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21 1978

FINANCE ACT, 1978

Chapter III

Corporation Tax

Disregard of profits or losses attributable to certain transactions of industrial and provident societies.

18. —(1) In this section and in Parts I and II of the Second Schedule—

agricultural society” means a society—

(a) in relation to which both the following conditions are satisfied:

(i) that the number of the society's members is not less than fifty,

(ii) that all or a majority of the society's members are persons who are mainly engaged in, and derive the principal part of their income from, husbandry,

or

(b) to which a certificate under subsection (2) (a) relates;

exempted transactions” means—

(a) in relation to an agricultural society, transactions falling within any of the classes of transactions set out in Part I of the Second Schedule, and

(b) in relation to a fishery society, transactions falling within any of the classes of transactions set out in Part II of the Second Schedule,

but excluding sales to the intervention agency and, for the purposes of this exclusion, the sale of a commodity by an agricultural society or a fishery society to a person other than the intervention agency shall be deemed to be a sale by the agricultural society or the fishery society, as the case may be, to the intervention agency if that commodity is ultimately sold to the intervention agency;

fishery society” means a society—

(a) in relation to which both the following conditions are satisfied:

(i) that the number of the society's members is not less than twenty,

(ii) that all or a majority of the society's members are persons who are mainly engaged in, and derive the principal part of their income from, fishing,

or

(b) to which a certificate under subsection (2) (b) relates;

intervention agency” means the Minister for Agriculture when exercising or performing any power or function conferred on him by Regulation 3 of the European Communities (Common Agricultural Policy) (Market Intervention) Regulations, 1973 (S.I. No. 24 of 1973), and any other person when exercising or performing any corresponding power or function in any Member State of the European Economic Community;

selling by wholesale” means selling goods of any class to a person who carries on a trade of selling goods of that class or uses goods of that class for a the purposes of a trade carried on by him;

society” means a society registered under the Industrial and Provident Societies Acts, 1893 to 1971.

(2) (a) The Minister for Finance may, on the recommendation of the Minister for Agriculture, give a certificate entitling a society to be treated, for the purposes of this section, as an agricultural society notwithstanding that one or both of the conditions in paragraph (a) of the definition of “agricultural society” is or are not complied with in relation to the society.

(b) The Minister for Finance may, on the recommendation of the Minister for Fisheries, give a certificate entitling a society to be treated, for the purposes of this section, as a fishery society notwithstanding that one or both of the conditions in paragraph (a) of the definition of “fishery society” is or are not complied with in relation to the society.

(c) A certificate under subsection (2) (a) or (b) of section 70 of the Finance Act, 1963 , or under the said subsection (2) (a) or (b) and subsection (2) (a) or (b) of section 220 of the Income Tax Act, 1967 , shall, unless it has been revoked, be deemed to be a certificate under this subsection.

(d) A certificate under paragraph (a) or (b) of this subsection—

(i) shall have effect as from such date, whether before or after the date on which it is given, as may be stated therein, and

(ii) shall be published in Iris Oifigiúil as soon as may be after it is given.

(e) A certificate under this subsection may be revoked by the Minister for Finance at any time and notice of any such revocation shall be published as soon as may be in Iris Oifigiúil.

(3) Where, in the case of a trade carried on by a society, the transactions in any accounting period of the society throughout which the society was an agricultural society or a fishery society include exempted transactions, so much of the trading income or the loss (as the case may be) of that period as is attributable to the exempted transactions of the period shall be disregarded for all the purposes of the Tax Acts.

(4) For the purposes of subsections (3) and (5), in relation to any trade—

(a) the amount of the trading income or loss for any accounting period shall be computed in accordance with the provisions, other than this section, applicable to Case I of Schedule D after all deductions and additions for that period by virtue of section 14 of the Corporation Tax Act, 1976 , and before any set-off or reduction of income by virtue of section 16 or 18 of that Act, and

(b) the amount of the trading income or loss attributable to the exempted transactions of any accounting period shall be taken to be the amount which bears to the full amount of the trading income or loss (as the case may be) for the period the same proportion as the aggregate of the amounts receivable by the society, by virtue of those transactions, from the sale of goods and the provision of services bears to the aggregate of all amounts receivable by the society, by virtue of transactions in the period, from the sale of goods and the provision of services.

