First Previous (Chapter III Relief for Investment in Research and Development) Next (Chapter V Urban Renewal: Relief from Income Tax and Corporation Tax)

13 1986

FINANCE ACT, 1986

Chapter IV

Interest Payments by Certain Deposit Takers

Interpretation ( Chapter IV ).

31. —(1) In this Chapter—

amount on account of appropriate tax” shall be construed in accordance with section 33 (4);

appropriate tax”, in relation to a payment of relevant interest, means a sum representing income tax on the amount of that payment at the standard rate in force at the time of the payment;

building society” means a society within the meaning of the Building Societies Acts, 1976 to 1983;

deposit” means a sum of money paid to a relevant deposit taker on terms under which it will be repaid with or without interest and either on demand or at a time or in circumstances agreed by or on behalf of the person making the payment and the person to whom it is made;

interest” means any interest of money whether yearly or otherwise, including any amount whether or not described as interest paid in consideration of the making of a deposit, and, as respects a building society, includes any dividend or other distribution in respect of shares in the society:

Provided that any amount consisting of an excess of the amount received on the redemption of any holding of A.C.C. Bonus Bonds — First Series, issued by the Agricultural Credit Corporation, p.l.c., over the amount paid for the holding shall not be treated as interest for the purposes of this Chapter;

relevant deposit” means a deposit held by a relevant deposit taker other than a deposit—

(a) which is made by, and the interest on which is beneficially owned by—

(i) a relevant deposit taker,

(ii) the Central Bank of Ireland, or

(iii) the Insurance Corporation of Ireland, p.l.c.,

(b) which is a debt on a security which is issued by the relevant deposit taker and is listed on a stock exchange,

(c) which, in the case of a relevant deposit taker resident in the State for the purposes of corporation tax, is held at a branch of the relevant deposit taker situated outside the State,

(d) which, in the case of a relevant deposit taker not resident in the State for the purposes of corporation tax, is held otherwise than at a branch of the relevant deposit taker situated in the State,

(e) which is a deposit denominated in a foreign currency,

(f) in respect of which—

(i) no person who is ordinarily resident in the State is beneficially entitled to any interest, and

(ii) a declaration of the kind mentioned in section 37 has been made to the relevant deposit taker, or

(g) (i) the interest on which is exempt—

(I) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(II) from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 ,

as the case may be, and

(ii) in respect of which a declaration of the kind mentioned in section 38 has been made to the relevant deposit taker;

relevant deposit taker” means any of the following persons, that is to say:

(a) a person who is a holder of a licence granted under section 9 of the Central Bank Act, 1971 ,

(b) a building society,

(c) a trustee savings bank within the meaning of the Trustee Savings Banks Acts, 1863 to 1979,

(d) the Agricultural Credit Corporation, p.l.c.,

(e) the Industrial Credit Corporation, p.l.c.,

and

(f) the Post Office Savings Bank;

relevant interest” means interest paid on or after the 6th day of April, 1986, in respect of a relevant deposit;

return” means a return under section 33 (2).

(2) For the purposes of this Chapter—

(a) any amount which is credited as interest in respect of a relevant deposit shall be treated as a payment of interest, and references in this Chapter to relevant interest being paid shall be construed accordingly,

(b) any reference in this Chapter to the amount of a payment of relevant interest shall be construed as a reference to the amount which would be the amount of that payment if no appropriate tax were to be deducted therefrom, and

(c) a deposit is held at a branch of a relevant deposit taker if it is recorded in its books as a liability of that branch.

Deduction of tax from relevant interest.

32. —(1) Where a relevant deposit taker makes a payment of relevant interest it shall deduct out of the amount of the payment the appropriate tax in relation to the payment; and the person to whom such payment is made shall allow such deduction upon the receipt of the residue of the payment; and the relevant deposit taker shall be acquitted and discharged of so much money as is represented by the deduction as if that amount of money had actually been paid to the person.

(2) A relevant deposit taker shall treat every deposit made with it as a relevant deposit unless satisfied that it is not a relevant deposit; but where it has satisfied itself that a deposit is not a relevant deposit it shall be entitled to continue to so treat the deposit until such time as it is in possession of information which can reasonably be taken to indicate that the deposit is, or may be, a relevant deposit.

