling within section 13 (5) of the Capital Gains Tax Act, 1975 .

(2) In relation to shares in respect of which relief has been given and not withdrawn, any question—

(a) as to which of any such shares issued to a person at different times a disposal relates, or

(b) whether a disposal relates to such shares or to other shares,

shall for the purposes of capital gains tax be determined as for the purposes of section 25 .

(3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, then, if there is within the meaning of paragraph 2 (1) of Schedule 2 to the Capital Gains Tax Act, 1975 , a reorganisation affecting those shares, paragraph 2 (2) of that Schedule shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

(4) There shall be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

Chapter IV

Interest Payments by Certain Deposit Takers

Interpretation ( Chapter IV ).

31.—(1) In this Chapter—

“amount on account of appropriate tax” shall be construed in accordance with section 33 (4);

“appropriate tax”, in relation to a payment of relevant interest, means a sum representing income tax on the amount of that payment at the standard rate in force at the time of the payment;

“building society” means a society within the meaning of the Building Societies Acts, 1976 to 1983;

“deposit” means a sum of money paid to a relevant deposit taker on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made;

“interest” means any interest of money whether yearly or otherwise, including any amount whether or not described as interest paid in consideration of the making of a deposit, and, as respects a building society, includes any dividend or other distribution in respect of shares in the society:

Provided that any amount consisting of an excess of the amount received on the redemption of any holding of A.C.C. Bonus Bonds — First Series, issued by the Agricultural Credit Corporation, p.l.c., over the amount paid for the holding shall not be treated as interest for the purposes of this Chapter;

“relevant deposit” means a deposit held by a relevant deposit taker other than a deposit—

(a) which is made by, and the interest on which is beneficially owned by—

(i) a relevant deposit taker,

(ii) the Central Bank of Ireland, or

(iii) the Insurance Corporation of Ireland, p.l.c.,

(b) which is a debt on a security which is issued by the relevant deposit taker and is listed on a stock exchange,

(c) which, in the case of a relevant deposit taker resident in the State for the purposes of corporation tax, is held at a branch of the relevant deposit taker situated outside the State,

(d) which, in the case of a relevant deposit taker not resident in the State for the purposes of corporation tax, is held otherwise than at a branch of the relevant deposit taker situated in the State,

(e) which is a deposit denominated in a foreign currency,

(f) in respect of which—

(i) no person who is ordinarily resident in the State is beneficially entitled to any interest, and

(ii) a declaration of the kind mentioned in section 37 has been made to the relevant deposit taker, or

(g) (i) the interest on which is exempt—

(I) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(II) from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 ,

as the case may be, and

(ii) in respect of which a declaration of the kind mentioned in section 38 has been made to the relevant deposit taker;

“relevant deposit taker” means any of the following persons, that is to say:

(a) a person who is a holder of a licence granted under section 9 of the Central Bank Act, 1971 ,

(b) a building society,

(c) a trustee savings bank within the meaning of the Trustee Savings Banks Acts, 1863 to 1979,

(d) the Agricultural Credit Corporation, p.l.c.,

(e) the Industrial Credit Corporation, p.l.c.,

and

(f) the Post Office Savings Bank;

“relevant interest” means interest paid on or after the 6th day of April, 1986, in respect of a relevant deposit;

“return” means a return under section 33 (2).

(2) For the purposes of this Chapter—

(a) any amount which is credited as interest in respect of a relevant deposit shall be treated as a payment of interest, and references in this Chapter to relevant interest being paid shall be construed accordingly,

(b) any reference in this Chapter to the amount of a payment of relevant interest shall be construed as a reference to the amount which would be the amount of that payment if no appropriate tax were to be deducted therefrom, and

(c) a deposit is held at a branch of a relevant deposit taker if it is recorded in its books as a liability of that branch.

Deduction of tax from relevant interest.

32.—(1) Where a relevant deposit taker makes a payment of relevant interest it shall deduct out of the amount of the payment the appropriate tax in relation to the payment; and the person to whom such payment is made shall allow such deduction upon the receipt of the residue of the payment; and the relevant deposit taker shall be acquitted and discharged of so much money as is represented by the deduction as if that amount of money had actually been paid to the person.

(2) A relevant deposit taker shall treat every deposit made with it as a relevant deposit unless satisfied that it is not a relevant deposit; but where it has satisfied itself that a deposit is not a relevant deposit it shall be entitled to continue to so treat the deposit until such time as it is in possession of information which can reasonably be taken to indicate that the deposit is, or may be, a relevant deposit.

(3) Any payment of relevant interest which is within subsection (1) shall be treated as not being within section 31 of the Finance Act, 1974 .

Returns and collection of appropriate tax.

33.—(1) Notwithstanding any other provision of the Tax Acts, this section shall have effect for the purpose of regulating the time and manner in which appropriate tax in relation to a payment of relevant interest shall be accounted for and paid.

(2) Subject to subsection (5), a relevant deposit taker shall, for the year 1986-87 and for each subsequent year of assessment, make, within 15 days from the end of the year of assessment, a return to the Collector-General of the relevant interest paid by it in that year and of the appropriate tax in relation to the payment of that interest.

(3) The appropriate tax in relation to a payment of relevant interest which is required to be included in a return shall be due at the time by which the return is to be made and shall be paid by the relevant deposit taker to the Collector-General, and the appropriate tax so due shall be payable by the relevant deposit taker without the making of an assessment; but appropriate tax which has become due as aforesaid may be assessed on the relevant deposit taker without the making of an assessment; but appropriate tax which has become due as aforesaid may be assessed on the relevant deposit taker (whether or not it has been paid when the assessment is made) if that tax or any part of it is not paid on or before the due date.

(4) Notwithstanding subsection (3), a relevant deposit taker shall, for each year of assessment (being the year 1986-87 or any subsequent year of assessment) pay to the Collector-General within 15 days from the 5th day of October in that year of assessment an amount on account of appropriate tax which shall be not less than the amount of appropriate tax which would be due and payable by it for that year of assessment in accordance with the said subsection (3) if the total amount of the relevant interest which had accrued (interest being, for this purpose, treated, if not otherwise so treated, as accruing from day to day) in the period commencing on the 6th day of April and ending on the 5th day of October in that year of assessment on all relevant deposits held by the relevant deposit taker in that period (and no more) had been paid by it in that year of assessment; and any amount on account of appropriate tax so paid by the relevant deposit taker for a year of assessment shall be treated as far as may be as a payment on account of any appropriate tax due and payable by it for that year of assessment under the said subsection (3):

Provided that, where the amount on account of appropriate tax paid by a relevant deposit taker for a year of assessment under this subsection exceeds the amount of appropriate tax due and payable by it for that year of assessment under the said subsection (3), the excess shall be carried forward and shall be set off against any amount due and payable under this subsection or the said subsection (3) by the relevant deposit taker for any subsequent year of assessment (any such set-off being effected as far as may be against an amount so due and payable at an earlier date rather than at a later date).

