Number 33 of 1978

CAPITAL GAINS TAX (AMENDMENT) ACT, 1978

ARRANGEMENT OF SECTIONS

SCHEDULE 1

Supplementary Provisions

SCHEDULE 2

Enactments Repealed

Number 33 of 1978

CAPITAL GAINS TAX (AMENDMENT) ACT, 1978

BE IT ENACTED BY THE OIREACHTAS AS FOLLOWS:

1. —(1) In this Act and in any Act passed after this Act, except in so far as the context otherwise requires, “the Capital Gains Tax Acts” means the Capital Gains Tax Act, 1975 , and every other enactment relating to capital gains tax.

(2) In this Act “the Principal Act” means the Capital Gains Tax Act, 1975 .

(3) References in this Act to any enactment shall, unless the context otherwise requires, be construed as references to that enactment as amended or extended by any subsequent enactment.

(4) In this Act a reference to a section or schedule is a reference to a section of or schedule to this Act unless it is indicated that reference to some other enactment is intended.

(5) In this Act a reference to a subsection, paragraph, subparagraph or clause is to the subsection, paragraph, subparagraph or clause of the provision (including a schedule) in which the reference occurs, unless it is indicated that reference to some other provision is intended.

2. —Section 3 of the Principal Act is hereby amended, for the year 1978-79 and each subsequent year of assessment, by the substitution for subsection (3) of that section of the following subsection:

“(3) Except as otherwise provided for by the Capital Gains Tax Acts, the rate of capital gains tax shall be 30 per cent.”.

3. —(1) For the purposes of computing the chargeable gain accruing to a person on the disposal of an asset, each sum (in this section referred to subsequently as “deductible expenditure”) allowable as a deduction from the consideration for the disposal under clauses (a) and (b) of paragraph 3 (1) of Schedule 1 to the Principal Act shall be adjusted by multiplying it by the figure (in this section referred to subsequently as the “multiplier”) specified in subsection (4) or determined under subsection (5), as may be appropriate (the multiplier being the quotient, rounded up to three decimal places, obtained by dividing the consumer price index number relevant to the year of assessment in which the disposal is made by the consumer price index number relevant to the year of assessment in which the deductible expenditure was incurred):

Provided that this subsection shall not apply in relation to deductible expenditure where the person making the disposal had incurred the expenditure within the period of twelve months ending with the date of the disposal.

(2) For the purposes of the Capital Gains Tax Acts it shall be assumed that an asset held by a person on the 6th day of April, 1974, was sold and immediately re-acquired by him on that date and there shall be deemed to have been given by him, as consideration for the re-acquisition, an amount equal to the market value of the asset at the said date.

(3) Subsections (1) and (2) shall not apply in relation to the disposal of an asset—

(a) if as a consequence of the application of the said subsections (1) and (2) a gain would accrue on that disposal to the person making the disposal and either a smaller gain or a loss would so accrue if the said subsections (1) and (2) did not apply, or

(b) if as a consequence of the application of the said subsections (1) and (2) a loss would so accrue and either a smaller loss or a gain would accrue if subsections (1) and (2) did not apply,

and, accordingly, in a case to which paragraph (a) or (b) applies, the amount of the gain or loss accruing on the disposal shall be computed without regard to the provisions of the preceding subsections of this section but, in a case where this subsection would otherwise substitute a loss for a gain or a gain for a loss, it shall be assumed, in relation to the disposal, that the relevant asset was acquired by the owner for a consideration such that neither a gain nor a loss accrued to him on making the disposal.

(4) In relation to the disposal of an asset made in the year 1978-79, the multiplier shall be the figure mentioned in column (2) of the Table to this subsection opposite the mention in column (1) of the said Table of the year of assessment in which the deductible expenditure was incurred.

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(5) The Revenue Commissioners shall make regulations specifying the multipliers, determined in accordance with subsection (1), in relation to the disposal of an asset made in the year 1979-80 and shall make corresponding regulations in relation to the disposal of an asset made in each subsequent year of assessment.

(6) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next twenty-one days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

(7) In this section “the consumer price index number” means the All Items Consumer Price Index Number compiled by the Central Statistics Office and the consumer price index number relevant to any year of assessment means the consumer price index number at the mid-February next before the commencement of that year expressed on the basis that the consumer price index number at mid-November, 1968, is 100.

