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Amendment of section 4 (special provisions in relation to the supply of immovable goods) of Principal Act.
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99.—Section 4 of the Principal Act is amended by the insertion of the following subsection after subsection (3)—
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“(3A) (a) Where a person having an interest in immovable goods to which this section applies surrenders possession of those goods or of any part of them by means of a disposal of that interest or of an interest which derives from that interest, and where the value of the interest being disposed of is less than its economic value then for the purposes of this Act such disposal—
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(i) shall be deemed not to be a supply of immovable goods for the purposes of subsection (2), but
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(ii) shall be deemed to be a letting of immovable goods to which paragraph (iv) of the First Schedule applies.
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(b) This subsection does not apply to the disposal of a freehold interest.
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(c) Where a person establishes to the satisfaction of the Revenue Commissioners that the value of an interest in immovable goods being disposed of by such person is less than the economic value of those immovable goods because of an unforeseen change in market conditions affecting the value of that interest since such person acquired and developed those goods, then the Revenue Commissioners may determine that that disposal be treated as a supply of immovable goods for the purposes of subsection (2).
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(d) For the purposes of this subsection—
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‘economic value’, in relation to an interest in immovable goods being disposed of, means the amount on which tax was chargeable to the person disposing of that interest in respect of that person's acquisition of that interest and in respect of any development of those immovable goods by or on behalf of that person since that acquisition; but if—
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(i) there was no development of those immovable goods by or on behalf of that person since that person's acquisition of that interest, and
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(ii) that person disposes, including by way of surrender or assignment, of an interest (in this subsection referred to as a ‘lesser interest’) which is derived from the interest which that person acquired (in this subsection referred to as a ‘greater interest’), and
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(iii) the lesser interest is an interest of not more than 35 years,
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then the economic value of the lesser interest shall be deemed to be the amount calculated in accordance with the following formula:
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where—
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E is the economic value of the greater interest,
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N1 is the number of full years in the lesser interest, and
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N2 is the number of full years in the greater interest, but if the number of full years in the greater interest exceeds 35 or if the greater interest is a freehold interest then N2 shall be deemed to be equal to 35,
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but where—
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(I) the disposal of the lesser interest is not a disposal by way of surrender or assignment, and
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(II) the amount so calculated is less than 75 per cent of the economic value of the greater interest,
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then the economic value of the lesser interest shall be deemed to be 75 per cent of the economic value of the greater interest;
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‘the value of an interest being disposed of’ means the amount on which tax would be chargeable in accordance with section 10 if that disposal were deemed to be a supply of immovable goods in accordance with subsection (2).”.
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