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7 1976

CORPORATION TAX ACT, 1976

PART IX

Schedule F and Company Distributions

Schedule F.

83. —(1) Income tax for any year of assessment after the year 1975-76 shall be chargeable under a new Schedule, to be called Schedule F, in respect of dividends and other distributions in that year of a company resident in the State.

(2) The Schedule referred to as Schedule F is as follows—

SCHEDULE F

1. Income tax under this Schedule shall be chargeable for any year of assessment in respect of all dividends and other distributions in that year of a company resident in the State which are not specially excluded from income tax, and for the purposes of income tax all such distributions shall be regarded as income however they fall to be dealt with in the hands of the recipient.

2. For the purposes of this Schedule and all other purposes of the Tax Acts any such distribution as aforesaid in respect of which a person is entitled to a tax credit shall be treated as representing income equal to the aggregate of the amount or value of that distribution and the amount of that credit, and income tax under this Schedule shall accordingly be charged on that aggregate.

(3) No distribution which is chargeable under Schedule F shall be chargeable under any other provision of the Income Tax Acts.

(4) Where for any year of assessment the income of a person who for that year is not resident in the State includes an amount in respect of a distribution made by a company which is resident in the State—

(a) that person's liability under any assessment to income tax made in respect of the distribution shall be reduced by a sum equal to income tax at the standard rate for that year on the said amount, and

(b) the amount or value of the distribution shall be treated for the purposes of sections 433 (yearly interest, etc., payable wholly out of taxed profits) and 434 (interest, etc., not payable out of taxed profits) of the Income Tax Act, 1967 , as not brought into charge to income tax.

(5) A company which makes a distribution (not being a distribution to which section 5 (1) refers) shall, if the recipient so requests in writing, furnish to him a statement in writing showing the amount or value of the distribution and (whether or not the recipient is a person entitled to a tax credit in respect of the distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect thereof.

The duty imposed by this subsection shall be enforceable at the suit or instance of the person requesting the statement.

Matters to be treated as distributions.

84. —(1) The following provisions of this Part, together with section 96 (payments, etc., to participators and associates) and section 97 (interest paid to directors and directors' associates), shall, subject to any express exceptions, have effect with respect to the meaning in this Act of “distribution” and for determining the persons to whom certain distributions are to be treated as made; but references in this Act to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.

(2) In relation to any company “distribution” means—

(a) any dividend paid by the company, including a capital dividend;

(b) any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except, subject to section 86, so much of the distribution, if any, as represents a repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;

(c) any amount met out of assets of the company (whether in cash or otherwise) in respect of the redemption of any security issued by the company in respect of shares in or securities of the company otherwise than wholly for new consideration, or in the redemption of such part of any such security so issued as is not properly referable to new consideration;

(d) any interest (excluding interest paid before the 6th day of April, 1976) or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured, and, without prejudice to section 87 (9), for this purpose no amount shall be regarded as representing the principal secured by a security in so far as it exceeds any new consideration which has been received by the company for the issue of the security), where the securities are—

(i) securities issued as mentioned in paragraph (c), but excluding securities issued before the 27th day of November, 1975; or

(ii) securities convertible directly or indirectly into shares in the company or securities carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted; or

(iii) securities under which—

(I) the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company's business or any part of it, or

(II) the consideration so given represents more than a reasonable commercial return for the use of that principal; provided that this shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal; or

(iv) securities issued by the company and held by a company not resident in the State, where—

(I) the company which issued the securities is a 75 per cent. subsidiary of the other company; or

(II) both are 75 per cent. subsidiaries of a third company which is not resident in the State; or

(III) except where 90 per cent. or more of the share capital of the company which issued the securities is directly owned by a company resident in the State both the company which issued the securities and the company not resident in the State are 75 per cent. subsidiaries of a third company which is resident in the State; or

(v) securities which are connected with shares in the company, where “connected with” means that in consequence of the nature of the rights attaching to the securities or shares, and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or acquire, a proportionate holding of the shares;

(e) any such amount as is required to be treated as a distribution by subsection (3) or by section 85.

