Finance Act, 1987

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Amendment of section 14 (taxation treatment of certain dividends) of Finance Act, 1986.

5.— Section 14 of the Finance Act, 1986 , is hereby amended, as respects the year 1987-88 and any subsequent year of assessment—

(a) by the insertion in subsection (1) after “A dividend” of “in respect of eligible shares”,

(b) by the insertion after subsection (1) of the following subsection:

“(1A) (a) In this section ‘eligible shares’, in relation to a company, means shares forming part of the ordinary share capital of the company which—

(i) are fully paid up,

(ii) 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, and

(iii) are not subject to any different treatment from the treatment which applies to all shares of the same class, in particular, different treatment in respect of—

(I) the dividend payable,

(II) repayment,

(III) restrictions attaching to the shares,

or

(IV) any offer of substituted or additional shares, securities or rights of any description in respect of the shares.

(b) Except where the shares are in a company whose ordinary share capital consists of shares of one class only, shares shall not be eligible shares for the purposes of this section unless, at the time of payment of the dividend in respect of the shares to which the claim under this section relates, the majority of the issued shares of the same class as those shares are held by persons other than—

(i) persons who acquired their shares in pursuance of any benefit or right conferred on them or an opportunity afforded to them as a director or employee of the company concerned or any other company and not in pursuance of an offer to the public, and

(ii) trustees holding shares on behalf of persons who acquired their beneficial interest in the shares in pursuance of such a benefit, right or opportunity as is mentioned in subparagraph (i).

(c) In this subsection, ‘ordinary share capital’ has the meaning assigned to it by section 155 (5) of the Corporation Tax Act, 1976 .

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

(c) by the substitution of the following proviso for the proviso to subsection (2):

“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—

(i) in the case of qualifying dividends paid by a company—

(I) which exists wholly for the purpose of carrying on wholly or mainly in the State a trade which consists wholly or mainly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980 , and

(II) which has established a profit sharing scheme which has been approved of, and continues to be so approved of, by the Revenue Commissioners in accordance with Part I of the Third Schedule to the Finance Act, 1982 ,

£9,000, and

(ii) in the case of qualifying dividends paid by any other company, £7,000:

Provided further that the total amount by which the income of an individual which is represented by qualifying dividends is to be reduced under this section for any year of assessment shall not exceed £9,000.”,

and

(d) by the insertion after subsection (2) of the following subsection:

“(2A) For the purposes of subsection (2), a trade, which consists partly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980 , and partly of other trading operations, shall be regarded as consisting wholly or mainly of the manufacture of goods within the said meaning if, but only if, the total amount receivable by the company carrying on the trade from the sale of such goods is not less than 75 per cent. of the total amount receivable by the company from all sales made in the course of the trade.”,

and the said subsection (1), as so amended, is set out in the Table to this section.

TABLE

(1) A dividend in respect of eligible shares 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.