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13 1986

FINANCE ACT, 1986

PART I

Income Tax, Corporation Tax and Capital Gains Tax

Chapter I

Income Tax

Amendment of section 2 (age exemption) of Finance Act, 1980.

1. Section 2 of the Finance Act, 1980 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution in subsection (6) of “£6,300” for “£6,000” (inserted by the Finance Act, 1985 ), of “£7,350” for “£7,000” (inserted by the Finance Act, 1985 ), of “£3,150” for “£3,000” (inserted by the Finance Act, 1985 ) and of “£3,675” for “£3,500” (inserted by the Finance Act, 1985 ), and the said subsection (6), as so amended, is set out in the Table to this section.

TABLE

(6) In this section “the specified amount” means—

(a) in a case where the individual would, apart from this section, be entitled to a deduction specified in paragraph (a) of the said section 138, £6,300:

Provided that, if at any time during the year of assessment either the individual or his spouse was of the age of seventy-five years or upwards, “the specified amount” means £7,350;

(b) in any other case, £3,150:

Provided that, if at any time during the year of assessment the individual was of the age of seventy-five years or upwards, “the specified amount” means £3,675.

Alteration of rates of income tax.

2. Section 2 of the Finance Act, 1984 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following Table for the Table to the said section:

“TABLE

PART I

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £4,700

35 per cent.

the standard rate

The next £2,800

48 per cent.

}

the higher rates

The remainder

58 per cent.

PART II

Part of taxable income

Rate of tax

Description of rate

(1)

(2)

(3)

The first £9,400

35 per cent.

the standard rate

The next £5,600

48 per cent.

}

the higher rates

The remainder

58 per cent.

Personal reliefs.

3. —(1) Where a deduction falls to be made from the total income of an individual for the year 1986-87 or any subsequent year of assessment in respect of relief to which the individual is entitled under a provision mentioned in column (1) of the Table to this subsection and the amount of the deduction would, but for this section, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2).

TABLE

Statutory provision

Amount to be deducted from total income for 1985-86

Amount to be deducted from total income for 1986-87 and subsequent years

(1)

(2)

(3)

£

£

Income Tax Act, 1967 :

section 138

(married man)

3,800

4,000

(widowed person)

2,400

2,500

(widow bereaved in the year of assessment)

3,800

4,000

(single person)

1,900

2,000

section 138A

(additional allowance for widows and others in respect of children)

(widowed person)

1,400

1,500

(others)

1,900

2,000

section 138B

(employee allowance)

600

700

Finance Act, 1974 :

section 8

(age allowance, single or widowed person)

100

200

(age allowance, married man)

200

400

(2) Section 2 of the Finance Act, 1981 , section 2 of the Finance Act, 1982 , and sections 3 and 4 of the Finance Act, 1985 , shall have effect subject to the provisions of this section.

(3) The First Schedule shall have effect for the purposes of supplementing subsection (1).

Amendment of section 141 (children) of Income Tax Act, 1967.

4. —The Income Tax Act, 1967 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following section for section 141:

“Incapacitated children.

141.—(1) If the claimant proves that he has living at any time during the year of assessment any child—

(a) who is under the age of 16 years and is permanently incapacitated by reason of mental or physical infirmity, or

(b) who, if over the age of 16 years at the commencement of that year, is permanently incapacitated by reason of mental or physical infirmity from maintaining himself and had become so permanently incapacitated before he had attained the age of 21 years or had become so permanently incapacitated after attaining the age of 21 years but while he had been in receipt of full-time instruction at any university, college, school or other educational establishment,

he shall, subject to the provisions of this section, be entitled in respect of each such child to a deduction of £600:

Provided that—

(i) a child who is under the age of 16 years shall be regarded as permanently incapacitated by reason of mental or physical infirmity only if the infirmity is such that there would be a reasonable expectation that, if the child were over the age of 16 years, he would be incapacitated from maintaining himself,

(ii) in the case of a child to whom paragraph (b) applies, the deduction shall be £600 or the amount expended by the claimant in the year of assessment on the maintenance of the child, whichever is the lesser, and

(iii) any deduction under this subsection shall be in substitution for, and not in addition to, any deduction to which the claimant might be entitled in respect of the same child under section 142.

