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Amendment of Part 29 (patents, scientific and certain other research, know-how and certain training) of Principal Act.
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27.— (1) Part 29 of the Principal Act is amended in Chapter 2—
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(a) in section 766(1)(a) by deleting “and”, where it last occurs, in subparagraph (IA) of paragraph (iii) of the definition of “expenditure on research and development” and by inserting after that clause—
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“(IB) expenditure on research and development shall not include—
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(A) except as provided for in subparagraphs (vii) and (viii) of subsection (1)(b), any amount paid to another person to carry on research and development activities, or
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(B) expenditure incurred by a company in the management or control of research and development activities where such activities are carried on by another person,
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and ‘in the carrying on by it of research and development activities’ shall be construed accordingly, and”,
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(b) in section 766(1)(a) by inserting the following after the definition of “group expenditure on research and development”:
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“ ‘key employee’ has the meaning ascribed to it by section 472D;”,
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(c) in section 766(1)(a) in the definition of “qualifying group expenditure on research and development” by deleting “means an amount equal to the excess of the amount of group expenditure on research and development in relation to a relevant period over the threshold amount in relation to the relevant period;” and substituting the following:
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“shall be determined by the following formula—
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A + B
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where—
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A is so much of the amount of group expenditure on research and development in relation to a relevant period as does not exceed €100,000, and
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B is the amount equal to the excess of the amount of group expenditure on research and development in relation to the relevant period over the threshold amount in relation to the relevant period,
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but the amount of qualifying group expenditure on research and development in relation to a relevant period shall not exceed the amount of group expenditure on research and development in relation to that relevant period;”,
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(d) in section 766(1)(a) by inserting the following after the definition of “research and development centre”:
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“ ‘specified amount’ means an amount—
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(i) paid by the Revenue Commissioners in accordance with subsection (4B) of this section or section 766A(4B), as the case may be, or
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(ii) surrendered in accordance with subsection (2A),
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and a claim in respect of a specified amount shall be construed accordingly;”,
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(e) in section 766(1)(b)(v) by deleting “by or through the State, any board established by statute, any public or local authority or any other agency of the State;” and substituting the following:
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“by or through—
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(I) the State or another relevant Member State, or
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(II) any board established by statute, any public or local authority or any other agency of the State or another relevant Member State;”,
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(f) in section 766(1)(b)(vii) by deleting “5 per cent of that expenditure shall be treated as if it were expenditure incurred by the company on the carrying on by it of research and developing activities;” and substituting “the greater of 5 per cent of that expenditure or €100,000, shall, to the extent that it does not exceed the expenditure referred to in clause (I), be treated as if it were expenditure incurred by the company in the carrying on by it of research and development activities;”,
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(g) in section 766(1)(b) by substituting the following for sub-paragraph (viii):
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“(viii) where in any period a company—
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(I) incurs expenditure on research and development, and
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(II) pays a sum (not being a sum referred to in clause (II) of subparagraph (vii)) to a person, other than to a person who is connected (within the meaning of section 10) with the company, in order for that person to carry on research and development activities, and notifies that person in writing that the payment is a payment to which this clause applies and that the person may not make a claim under this section in respect of such research and development activities,
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then, so much of the sum so paid as does not exceed the greater of 10 per cent of that expenditure or €100,000, shall, to the extent that it does not exceed the expenditure referred to in clause (I), be treated as if it were expenditure incurred by the company in the carrying on by it of research and development activities and expenditure incurred by that other person in connection with the activities referred to in clause (II) shall not be expenditure on research and development;”,
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(h) in section 766(2) by deleting “Where” and substituting “Subject to subsection (2A) where”,
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(i) by inserting the following after section 766(2):
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“(2A) (a) Subject to paragraph (c), where as respects any accounting period a company is entitled to reduce the corporation tax of that accounting period by an amount, in accordance with subsection (2), the company may instead on making a claim in that behalf to the appropriate inspector surrender all or part of that amount to one or such number of key employees as the company may specify but the aggregate of such amounts, attributable to such employees, may not exceed the amount so surrendered.
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(b) The part of that amount that may be surrendered by the company may not exceed the corporation tax of the accounting period, which would be chargeable, if no claim could be made in accordance with subsection (2).
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(c) A company may not make a claim under this subsection where, at the time of making such a claim the company has a liability (within the meaning of section 960H) in respect of the corporation tax of the accounting period referred to in subsection (2) or a previous accounting period.
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(d) A claim in accordance with this subsection shall be made in such form as the Revenue Commissioners may prescribe and the company shall notify the key employee, in writing, of any amount surrendered to that employee.
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(2B) Where as respects any accounting period a company makes a claim under subsections (2) and (2A) and in accordance with that claim—
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(a) the corporation tax of an accounting period is reduced and an amount is surrendered, and
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(b) either or both the amount so reduced or surrendered, as the case may be, is subsequently found not to have been as is authorised by this section,
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then, the amount which is not so authorised shall be first attributable to a claim under subsection (2) in priority to a claim under subsection (2A).