(5) Section 10 of the Corporation Tax Act, 1976 , shall have effect for the purpose of computing the corporation tax payable for any accounting period of a society which commences on or after the 1st day of April, 1978, as if—

(a) in subsection (1) “the appropriate part of” were inserted after “company” where it first occurs, and

(b) the appropriate part of any charges on income paid by the society were determined by the formula—

A ×

B + D

______

C + D

where—

A is the amount of the charges on income paid by the society in the accounting period,

B is the amount of the society's trading income for the accounting period after deducting therefrom the amount of the trading income attributable to the exempted transactions of the period,

C is the amount of the society's trading income for the period, and

D is the aggregate amount of the society's income (including franked investment income), other than trading income, for the period:

Provided that in relation to the aggregate amount of interest paid in any accounting period the appropriate part of that interest shall not exceed £2,000 if the accounting period is a period of twelve months, and shall

not exceed a proportionate part of £2,000 if the accounting period is a period of less than twelve months.

(6) All amounts receivable by an agricultural society or a fishery society from the sale of goods within the meaning of Part IV of the Corporation Tax Act, 1976 , being amounts which are so receivable by virtue of exempted transactions, shall be disregarded for the purposes of the said Part IV.

(7) The provisions of subsection (3) shall not apply to an accounting period which ends on or before the 31st day of March, 1978, and where an agricultural society or a fishery society is within the charge to corporation tax in respect of a trade on that date, an accounting period of the society shall end for purposes of corporation tax on that date.

(8) Where, apart from the provisions of this section, any loss (other than the attributable loss within the meaning of subsection (9)) incurred in a trade carried on by a society in an accounting period which ends in the period from the 6th day of April, 1976, to the 31st day of March, 1978, would, on a claim being made to that effect under section 16 (1) of the Corporation Tax Act, 1976 , fall to be carried forward to any accounting period of the society which commences on or after the 1st day of April, 1978, the amount of such loss which may be so claimed to be carried forward shall be reduced by an amount arrived at by applying to the amount of such loss the fraction /images/en.act.1978.0021.sec18.1.png where—

A is the aggregate of the amounts receivable by the society in the twelve months ending on the 31st day of March, 1979, by virtue of exempted transactions, from the sale of goods and the provision of services, and

B is the aggregate of all amounts receivable by the society, by virtue of transactions in that period of twelve months, from the sale of goods and the provision of services:

Provided that, in relation to a case where a society so elects by notice in writing delivered to the inspector on or before the 30th day of September, 1980, the references in the definitions of A and B to a period of twelve months ending on the 31st day of March, 1979, shall be construed as references to a period of twenty-four months ending on the 31st day of March, 1980.

(9) Where—

(a) under subsection (4) of section 33 of the Finance Act, 1976 , an allowance equal to the specified amount (within the meaning of subsection (5) of that section) was made in taxing the trade of a society for the accounting period of the society which commenced on the 6th day of April, 1976, and

(b) the society incurred a loss in its trade in that accounting period (being a loss the whole or any part of which is available for set-off under section 16 (1) of the Corporation Tax Act, 1976 , against trading income from the trade in a succeeding accounting period) and the loss was not, or is deemed under the provisions of this subsection not to have been, set off fully under the provisions of the said section 16 (1) against the trading income from the trade in an accounting period or periods ending on or before the 31st day of March, 1978, the following provisions shall apply—

(i) the whole or any part (as the case may be) of that loss which would not have arisen but for the making of the allowance referred to in paragraph (a) shall be a loss (hereinafter and in subsection (8) referred to as “the attributable loss”) in respect of which the society may not make a claim under the said section 16 (1) in respect of any accounting period which commences on or after the 1st day of April, 1978;

(ii) any set-off of loss allowed under section 16 (1) against the trading income of the society for any accounting period which commenced after the 6th day of April, 1976, and ended on or before the 31st day of March, 1978, shall be deemed to be a set-off allowed in respect of any loss other than the attributable loss incurred by the society in its trade in priority to a set-off allowed in respect of the attributable loss; and

(iii) the amount of the attributable loss which has been (or, as the case may be, is deemed under this subsection to have been) set off under the said section 16 (1) shall be treated, in relation to any claim under section 182 or 184 of the Corporation Tax Act, 1976 , for an accounting period commencing on or after the 1st day of April, 1978, as an amount in respect of which relief has been allowed under those sections for the accounting period ending on the 31st day of March, 1978.

