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10 1987

FINANCE ACT, 1987

Chapter IV

Income Tax and Corporation Tax

Farming: amendment of provisions relating to relief in respect of increase in stock values.

22. —(1) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended by the substitution of “1987” for “1986” (inserted by the Finance Act, 1986 )—

(a) in paragraph (iv) (inserted by the Finance Act, 1979 ) of the proviso to subsection (4) (a), and

(b) in each place where it occurs in subsections (7) and (9) (inserted by the Finance Act, 1984 ),

and the said paragraph (iv), the said subsection (7) (apart from the proviso) and the said subsection (9) (apart from the proviso), as so amended, are set out in the Table to this subsection.

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(iv) a deduction shall not be allowed under the provisions of this section in computing a company's trading income for any accounting period which ends on or after the 6th day of April, 1987.

(7) Where in relation to an accounting period a company's opening stock value exceeds its closing stock value, the amount of the excess (in this section referred to as the company's “decrease in stock value”) shall, if the accounting period ends on a date before the 6th day of April, 1987, be treated in the computation of the company's trading income for the purposes of corporation tax, as a trading receipt of the company's trade for that accounting period:

(9) In the computation of a company's trading income for the purposes of corporation tax for any accounting period which ends on or after the 6th day of April, 1987, in which there is a decrease in stock value, there shall be treated as a trading receipt of the company's trade for that accounting period the amount (if any) by which A exceeds the aggregate of ? and C

where—

A is the aggregate amount of the company's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1987,

B is the aggregate amount of the company's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1987, and

C is the aggregate of the amounts which under this subsection are treated as trading receipts of the company's trade for preceding accounting periods:

(2) Section 12 of the Finance Act, 1976 , is hereby amended—

(a) by the substitution in subsection (3) of “1987-88” for “1986-87” (inserted by the Finance Act, 1986 ), and

(b) by the substitution of “1987” for “1986” (inserted by the Finance Act, 1986 ) in each place where it occurs in subsections (5) and (6) (inserted by the Finance Act, 1984 ),

and the said subsection (3), the said subsection (5) (apart from the proviso) and the said subsection (6) (apart from the proviso), as so amended, are set out in the Table to this subsection.

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(3) Any deduction allowed by virtue of this section in computing a person's trading profits for an accounting period shall not have effect for any purpose of the Income Tax Acts for any year of assessment prior to the year 1974-75 or later than the year 1987-88.

(5) In the computation of a person's trading profits for an accounting period in which there is a decrease in stock value and which ends on a date in the period from the 6th day of April, 1976, to the 5th day of April, 1987, the amount of that decrease shall be treated as a trading receipt of the trade for that accounting period:

(6) In the computation of a person's trading profits for any accounting period in which there is a decrease in stock value and which ends on or after the 6th day of April, 1987, there shall be treated as a trading receipt of the trade for that accounting period the amount (if any) by which A exceeds the aggregate of ? and C

where—

A is the aggregate amount of the person's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1987,

B is the aggregate amount of the person's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1987, and

C is the aggregate of the amounts which are treated as trading receipts of the person's trade for preceding accounting periods which ended on or after the 6th day of April, 1987:

(3) This section shall have effect only as respects a trade of farming.

Repeal of section 362 (relief on profits from business of sea or air transport) of Income Tax Act, 1967.

23. —(1) Section 362 of the Income Tax Act, 1967 , is hereby repealed.

(2) Notwithstanding the repeal of section 362 of the Income Tax Act, 1967 , effected by subsection (1), where, prior to the commencement of this Act, an order has been made under that section, the arrangement to which the order relates shall have the force of law to the same extent as if this section had not been enacted.

Capital allowances for certain road vehicles.

24. —(1) (a) In this section—

car” means any mechanically propelled road vehiclebeing a vehicle which has been constructed or adapted to be primarily suited to the carriage of passengers and not to the conveyance of goods or burden of any description or to the haulage by road of other vehicles, and which is a vehicle of a type commonly used as a private vehicle and suitable to be so used, and includes a vehicle in use for the purpose referred to in paragraph (ii) of the definition of “qualifying purposes”;

chargeable period” and “chargeable period or its basis period” haver, respectively, the meanings assigned to them by paragraph 1 (2) of the First Schedule to the Corporation Tax Act, 1976 ;

qualifying purposes” means the use, in the ordinary course of trade, of a car for the purposes of—

(i) short-term hire to members of the public, or

(ii) the carriage of members of the public while the car is a licensed public hire vehicle fitted with a taximeter in pursuance of the Road Traffic (Public Service Vehicles) Regulations, 1963 (S.I. No. 191 of 1963);

short-term hire” means, in relation to a car, the hire of the car to a person under a hire-drive agreement (within the meaning of section 3 of the Road Traffic Act, 1961 ) for a continuous period which does not exceed eight weeks:

Provided that, where a period of hire of a car to a person by another person is followed within seven days of the end of that period by a further period of hire of a car (whether the same car or not) to that person by that other person, the two periods shall be deemed for the purposes of this section, including any subsequent application of this proviso, to constitute together a single continuous period of hire, so that where that continuous period of hire exceeds eight weeks, the period of hire of any car included in that continuous period of hire shall not be treated as a period of short-term hire, and, for the purposes of this proviso, any reference to a person shall be treated as including a reference to any other person who would be regarded as connected with that person under section 16 of the Finance (Miscellaneous Provisions) Act, 1968 ;

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

(b) For the purposes of this section, a car shall be regarded as used by a person for qualifying purposes as respects a chargeable period if, and only if, not less than 75 per cent. of its use (determined by reference to the periods of time in which the car is used, or available for use, for any purpose) by that person in the chargeable period or its basis period is for qualifying purposes:

Provided that, where as respects a chargeable period the use of a car for qualifying purposes doesnot satisfy the requirements of this paragraph but would have satisfied those requirements if the reference to “75 per cent.” were a reference to “50 per cent.”, the car shall be deemed to be used for qualifying purposes as respects that chargeable period if the use of the car by that person for qualifying purposes satisfied the requirements of this paragraph as respects the immediately preceding chargeable period, or the car shall be deemed to be so used if the said use of the car has satisfied those requirements as respects the immediately succeeding chargeable period and the inspector shall accordingly adjust the amount of capital allowances falling to be made in taxing the person's trade and any amount of tax overpaid shall be repaid.

(2) In determining what capital allowances fall to be made to a person, for any chargeable period ending on or after the 6th day of April, 1987, in taxing a trade which consists of or includes the carrying on of qualifying purposes, section 241 of the Income Tax Act, 1967 , shall apply to a car which, as respects that period, has been used by the person for qualifying purposes as if—

(a) the reference in subsection (1) of that section to “five-fourths of the amount” were a reference to “twice the amount”, and

(b) the second proviso to the said subsection (1) were deleted.

Application of section 52 (capital allowances: treatment of grants, etc.) of Finance Act, 1986, to food processing trade.

25. —(1) For the purposes of this section—

food processing trade” means a trade which consists of, or includes, the manufacture of processed food;

processed food” means goods, manufactured within the State in the course of a trade by a company, which—

(a) are intended for human consumption as a food, and

(b) have been manufactured by a process involving the use of machinery or plant whereby the goods which are produced by the application of that process differ substantially in form and value from the materials to which the process has been applied and, without prejudice to the generality of the foregoing, the process does not consist primarily of—

(i) the acceleration, retardation, alteration or application of a natural process, or

(ii) the application of methods of preservation, pasteurisation or any similar treatment;

qualifying machinery or plant” means machinery or plant used solely in the course of a process of manufacture whereby processed food is produced.

(2) The provisions of subsection (1) of section 52 of the Finance Act, 1986 , shall not apply, and shall be deemed never to have applied,where an allowance falls to be made under section 241 or section 251 of the Income Tax Act, 1967 , in taxing a food processing trade carried on by a company and the capital expenditure in respect of which the allowance falls to be made was incurred by that company and was so incurred in respect of qualifying machinery or plant:

Provided that the reference in this subsection to expenditure incurred by a company shall not include any expenditure which it is deemed to have incurred in accordance with the provisions of section 241 (2) or section 252 of the said Act.

Amendment of section 40 (capital allowances for certain leased assets) of Finance Act, 1984.

26. Section 40 of the Finance Act, 1984 , is hereby amended by the substitution in paragraph (a) of subsection (10) (inserted by the Finance Act, 1986 ) of “lessee” for “borrower”, and the said paragraph, as so amended, is set out in the Table to this section.

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(a) the manufacture of goods (including activities which would, if the lessee 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

Designated areas for urban renewal relief.

27. —(1) For the purposes of Chapter V of Part I of the Finance Act, 1986 , the Minister for Finance, after consultation with the Minister for the Environment, may, by order, direct that—

(a) (i) the definition of “designated area” contained in section 41 of that Act shall include such area or areas described in the order which, but for the order, would not be included in that definition,

(ii) as respects any such area so described in the order, the definition of “qualifying period” in section 42, 44 or 45 of the said Act shall be construed as a reference to such period as shall be specified in the order in relation to that area: provided that no such period specified in the order shall commence prior to the date of the passing of this Act, or end after the 31st day of May, 1991,

and

(b) the definition of “the Custom House Docks Area” contained in the said section 41 shall, with effect from the date of such order, include such area or areas described in the order which, but for the order, would not be included in that definition,

and where the Minister for Finance so orders, the said definition of “designated area” or “the Custom House Docks Area”, as the case may be, shall be deemed to include the said area or areas and the said definition of “qualifying period” shall be construed as a reference to the said period specified in the order.

(2) The Minister for Finance may make orders for the purpose of this section and any order 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 order is passed by Dáil Éireann within the next twenty-one days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.