(3) Any payment of relevant interest which is within subsection (1) shall be treated as not being within section 31 of the Finance Act, 1974 .

Returns and collection of appropriate tax.

33. —(1) Notwithstanding any other provision of the Tax Acts, this section shall have effect for the purpose of regulating the time and manner in which appropriate tax in relation to a payment of relevant interest shall be accounted for and paid.

(2) Subject to subsection (5), a relevant deposit taker shall, for the year 1986-87 and for each subsequent year of assessment, make, within 15 days from the end of the year of assessment, a return to the Collector-General of the relevant interest paid by it in that year and of the appropriate tax in relation to the payment of that interest.

(3) The appropriate tax in relation to a payment of relevant interest which is required to be included in a return shall be due at the time by which the return is to be made and shall be paid by the relevant deposit taker to the Collector-General, and the appropriate tax so due shall be payable by the relevant deposit taker without the making of an assessment; but appropriate tax which has become due as aforesaid may be assessed on the relevant deposit taker without the making of an assessment; but appropriate tax which has become due as aforesaid may be assessed on the relevant deposit taker (whether or not it has been paid when the assessment is made) if that tax or any part of it is not paid on or before the due date.

(4) Notwithstanding subsection (3), a relevant deposit taker shall, for each year of assessment (being the year 1986-87 or any subsequent year of assessment) pay to the Collector-General within 15 days from the 5th day of October in that year of assessment an amount on account of appropriate tax which shall be not less than the amount of appropriate tax which would be due and payable by it for that year of assessment in accordance with the said subsection (3) if the total amount of the relevant interest which had accrued (interest being, for this purpose, treated, if not otherwise so treated, as accruing from day to day) in the period commencing on the 6th day of April and ending on the 5th day of October in that year of assessment on all relevant deposits held by the relevant deposit taker in that period (and no more) had been paid by it in that year of assessment; and any amount on account of appropriate tax so paid by the relevant deposit taker for a year of assessment shall be treated as far as may be as a payment on account of any appropriate tax due and payable by it for that year of assessment under the said subsection (3):

Provided that, where the amount on account of appropriate tax paid by a relevant deposit taker for a year of assessment under this subsection exceeds the amount of appropriate tax due and payable by it for that year of assessment under the said subsection (3), the excess shall be carried forward and shall be set off against any amount due and payable under this subsection or the said subsection (3) by the relevant deposit taker for any subsequent year of assessment (any such set-off being effected as far as may be against an amount so due and payable at an earlier date rather than at a later date).

(5) (a) Any amount on account of appropriate tax payable by a relevant deposit taker under subsection (4) shall be so payable without the making of an assessment,

(b) all the provisions of this Chapter relating to the collection and recovery of appropriate tax shall apply with any necessary modifications to the collection and recovery of any amount on account of appropriate tax, and

(c) a return required to be made by a relevant deposit taker for a year of assessment shall contain a statement of the amount of interest in respect of which an amount on account of appropriate tax is due and payable by the relevant deposit taker for that year of assessment and of the amount on account of appropriate tax so due and payable; and a return shall be so required to be made by a relevant deposit taker for a year of assessment notwithstanding that no relevant interest was paid by it in that year of assessment.

(6) If it appears to the inspector that there is any amount of appropriate tax in relation to a payment of relevant interest which ought to have been and has not been included in a return, or if the inspector is dissatisfied with any return, he may make an assessment on the relevant deposit taker to the best of his judgment; and any amount of appropriate tax in relation to a payment of relevant interest due under an assessment made by virtue of this subsection shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

(7) Where any item has been incorrectly included in a return as a payment of relevant interest, the inspector may make such assessments, adjustments or set-offs as may in his judgment be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the relevant deposit taker or any other person are, so far as possible, the same as they would have been if the item had not been so included.

(8) (a) Any appropriate tax assessed on a relevant deposit taker under this Chapter shall be due within one month after the issue of the notice of assessment (unless that tax or any amount treated as an amount on account of it is due earlier under subsection (3) or (4)) subject to any appeal against the assessment, but no such appeal shall affect the date when any amount is due under the said subsection (3) or (4), and

(b) on the determination of an appeal against an assessment under this Chapter any appropriate tax overpaid shall be repaid.