(5) (a) Any amount on account of appropriate tax payable by a relevant deposit taker under subsection (4) shall be so payable without the making of an assessment,

(b) all the provisions of this Chapter relating to the collection and recovery of appropriate tax shall apply with any necessary modifications to the collection and recovery of any amount on account of appropriate tax, and

(c) a return required to be made by a relevant deposit taker for a year of assessment shall contain a statement of the amount of interest in respect of which an amount on account of appropriate tax is due and payable by the relevant deposit taker for that year of assessment and of the amount on account of appropriate tax so due and payable; and a return shall be so required to be made by a relevant deposit taker for a year of assessment notwithstanding that no relevant interest was paid by it in that year of assessment.

(6) If it appears to the inspector that there is any amount of appropriate tax in relation to a payment of relevant interest which ought to have been and has not been included in a return, or if the inspector is dissatisfied with any return, he may make an assessment on the relevant deposit taker to the best of his judgment; and any amount of appropriate tax in relation to a payment of relevant interest due under an assessment made by virtue of this subsection shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

(7) Where any item has been incorrectly included in a return as a payment of relevant interest, the inspector may make such assessments, adjustments or set-offs as may in his judgment be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the relevant deposit taker or any other person are, so far as possible, the same as they would have been if the item had not been so included.

(8) (a) Any appropriate tax assessed on a relevant deposit taker under this Chapter shall be due within one month after the issue of the notice of assessment (unless that tax or any amount treated as an amount on account of it is due earlier under subsection (3) or (4)) subject to any appeal against the assessment, but no such appeal shall affect the date when any amount is due under the said subsection (3) or (4), and

(b) on the determination of an appeal against an assessment under this Chapter any appropriate tax overpaid shall be repaid.

(9) (a) All the provisions of the Income Tax Acts relating to—

(i) assessments to income tax,

(ii) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court), and

(iii) the collection and recovery of income tax,

shall, so far as they are applicable, apply to the assessment, collection and recovery of appropriate tax;

(b) any amount of appropriate tax or amount on account of appropriate tax payable in accordance with this Chapter without the making of an assessment shall carry interest at the rate of 1.25 per cent. for each month or part of a month from the date when the amount becomes due and payable until payment;

(c) the provisions of subsections (3) to (5) of section 550 of the Income Tax Act, 1967 , shall apply in relation to interest payable under paragraph (b) as they apply in relation to interest payable under the said section 550;

(d) in its application to any appropriate tax charged by any assessment made in accordance with this Chapter, section 550 of the Income Tax Act, 1967 , shall have effect with the omission of the proviso to subsection (1) and subsections (2) and (2A); and

(e) notwithstanding anything in the Income Tax Acts, the provisions of section 419 of the Income Tax Act, 1967 , and section 30 of the Finance Act, 1976 , shall not apply in relation to any appropriate tax which is charged by an assessment made in accordance with this Chapter.

(10) Every return shall be in a form prescribed by the Revenue Commissioners and shall include a declaration to the effect that the return is correct and complete.

Amendment of section 31 (building societies) of Corporation Tax Act, 1976.

34.—As respects the year 1986-87 and any subsequent year of assessment—

(a) subsections (1) to (3) and (6) of section 31 of the Corporation Tax Act, 1976 , shall cease to have effect, and

(b) subsections (4) and (9) of that section shall have effect as if the references therein to arrangements made under that section being in force or being entered into by a building society were omitted.

Taxation of relevant interest, etc.

35.—(1) Notwithstanding anything in the Tax Acts—

(a) no part of any interest paid by a building society on or after the 6th day of April, 1986, in respect of any shares in the society shall be treated for the purposes of the Corporation Tax Acts as a distribution of the society or as franked investment income of any company resident in the State,

(b) save as is otherwise provided for in section 39 , no repayment of appropriate tax in respect of any relevant interest shall be made to any person receiving or entitled to the payment of the relevant interest who is not a company within the charge to corporation tax in respect of the payment,

(c) the amount of any payment of relevant interest shall be regarded as income chargeable to tax under Case IV of Schedule D and under no other Case or Schedule and shall be taken into account in computing the total income of the person entitled to that amount, but, subject to paragraph (d), no assessment to income tax shall be made in respect of any relevant interest on the person receiving or entitled to the payment of the relevant interest,

(d) paragraph (c) shall not prevent an assessment in respect of income tax at the higher rates or in respect of a surcharge under section 13 of the Finance Act, 1976 , on any relevant interest in respect of which appropriate tax is deductible, and

(e) section 4 of the Finance Act, 1974 , shall have effect as if a reference to appropriate tax deductible by virtue of this Chapter were contained in paragraph (a) of that section.

(2) Where a deposit which is a source of income of any person (hereafter in this section referred to as the “lender”) who is chargeable to income tax in respect of any interest payable on the deposit is not a taxed-interest deposit within the meaning of subsection (4) but at any time becomes such a deposit, then, notwithstanding section 75 of the Income Tax Act, 1967 , section 77 (3) of that Act shall apply as if the deposit were a source of income which is directed to be separately computed under subsection (2) of the said section 75 and as if the deposit were a source of income which the lender ceased to possess immediately before it became such a taxed-interest deposit:

Provided that, in the case of a deposit which becomes a taxed-interest deposit on the 6th day of April, 1986, the said section 77 (3) shall not apply so as to require any adjustment of the total income of a lender in so far as that income includes any interest paid in respect of that deposit for any year of assessment prior to the year 1985-86.

(3) Where a deposit which is a source of income of a lender ceases to be a taxed-interest deposit within the meaning of subsection (4) then, notwithstanding section 75 of the Income Tax Act, 1967 , subsections (1) and (2) of section 77 of that Act shall apply, as respects the year of assessment in which it so ceases and the next subsequent year of assessment, as if the deposit were a source of income which is directed to be separately computed under subsection (2) of the said section 75 and as if the deposit were a new source of income acquired by the lender immediately after it ceased to be such a taxed-interest deposit.

(4) For the purposes of subsections (2) and (3), a deposit is at any time a taxed-interest deposit if, were the relevant deposit taker who holds it to make a payment of interest in respect of it at that time, the said relevant deposit taker would be required to deduct the appropriate tax out of the payment.

(5) Section 344 of the Income Tax Act, 1967 , shall not have effect as respects any relevant interest.