4. —(1) Notwithstanding section 3 (3) of the Principal Act, but subject to the provisions of this section, a person (not being a company) who is resident or ordinarily resident in the State and who makes, in the manner prescribed by the Capital Gains Tax Acts, a claim in that behalf and makes a return in the prescribed form shall, for the year 1978-79 and each subsequent year of assessment, be entitled, in respect of chargeable gains accruing to him on the disposal of an asset owned by him for a period of ownership of more than three years and not more than twenty-one years, to be charged at a reduced rate of tax for the year of assessment in which the disposal is made and such reduced rate shall be as follows, that is to say, if his period of ownership of the asset is—

(2) Assets shall not be chargeable assets where they are owned by a person, within the meaning of subsection (1), whose period of ownership thereof exceeds twenty-one years.

(3) (a) Subsections (1) and (2) shall not apply in respect of chargeable gains accruing on the disposal of—

(i) land in the State the consideration for the disposal of which exceeds what the market value of the land would be if, immediately before the disposal, it had become unlawful to carry out any development (within the meaning of section 3 (1) of the Local Government (Planning and Development) Act, 1963 ) in relation to the land other than development of the kinds specified in section 4 (1) of that Act;

(ii) minerals in the State or any rights, interests or other assets in relation to mining or minerals or the searching for minerals; or

(iii) exploration or exploitation rights in a designated area.

(b) References in paragraph (a) to the disposal of assets mentioned in subparagraphs (i), (ii) and (iii) of that paragraph include references to the disposal of shares deriving their value or the greater part of their value directly or indirectly from those assets, other than shares quoted on a stock exchange.

(4) Subsections (1) and (2) shall not apply where the amount chargeable to capital gains tax is an amount determined in accordance with section 4 (3) of the Principal Act.

(5) A claim under this section shall be made by notice in writing to the inspector given within two years from the end of the year of assessment in which the disposal is made or such longer period as the Revenue Commissioners may by notice in writing allow.

(6) This section shall apply to chargeable gains accruing to a qualifying unit trust, within the meaning of section 32 (inserted by the Finance Act, 1977) of the Principal Act, as if, in subsection (2) of that section, for the reference to section 3 (3) of that Act, there were substituted a reference to this section.

(7) Section 5 (1) of the Principal Act shall apply subject to the provisions of this section and of paragraph 7 of Schedule 1.

(8) In this section—

“designated area”, “exploration or exploitation rights” and “shares” have the same meanings as in section 4 (8) of the Principal Act;

“period of ownership”, in relation to a person making a disposal of an asset, means his period of continuous ownership of the asset, in the same capacity, ending with the date of such disposal, and, for the purposes of this definition, a period of ownership shall be determined without regard to the provisions of section 3 (2) and, where the asset was acquired by the person on the death of his spouse so that his period of ownership would, apart from this subsection, be treated as having commenced on the date of that death, his period of ownership shall be deemed to be extended to include his spouse's period of continuous ownership ending on that date.

5. —(1) Where, on or after the 6th day of April, 1978, a person makes a disposal of, or of an interest in, property situate in the State (in this section referred to subsequently as “the original assets”) to an authority possessing compulsory purchase powers and claims and proves to the satisfaction of the Revenue Commissioners—

(a) that the disposal would not have been made but for—

(i) the exercise of those powers, or

(ii) the giving by the authority of formal notice of its intention to exercise those powers,

(b) that the whole of the consideration for the disposal, and no more, is applied in acquiring other property situate in the State or an interest in such other property (in this section referred to subsequently as “the replacement assets”), and

(c) that the original assets and the replacement assets are within one, and the same one, of the classes of assets specified in subsection (5),

then, for the purposes of the Capital Gains Tax Acts, the disposal shall not be treated as involving any disposal of the original assets and the acquisition shall not be treated as involving any acquisition of the replacement assets or any part of them but the original assets and the replacement assets shall be treated as the same assets acquired as the original assets were acquired.