(3) Where on a transfer of assets or liabilities by a company to its members or to a company by its members, the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by him, the company shall be treated as making a distribution to him of an amount equal to the difference:

Provided that, where the company and the member receiving the benefit are both resident in the State and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident, the said amount shall not be treated as a distribution.

(4) The question whether one company is a subsidiary of another for the purpose of subsection (3) shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade; or

(b) of any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt; or

(c) of any share capital which it owns directly or indirectly in a company not resident in the State.

(5) (a) No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (3) if they are companies—

(i) both of which are resident in the State and neither of which is a 51 per cent. subsidiary of a company not so resident; and

(ii) which neither at the time of the transfer nor as a result of it are under common control.

(b) For the purposes of this subsection two companies are under common control if they are under the control of the same person or persons, and for this purpose “control” shall have the meaning assigned to it by section 158.

(c) Any amount which would be a distribution by virtue of subsection (3) apart from the proviso to that subsection (groups of companies resident in the State), shall not constitute a distribution by virtue of subsection (2)(b).

Bonus issues following repayment of share capital.

85. —(1) Where a company—

(a) repays any share capital, or has done so at any time on or after the 27th day of November, 1975; and

(b) at or after the time of that repayment issues as paid up otherwise than by the receipt of new consideration any share capital;

the amount so paid up shall be treated as a distribution made in respect of the shares on which it is paid up, except in so far as that amount exceeds the amount or aggregate amount of share capital so repaid less any amounts previously so paid up and treated by virtue of this subsection as distributions.

(2) Subsection (1) shall not apply where the repaid share capital consists of fully paid up preference shares—

(a) if those shares existed as issued and fully paid preference shares on the 27th day of November, 1975, and throughout the period from that date until the repayment those shares continued to be fully paid preference shares, or

(b) if those shares were issued after the 27th day of November, 1975, as fully paid preference shares wholly for new consideration not derived from ordinary shares and throughout the period from their issue until the repayment those shares continued to be fully paid preference shares.

(3) In this section—

ordinary shares” means shares other than preference shares;

preference shares” means shares—

(a) which do not carry any right to dividends other than dividends at a rate per cent. of the nominal value of the shares which is fixed, and

(b) which carry rights in respect of dividends and capital which are comparable with those general for fixed-dividend shares quoted on a stock exchange in the State;

new consideration not derived from ordinary shares” means new consideration other than consideration consisting of the surrender, transfer or cancellation of ordinary shares of the company or any other company or consisting of the variation of rights in ordinary shares of the company or any other company, and other than consideration derived from a repayment of share capital paid in respect of ordinary shares of the company or of any other company.

(4) Except in relation to a close company within the meaning of section 94 (meaning of close company) this section shall not apply if the issue of share capital mentioned in paragraph (b) of subsection (1)—

(a) is of share capital other than redeemable share capital; and

(b) takes place more than ten years after the repayment of share capital mentioned in paragraph (a) of that subsection.

Matters to be treated or not treated as repayments of share capital.

86. —(1) Where—

(a) a company issues any share capital as paid up otherwise than by the receipt of new consideration, or has done so on or after the 27th day of November, 1975; and

(b) any amount so paid up does not fall to be treated as a distribution:

then for the purposes of sections 84 and 85 distributions afterwards made by the company in respect of shares representing that share capital shall not be treated as repayments of share capital, except to the extent to which those distributions, together with any relevant distributions previously so made, exceed the amounts so paid up (then or previously) on such shares after that date and not falling to be treated as distributions.

(2) In subsection (1) “relevant distribution” means so much of any distribution made in respect of shares representing the relevant share capital as apart from that subsection would be treated as a repayment of share capital, but by virtue of that subsection cannot be so treated.

(3) For the purposes of subsection (1) all shares of the same class shall be treated as representing the same share capital, and where shares are issued in respect of other shares, or are directly or indirectly converted into or exchanged for other shares, all such shares shall be treated as representing the same share capital.

(4) Where share capital is issued at a premium representing new consideration, the amount of the premium is to be treated as forming part of that share capital for the purpose of determining under this Part whether any distribution made in respect of shares representing the share capital is to be treated as a repayment of share capital:

Provided that this subsection shall not have effect in relation to any part of the premium after that part has been applied in paying up share capital.

(5) Subject to subsection (4), premiums paid on redemption of share capital are not to be treated as repayments of capital.