Statement furnished by relevant deposit taker.

36.—A relevant deposit taker shall, when requested to do so by any person entitled to any relevant interest on a relevant deposit held by the relevant deposit taker, furnish to that person, as respects any payment of such relevant interest, a statement showing—

(a) the amount of that payment,

(b) the amount of appropriate tax deducted therefrom,

(c) the net amount of the payment, and

(d) the date of the payment.

Declarations relating to deposits of non-residents.

37.—(1) The declaration referred to in paragraph (f) (ii) of the definition of “relevant deposit” in section 31 (1) is a declaration in writing to a relevant deposit taker which—

(a) is made by a person (hereafter in this section referred to as “the declarer”) to whom any interest on the deposit in respect of which the declaration is made is payable by the relevant deposit taker, and is signed by the declarer,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) declares that at the time when the declaration is made the person who is beneficially entitled to the interest in relation to the said deposit is not, or, as the case may be, all of the persons who are so entitled are not, ordinarily resident in the State,

(d) contains as respects the person, or, as the case may be, each of the persons, mentioned in paragraph (c)—

(i) the name of the person,

(ii) the address of his principal place of residence, and

(iii) the name of the country in which he is ordinarily resident at the time the declaration is made,

(e) contains an undertaking by the declarer that if the person, or, as the case may be, any of the persons, referred to in paragraph (c) becomes ordinarily resident in the State, the declarer will notify the relevant deposit taker accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of this Chapter:

Provided that—

(i) subject to subsections (3) and (4), where, in relation to a deposit, a notice was served, on or before the 29th day of January, 1986, on a relevant deposit taker under section 175 (4) of the Income Tax Act, 1967 , the notice shall, at all times before the 6th day of April, 1987, be deemed for the purposes of this Chapter, apart from subsection (2), to be, as respects that deposit, a declaration of the kind mentioned in this section, and

(ii) a declaration made before the passing of this Act in a form authorised by the Revenue Commissioners under paragraph (22) of Financial Resolution No. 12 passed by Dáil Éireann on the 30th day of January, 1986, shall be deemed for all the purposes of this Chapter to be a declaration of the kind mentioned in this section.

(2) (a) A relevant deposit taker shall—

(i) keep and retain for the longer of the following periods, that is to say—

(I) a period of six years, and

(II) a period which, in relation to the deposit in respect of which the declaration is made, ends not earlier than three years after the date on which the deposit is repaid or, as the case may be, becomes a relevant deposit, and

(ii) on being so required by notice given to it in writing by an inspector, make available to the inspector, within the time specified in the notice,

all declarations of the kind mentioned in this section which have been made in respect of deposits held by the relevant deposit taker.

(b) The inspector may examine or take extracts from or copies of any declarations made available to him under paragraph (a).

(3) Where, on a day (hereafter in this subsection referred to as “the relevant day”) after the 29th day of January, 1986, the amount of a deposit is reduced to less than three-quarters of the amount of the deposit on the 29th day of January, 1986, paragraph (i) of the proviso to subsection (1), if it would, apart from this subsection, have effect as respects the deposit, shall not so have effect at any time on or after the relevant day.

(4) Where a notice (hereafter in this subsection referred to as “the relevant notice”) of the kind mentioned in paragraph (i) of the proviso to subsection (1) was served on a relevant deposit taker on or before the 29th day of January, 1986, in relation to a deposit and, at any time after the 5th day of April, 1986, but before a declaration of the kind mentioned in this section has been made in respect of the deposit, the deposit ceases to be held by the relevant deposit taker, then a declaration of the kind mentioned in this section shall be made, in respect of that deposit, to the relevant deposit taker by the person to whom any interest on the deposit was payable at any time after the 29th day of January, 1986 (or, if there is more than one such person, the declaration may be made by any one of those persons):

Provided that, if a declaration is not so made in respect of the deposit, the relevant notice shall be deemed, for the purposes of subsection (2), to be, as respects the deposit, a declaration of the kind mentioned in this section.

Declarations relating to deposits of charities.

38.—(1) The declaration referred to in paragraph (g) (ii) of the definition of “relevant deposit” in section 31 (1) is a declaration in writing to a relevant deposit taker which—

(a) is made by a person (hereafter in this section referred to as “the declarer”) to whom any interest on the deposit in respect of which the declaration is made is payable by the relevant deposit taker, and is signed by the declarer,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) declares that at the time when the declaration is made the interest on the deposit in respect of which the declaration is made—

(i) (I) forms part of the income of a body of persons or trust which is treated by the Revenue Commissioners as a body or trust established for charitable purposes only, or

(II) is, according to the rules or regulations established by statute, charter, decree, deed of trust or will, applicable to charitable purposes only and is so treated by the Revenue Commissioners, and

(ii) will be applied to charitable purposes only,

(d) contains the name and address of the person, or, as the case may be, of each of the persons entitled, in respect of the interest in relation to the deposit, to exemption—

(i) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(ii) as the case may be, from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 ,

(e) contains an undertaking by the declarer that if the person, or, as the case may be, any of the persons, referred to in paragraph (d) ceases to be so exempt in respect of that interest, the declarer will notify the relevant deposit taker accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of this Chapter.

(2) Subsection (2) of section 37 shall have effect as respects declarations of the kind mentioned in this section as it has effect as respects declarations of the kind mentioned in that section.

Repayment of appropriate tax in certain cases.

39.—(1) Notwithstanding section 35 (1) (b), repayment of appropriate tax in respect of any relevant interest shall be made to a person who is entitled to exemption in respect of that interest—

(a) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(b) as the case may be, from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 .

(2) Where, in the year 1986-87 or any subsequent year of assessment (hereafter in this section referred to as “the relevant year”), the total income of a relevant person includes any relevant interest and, apart from section 35 (1) (b), the relevant person would be entitled to repayment of the whole or any part of the appropriate tax deducted from the relevant interest, then, notwithstanding section 35 (1) (b), the repayment to which the relevant person would be so entitled may be made to him on the making by him to the inspector, not earlier than the end of the relevant year, of a claim in that behalf.

(3) In subsection (2) “relevant person” means an individual who proves to the satisfaction of the inspector, or, on appeal, to the Appeal Commissioners, that—

(a) at some time during the relevant year he or his spouse was of the age of sixty-five years or upwards, or

(b) throughout the relevant year he or his spouse was, or as on and from some time during the relevant year he or his spouse became, permanently incapacitated by reason of mental or physical infirmity from maintaining himself or herself.

Penalties.

40.—(1) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion—

(a) in column 2 of “Finance Act, 1986, section 33 (2)”,

and

(b) in column 3 of “Finance Act, 1986, section 32 (1)”.