(2) In a case where subsection (1) would apply but for the fact that an amount in excess of the amount or value of the consideration for the disposal concerned is applied as described in paragraph (b) of that subsection, the person making the disposal shall be treated, for the purposes of the Capital Gains Tax Acts, as if, in consideration of that excess, he had acquired, at the time of the acquisition of the replacement assets, a portion of those assets which bears to the whole the same proportion as the amount of the excess bears to the amount or value of the consideration applied in acquiring the replacement assets and subsection (1) shall apply to the remainder of those assets and to the original assets.

(3) In a case where subsection (1) would apply but for the fact that part of the amount or value of the consideration for the disposal concerned is not applied as described in paragraph (b) of that subsection, the person making the disposal shall be treated, for the purposes of the Capital Gains Tax Acts, as if, in consideration of the said part, he had disposed of an interest in the original assets and subsection (1) shall apply to the remainder of those assets and to the replacement assets.

(4) This section shall only apply if the acquisition of the replacement assets takes place, or an unconditional contract for the acquisition is entered into, in the period beginning twelve months before and ending three years after the disposal of the original assets, or at such earlier or later time as the Revenue Commissioners may by notice in writing allow:

Provided that, where an unconditional contract for the acquisition is so entered into, this section may be applied on a provisional basis without waiting to ascertain whether the replacement assets are acquired in pursuance of the contract, and, when that fact is ascertained, all necessary adjustments shall be made by making assessments or by repayment or discharge of tax, and shall be so made notwithstanding any limitation in the Capital Gains Tax Acts on the time within which assessments may be made.

(5) The classes of assets for the purposes of this section are as follows:

Class 1

Assets of a trade carried on by the person making the disposal which consist of—

A. plant or machinery;

B. except where the trade is a trade of dealing in or developing land, or of providing services for the occupier of land in which the person carrying on the trade has an estate or interest—

(i) any building or part of a building and any permanent or semi-permanent structure in the nature of a building, occupied (as well as used) only for the purposes of the trade,

(ii) any land occupied (as well as used) only for the purposes of the trade, provided that where the trade is a trade of dealing in or developing land, but a profit on the sale of any land held for the purposes of the trade would not form part of the trading profits, the trade shall be treated for the purposes of this subsection as if it were not a trade of dealing in or developing land;

C. goodwill.

Class 2

Any land or buildings, not being land or buildings within Class 1, but excluding a dwelling-house or part of a dwelling-house in relation to which the person making the disposal would be entitled to claim relief under section 25 of the Principal Act.

6. —(1) Section 14 of the Principal Act is hereby amended by the substitution, for subsection (1) of that section, of the following subsection:

“(1) For the purposes of this Act, the assets of which a deceased person was competent to dispose—

(a) shall be deemed to be acquired on his death by the personal representatives or other person on whom they devolve for a consideration equal to their market value at the date of the death; but

(b) shall not be deemed to be disposed of by him on his death (whether or not they were the subject of a testamentary disposition).”.

(2) This section shall apply in relation to a disposal of assets made on or after the 6th day of April, 1978, by the personal representatives or other person on whom those assets devolved on a death.

7. —(1) Section 15 of the Principal Act is hereby amended by the substitution for subsection (4) (b) of the following paragraph:

“(b) the re-acquisition under that subsection shall be deemed to be for a consideration equal to the market value of the assets at the date of the death.”.

(2) This section shall apply in relation to a disposal of assets made on or after the 6th day of April, 1978, by a trustee of the kind referred to in subsection (4) of the said section 15, in his capacity as a trustee within section 8 (3) of the Principal Act, or by the person becoming absolutely entitled to the assets in the circumstances referred to in the said subsection (4).

8. —The following section shall be substituted for section 27 of the Principal Act:

“27.—(1) (a) Subject to the provisions of this section, where an individual who has attained the age of fifty-five years disposes of the whole or part of his qualifying assets to a child of his, relief shall be given in respect of the capital gains tax chargeable on any gain accruing on the disposal.

(b) For the purposes of paragraph (a), the capital gains tax chargeable in respect of the gain shall be the amount of tax which would not have been chargeable but for that gain.