(2) If the claimant proves that for the year of assessment he has the custody of and maintains at his own expense any child who, but for the fact that he is not a child of the claimant, would be such a child as is referred to in subsection (1) and that neither he nor any other individual is entitled to a deduction in respect of the same child under subsection (1) or under any of the other provisions of this Part, or, if any other individual is entitled to such a deduction, that that other individual has relinquished his claim thereto, he shall be entitled in respect of the child to the same deduction as if the child were a child of his.

(3) (a) The reference in subsection (1) to a child receiving full-time instruction at an educational establishment shall include a reference to a child undergoing training by any person (hereafter in this subsection referred to as ‘the employer’) for any trade or profession in such circumstances that the child is required to devote the whole of his time to the training for a period of not less than two years.

(b) For the purpose of a claim in respect of a child undergoing training the inspector may require the employer to furnish particulars with respect to the training of the child in such form as may be prescribed by the Revenue Commissioners.

(4) No deduction shall be allowed under this section in respect of any child who is entitled in his own right to an income exceeding £720 a year, except that, if the amount of the excess is less than the deduction which apart from this subsection would be allowable, a deduction reduced by that amount shall be allowed:

Provided that in calculating the income of the child for the purposes of the foregoing provision no account shall be taken of any income to which the child is entitled as the holder of a scholarship, bursary, or other similar educational endowment.

(5) If any question arises as to whether any person is entitled to an allowance under this section in respect of a child who is over the age of 21 years as being a child who had become permanently incapacitated by reason of mental or physical infirmity from maintaining himself after attaining that age but while in receipt of such full-time instruction as aforesaid, the Revenue Commissioners may consult the Minister for Education.

(6) Where, for any year of assessment, two or more individuals are or would, but for the provisions of this subsection, be entitled under this section to relief in respect of the same child, the following provisions shall have effect, that is to say:—

(a) only one deduction under this section shall be allowed in respect of such child;

(b) where such child is maintained by one parent only, that parent only shall be entitled to claim such deduction;

(c) where such child is maintained jointly by both parents, each parent shall be entitled to claim such part of such deduction as is proportionate to the amount expended by him or her on the maintenance of such child; and

(d) in ascertaining for the purposes of this subsection whether a parent maintains a child and, if so, to what extent, any payment made by such parent for or towards the maintenance of such child which such parent is entitled to deduct in computing his or her total income for the purposes of this Act shall be deemed not to be a payment for or towards the maintenance of such child.

(7) In the preceding provisions of this section ‘child’ includes a stepchild and an illegitimate child whose parents have married each other after his birth and a child in respect of whom an adoption order under the Adoption Acts, 1952 to 1976, is in force.”.

Amendment of section 12 (relief for health expenses) of Finance Act, 1967.

5. Section 12 of the Finance Act, 1967 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the insertion, in the definition of “dependant” in subsection (1), of the following after paragraph (b):

“and

(c) a child who, for the year of assessment—

(i) (I) is under the age of 16 years, or

(II) if over the age of 16 years at the commencement of the year of assessment, is receiving full-time instruction at any university, college, school or other educational establishment, and

(ii) is a child of the individual or, not being such a child, is in the custody of the individual and is maintained by the individual at his own expense for the whole or part of the year of assessment:

Provided that the provisions of subsections (3), (4), (5) and (7) of section 141 (inserted by the Finance Act, 1986) shall, with any necessary modifications, apply for the purposes of determining whether relief is to be granted under this section as they apply in determining whether a deduction is to be allowed under that section, except that in a case where the child's income exceeds the amount specified in the said subsection (4) relief under this section shall not be allowed;”.

Amendment of section 6 (special allowance in respect of P.R.S.I. for 1982-83) of Finance Act, 1982.

6. Section 6 of the Finance Act, 1982 , shall have effect for the purpose of ascertaining the amount of income on which an individual referred to therein is to be charged to income tax for the year 1986-87, as if in subsection (2)—

(a) “1986-87” were substituted for “1982-83”, and

(b) “£286” were substituted for “£312”, in each place where it occurs.

Amendment of section 8 (permanent health benefit schemes) of Finance Act, 1979.

7. Section 8 of the Finance Act, 1979 , is hereby amended by the insertion after subsection (5) of the following subsection:

“(6) (a) A policy of permanent health insurance, sickness insurance or other similar insurance issued in respect of an insurance made on or after the 6th day of April, 1986, shall be a permanent health benefit scheme within the meaning of this section if it conforms with a form which, at the time the policy is issued, is either—

(i) a standard form approved by the Revenue Commissioners as a standard form of permanent health benefit scheme; or

(ii) a form varying from a standard form so approved in no other respect than by making such alterations thereto as are, at the time the policy is issued, approved by the Revenue Commissioners as being compatible with a permanent health benefit scheme when made to that standard form and satisfying any conditions subject to which the alterations are so approved.