(2) Section 94 (2) of the Finance Act, 1983 , is hereby amended by the insertion after paragraph (d) of the following paragraph:

“(dd) (i) fails to make any deduction required to be made by him under section 32 (1) of the Finance Act, 1986,

(ii) fails, having made the deduction, to pay the sum deducted to the Collector-General within the time specified in that behalf in section 33 (3) of that Act, or

(iii) fails to pay to the Collector-General an amount on account of appropriate tax (within the meaning of Chapter IV of Part I of that Act) within the time specified in that behalf in section 33 (4) of that Act,”.

Chapter V

Urban Renewal: Relief from Income Tax and Corporation Tax

Interpretation ( Chapter V ), etc.

41.—(1) In this Chapter—

“the Custom House Docks Area” means the area described in Part II of the Fourth Schedule ;

“designated area” means the Custom House Docks Area or any other area described in Part III , IV , V , VI or VII of the Fourth Schedule , and a reference to a designated area of a county borough shall, save where otherwise specifically provided, be construed as a reference to the part or parts of that county borough described in the appropriate Part or Parts of that Schedule.

(2) As respects the application of this Chapter to any expenditure incurred in relation to, or rent payable in respect of, any premises the site of which is wholly within the Custom House Docks Area—

“the specified day” means the day appointed by the Minister for Finance by order to be the specified day for the purposes of this Chapter;

“the specified period” means the period of five years commencing on the specified day.

(3) The Fourth Schedule shall have effect for the purposes of supplementing this Chapter.

Allowance in relation to construction of certain commercial premises.

42.—(1) In this section—

“multi-storey car-park” has the meaning given to it by section 25 of the Finance Act, 1981 ;

“qualifying period” means the period commencing on the 23rd day of October, 1985, and ending on the 31st day of May, 1989, or, where section 41 (2) applies, the specified period;

“qualifying premises” means a building or structure the site of which is wholly within a designated area and which—

(a) apart from this section is not an industrial building or structure within the meaning of section 255 (1) of the Income Tax Act, 1967 , and

(b) (i) is in use for the purposes of a trade or profession, or

(ii) whether or not it is so used, is let on bona fide commercial terms for such consideration as might be expected to be paid in a letting of the building or structure which was negotiated on an arm's length basis,

but does not include any building or structure in use as, or as part of, a dwelling-house;

references to sections 254 , 264 and 265 of the Income Tax Act, 1967 , are references to those sections as inserted by the Corporation Tax Act, 1976 .

(2) Subject to the modifications provided for in subsections (3) to (7), all the provisions of the Tax Acts relating to the making of allowances or charges in respect of capital expenditure on the construction of an industrial building or structure shall, notwithstanding anything to the contrary therein, apply—

(a) as if a qualifying premises were, at all times at which it is a qualifying premises, a building or structure in respect of which an allowance falls to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV or under Chapter I of Part XVI of the Income Tax Act, 1967 , by reason of its use for a purpose specified in section 255 (1) (a) of that Act, and

(b) where any activity carried on in the qualifying premises is not a trade, as if it were a trade:

Provided that an allowance shall be given by reason of this subsection in respect of any capital expenditure incurred on the construction of a qualifying premises only in so far as that expenditure is incurred in the qualifying period.

(3) For the purposes of subsection (2) the references to the 1st day of April, 1988 (as provided for by section 20 of the Finance Act, 1985 ) in the provisions of the Income Tax Act, 1967 , specified in the Table to this subsection, shall be deemed to be references to the 1st day of June, 1989, or, where section 41 (2) applies, to the day next following the end of the specified period.

TABLE

Subsection (2A) (a) of section 254 (industrial building allowance)

Paragraph (ii) of the proviso to subsection (1) and paragraph (ii) of the proviso to subsection (3) of section 264 (annual allowances)

Paragraph (iii) of the proviso to subsection (1) of section 265 (balancing allowances and balancing charges)

(4) As respects a qualifying premises the site of which is wholly within a designated area of Dublin other than the Custom House Docks Area, any allowance or charge which, apart from this subsection, would fall to be made under subsection (2) in respect of capital expenditure on the construction of the qualifying premises shall be reduced to one-half of the amount which, apart from this subsection, would be the amount of that allowance or charge; and for the purposes of this subsection the amount of an allowance or charge so falling to be reduced to one-half thereof shall be computed as if—

(a) this subsection had not been enacted, and

(b) effect had been given to all allowances taken into account in so computing that amount:

Provided that nothing in this section shall affect the operation of section 265 (5) of the Income Tax Act, 1967 .

(5) Subject to subsection (6), section 25 of the Finance Act, 1981 , shall not have effect as respects a qualifying premises which is a multi-storey car-park in relation to which any allowance in respect of expenditure incurred on its construction falls to be made under subsection (2).

(6) Subsections (2) and (4) shall not apply as respects any capital expenditure which—

(a) is incurred before the 1st day of April, 1988, on the construction of a multi-storey car-park the site of which is wholly within a designated area of Dublin other than the Custom House Docks Area, and

(b) is relevant expenditure within the meaning of section 25 of the Finance Act, 1981 .

(7) For the purposes only of determining, in relation to a claim for an allowance by virtue of subsection (2), whether and to what extent capital expenditure incurred on the construction of a qualifying premises is incurred in the qualifying period, only such an amount of that capital expenditure as is determined by the inspector, according to the best of his knowledge and judgment, to be properly attributable to work on the construction of the premises which was actually carried out during the qualifying period shall (notwithstanding any other provision of the Tax Acts as to the time when any capital expenditure is, or is to be treated as, incurred) be treated as having been incurred in that period:

Provided that any amount which, by virtue of this subsection, is determined by the inspector may be amended by the Appeal Commissioners or by the Circuit Court on the hearing, or the rehearing, of an appeal against that determination.

Deduction for certain expenditure on the provision of rented residential accommodation.

43.—(1) In this section—

“construction or conversion expenditure” means expenditure in respect of which, if it were incurred in the qualifying period, relief would fall to be given under subsection (2) of the principal section otherwise than by virtue of section 21 of the Finance Act, 1985 ;

“expenditure to which this section applies” means construction or conversion expenditure incurred in the specified period in relation to a qualifying premises the site of which is wholly within the Custom House Docks Area; and, for the purposes of determining whether and to what extent such expenditure was so incurred in the specified period, subsection (1) (b) of the principal section shall have effect as if the references in subparagraph (i) thereof to the qualifying period were references to the specified period and with any other necessary modifications;

“the principal section” means section 23 of the Finance Act, 1981 .