(9) (a) All the provisions of the Income Tax Acts relating to—

(i) assessments to income tax,

(ii) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court), and

(iii) the collection and recovery of income tax,

shall, so far as they are applicable, apply to the assessment, collection and recovery of appropriate tax;

(b) any amount of appropriate tax or amount on account of appropriate tax payable in accordance with this Chapter without the making of an assessment shall carry interest at the rate of 1.25 per cent. for each month or part of a month from the date when the amount becomes due and payable until payment;

(c) the provisions of subsections (3) to (5) of section 550 of the Income Tax Act, 1967 , shall apply in relation to interest payable under paragraph (b) as they apply in relation to interest payable under the said section 550;

(d) in its application to any appropriate tax charged by any assessment made in accordance with this Chapter, section 550 of the Income Tax Act, 1967 , shall have effect with the omission of the proviso to subsection (1) and subsections (2) and (2A); and

(e) notwithstanding anything in the Income Tax Acts, the provisions of section 419 of the Income Tax Act, 1967 , and section 30 of the Finance Act, 1976 , shall not apply in relation to any appropriate tax which is charged by an assessment made in accordance with this Chapter.

(10) Every return shall be in a form prescribed by the Revenue Commissioners and shall include a declaration to the effect that the return is correct and complete.

Amendment of section 31 (building societies) of Corporation Tax Act, 1976.

34. —As respects the year 1986-87 and any subsequent year of assessment—

(a) subsections (1) to (3) and (6) of section 31 of the Corporation Tax Act, 1976 , shall cease to have effect, and

(b) subsections (4) and (9) of that section shall have effect as if the references therein to arrangements made under that section being in force or being entered into by a building society were omitted.

Taxation of relevant interest, etc.

35. —(1) Notwithstanding anything in the Tax Acts—

(a) no part of any interest paid by a building society on or after the 6th day of April, 1986, in respect of any shares in the society shall be treated for the purposes of the Corporation Tax Acts as a distribution of the society or as franked investment income of any company resident in the State,

(b) save as is otherwise provided for in section 39 , no repayment of appropriate tax in respect of any relevant interest shall be made to any person receiving or entitled to the payment of the relevant interest who is not a company within the charge to corporation tax in respect of the payment,

(c) the amount of any payment of relevant interest shall be regarded as income chargeable to tax under Case IV of Schedule D and under no other Case or Schedule and shall be taken into account in computing the total income of the person entitled to that amount, but, subject to paragraph (d), no assessment to income tax shall be made in respect of any relevant interest on the person receiving or entitled to the payment of the relevant interest,

(d) paragraph (c) shall not prevent an assessment in respect of income tax at the higher rates or in respect of a surcharge under section 13 of the Finance Act, 1976 , on any relevant interest in respect of which appropriate tax is deductible, and

(e) section 4 of the Finance Act, 1974 , shall have effect as if a reference to appropriate tax deductible by virtue of this Chapter were contained in paragraph (a) of that section.

(2) Where a deposit which is a source of income of any person (hereafter in this section referred to as the “lender”) who is chargeable to income tax in respect of any interest payable on the deposit is not a taxed-interest deposit within the meaning of subsection (4) but at any time becomes such a deposit, then, notwithstanding section 75 of the Income Tax Act, 1967 , section 77 (3) of that Act shall apply as if the deposit were a source of income which is directed to be separately computed under subsection (2) of the said section 75 and as if the deposit were a source of income which the lender ceased to possess immediately before it became such a taxed-interest deposit:

Provided that, in the case of a deposit which becomes a taxed-interest deposit on the 6th day of April, 1986, the said section 77 (3) shall not apply so as to require any adjustment of the total income of a lender in so far as that income includes any interest paid in respect of that deposit for any year of assessment prior to the year 1985-86.