(6) Except in relation to a close company within the meaning of section 94, subsection (1) shall not prevent a distribution being treated as a repayment of share capital if it is made—

(a) more than ten years after the issue of share capital mentioned in paragraph (a) of that subsection; and

(b) in respect of share capital other than redeemable share capital.

Distributions: supplemental.

87. —(1) In this Part “new consideration” means consideration not provided directly or indirectly out of the assets of the company, and in particular does not include amounts retained by the company by way of capitalising a distribution:

Provided that where share capital has been issued at a premium representing new consideration, any part of that premium afterwards applied in paying up share capital shall be treated as new consideration also for that share capital, except in so far as the premium has been taken into account under section 86 (4) so as to enable a distribution to be treated as a repayment of share capital.

(2) (a) No consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of this Part as new consideration received by the company unless the consideration consists of—

(i) money or value received from the company as a distribution;

(ii) money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by that security; or

(iii) the giving up of the right to that share capital or security on its cancellation, extinguishment or acquisition by the company.

(b) No amount shall be regarded as new consideration by virtue of paragraph (a) (ii) or (iii) in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a distribution on issue, the nominal value of that share capital.

(3) Where two or more companies enter into arrangements to make distributions to each other's members, all parties concerned may for the purposes of this Part be treated as if anything done by any of those companies had been done by any other, and this subsection applies however many companies participate in the arrangements.

(4) (a) In this Part the expressions “in respect of shares in the company” and “in respect of securities of the company” in relation to a company which is a member of a 90 per cent. group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.

(b) Without prejudice to section 84 (2) (b) as extended by the immediately preceding paragraph, in relation to a company which is a member of a 90 per cent. group, “distribution” includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.

(c) Nothing in this subsection shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the State.

(d) For the purposes of this subsection a principal company and all its 90 per cent. subsidiaries form a “90 per cent. group” and “principal company” means a company of which another company is a subsidiary.

(5) A distribution shall be treated under this Part as made, or consideration as provided, out of assets of a company if the cost falls on the company.

(6) In this Part “share” includes stock, and any other interest of a member in a company.

(7) References in this Part to issuing share capital as paid up apply also to the paying up of any issued share capital.

(8) For purposes of this Part “security” includes securities not creating or evidencing a charge on assets, and interest paid by a company on money advanced without the issue of a security for the advance, or other consideration given by a company for the use of money so advanced, shall be treated as if paid or given in respect of a security issued for the advance by the company.

(9) Where securities are issued at a price less than the amount repayable on them, and are not quoted on a recognised stock exchange, the principal secured shall not be taken for the purposes of this Part to exceed the issue price, unless the securities are issued on terms reasonably comparable with the terms of issue of securities so quoted.

(10) For the purposes of this Part a thing is to be regarded as done in respect of a share if it is done to a person as being the holder of the share, or as having at a particular time been the holder, or is done in pursuance of a right granted or offer made in respect of a share, and anything done in respect of shares by reference to share holdings at a particular time is to be regarded as done to the then holder of the shares or the personal representatives of any share holder then dead.

This subsection shall apply in relation to securities as it applies in relation to shares.

Tax credit for certain recipients of distributions.

88. —(1) Where a company resident in the State makes a distribution on or after the 6th day of April, 1976, and the person receiving the distribution is another such company or a person resident in the State, not being a company, the recipient of the distribution shall, subject to the provisions of this Act, be entitled to a tax credit under this section (in this Act referred to as a “tax credit”).

(2) The tax credit in respect of a distribution shall be available for the purposes specified in the Tax Acts and shall, subject to any express provision to the contrary, be an amount determined by the formula

A

D ×_____

100 – A

where—

A is the standard rate per cent. for the year of assessment in which the distribution is made, and

D is the amount or value of the distribution.

(3) A company resident in the State which is entitled to a tax credit in respect of a distribution may claim to have the amount of the tax credit paid to it if—

(a) the company is wholly exempt from corporation tax or is only not exempt in respect of trading income; or

(b) the distribution is one in relation to which express exemption (otherwise than by section 2 (resident company distributions not chargeable to corporation tax)) is given, whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.