(b) In approving a policy as a standard form of permanent health benefit scheme in pursuance of paragraph (a), the Revenue Commissioners may disregard any provision of the policy which appears to them insignificant.”.

Relief for gifts to Cospóir.

8. —(1) In this section—

Cospóir” means the National Sports Council (an Chomhairle Náisiúnta Spóirt) which was established by the Minister of State at the Department of Education on the 10th day of February, 1978;

tax” means income tax or corporation tax, as the case may be.

(2) (a) This section applies to a gift of money which, on or after the 6th day of April, 1986, is made to the Minister for Education for the benefit of Cospóir and is not deductible in computing for the purposes of tax the profits or gains of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967 , apply.

(b) The Revenue Commissioners may consult with the Minister for Education in relation to any question which may arise in connection with paragraph (a).

(3) Where a person proves that he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (4) or, as the case may be, subsection (5) shall apply:

Provided that, in determining the net amount of the gift for the purposes of those subsections, the amount or value of any consideration received by the said person as a result of making the gift, whether received directly or indirectly from Cospóir or any other person, shall be deducted from the amount of the gift.

(4) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the net amount thereof shall, subject to subsection (5), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , the total income of the husband shall be calculated accordingly:

Provided that relief under this section shall not be given to a person for a year of assessment—

(a) if the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100, or

(b) to the extent to which the net amount of the gift (or the aggregate of the net amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, exceeds £10,000.

(5) Where a gift to which this section applies is made by a company—

(a) the net amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made, and

(b) the references in the proviso to subsection (4) to a year of assessment shall be construed as references to an accounting period of the company.

Tax treatment of directors of companies and employees granted rights to acquire shares or other assets.

9. —(1) (a) In this section, save where the context otherwise requires—

company” has the meaning assigned to it by section 1 of the Corporation Tax Act, 1976 ;

director” and “employee” have the meanings respectively assigned to them by section 13 (1) of the Finance Act, 1972 ;

right” means a right to acquire any asset or assets including shares in any company;

market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

shares” includes securities (within the meaning of Part IX of the Corporation Tax Act, 1976 ) and stock.

(b) In this section—

(i) references to the release of a right include references to agreeing to the restriction of the exercise of the right;

(ii) any question whether a person is connected with another shall be determined in accordance with the provisions of section 157 of the Corporation Tax Act, 1976 ;

(iii) a person shall be regarded as acquiring a right as a director of a company or as an employee—

(I) if by reason of his office or employment it is granted to him, or to another person who assigns the right to him, and

(II) if section 76 (3) of the Income Tax Act, 1967 , does not apply in charging to tax the profits or gains of that office or employment,

and clauses (I) and (II) shall apply to a right granted by reason of a person's office or employment before he has commenced to hold it or after he has ceased to hold it as they would apply if he had commenced to hold the office or employment or had not ceased to hold the office or employment, as the case may be.

(2) Where a person realises a gain by the exercise of, or by the assignment or release of, a right obtained by that person on or after the 6th day of April, 1986, as a director of a company or employee, he shall be chargeable to tax under Schedule E for the year of assessment in which the gain is so realised on an amount equal to the amount of his gain, as computed in accordance with this section.

(3) Subject to subsection (5), where tax may by virtue of this section become chargeable in respect of any gain which may be realised by the exercise of a right, tax shall not be chargeable under any other provision of the Tax Acts in respect of the receipt of the right.

(4) The gain realised by—

(a) the exercise of any right at any time shall be taken to be the difference between the market value of the asset or assets, as the case may be, at the time of acquisition and the aggregate amount or value of the consideration, if any, given for the asset or assets and for the grant of the right, and

(b) the assignment or release of any right shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration, if any, given for the grant of the right,

and for this purpose the inspector may make a just apportionment of any entire consideration given for the grant of the right or for the grant of the right and for something besides:

Provided that neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with an office or employment, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection.

(5) (a) Where such a right as is mentioned in subsection (2) is obtained as mentioned therein, and the right is capable of being exercised later than seven years after it is obtained, subsection (3) shall not prevent the charging of tax under any other provisions of the Tax Acts in respect of the receipt of the right; but where tax is charged under any of those provisions it shall be deducted from any tax which, under subsection (2), is chargeable by reference to the gain realised by the exercise, assignment or release of the right.