(c) In paragraph (a) ‘child’, in relation to a disposal, includes a nephew or a niece who has worked substantially on a full-time basis for the period of five years ending with the disposal in carrying on, or assisting in the carrying on of, the trade, business or profession concerned or the work of, or connected with, the office or employment concerned.

(2) Nothing in this section shall affect the computation of gains accruing on the disposal of assets other than qualifying assets by an individual who makes a disposal falling within subsection (1).

(3) Section 26 (3) shall apply to a disposal falling within subsection (1) as it applies to a disposal falling within section 26 (1).

(4) (a) Where assets comprised in a disposal to a child in respect of which relief has been granted, whether before or after the commencement of the Capital Gains Tax (Amendment) Act, 1978, under this section are, within ten years of the disposal by the individual concerned, disposed of by the child, the capital gains tax which, if subsection (1) had not applied, would have been charged on the individual on his disposal of those assets to the child shall be assessed and charged on the child, in addition to any capital gains tax chargeable in respect of the gain accruing to the child on his disposal of those assets.

(b) An assessment to give effect to the provisions of this subsection shall not be out of time if made within ten years after the end of the year of assessment in which the assets are disposed of by the child.

(5) The consideration on a disposal falling within subsection (1) shall not be taken into account for the purposes of aggregation under section 26 (2).”.

9. —Section 28 of the Principal Act is hereby amended by the insertion after subsection (2) of the following subsection:

“(2A) A chargeable gain or the balance of a chargeable gain which, under the provisions of subsection (1) or (2), as may be appropriate, is treated as accruing at a date later than the date of the disposal on which it accrued shall not be so treated for the purposes of section 3 of the Capital Gains Tax (Amendment) Act, 1978, or for the purposes of determining the period of ownership under section 4 of that Act.”.

10. —Section 39 of the Principal Act is hereby amended by the substitution for subsection (1) of the following subsection:

“(1) (a) Where a disposal of an asset is made otherwise than under a bargain at arm's length—

(i) to the State,

(ii) to a charity, or

(iii) to any of the bodies falling within section 28 (3) of the Finance Act, 1931 (national institutions and other public bodies),

section 9 (consideration deemed to be equal to market value) shall not apply, but if the disposal is for no consideration or for a consideration not exceeding the sums which would be allowable as a deduction under paragraph 3 of Schedule 1 for the purposes of computing a chargeable gain, then—

(I) the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(II) where the disposal is to a person within subparagraph (ii) or (iii) and the asset is later disposed of by that person in such circumstances that if a gain accrued on the later disposal it would be a chargeable gain, the capital gains tax which would have been chargeable in respect of the gain accruing on the earlier disposal if the said section 9 had applied in relation to it shall be assessed and charged on the person making the later disposal in addition to any capital gains tax chargeable in respect of the gain accruing to him on the later disposal.

(b) Where relief was given under this subsection in respect of a disposal to a person of an asset, being a disposal made before the commencement of the Capital Gains Tax (Amendment) Act, 1978, and there is a later disposal of the asset by the person after such commencement, paragraph (a) (II) shall have effect as if the first-mentioned disposal were the earlier disposal referred to in that paragraph.

(c) An assessment to give effect to the provisions of paragraph (a) (II) shall not be out of time if made within ten years after the end of the year of assessment in which the asset concerned is disposed of by the person making the later disposal.

(d) For the purposes of paragraph (a) (II), the amount of the capital gains tax which would have been chargeable in respect of the gain accruing on the earlier disposal shall be the amount of tax which would not have been chargeable but for that gain.”.

11. —(1) Sections 13 (1) and 37 (3) (a) of the Corporation Tax Act, 1976 , are hereby amended as respects—

(a) the financial year 1978 in relation to any accounting period or part of an accounting period falling after the 5th day of April, 1978, and

(b) the financial year 1979 and each subsequent financial year.

by the substitution of “fifteen-forty-fifths” for “nineteen-forty-fifths” (inserted by the Finance Act, 1977).

(2) Section 37 (1) of the Corporation Tax Act, 1976 , is hereby amended as respects—

(a) the financial year 1978 in relation to any accounting period or part of an accounting period falling after the 5th day of April, 1978, and

(b) the financial year 1979 and each subsequent financial year,

by the substitution of “30 per cent.” for “26 per cent.”.