(2) This section shall be construed together with the principal section.

(3) The principal section and section 24 of the Finance Act, 1981 , shall have effect as respects expenditure to which this section applies as if—

(a) the following definition were substituted for the definition of “qualifying period” in subsection (1) (a) of the principal section:

“‘qualifying period’ means the specified period within the meaning of section 41 of the Finance Act, 1986;”,

(b) for the purposes of the definition of “qualifying premises” in the said subsection (1) (a), the reference in subsection (2) of section 29 of the Finance Act, 1983 , to expenditure to which that section applies were a reference to expenditure to which this section applies,

(c) in subsections (1) and (2) of section 22 of the Finance Act, 1985 , the specified period were substituted for the period mentioned therein, and

(d) the provisions of the Tax Acts set out in the Table to this subsection had not been enacted.

TABLE

Subsections (3) and (4) of section 29 of the Finance Act, 1983

The said subsections (3) and (4) as they are applied by section 30 (1) of the Finance Act, 1983

Section 21 of the Finance Act, 1985

Allowance to owner-occupiers in respect of certain premises.

44.—(1) (a) In this section—

“qualifying expenditure”, in relation to an individual, means, subject to paragraph (c), an amount equal to the amount of the expenditure incurred by the individual in the qualifying period on the construction of a qualifying premises which is a qualifying owner-occupied dwelling in relation to the individual after deducting from that amount of expenditure any sum in respect of or by reference to that expenditure, or in respect of or by reference to the qualifying premises or construction work in respect of which it was incurred, which the individual has received, or is entitled to receive, directly or indirectly, from the State, any board established by statute or any public or local authority;

“qualifying owner-occupied dwelling”, in relation to an individual, means a qualifying premises, the site of which is wholly within a designated area other than the Custom House Docks Area and which is first used, after the qualifying expenditure has been incurred, by that individual as his only or main residence;

“qualifying premises” shall be construed in accordance with paragraph (b);

“qualifying period” means the period commencing on the 23rd day of October, 1985, and ending on the 31st day of May, 1989;

“refurbishment” has the same meaning as in section 21 of the Finance Act, 1985 .

(b) A premises which would be a qualifying premises for the purposes of section 23 of the Finance Act, 1981 , as it applies to expenditure to which section 29 of the Finance Act, 1983 , applies, if—

(i) clause (iv) of the definition of “qualifying premises” in the said section 23 were deleted, and

(ii) subsection (8) of that section had not been enacted,

shall be a qualifying premises for the purposes of this section, and all the provisions of the said section 23 in so far as they apply for the purpose of determining whether a premises is a qualifying premises shall, subject to the modifications mentioned in subparagraphs (i) and (ii) and with any other necessary modifications, apply for the purposes of this section.

(c) A person shall be regarded as having incurred expenditure in the qualifying period on the construction of a qualifying premises to the extent that he would be regarded as having incurred expenditure on the construction or refurbishment of that premises for the purposes of section 23 of the Finance Act, 1981 , if for the definition of “qualifying period” in that section and in section 21 of the Finance Act, 1985 , there were substituted the definition of “qualifying period” in this section, and all the provisions of the said sections 23 and 21 in so far as they apply for the purpose of determining the amount of expenditure incurred in the qualifying period on the construction or refurbishment of a qualifying premises shall, subject to the aforesaid modification of the definition of “qualifying period” and with any other necessary modifications, apply for the purposes of this section.

(d) For the purposes of this section, other than for the purposes of determining whether and to what extent expenditure on the construction or refurbishment of a qualifying premises is incurred in the qualifying period, expenditure incurred on the construction or refurbishment of a qualifying premises shall be deemed to have been incurred on the earliest date after the expenditure was actually incurred that the premises is in use as a dwelling.

(e) (i) Where the qualifying expenditure in relation to a qualifying premises is incurred by two or more persons, each of those persons shall be treated as having incurred only such amount of the expenditure as the inspector, to the best of his knowledge and judgment, considers to be just and reasonable and the expenditure shall be apportioned accordingly.

(ii) An apportionment made under subparagraph (i) may be amended by the Appeal Commissioners or by the Circuit Court on the hearing, or the rehearing, of an appeal against any deduction granted on the basis of the apportionment.

(2) Where an individual, having made a claim in that behalf, proves that he has incurred qualifying expenditure in a year of assessment, he shall be entitled, for that year of assessment and for any of the nine immediately subsequent years of assessment in which the qualifying premises in respect of which the expenditure was incurred is the only or main residence of the individual, to have a deduction made from his total income of an amount equal to 5 per cent. of the amount of the qualifying expenditure.

(3) An appeal to the Appeal Commissioners shall lie on any question arising under this section, other than a question on which an appeal lies under section 18 of the Housing (Miscellaneous Provisions) Act, 1979 , in like manner as an appeal would lie against an assessment to income tax and the provisions of the Income Tax Acts relating to appeals shall apply and have effect accordingly.

(4) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to deductions under this section.

(5) Section 198 (1) (a) of the Income Tax Act, 1967 , is hereby amended by the insertion of the following subparagraph after subparagraph (x) (inserted by section 19 ):

“(xi) so far as it flows from relief under section 44 of the Finance Act, 1986, in the proportions in which they incurred the expenditure giving rise to the relief,”.

Double rent allowance as a deduction in computing trading income.

45.—(1) (a) In this section—

“lease”, “lessee”, “lessor” and “rent” have the meanings respectively assigned to them by Chapter VI of Part IV of the Income Tax Act, 1967 ;

“qualifying lease” means a lease in respect of a qualifying premises granted in the qualifying period on bona fide commercial terms by a lessor to a lessee who is not connected with the lessor, or with any other person who is entitled to a rent in respect of the qualifying premises, whether under that lease or any other lease;

“qualifying period” means the period commencing on the 23rd day of October, 1985, and ending on the 31st day of May, 1989, or, where section 41 (2) applies, the specified period;

“qualifying premises” means a building or structure the site of which is wholly within a designated area and—

(i) (I) which is an industrial building or structure within the meaning of section 255 (1) of the Income Tax Act, 1967 , or

(II) in respect of which an allowance falls to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV or under Chapter I of Part XVI of that Act, by reason of section 42 , and

(ii) which is let on such terms as are referred to in paragraph (b) (ii) of the definition of “qualifying premises” in the said section 42 ;

“relevant rental period”, in relation to a qualifying premises, means the period of ten years commencing on the day on which rent in respect of that premises is first payable under any qualifying lease.