(3) Where a deposit which is a source of income of a lender ceases to be a taxed-interest deposit within the meaning of subsection (4) then, notwithstanding section 75 of the Income Tax Act, 1967 , subsections (1) and (2) of section 77 of that Act shall apply, as respects the year of assessment in which it so ceases and the next subsequent year of assessment, as if the deposit were a source of income which is directed to be separately computed under subsection (2) of the said section 75 and as if the deposit were a new source of income acquired by the lender immediately after it ceased to be such a taxed-interest deposit.

(4) For the purposes of subsections (2) and (3), a deposit is at any time a taxed-interest deposit if, were the relevant deposit taker who holds it to make a payment of interest in respect of it at that time, the said relevant deposit taker would be required to deduct the appropriate tax out of the payment.

(5) Section 344 of the Income Tax Act, 1967 , shall not have effect as respects any relevant interest.

Statement furnished by relevant deposit taker.

36. —A relevant deposit taker shall, when requested to do so by any person entitled to any relevant interest on a relevant deposit held by the relevant deposit taker, furnish to that person, as respects any payment of such relevant interest, a statement showing—

(a) the amount of that payment,

(b) the amount of appropriate tax deducted therefrom,

(c) the net amount of the payment, and

(d) the date of the payment.

Declarations relating to deposits of non-residents.

37. —(1) The declaration referred to in paragraph (f) (ii) of the definition of “relevant deposit” in section 31 (1) is a declaration in writing to a relevant deposit taker which—

(a) is made by a person (hereafter in this section referred to as “the declarer”) to whom any interest on the deposit in respect of which the declaration is made is payable by the relevant deposit taker, and is signed by the declarer,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) declares that at the time when the declaration is made the person who is beneficially entitled to the interest in relation to the said deposit is not, or, as the case may be, all of the persons who are so entitled are not, ordinarily resident in the State,

(d) contains as respects the person, or, as the case may be, each of the persons, mentioned in paragraph (c)

(i) the name of the person,

(ii) the address of his principal place of residence, and

(iii) the name of the country in which he is ordinarily resident at the time the declaration is made,

(e) contains an undertaking by the declarer that if the person, or, as the case may be, any of the persons, referred to in paragraph (c) becomes ordinarily resident in the State, the declarer will notify the relevant deposit taker accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of this Chapter:

Provided that—

(i) subject to subsections (3) and (4), where, in relation to a deposit, a notice was served, on or before the 29th day of January, 1986, on a relevant deposit taker under section 175 (4) of the Income Tax Act, 1967 , the notice shall, at all times before the 6th day of April, 1987, be deemed for the purposes of this Chapter, apart from subsection (2), to be, as respects that deposit, a declaration of the kind mentioned in this section, and

(ii) a declaration made before the passing of this Act in a form authorised by the Revenue Commissioners under paragraph (22) of Financial Resolution No. 12 passed by Dáil Éireann on the 30th day of January, 1986, shall be deemed for all the purposes of this Chapter to be a declaration of the kind mentioned in this section.

(2) (a) A relevant deposit taker shall—

(i) keep and retain for the longer of the following periods, that is to say—

(I) a period of six years, and

(II) a period which, in relation to the deposit in respect of which the declaration is made, ends not earlier than three years after the date on which the deposit is repaid or, as the case may be, becomes a relevant deposit, and

(ii) on being so required by notice given to it in writing by an inspector, make available to the inspector, within the time specified in the notice,

all declarations of the kind mentioned in this section which have been made in respect of deposits held by the relevant deposit taker.

(b) The inspector may examine or take extracts from or copies of any declarations made available to him under paragraph (a).

(3) Where, on a day (hereafter in this subsection referred to as “the relevant day”) after the 29th day of January, 1986, the amount of a deposit is reduced to less than three-quarters of the amount of the deposit on the 29th day of January, 1986, paragraph (i) of the proviso to subsection (1), if it would, apart from this subsection, have effect as respects the deposit, shall not so have effect at any time on or after the relevant day.