(10) Where a society claims relief from tax by virtue of this section, the inspector may by notice in writing require the society to make available, within such time as may be specified in the notice, for inspection by him, all books, records and documents containing information as to its trading transactions for the accounting period concerned (or any other period which is relevant for the purposes of the relief claimed), and if the society fails to comply with such notice, no relief under this section shall be given.

Industrial and provident societies.

19. —With effect as on and from the 1st day of April, 1978, the following section shall be substituted for section 30 of the Corporation Tax Act, 1976 :

“30.—(1) The provisions of section 218 (industrial and provident societies: interpretation) of the Income Tax Act, 1967 , shall have effect for the interpretation of this section.

(2) Notwithstanding anything in the Tax Acts, any share or loan interest paid by a society—

(a) shall be paid without deduction of income tax and shall be charged under Case III of Schedule D, and

(b) shall not be treated as a distribution:

Provided that paragraph (a) shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not within the State.

(3) In computing the corporation tax payable for any accounting period of a society, section 10 (allowance of charges on income) shall have effect subject to the deletion of ‘yearly’ in subsection (3) (a).

(4) On or before the 1st day of May in each year, every society shall deliver to the inspector a return in such form as the Revenue Commissioners may prescribe showing—

(a) the name and place of residence of every person to whom share interest or loan interest amounting to the sum of £70 or more has been paid by the society in the year of assessment which ended next before the said 1st day of May, and

(b) the amount of such share interest or loan interest paid in that year to each of those persons,

and if such a return is not fully made as respects any year of assessment, the society shall not be entitled to any deduction under section 81 (5) (e) (taxation of rents under short leases: deduction of loan interest) or section 219 (1) (deduction as expenses of certain sums, etc) of the Income Tax Act, 1967 , or section 10 (allowance of charges on income) in respect of any payments of share interest or loan interest which it was required to include in the return, and all such assessments and additional assessments shall be made as may be necessary to give effect to this subsection.

(5) (a) In section 219 (deduction as expenses of certain sums, etc.) of the Income Tax Act, 1967

(i) in subsection (4) (b) for ‘any annual allowance’ there shall be substituted ‘any writing-down allowance’, and for ‘any year of assessment’ there shall be substituted ‘any chargeable period’, and

(ii) in subsection (4) (c) for ‘any year of assessment’ there shall be substituted ‘any chargeable period’.

(b) The amendments made by paragraph (a) of this subsection shall not have effect in relation to income tax for the year 1975-76 or any earlier year of assessment.”.

Amendment of Chapter IV (manufacturing companies) of Part I of Finance Act 1977.

20. —Chapter IV of Part I of the Finance Act, 1977 , is hereby amended—

(a) by the substitution of the following sections for sections 21, 23, 24 and 26:

Standard year.

21.—For the purposes of, and subject to the subsequent provisions of, this Chapter, the standard year in relation to a specified trade means the financial year in which the trade is first carried on, and the standard year shall be applicable in relation to the specified trade whether or not during the whole or part of the standard year the specified trade was carried on by a person other than the company by which it is carried on in

the relevant period or separate parts of the specified trade were carried on by different persons:

Provided that where a trade was first carried on before the 1st day of January, 1976, the standard year in relation to that trade shall be the financial year 1976.

Corresponding part of standard year.

23.—Where a 1977 period, a 1978 period or a 1979 period is less than twelve months, the corresponding part of the standard year in relation to a specified trade shall be the part which begins twelve months, twenty-four months or thirty-six months, as the case may be, before the date on which that period begins and which ends twelve months, twenty-four months or thirty-six months, as the case may be, before the date on which that period ends.

Rate of corporation tax for certain manufacturing companies carrying on a trade on 31st December, 1976.

24.—(1) This section applies to a company which carried on a trade on the 31st day of December, 1976.