(b) A person shall be regarded for the purposes of this section as connected with another person if he would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

(2) Where, in the computation of the amount of the profits or gains of a trade or profession, a person is, apart from this section, entitled to any deduction (hereafter in this subsection referred to as “the first-mentioned deduction”) on account of rent in respect of a qualifying premises occupied by him for the purposes of that trade or profession which is payable by him in the relevant rental period in relation to that qualifying premises under a qualifying lease, he shall be entitled in that computation to a further deduction equal to the amount of the first-mentioned deduction.

Chapter VI

Income Tax, Corporation Tax and Capital Gains Tax

Limited partnerships: relief restrictions.

46.—(1) In this section—

“the aggregate amount”, in relation to a trade, means—

(a) in the case of an individual, the aggregate of amounts given or allowed to him at any time under any of the specified provisions—

(i) in respect of a loss sustained by him in the trade, or of interest paid by him by reason of his participation in the trade, in any relevant year of assessment, or

(ii) as an allowance falling to be made to him for any relevant year of assessment either in taxing the trade or by way of discharge or repayment of tax to which he is entitled by reason of his participation in the trade,

and

(b) in the case of a company, the aggregate of amounts given or allowed to the company (hereafter in this section referred to as the “partner company”) or to another company at any time under any of the specified provisions—

(i) in respect of a loss incurred by the partner company in the trade, or of charges paid by it or another company by reason of its participation in the trade, in any relevant accounting period, or

(ii) as an allowance falling to be made to the partner company for any relevant accounting period either in taxing the trade or by way of discharge or repayment of tax to which it is entitled by reason of its participation in the trade;

“limited partner”, in relation to a trade, means—

(a) a person who is carrying on the trade as a limited partner in a limited partnership registered under the Limited Partnerships Act, 1907 ,

(b) a person who is carrying on the trade as a general partner in a partnership, who is not entitled to take part in the management of the trade and who is entitled to have his liabilities, or his liabilities beyond a certain limit, for debts or obligations, incurred for the purposes of the trade, discharged or reimbursed by some other person, or

(c) a person who carries on the trade jointly with others and who, under the law of any territory outside the State, is not entitled to take part in the management of the trade and is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;

“relevant accounting period” means an accounting period of the partner company which ends on or after the specified date and at any time during which it carried on the trade as a limited partner;

“the relevant time” means—

(a) in the case of an individual, the end of the relevant year of assessment in which the loss is sustained or the interest is paid, or for which the allowance falls to be made (except that where he ceased to carry on the trade during that year of assessment it is the time when he so ceased), and

(b) in the case of a partner company, the end of the relevant accounting period in which the loss is incurred or the charges are paid, or for which the allowance falls to be made (except that where the partner company ceased to carry on the trade during that accounting period it is the time when it so ceased);

“relevant year of assessment” means a year of assessment which ends after the specified date and at any time during which the individual carried on the trade as a limited partner;

“the specified date” means the 22nd day of May, 1985;

“the specified provisions” means—

(a) in the case of an individual—

(i) section 296 of the Income Tax Act, 1967 ,

(ii) section 307 of that Act, and

(iii) Chapter III of Part I of the Finance Act, 1974 ,

and

(b) in the case of a company, the following provisions of the Corporation Tax Act, 1976 —

(i) section 10,

(ii) section 14 (6),

(iii) section 16 (2),

and

(iv) subsections (1), (2) and (6) of section 116.

(2) (a) Where, in the case of an individual who is a limited partner in relation to a trade, an amount may, apart from this section, be given or allowed under any of the specified provisions—

(i) in respect of a loss sustained by him in the trade or of interest paid by him by reason of his participation in the trade, in a relevant year of assessment, or

(ii) as an allowance falling to be made to him for a relevant year of assessment either in taxing the trade or by way of discharge or repayment of tax to which he is entitled by reason of his participation in the trade,

such an amount may be given or allowed, otherwise than against income consisting of profits or gains arising from the trade, only to the extent that the amount given or allowed or, as the case may be, the aggregate amount in relation to that trade, does not exceed the amount of his contribution to the trade as at the relevant time.

(b) Where, in the case of a partner company which is a limited partner in relation to a trade, an amount may, apart from this section, be given or allowed under any of the specified provisions—

(i) in respect of a loss sustained by the partner company in the trade, or of charges paid by the partner company or another company by reason of its participation in the trade, in a relevant accounting period, or

(ii) as an allowance falling to be made to the partner company for a relevant accounting period either in taxing the trade or by way of discharge or repayment of tax to which it is entitled by reason of its participation in the trade,

such an amount may be given or allowed to the partner company, otherwise than against profits or gains arising from the trade, or to another company, only to the extent that the amount given or allowed, or, as the case may be, the aggregate amount does not exceed the partner company's contribution to the trade as at the relevant time.

(3) (a) A person's contribution to a trade at any time is the aggregate of—

(i) the amount which he has contributed to it as capital and has not subsequently, either directly or indirectly, drawn out or received back from the partnership or from a person connected with the partnership (other than anything, in relation to expenditure which he has incurred on behalf of the partnership trade or in providing facilities for the partnership trade, which he is or may be entitled so to draw out or receive back at any time when he carries on the trade as a limited partner or which he is or may be entitled to require another person to reimburse to him), and

(ii) the amount of any profits or gains of the trade to which he is entitled but which he has not received in money or money's worth.

(b) A person shall, for the purposes of paragraph (a), be treated as having received back an amount which he has contributed to the partnership if—

(i) he received consideration of that amount or value for the sale of his interest, or any part of his interest, in the partnership,

(ii) the partnership or any person connected with the partnership repays that amount of a loan or an advance from him, or

(iii) the person receives that amount of value for assigning any debt due to him from the partnership or from any person connected with the partnership.

(4) To the extent that an allowance is taken into account in computing profits or gains or losses in the year of loss by virtue of section 318 of the Income Tax Act, 1967 , it shall, for the purposes of this section, be treated as falling to be made in the year of loss (and not in the year of assessment for which the year of loss is the basis year).

(5) For the purposes of this section, a person shall be regarded as connected with a partnership if he would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

Amendment of section 16 (gifts to President's Award Scheme) of Finance Act, 1985.

47.— Section 16 of the Finance Act, 1985 , is hereby amended by the substitution in subsection (1) (b) (i) of “1987” for “1986” and the said subsection (1) (b) (i), as so amended, is set out in the Table to this section.

TABLE

(i) is made on or before the 5th day of April, 1987, to the trustees of the President's Award Scheme to be applied by them for the purposes of that scheme, and

Surcharge for late submission of returns.