(4) Where a notice (hereafter in this subsection referred to as “the relevant notice”) of the kind mentioned in paragraph (i) of the proviso to subsection (1) was served on a relevant deposit taker on or before the 29th day of January, 1986, in relation to a deposit and, at any time after the 5th day of April, 1986, but before a declaration of the kind mentioned in this section has been made in respect of the deposit, the deposit ceases to be held by the relevant deposit taker, then a declaration of the kind mentioned in this section shall be made, in respect of that deposit, to the relevant deposit taker by the person to whom any interest on the deposit was payable at any time after the 29th day of January, 1986 (or, if there is more than one such person, the declaration may be made by any one of those persons):

Provided that, if a declaration is not so made in respect of the deposit, the relevant notice shall be deemed, for the purposes of subsection (2), to be, as respects the deposit, a declaration of the kind mentioned in this section.

Declarations relating to deposits of charities.

38. —(1) The declaration referred to in paragraph (g) (ii) of the definition of “relevant deposit” in section 31 (1) is a declaration in writing to a relevant deposit taker which—

(a) is made by a person (hereafter in this section referred to as “the declarer”) to whom any interest on the deposit in respect of which the declaration is made is payable by the relevant deposit taker, and is signed by the declarer,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) declares that at the time when the declaration is made the interest on the deposit in respect of which the declaration is made—

(i) (I) forms part of the income of a body of persons or trust which is treated by the Revenue Commissioners as a body or trust established for charitable purposes only, or

(II) is, according to the rules or regulations established by statute, charter, decree, deed of trust or will, applicable to charitable purposes only and is so treated by the Revenue Commissioners, and

(ii) will be applied to charitable purposes only,

(d) contains the name and address of the person, or, as the case may be, of each of the persons entitled, in respect of the interest in relation to the deposit, to exemption—

(i) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(ii) as the case may be, from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 ,

(e) contains an undertaking by the declarer that if the person, or, as the case may be, any of the persons, referred to in paragraph (d) ceases to be so exempt in respect of that interest, the declarer will notify the relevant deposit taker accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of this Chapter.

(2) Subsection (2) of section 37 shall have effect as respects declarations of the kind mentioned in this section as it has effect as respects declarations of the kind mentioned in that section.

Repayment of appropriate tax in certain cases.

39. —(1) Notwithstanding section 35 (1) (b), repayment of appropriate tax in respect of any relevant interest shall be made to a person who is entitled to exemption in respect of that interest—

(a) from income tax under Schedule D by virtue of paragraph (b) of section 333 (1) of the Income Tax Act, 1967 , or

(b) as the case may be, from corporation tax by virtue of the exemption conferred by the said paragraph (b) of the said section 333 (1) as it has effect for the purposes of corporation tax under section 11 (6) of the Corporation Tax Act, 1976 .

(2) Where, in the year 1986-87 or any subsequent year of assessment (hereafter in this section referred to as “the relevant year”), the total income of a relevant person includes any relevant interest and, apart from section 35 (1) (b), the relevant person would be entitled to repayment of the whole or any part of the appropriate tax deducted from the relevant interest, then, notwithstanding section 35 (1) (b), the repayment to which the relevant person would be so entitled may be made to him on the making by him to the inspector, not earlier than the end of the relevant year, of a claim in that behalf.

(3) In subsection (2)relevant person” means an individual who proves to the satisfaction of the inspector, or, on appeal, to the Appeal Commissioners, that—

(a) at some time during the relevant year he or his spouse was of the age of sixty-five years or upwards, or

(b) throughout the relevant year he or his spouse was, or as on and from some time during the relevant year he or his spouse became, permanently incapacitated by reason of mental or physical infirmity from maintaining himself or herself.

Penalties.

40. —(1) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion—

(a) in column 2 of “Finance Act, 1986, section 33 (2)”,

and

(b) in column 3 of “Finance Act, 1986, section 32 (1)”.

(2) Section 94 (2) of the Finance Act, 1983 , is hereby amended by the insertion after paragraph (d) of the following paragraph:

“(dd) (i) fails to make any deduction required to be made by him under section 32 (1) of the Finance Act, 1986,

(ii) fails, having made the deduction, to pay the sum deducted to the Collector-General within the time specified in that behalf in section 33 (3) of that Act, or

(iii) fails to pay to the Collector-General an amount on account of appropriate tax (within the meaning of Chapter IV of Part I of that Act) within the time specified in that behalf in section 33 (4) of that Act,”.