(2) Where a company to which this section applies claims and proves as respects a 1977 period—

(a) that it carries on a specified trade,

(b) that its income as computed for the purposes of corporation tax from the specified trade for the accounting period which coincides with or includes the 1977 period is not less than 95 per cent. of the total amount of its income as so computed for that accounting period,

(c) (i) that the volume of sales (being the amount determined in accordance with section 25) by the company in the 1977 period of goods manufactured in the State, and sold, in the course of the specified trade is not less than 105 per cent. of the amount receivable from the sale, in the standard year in relation to that trade, or, where the 1977 period is less than twelve months, in the corresponding part of the standard year in relation to that trade, of goods manufactured in the State in the course of that trade, or

(ii) that the amount receivable by the company from the sale in the 1977 period of goods manufactured in the State in the course of the specified trade is not less than 119 per cent. of the amount receivable from the sale, in the standard year in relation to that trade, or, where the 1977 period is less than twelve months, in the corresponding part of the standard year in relation to that trade, of goods manufactured in the State in the course of that trade,

and

(d) that the number of employment contributions payable in respect of all employed contributors engaged directly or indirectly in the manufacture of goods in the State in the course of the specified trade of the company in the 1977 period is not less than 103 per cent. of the number of employment contributions payable in respect of all employed contributors engaged directly or indirectly in the manufacture of goods in the State in the course of that trade, in the standard year in relation to that trade, or, where the 1977 period is less than twelve months, in the corresponding part of the standard year in relation to that trade,

the corporation tax charged on the income of the company for the accounting period which coincides with or includes the 1977 period shall, notwithstanding the provisions of sections 1 and 79 of the Corporation Tax Act, 1976 , be calculated as if the rate of corporation tax for the financial year 1977 were 25 per cent. and for this purpose the income of the company for that accounting period shall be its income for that period as defined in section 28 of the Corporation Tax Act, 1976 , for the purposes of that section.

(3) The provisions of subsection (2), except paragraph (c) thereof, shall apply, subject to the provisions of subsections (4), (5) and (6), in relation to a 1978 period and a 1979 period as they apply in relation to a 1977 period.

(4) (a) In relation to a 1978 period—

(i) each reference in subsection (2) to 1977 shall be construed as a reference to 1978, and

(ii) the reference in subsection (2) (d) to 103 per cent. shall be construed as a reference to 106 per cent.

(b) In relation to a 1979 period—

(i) each reference in subsection (2) to 1977 shall be construed as a reference to 1979, and

(ii) the reference in subsection (2) (d) to 103 per cent. shall be construed as a reference to 109 per cent.

(5) In relation to a 1978 period, a company may elect to have the financial year 1977 treated as the standard year for the purposes of subsection (2) (d) in relation to the specified trade carried on by it and, where such election is made, the provisions of subsection (4) (a) (ii) shall not apply to the company.

(6) In relation to a 1979 period, a company may elect either—

(a) to have the financial year 1977 treated as the standard year for the purposes of subsection (2) (d) in relation to the specified trade carried on by it, or

(b) to have the financial year 1978 treated as the standard year for the purposes of subsection (2) (d) in relation to the specified trade carried on by it, and

where the election referred to in paragraph (a) is made, the provisions of subsection (4) (b) (ii) shall apply to the company as if the reference to 109 per cent. were a reference to 106 per cent., and, where the election referred to in paragraph (b) is made, the provisions of subsection (4) (b) (ii) shall not apply to the company.

Rate of corporation tax for certain manufacturing companies commencing to trade in 1977.

24A.—(1) This section applies to a company which—

(a) begins to carry on a trade in the financial year 1977, and

(b) is not a company to which the provisions of section 24 apply.

(2) In relation to a 1978 period of a company to which this section applies—

(a) the provisions of section 24 (2), except paragraph (c) thereof, shall apply as they apply in relation to a 1977 period of a company to which section 24 applies with the modifications that—

(i) each reference in section 24 (2) to 1977 shall be construed as a reference to 1978, and

(ii) the reference in section 24 (2) (d) to 103 per cent. shall, if the standard year in relation to the specified trade carried on by the company is the financial year 1976, be construed as a reference to 106 per cent.,

and

(b) if, but for this paragraph, the standard year in relation to the specified trade carried on by the company would be the financial year 1976, the company may elect to have the financial year 1977 treated as the standard year for the purposes of the said section 24 (2) (d) in relation to such trade.