48.—(1) (a) In this section—

“return of income” means a return, statement, declaration or list which a person is required to deliver to the inspector by reason of a notice which is given by the inspector under any one or more of the specified sections;

“specified date” means, in relation to a return of income for a year of assessment or accounting period—

(i) (I) as respects the year 1986-87, the 31st day of December, 1987,

(II) as respects the year 1987-88 or any subsequent year of assessment, the 31st day of December in the year,

(III) as respects accounting periods ending in the year beginning on the 6th day of April, 1986, and ending on the 5th day of April, 1987, the 31st day of December, 1987, and

(IV) as respects accounting periods ending on or after the 6th day of April, 1987, the last day of the period of nine months commencing on the day next after the end of the accounting period, or

(ii) the last day of the period of six months commencing on the day next after the date on which the person is required by notice to deliver the return of income,

whichever is the later;

“specified sections” means—

(i) sections 70 , 94 (a), 94 (d), 169 , 170 , 172 and 197 of the Income Tax Act, 1967 ,

(ii) section 11 of the Finance Act, 1976 , and

(iii) section 143 of the Corporation Tax Act, 1976 ;

“tax” means income tax, corporation tax or capital gains tax as may be appropriate.

(b) For the purposes of this section—

(i) where a person fraudulently or negligently delivers an incorrect return of income on or before the specified date in relation to the return of income, he shall be deemed to have failed to deliver the return of income on or before that date unless the error in the return of income is remedied on or before that date,

(ii) where a person delivers an incorrect return of income on or before the specified date in relation to that return of income but does so neither fraudulently nor negligently and it comes to his notice (or, if he has died, to the notice of his personal representatives) that it is incorrect, he shall be deemed to have failed to deliver the return of income on or before the specified date in relation to the return of income unless the error in the return of income is remedied without unreasonable delay,

(iii) where a person delivers a return of income on or before the specified date in relation to the return of income but the inspector, by reason of being dissatisfied with any statement of profits or gains arising to the person from any trade or profession which is contained in the return of income, requires the person, by notice in writing served on him under section 174 of the Income Tax Act, 1967 , to do any thing, the person shall be deemed not to have delivered the return of income on or before the specified date unless he does that thing within the time specified in the notice,

(iv) references to such of the specified sections as are applied, subject to any necessary modifications, in relation to capital gains tax by paragraph 3 of Schedule 4 to the Capital Gains Tax Act, 1975 , shall be construed as including references to those sections as so applied, and

(v) references to a return of income for a year of assessment or in relation to a year of assessment shall be construed as references to a return of income requiring a statement or particulars of any income of the year ended on the 5th day of April immediately preceding the commencement of that year of assessment.

(2) Where, in relation to a year of assessment (being the year 1986-87 or any subsequent year of assessment) or accounting period (being an accounting period ending on or after the 6th day of April, 1986), a person who is required to deliver a return of income to the inspector fails to deliver the return of income, on or before the specified date in relation to the return of income, any amount of tax for that year of assessment or accounting period which, apart from this section, is or would be contained in an assessment to tax made or to be made on a person (hereafter in this subsection referred to as the “chargeable person”) who is chargeable to tax for that year of assessment or accounting period on or by reference to the whole or any part of the income, profits or chargeable gains which is contained in or returned in the return of income, or which would be so contained in or returned in the return of income if it were delivered, shall be increased by an amount (hereafter in this subsection referred to as the “surcharge”) equal to 10 per cent. of that amount of tax and, if the tax contained in the assessment to tax is not the amount of tax as so increased, all the provisions of the Tax Acts and the Capital Gains Tax Acts, apart from this section but including in particular those relating to the collection and recovery of tax and the payment of interest on unpaid tax, shall apply as if the tax contained in the assessment to tax were the amount of tax as so increased:

Provided that, in determining the amount of the surcharge, the tax contained in the assessment to tax shall be deemed to be reduced by the aggregate of—

(a) any tax deducted by virtue of any of the provisions of the Tax Acts or the Capital Gains Tax Acts from any income, profits or chargeable gains, charged in the assessment to tax in so far as that tax has not been repaid or is not repayable to the chargeable person and in so far as the tax so deducted may be set off against the tax contained in the assessment to tax,

(b) the amount of any tax credit to which the chargeable person is entitled in respect of any income, profits or chargeable gains charged in the assessment to tax, and

(c) any other amounts which are set off in the assessment to tax against the tax contained therein.

Amendment of section 30 (appeals against assessments and payments on account) of Finance Act, 1976.

49.— Section 30 of the Finance Act, 1976 , is hereby amended by the substitution, in subsection (1), of the following definition for the definition of “the appropriate amount” (inserted by the Finance Act, 1984 ):

“‘the appropriate amount’ means—

(a) in the case of an assessment to income tax (other than an assessment to an amount representing income tax for the purposes of section 31 (1) (a) of the Corporation Tax Act, 1976 ) for the year 1984-85 or 1985-86, 85 per cent. of the amount of tax found to be chargeable by the assessment on the determination of the appeal,

(b) in the case of—

(i) an assessment to income tax or capital gains tax for the year 1986-87 or any subsequent year of assessment, or

(ii) an assessment to corporation tax for an accounting period ending on or after the 6th day of April, 1986,

90 per cent. of the amount of the tax found to be chargeable by the assessment on the determination of the appeal, and

(c) in the case of any other assessment to tax, 80 per cent. of the amount of tax found to be chargeable by the assessment on the determination of the appeal;”.

Capital allowances for, and deduction in respect of, vehicles.

50.—(1) (a) Sections 25 to 29 of the Finance Act, 1973 , shall have effect, in relation to expenditure incurred on the provision or hiring of a vehicle to which those sections apply, as if for “£2,500”, in each place where it occurs in those sections, there were substituted “£4,000”.

(b) The reference in paragraph (a) to expenditure incurred on the provision or hiring of a vehicle does not include—

(i) as respects the said sections 25 to 27, a reference to expenditure incurred before the 6th day of April, 1986, or incurred within twelve months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of the said section 28 and the said section 29, a reference to expenditure under a contract entered into before the said 6th day of April, 1986.

(2) Section 32 of the Finance Act, 1976 , shall have effect, in relation to qualifying expenditure (within the meaning of that section) incurred in respect of a period subsequent to the 5th day of April, 1986, as if for “£3,500”, in each place where it occurs, there were substituted “£4,000”.

Amendment of section 25 (allowance for certain expenditure on construction of multi-storey car-parks) of Finance Act, 1981.

51.—(1) Section 25 of the Finance Act, 1981 , is hereby amended by the substitution in subsection (1), in the definition of “relevant expenditure”, of “1988” for “1987” (inserted by the Finance Act, 1984 ), and the said definition, as so amended, is set out in the Table to this subsection.