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(2C) Where in respect of an accounting period, a company makes a claim under subsection (2A) and it is subsequently found that the amount surrendered in accordance with that claim (hereafter in this section referred to as the ‘initial amount’) is not as authorised by this section, then, in relation to each key employee, the amount surrendered, which is authorised by this section, shall be an amount (hereafter in this section referred to as the ‘relevant authorised amount’) determined by the formula—
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A × B
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C
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where—
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A is the portion of the initial amount attributable to that key employee in accordance with the claim under subsection (2A),
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B is the aggregate amount that may be surrendered by the company for that accounting period as is authorised by this section, and
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C is the initial amount,
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and the company shall notify the key employee in writing of the relevant authorised amount.”,
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(j) by inserting the following after section 766(4B):
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“(4C) Where a company (in this section and section 766A referred to as the ‘predecessor’) which has made a claim in accordance with this section ceases to carry on a trade which includes the carrying on by it of research and development activities and another company (in this section and section 766A referred to as the ‘successor’) commences to carry on the trade and those research and development activities (the cessation and commencement referred to in this section and section 766A as the ‘event’) and—
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(a) both the predecessor and successor were, at the time of the event, members of the same group of companies within the meaning of section 411(1), and
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(b) on or at any time within 2 years after the event the trade and the research and development activities are not carried on otherwise than by the successor,
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then the successor may, to the extent that the predecessor has not used an amount to reduce the corporation tax of an accounting period in accordance with subsection (2), surrendered an amount in accordance with subsection (2A) or made a claim under subsection (4A) or (4B), carry forward any excess that the predecessor would have been entitled to carry forward in accordance with subsection (4).”,
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(k) by substituting the following for subsection 766(7B):
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“(7B) (a) Any amount payable by the Revenue Commissioners to the company or another company by virtue of subsection (4B) shall be deemed to be an overpayment of corporation tax, for the purposes only of section 960H(2).
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(b) Any claim in respect of a specified amount shall be deemed for the purposes of section 1077E to be a claim in connection with a credit and, for the purposes of determining an amount in accordance with section 1077E(11) or 1077E(12), a reference to an amount of tax that would have been payable for the relevant periods by the person concerned shall be read as if it were a reference to a specified amount.
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(c) Where a company makes a claim in respect of a specified amount and it is subsequently found that the claim is not as authorised by this section or by section 766A, as the case may be, then the company may be charged to tax under Case IV of Schedule D for the accounting period in respect of which the payment was made or the amount surrendered, as the case may be, in an amount equal to 4 times so much of the specified amount as is not so authorised.
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(d) Where in accordance with paragraph (c) an inspector makes an assessment in respect of a specified amount, the amount so charged shall for the purposes of section 1080 be deemed to be tax due and payable and shall carry interest as determined in accordance with subsection (2)(c) of section 1080 as if a reference to the date when the tax became due and payable were a reference to the date the amount was paid by the Revenue Commissioners, or a reference to the date the corporation tax of the company for the accounting period in respect of which the amount was surrendered, was payable, as the case may be.”,
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(l) in section 766A(1)(a) by inserting the following after the definition of “specified relevant period”:
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“ ‘specified time’ in relation to a building or structure means the period of 10 years commencing at the beginning of the accounting period in which the predecessor incurs relevant expenditure on that building or structure;”,
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(m) in section 766A(1)(b)(i) by deleting “by the State;” and substituting the following:
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“by or through—
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(I) the State or another relevant Member State, or
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(II) any board established by statute, any public or local authority or any other agency of the State or of another relevant Member State;”,
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(n) in section 766A(3) by deleting “then the company” and substituting “then, subject to subsection (3A), the company”, and
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(o) by inserting the following after subsection 766A(3):
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“(3A) Where an event referred to in section 766(4C) occurs and—
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(a) in connection with the event the predecessor transfers to the successor a building or structure in respect of which—
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(i) the predecessor had made a claim under section 766A,
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(ii) the transfer is a transfer to which section 617 applies, and
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(iii) at the time of the transfer either or both the specified relevant period and the specified time had not expired,
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(b) on, or at any time within 2 years after, the event, the trade and research and development activities are not carried on otherwise than by the successor, and
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(c) the building or structure in respect of which relevant expenditure was incurred by the predecessor—
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(i) in a case where the specified relevant period had not expired, would continue to be a qualifying building if a reference, in the definition of ‘qualifying building’ to activities carried on by the company were construed as a reference to activities carried on by the company and the successor, and
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(ii) continues to be used by the successor throughout the remainder of the ‘specified time’ for the purposes of research and development activities,
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then—
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(I) subparagraphs (i) and (ii) of subsection (3) shall not apply in relation to the transfer by the predecessor,
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(II) the successor may, to the extent that the predecessor has not used an amount to reduce the corporation tax of an accounting period in accordance with subsection (2) or made a claim under subsection (4A) or (4B) carry forward any excess that the predecessor would have been entitled to carry forward, in accordance with subsection (4), and
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(III) subsection (3) shall have effect as if a reference to the company in subsection (3)(c) and thereafter in subsection (3) were a reference to the successor.”.
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(2) (a) Paragraphs (f) and (g) shall apply to accounting periods ending on or after 1 January 2012.
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(b) Except where otherwise provided this section applies to accounting periods commencing on or after 1 January 2012.
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