(4) A person, not being a company resident in the State, who is entitled to a tax credit in respect of a distribution may claim to have the credit set against the income tax chargeable on his income for the year of assessment in which the distribution is made and, where the credit exceeds that income tax, to have the excess paid to him.

(5) (a) Where a distribution mentioned in subsection (1) is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether he is entitled to a tax credit in respect of it shall be determined by reference to where he, and not the actual recipient, is resident); and where any such distribution is income of a trust resident in the State the trustees shall be entitled to a tax credit in respect of it if no other person falls to be treated for the purposes of this section as receiving the distribution.

(b) In this subsection “trust resident in the State” means a trust administered under the law of the State, not being a trust the general administration of which is ordinarily carried on outside the State and the trustees, or a majority of the trustees, of which are resident or ordinarily resident outside the State.

Disallowance of reliefs in respect of bonus issues.

89. —(1) This section has effect where any person (in this section referred to as “the recipient”) receives an amount treated as a distribution by virtue of—

(a) section 84 (2) (c) (d),

(b) section 85, or

(c) section 86 (1),

and in the following provisions of this section a distribution falling within paragraph (a), (b) or (c) is referred to as a “bonus issue” and “relevant tax credit”, in relation to a bonus issue, means the tax credit to which the recipient of the bonus issue becomes entitled under section 88 in respect of the bonus issue.

(2) Subject to subsection (5), if the recipient is entitled by reason of—

(a) any exemption from tax, or

(b) the setting-off of losses against profits or income, or

(c) the payment of interest,

to recover tax in respect of any distribution received by him, no account shall be taken, for the purposes of any such exemption or set-off or payment of interest, of any bonus issue or relevant tax credit received by him.

(3) Subject to subsection (5), a bonus issue and the relevant tax credit shall be treated as not being franked investment income within the meaning of section 24 (franked investment income and franked payment).

(4) Subject to subsection (5), the relevant tax credit relating to a bonus issue shall not be available to set against any income tax which the recipient is entitled to deduct under section 433 , or with which he is chargeable by virtue of section 434 , of the Income Tax Act, 1967 .

(5) Nothing in subsections (2) to (4) shall affect the proportion (if any) of any bonus issue made in respect of any shares or securities which, if it were declared as a dividend, would represent a normal return to the recipient on the consideration provided by him for the relevant shares or securities, that is to say, those in respect of which the bonus issue was made and, if those securities are derived from shares or securities previously acquired by the recipient, the shares or securities which were previously acquired; nor shall anything in those subsections affect the like proportion of the relevant tax credit relating to that bonus issue.

(6) For the purposes of subsection (5)—

(a) if the consideration provided by the recipient for any of the relevant shares or securities was in excess of their market value at the time he acquired them, or if no consideration was provided by him for any of the relevant shares or securities, the recipient shall be taken to have provided for those shares or securities consideration equal to their market value at the time he acquired them; and

(b) in determining whether an amount received by way of dividend exceeds a normal return, regard shall be had to the length of time previous to the receipt of that amount that the recipient first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of them during that time.

Distributions made out of capital profits of companies.

90. —(1) Where on or after the 6th day of April, 1976, a company resident in the State makes a distribution partly out of capital profits of the company and partly out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of capital profits and out of other profits.

(2) Notwithstanding section 1 (2) (introduction for companies of corporation tax), where a company on or after the 6th day of April, 1976, makes a distribution (including part of a distribution treated under subsection (1) as a distribution) and the distribution is made, or is deemed under subsection (5) to have been made, out of capital profits of the company, the company shall, for the year of assessment in which the distribution is made, be assessed to income tax at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for that year is equal to the amount of the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(3) Where a distribution (including part of a distribution treated under subsection (1) as a distribution) to which subsection (2) applies is made partly out of capital profits which have been charged to capital gains tax or, after the reduction provided for by section 13 (computation of chargeable gains), to corporation tax and partly out of other capital profits, the distribution shall be treated as if it consisted of two distributions respectively made out of capital profits which have been so charged and out of other capital profits.