(b) For the purpose of any charge to tax enabled to be made by this subsection, the value of a right shall be taken to be not less than the market value at the time the right is obtained of the asset or assets which may be acquired by the exercise of the right or of any asset or assets for which the asset or assets so acquired may be exchanged, reduced by the amount or value (or, if variable, the least amount or value) of the consideration for which the asset or assets may be so acquired.

(6) Subject to subsection (7), a person shall, in the case of a right granted by reason of his office or employment, be chargeable to tax under this section in respect of a gain realised by another person—

(a) if the right was granted to that other person, or

(b) if the other person acquired the right otherwise than by or under an assignment made by way of a bargain at arm's length, or if the two are connected persons at the time when the gain is realised,

but in a case within paragraph (b) the gain realised shall be treated as reduced by the amount of any gain realised by a previous holder on an assignment of the right.

(7) A person shall not be chargeable to tax by virtue of subsection (6) (b) in respect of any gain realised by another person if the first-mentioned person was divested of the right by operation of law on his bankruptcy or otherwise, but the other person shall be chargeable to tax in respect of the gain under Case IV of Schedule D.

(8) If a right is assigned or released in whole or in part for a consideration which consists of or comprises another right, that other right shall not be treated as consideration for the assignment or release, but this section shall apply in relation to it as it applies in relation to the right assigned or released and as if the consideration for its acquisition did not include the value of the right assigned or released but did include the amount or value of the consideration given for the grant of the right assigned or released so far as that has not been offset by any valuable consideration for the assignment or release other than the consideration consisting of the other right.

(9) (a) If as a result of two or more transactions a person ceases to hold a right and he or a connected person comes to hold another right (whether or not acquired from the person to whom the other right was assigned) and any of those transactions was effected under arrangements to which two or more persons holding rights in respect of which tax may be chargeable under this section were parties, those transactions shall be treated for the purposes of subsection (8) as a single transaction whereby the one right is assigned for a consideration which consists of or comprises the other right.

(b) This subsection applies in relation to two or more transactions, whether they involve an assignment preceding, coinciding with, or subsequent to, an acquisition.

(10) If a gain chargeable to tax under subsection (2) or subsection (6) is realised by the exercise of a right, paragraph 3 of Schedule 1 of the Capital Gains Tax Act, 1975 , shall apply as if a sum equal to the amount of the gain so chargeable to tax formed part of the consideration given by the person acquiring the shares for their acquisition by him.

(11) (a) Where, in the year 1986-87 or any subsequent year of assessment, a person grants a right in respect of which tax may become chargeable under this section, or allots any shares or transfers any asset in pursuance of such a right, or gives any consideration for the assignment or release in whole or in part of such a right, or receives written notice of the assignment of such a right, he shall deliver particulars thereof in writing to the inspector not later than thirty days after the end of that year.

(b) Schedule 15 of the Income Tax Act, 1967 , is hereby amended by the insertion in column 2 of “Finance Act, 1986, section 9 (11) (a)”.

Approved share option schemes.

10. —(1) The provisions of this section shall apply where, on or after the 6th day of April, 1986, an individual obtains a right to acquire shares in a body corporate—

(a) by reason of his office or employment as a director or employee of that or any other body corporate; and

(b) in accordance with the provisions of a scheme approved under the Second Schedule .

(2) If the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved under the Second Schedule

(a) tax shall not be chargeable under section 9 in respect of any gain realised by the exercise of the right,

(b) if, but for this paragraph, section 9 of the Capital Gains Tax Act, 1975 , would apply, that section shall not apply in calculating the consideration for the acquisition of the shares by him or for any corresponding disposal of them to him, and

(c) as respects shares to which subsection (3) applies, and which were acquired by an individual by the exercise of the right, the period of ownership of those shares for the purposes of subsection (3) of section 3 of the Capital Gains Tax Act, 1975 , shall be construed, notwithstanding subsection (4) of that section, as if the shares were acquired by the individual on the date on which he acquired the right.

(3) (a) This subsection applies to shares which are acquired pursuant to the exercise of a right to acquire shares in a company which, at the time the right was obtained, was a qualifying company.

(b) For the purposes of this subsection, a company is a qualifying company at any time if, throughout the period of twelve months ending at that time or, if the company commenced to trade during that period, throughout the period of twelve months commencing on the date the company so commenced to trade, it existed solely for the carrying on of a specified trade.