(3) In relation to a 1979 period of a company to which this section applies—

(a) the provisions of section 24 (2), except paragraph (c) thereof, shall apply as they apply in relation to a 1977 period of a company to which section 24 applies with the modifications that—

(i) each reference in section 24 (2) to 1977 shall be construed as a reference to 1979, and

(ii) the reference in section 24 (2) (d) to 103 per cent. shall, if the standard year in relation to the specified trade carried on by the company is the financial year 1976, be construed as a reference to 109 per cent., and if such standard year in relation to such trade is the financial year 1977, be construed as a reference to 106 per cent.,

(b) if, but for this paragraph, the standard year in relation to the specified trade carried on by the company would be the financial year 1976, the company may elect to have the financial year 1977 or the financial year 1978 treated as the standard year for the purposes of the said section 24 (2) (d) in relation to such trade, and

(c) if, but for this paragraph, the standard year in relation to the specified trade carried on by the company would be the financial year 1977, the company may elect to have the financial year 1978 treated as the standard year for the purposes of the said section 24 (2) (d) in relation to such trade.

Rate of corporation tax for certain manufacturing companies commencing to trade in 1978.

24B.—(1) This section applies to a company which—

(a) begins to carry on a trade in the financial year 1978, and

(b) is not a company to which the provisions of section 24 or 24A apply.

(2) (a) The provisions of section 24 (2), except paragraph (c) thereof, shall apply in relation to a 1979 period of a company to which the provisions of this section apply, as they apply in relation to a 1977 period of a company to which the provisions of section 24 apply with the modifications specified in section 24A (3) (a).

(b) Paragraphs (b) and (c) of section 24A (3) shall apply for the purposes of this section as they apply for the purposes of that section.

Succession to trade.

26.—Where a company succeeds to a trade or part of a trade which was carried on by another company the first-mentioned company shall, for the purposes of this Chapter, be deemed to have carried on the trade or part of the trade from the date on which the other company commenced to carry on the trade.”,

and

(b) in section 29—

(i) by the substitution of the following paragraph for paragraph (b) of subsection (1):

“(b) the accounting period falls partly in one financial year and partly in another financial year,”, and

(ii) by the substitution of the following subsection for subsection (3):

“(3) Where for an accounting period corporation tax is charged at the rate of 25 per cent. on all or part of a company's income—

(a) the provisions of section 28 of the Corporation Tax Act, 1976 , shall not have effect for the 1977 period, the 1978 period or the 1979 period which coincides with, or is included in, that accounting period, and

(b) sections 182 (3) and 184 (3) of the said Act shall have effect for the 1977 period, the 1978 period or the 1979 period which coincides with, or is included in, that accounting period as if the standard rate for each of the years 1976-77 to 1979-80 were 25 per cent.”.

Amendment of section 28 (reduction of corporation tax liability of small companies) of Corporation Tax Act, 1976.

21. Section 28 (as amended by the Finance Act, 1977 ) of the Corporation Tax Act, 1976 , is hereby amended, as respects the financial year 1977 and each subsequent financial year, by—

(a) in subsection (2), the substitution of “25 per cent.” for “20 per cent.”, and

(b) in subsection (3)—

(i) the substitution of “£25,000” for “£10,000” in each place where it occurs, and

(ii) the substitution of “£35,000” for “£15,000” in each place where it occurs,

and the said subsections (2) and (3), as so amended, are set out in the Table to this section.

TABLE

(2) Where in any accounting period the profits of any such company exceed the lower relevant maximum amount but do not exceed the upper relevant maximum amount, the company may claim that the corporation tax charged on its income for that period shall be reduced by a sum equal to 25 per cent. of the following amount—

(M − P) ×

I

___

P

where M is the upper relevant maximum amount, P is the amount of the profits and I is the amount of the income.

(3) The lower and upper relevant maximum amounts mentioned in the foregoing subsections shall be determined as follows—

(a) where the company has no associated company in the accounting period those amounts are £25,000 and £35,000 respectively;

(b) where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is £25,000 divided by one plus the number of those associated companies and the upper relevant maximum amount is £35,000 divided by one plus the number of those associated companies.