(4) Where on or after the 6th day of April, 1976, a company makes a distribution out of capital profits which have been charged to capital gains tax or, after the reduction provided for by section 13, to corporation tax, the tax charged under subsection (2) shall be reduced by an amount equal to the amount of capital gains tax which would be chargeable under section 3 of the Capital Gains Tax Act, 1975 , for the year of assessment in which the distribution is made on an amount equal to the aggregate of the distribution and the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(5) Where a distribution (being a distribution by virtue of section 96 (payments to participators or associates) or section 97 (interest paid to directors and their associates)) is made by a company, the distribution shall be deemed to be made out of the profits of the company to the extent of those profits, and where the distribution exceeds the profits of the company the amount of the excess shall be deemed to have been made out of capital profits of the company which have not been charged to capital gains tax or to corporation tax.

(6) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

Distributions by newly resident companies out of profits arising before residence begins.

91. —(1) Where, on or after the date on which it begins to be resident in the State, but not earlier than the 6th day of April, 1976, a company makes a distribution partly out of profits which arose to it before the date on which it begins to be so resident and partly out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of profits which arose to the company before the date on which it begins to be resident in the State and out of other profits.

(2) Notwithstanding section 1 (2), a company which, on or after the date on which it begins to be resident in the State but not earlier than the 6th day of April, 1976, makes a distribution, including part of a distribution treated under subsection (1) as a distribution, out of profits which arose to it before the date on which it begins to be so resident shall, for the year of assessment in which the distribution is made, be assessed to income tax at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for the said year of assessment is equal to the amount of the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(3) Any person who by virtue of any exemption or relief from tax claims payment of the tax credit in respect of a distribution to which subsection (2) refers shall not be entitled to payment of the said credit if the company by which the distribution is made is a close company (as defined in section 94) which has not paid the total amount of the income tax which is assessed on it under subsection (2).

(4) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

Distributions made before 6th April, 1976.

92. —(1) Where on or after the 27th day of November, 1975, and before the 6th day of April, 1976, a distribution is made by a company which is resident in the State, such distribution, for the purposes of sections 83, 88 and 90, shall be deemed to have been made on the 6th day of April, 1976:

Provided that “distribution” in this section shall be deemed not to include a dividend from which income tax was deducted or a dividend from which income tax was not deducted by virtue of section 387 or 410 of the Income Tax Act, 1967 .

(2) This section shall not apply to a distribution made on or after the 27th day of November, 1975, and before the 6th day of April, 1976, if—

(a) it was declared by the company in general meeting before the first-mentioned date; or

(b) it was declared in general meeting after the first-mentioned date but in accordance with a recommendation of the directors and the directors' decision to make that recommendation was, with the authority of the directors, publicly announced before that date; or

(c) it was made in accordance with a decision of the directors, and that decision was, with their authority, publicly announced before the first-mentioned date.

Distributions out of certain exempt profits.

93. —(1) In this section “exempt profits” means profits or gains which by virtue of—

(a) section 18 of the Finance Act, 1969 (profits from the occupation of certain lands), or

(b) that section as applied by section 11 (6) (continuation of exemptions)

were not charged to tax.

(2) Where a distribution for an accounting period is made by a company in part out of exempt profits and in part out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of exempt profits and out of other profits.

(3) (a) So much of any distribution as has been made out of exempt profits—

(i) shall, where the recipient of such distribution is a company, be deemed for the purposes of this Act to be exempt profits of the company, and

(ii) shall not be regarded as income for any purpose of the Income Tax Acts.

(b) Notwithstanding the provisions of section 88, the recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of exempt profits shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Where a company makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 178 (dividends at gross rate or of gross amount) relates and the distribution is made out of exempt profits the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3) (b) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of exempt profits.

(5) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a company out of exempt profits, sections 5 (dividend warrants) and 83 (5) shall apply to the company so that the statements provided for by these sections shall show as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempt profits.

(6) In relation to any supplementary distribution under subsection (4), section 5 shall apply to the company so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(7) Where a company makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (as defined in section 64 (4)) of that period to the extent of that income, and in relation to the excess of the distribution over that income, out of the most recently accumulated income.

(8) Subsections (5) and (6) of section 64 shall apply for the purposes of this section as they apply for the purposes of that section.

(9) In this section “other profits” includes a dividend or other distribution of a company which is resident in the State but does not include a distribution to which subsection (3) (a) (i) applies.