(4) For the purposes of subsection (3), “specified trade” means a trade which consists wholly or mainly of—

(a) the manufacture of goods (including activities which would, if the company carrying on the trade were to make a claim for relief in respect of the trade under Chapter VI of Part I of the Finance Act, 1980 , fall to be regarded for the purposes of that Chapter as the manufacture of goods), or

(b) exempted trading operations within the meaning of Part V (Profits from Trading within Shannon Airport) of the Corporation Tax Act, 1976 .

(5) For the purposes of subsections (3) and (4), a trade shall be regarded, as respects a period of twelve months, as consisting wholly or mainly of particular activities if, but only if, the total amount receivable by the company carrying on the trade from sales made or, as the case may be, in payment for services rendered in the course of those activities in the period of twelve months is not less than 75 per cent. of the total amount receivable by the company from all sales made or, as the case may be, in payment for all services rendered in the course of the trade in that period.

(6) Schedule 15 of the Income Tax Act, 1967 , is hereby amended by the insertion in Column 2 of “Finance Act, 1986, paragraph 14 of the Second Schedule ”.

Profit sharing schemes.

11. Section 52 of the Finance Act, 1982 , is hereby amended, as respects the year 1986-87 and subsequent years of assessment, by the substitution of the following subsections for subsections (7) and (8):

“(7) In this Chapter ‘the release date’, in relation to any of a participant's shares, means the fifth anniversary of the date on which the shares were appropriated to him.

(8) Subject to section 56 (4), for the purposes of provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of his shares, any reference to ‘the appropriate percentage’ in relation to those shares shall be determined according to the time of that event, as follows:—

(a) if the event occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) does not apply, the appropriate percentage is 100 per cent.;

(b) if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and paragraph (c) does not apply, the appropriate percentage is 75 per cent.; and

(c) if, in a case where at the time of the event the participant—

(i) has ceased to be an employee or director of a relevant company as mentioned in subsection (5) (a), or

(ii) has reached pensionable age, as defined in section 2 of the Social Welfare (Consolidation) Act, 1981 ,

the event occurs before the fifth anniversary of the date on which the shares were appropriated to him, the appropriate percentage is 50 per cent.”.

Relief for new shares purchased on issue by employees.

12. —(1) (a) In this section—

director” has the same meaning as in Chapter III of Part V of the Income Tax Act, 1967 ;

eligible employee” in relation to a qualifying company means—

(i) where the company is a trading company, a full-time director or full-time employee of the company, or

(ii) where the company is a holding company, a full-time director or full-time employee of the company or of a company which is its 75 per cent. subsidiary;

eligible shares”, in relation to a qualifying company, means new shares forming part of the ordinary share capital of the company which—

(i) are issued on or after the 6th day of April, 1986,

(ii) are fully paid up,

(iii) throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed,

(iv) are not subject to any restrictions other than restrictions which attach to all shares of the same class, and

(v) are issued to and acquired by an eligible employee in relation to the company at not less than their market value at the time of issue;

full-time director” and “full-time employee” have respectively the same meanings as in section 8 of the Finance Act, 1978 ;

holding company” means a company whose business consists wholly or mainly of the holding of shares or securities of trading companies which are its 75 per cent. subsidiaries;

market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

ordinary share capital” has the meaning assigned to it by section 155 (5) of the Corporation Tax Act, 1976 ;

qualifying company” means a company which is at the time the eligible shares are issued—

(i) incorporated in the State,

(ii) resident in the State and not resident elsewhere, and

(iii) (I) a trading company, or

(II) a holding company;

trading company” means a company whose business consists wholly or mainly of the carrying on wholly or mainly in the State of a trade or trades.

(b) In this section “75 per cent. subsidiary”, in relation to a company, has the meaning assigned to it for the purposes of the Corporation Tax Acts by section 156 of the Corporation Tax Act, 1976 , as applied for the purposes of section 107 of that Act by subsections (6) and (7) of that section.

(c) References in this section to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this section as disposing of any shares which he is treated by virtue of paragraph 5 of Schedule 2 to the Capital Gains Tax Act, 1975 , as exchanging for other shares.