TABLE

“relevant expenditure” means capital expenditure incurred on or after the 29th day of January, 1981, and before the 1st day of April, 1988, on the construction of a multi-storey car-park.

(2) The said section 25 is hereby further amended by the substitution of the following subsection for subsection (2) (inserted by the Finance Act, 1984 ):

“(2) All the provisions of the Tax Acts (other than section 25 of the Finance Act, 1978 ) relating to the making of allowances or charges in respect of capital expenditure on the construction of an industrial building or structure shall apply to relevant expenditure as if it were expenditure incurred on the construction of a building or structure in respect of which an allowance falls to be made for the purposes of income tax or corporation tax, as the case may be, under Chapter II of Part XV or under Chapter I of Part XVI of the Income Tax Act, 1967 , by reason of its use for a purpose specified in section 255 (1) (a) of that Act.”.

Capital allowances: treatment of grants, etc.

52.—(1) (a) Subject to paragraph (b), where an allowance falls to be made for the purposes of income tax or corporation tax, as the case may be, under section 241 or 251 of the Income Tax Act, 1967 , and the capital expenditure incurred on the provision of the machinery or plant in respect of which the allowance falls to be made was incurred on or after the 29th day of January, 1986, the following provisions shall apply:—

(i) expenditure shall not be regarded as having been incurred by a person in so far as it has been or is to be met directly or indirectly by the State, by any board established by statute or by any public or local authority, and

(ii) the actual cost of any machinery or plant to any person shall, for the purposes of the said section 241, be taken to be the amount of capital expenditure incurred on the provision of such machinery or plant less any such expenditure as is referred to in subparagraph (i).

(b) Paragraph (a) shall not have effect in relation to any capital expenditure which is or is to be met in the manner mentioned in paragraph (a) (i)—

(i) under the terms of an agreement finally approved on or before the 29th day of January, 1986, by a Department of State, any board established by statute or any public or local authority, or

(ii) under the terms of an agreement which—

(I) is the subject of negotiations which were in progress on the 29th day of January, 1986, with a Department of State, any board established by statute or any public or local authority, and

(II) is finally approved by such Department, board or authority not later than the 31st day of December, 1986.

(2) Section 264 of the Income Tax Act, 1967 , is hereby amended by the insertion after subsection (3) of the following subsection:

“(3A) In ascertaining the writing-down allowance falling to be made to a person under subsection (3), the residue of expenditure mentioned in that subsection shall, where it exceeds the amount of expenditure incurred by that person in respect of the sale, be taken to be the amount of expenditure so incurred.”.

Application of section 40 (capital allowances for certain leased assets) of Finance Act, 1984.

53.— Section 40 of the Finance Act, 1984 , is hereby amended, as respects machinery or plant provided for leasing on or after the 13th day of May, 1986—

(a) in subsection (1), by the insertion after the definition of “chargeable period or its basis period” of the following definition:

“‘lessee’ and ‘lessor’, in relation to machinery or plant provided for leasing, mean, respectively, the person to whom the machinery or plant is or is to be leased and the person providing the machinery or plant for leasing and ‘lessee’ and ‘lessor’ include, respectively, the successors in title of a lessee or a lessor;”,

(b) in subsection (1), in the definition of “the specified capital allowances”, by the insertion after “subsection (6)” of “, (7) or (8)”, and the said definition, as so amended, is set out in the Table to this section,

(c) in subsection (5), by the insertion after “subsection (6)” of “or (7)”, and the said subsection, as so amended, is set out in the Table to this section, and

(d) by the deletion of subsection (6) and the substitution therefor of the following subsections:

“(6) References in this section to machinery or plant to which this subsection applies are references to machinery or plant provided on or after the 25th day of January, 1984, for leasing where the expenditure incurred on the provision of the machinery or plant was incurred under an obligation entered into by the lessor and the lessee—

(a) before the 25th day of January, 1984, or

(b) before the 1st day of March, 1984, pursuant to negotiations which were in progress between the lessor and the lessee before the 25th day of January, 1984.

(7) References in this section to machinery or plant to which this subsection applies are references to machinery or plant provided on or after the 25th day of January, 1984, for leasing where the expenditure incurred on the provision of the machinery or plant (or, in the case of a film to which section 6 or 7 of the Irish Film Board Act, 1980 , applies, the cost of the making of the film) has been or is to be met directly or indirectly, wholly or partly, by the Industrial Development Authority, the Irish Film Board, the Shannon Free Airport Development Company Limited, or Údarás na Gaeltachta:

Provided that this subsection shall not apply to machinery or plant provided for leasing on or after the 13th day of May, 1986, unless—

(a) the machinery or plant is a film to which section 6 or 7 of the Irish Film Board Act, 1980 , applies, or

(b) the expenditure incurred on the provision of the machinery or plant (not being a film of the kind mentioned in paragraph (a)) was incurred under an obligation entered into by the lessor and the lessee before—

(i) the 13th day of May, 1986, or

(ii) the 1st day of September, 1986, pursuant to negotiations which were in progress between the lessor and the lessee before the 13th day of May, 1986.

(8) (a) The reference in the definition of ‘the specified capital allowances’ in subsection (1) to machinery or plant to which this subsection applies is a reference to machinery or plant (not being a film of the kind mentioned in paragraph (a) of the proviso to subsection (7)) provided on or after the 13th day of May, 1986, for leasing by a lessor to a lessee (who is not a person connected with the lessor) under a lease the terms of which include an undertaking given by the lessee that, during a period (hereafter in this section referred to as ‘the relevant period’) which is not less than three years and which commences on the day on which the machinery or plant is first brought into use by the lessee, the machinery or plant so provided will be used by the lessee for the purposes only of a specified trade carried on in the State by the lessee:

Provided that any machinery or plant in respect of which such an undertaking has been given by a lessee, and which at any time has been treated as machinery or plant to which this subsection applies, shall at any later time cease to be machinery or plant to which this subsection applies if, at that later time, it appears to the inspector (or, on appeal, to the Appeal Commissioners) that the undertaking has not been fulfilled by the lessee; and, where any machinery or plant so ceases to be machinery or plant to which this subsection applies, such assessments or adjustments of assessments shall be made to recover from the lessor any relief from tax given to the lessor because the machinery or plant was treated as machinery or plant to which this subsection applies.

(b) This subsection shall not apply to machinery or plant provided for leasing on or after the 13th day of May, 1986, if the expenditure incurred on the provision of the machinery or plant was incurred under an obligation entered into by the lessor and the lessee before—

(i) the 13th day of May, 1986, or

(ii) the 1st day of September, 1986, pursuant to negotiations which were in progress between the lessor and the lessee before the 13th day of May, 1986.