12. —(1) Section 90 (3) of the Corporation Tax Act, 1976 , is hereby amended by the substitution of “are chargeable gains” for “have been charged to capital gains tax or, after the reduction provided for by section 13 (computation of chargeable gains), to corporation tax” and “have been so charged”, respectively, and the said section 90 (3), as so amended, is set out in the Table to this section.

(2) Section 90 (4) of the Corporation Tax Act, 1976 , is hereby amended by the substitution of “are chargeable gains” for “have been charged to capital gains tax or, after the reduction provided for by section 13, to corporation tax” and of “by virtue of section 3 (3) of the Capital Gains Tax Act, 1975 , for the year of assessment in which the chargeable gains accrued” for “under section 3 of the Capital Gains Tax Act, 1975 , for the year of assessment in which the distribution is made” and the said section 90 (4), as so amended, is set out in the Table to this section.

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(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 are chargeable gains 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 are chargeable gains 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 are chargeable gains, the tax charged under subsection (2) shall be reduced by an amount equal to the amount of capital gains tax which would be chargeable by virtue of section 3 (3) of the Capital Gains Tax Act, 1975 , for the year of assessment in which the chargeable gains accrued 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.

13. — Section 127 (1) of the Corporation Tax Act, 1976 , is hereby amended by the substitution of “section 3 of the Capital Gains Tax (Amendment) Act, 1978,” for “Part II of Schedule I to the Capital Gains Tax Act, 1975 , (assets held on the 6th day of April, 1974),” and the said section 127 (1), as so amended, is set out in the Table to this section.

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(1) Subject to the provisions of this section, where—

(a) any scheme of reconstruction or amalgamation involves the transfer of the whole or part of a company's business to another company, and

(b) at the time of the transfer both companies are resident in the State, and

(c) the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business),

then so far as relates to corporation tax on chargeable gains the two companies shall be treated as if any assets included in the transfer were acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of section 3 of the Capital Gains Tax (Amendment) Act, 1978, the acquiring company shall be treated as if the respective acquisitions of the assets by the other company had been the acquiring company's acquisition of them.

14. — Section 132 (2) of the Corporation Tax Act, 1976 , is hereby amended by the substitution of “Section 3 of the Capital Gains Tax (Amendment) Act, 1978,” for “Part II of Schedule 1 to the Capital Gains Tax Act, 1975 ,” and the said section 132 (2), as so amended, is set out in the Table to this section.

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(2) Section 3 of the Capital Gains Tax (Amendment) Act, 1978, shall apply in relation to a disposal of an asset by a company which is or has been a member of a group of companies, and which acquired the asset from another member of the group at a time when both were members of the group, as if all members of the group for the time being were the same person, and as if the acquisition or provision of the asset by the group, so taken as a single person, had been the acquisition or provision of it by the member disposing of it.

15. —Paragraph 8 (appeals) of Schedule 4 to the Principal Act is hereby amended, as respects assessments made on or after the passing of this Act, by the substitution in subparagraph (1) of “thirty days” for “twenty-one days” and the said subparagraph, as so amended, is set out in the Table to this section.

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(1) A person aggrieved by any assessment under this Act made upon him by the inspector or such other officer as is mentioned in paragraph 1 (2) shall be entitled to appeal to the Appeal Commissioners on giving, within thirty days after the date of the notice of assessment, notice in writing to the inspector or other officer, and in default of notice of appeal by a person to whom notice of assessment has been given or in case of the neglect or refusal of a person, who has given notice of appeal, to attend before the Appeal Commissioners at the time and place appointed for the purpose of hearing appeals, the assessment made on him shall be final and conclusive.

16. —Schedule 1 shall have effect for the purposes of this Act.

17. —Each enactment mentioned in column (2) of Schedule 2 is hereby repealed to the extent specified in column (3) of that Schedule, subject to the provision made at the end of that Schedule.

18. —(1) This Act may be cited as the Capital Gains Tax (Amendment) Act, 1978.

(2) This Act shall be construed together with the Capital Gains Tax Acts.

(3) This Act shall, save as is otherwise expressly provided therein, be deemed to have come into force and shall take effect as on and from the 6th day of April, 1978.