(d) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

(2) Subject to the subsequent provisions of this section, where, in the year 1986-87 or any subsequent year of assessment, an eligible employee in relation to a qualifying company subscribes for eligible shares in the qualifying company, he shall be entitled, in estimating the amount of his total income for the year of assessment in which the shares are issued, to have a deduction made of an amount equal to the amount of the subscription:

Provided that a deduction shall not be given to the extent to which the amount subscribed by an eligible employee for eligible shares issued to him in all years of assessment exceeds £750.

(3) Subsection (2) shall not apply as respects any amount subscribed for eligible shares if within the period of five years from the date of their acquisition—

(a) they are disposed of, or

(b) the eligible employee who made the subscription receives in respect of the shares any money or money's worth which does not constitute income in his hands for the purposes of income tax,

and there shall be made all such assessments, additional assessments or adjustments of assessments as are necessary to withdraw any relief from income tax already given under subsection (2) in respect of the amount subscribed:

Provided that where an event mentioned in paragraph (a) or (b) occurs after the fourth anniversary of the date on which the shares were issued to the eligible employee relief shall be withdrawn only to the extent of 75 per cent. of the amount which would otherwise be withdrawn.

(4) Except where the shares are in a company whose ordinary share capital, at the time of acquisition of the shares by the eligible employee, consists of shares of one class only the majority of the issued shares of the same class as the eligible shares must be shares other than—

(a) eligible shares, and

(b) shares held by persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the qualifying company or any of its 75 per cent. subsidiaries.

(5) In relation to shares in respect of which relief has been given under subsection (2) and not withdrawn, any question—

(a) as to which (if any) such shares issued to an eligible employee at different times a disposal relates, or

(b) whether a disposal relates to such shares or to other shares,

shall for the purposes of this section be determined as for the purposes of section 17 of the Finance Act, 1984 .

(6) Where there occurs in relation to any of the eligible shares of an eligible employee (hereinafter referred to as “the original holding”) a transaction which results in a new holding, as defined in paragraph 2 (1) (b) of Schedule 2 to the Capital Gains Tax Act, 1975 , being equated with the original holding for the purposes of capital gains tax, then for the purposes of subsection (3)

(a) the new holding shall be treated as shares in respect of which relief under this section has been given,

(b) the transaction shall not be treated as involving a disposal of the original holding,

(c) the consideration for the disposal of the original holding to the extent that it consists of the new holding shall not be treated as money or money's worth, and

(d) a disposal of the whole or a part of the new holding shall be treated as a disposal of the whole or a corresponding part of the shares in respect of which relief has been given under this section.

(7) Any amount in respect of which relief is allowed under subsection (2) and not withdrawn shall be treated as a sum which, by reason of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975 , is to be excluded from the sums allowable under paragraph 3 of that Schedule.

(8) An eligible employee shall not be entitled to relief under subsection (2) in respect of any shares unless the shares are subscribed for and issued for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

(9) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this section.

Amendment of provisions relating to relief for investment in corporate trades.

13. Section 12 of the Finance Act, 1984 , is hereby amended by the substitution in subsection (11) of “any of the six years” for “either of the two years”, and the said subsection (11), as so amended, is set out in the Table to this section.

TABLE

(11) This section applies only where the shares concerned are issued in the year 1984-85 or any of the six years of assessment immediately following.

Taxation treatment of certain dividends.

14. —(1) A dividend which is paid on or after the 6th day of April, 1986, by a company resident in the State and which is a relevant distribution for the purposes of section 45 of the Finance Act, 1980 , shall be a qualifying dividend for the purposes of this section.

(2) Where an individual who is resident in the State and is not resident elsewhere claims and proves that for any year of assessment (being the year 1986-87 or any subsequent year of assessment) he is beneficially entitled to qualifying dividends he shall, for all the purposes of the Income Tax Acts, apart from this section, be entitled, in computing the amount of his total income for that year of assessment, to have the amount of his income for that year which is represented by the qualifying dividends reduced by 50 per cent. of that amount, but the amount of any tax credit to which he is entitled in respect of any qualifying dividend included in his income for that year shall be determined in accordance with section 45 (3) of the Finance Act, 1980 , as if this section had not been enacted:

Provided that the amount by which the income of an individual which is represented by qualifying dividends is reduced in accordance with this section for any year of assessment shall not exceed £7,000.

(3) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this section.

(4) Section 198 (1) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , is hereby amended by the insertion in paragraph (a) of the following subparagraph after subparagraph (viii):

“(ix) so far as it flows from relief under section 14 of the Finance Act, 1986, in the proportions in which they are beneficially entitled to the income from the qualifying dividends giving rise to the relief,”.