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12 1988

FINANCE ACT, 1988

SECOND SCHEDULE

Tax Credits

Section 31 .

PART I

Amendments Consequential on Changes in Amounts of Tax Credits in respect of Distributions

1. The provisions referred to in section 31 (1) are the following:

(a) sections 45 (5), 64 (2), 66 (2), 67 , 82 (2), 82 (7), 83 (4), 88 (2) and 178 of the Corporation Tax Act, 1976 ,

(b) in subparagraph (ii) (as amended by the Finance Act, 1977 ) of section 66 (3) (b) of the Corporation Tax Act, 1976 , the expression “income tax at the standard rate”,

(c) in subparagraph (iii) (inserted by the Finance Act, 1977 ) of the said section 66 (3) (b), the expression “standard rate per cent.” in each place where it occurs, and

(d) in section 79 (6) of the Corporation Tax Act, 1976 , the definition of “A” in paragraph (b).

2. (1) For the purposes of this paragraph and section 45 (5) of the Corporation Tax Act, 1976

(a) where an accounting period begins before the 6th day of April, 1988, and ends on or after that date, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 5th day of April, 1988, and another part beginning on the 6th day of April, 1988, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods,

and

(b) where an accounting period begins before the 6th day of April, 1989, and ends on or after that day, it shall be divided into one part, beginning on the day on which the accounting period begins and ending on the 5th day of April, 1989, and another part beginning on the 6th day of April, 1989, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods.

(2) As respects any accounting period beginning on or after the 6th day of April, 1988, subsection (5) of section 45 of the Corporation Tax Act, 1976 , is hereby amended by the substitution for the words from “but the restriction” to the end of the subsection of “but the amount of the tax credit, or aggregate of tax credits if more than one distribution has been received, which may be so set off shall not exceed an amount determined by the formula

S ×  (A − B)

____________

100

where—

S is the standard rate per cent. for the year of assessment in which the distribution is made,

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 43 (3), or, as the case may be, the portion, determined in accordance with subsection (4), of the income from investments which is included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 8 (3).”.

3. (1) This paragraph applies to a distribution which is made by a company in the year 1988-89 and to which section 64 of the Corporation Tax Act, 1976 , applies.

(2) Neither section 28 (7) of the Finance Act, 1978 , nor section 28 (3) of the Finance Act, 1983 , shall apply to a distribution to which this paragraph applies.

(3) The reference to certain tax credits in the definition of “B” in subsection (2) of section 64 of the Corporation Tax Act, 1976 , shall, in relation to distributions which were received by a company which makes a distribution to which this paragraph applies, be construed—

(a) as a reference to such tax credits multiplied by .8739 in so far as they are tax credits in respect of distributions which were made before the 6th day of April, 1978, or after the 5th day of April, 1983, and before the 6th day of April, 1988, and

(b) as a reference to such tax credits multiplied by 1.0980 in so far as they are tax credits in respect of distributions which were made after the 5th day of April, 1978, and before the 6th day of April, 1983.

4. (1) This paragraph applies to a distribution which is made by a company in the year 1989-90 or subsequent years of assessment, and to which section 64 of the Corporation Tax Act, 1976 , applies.

(2) Neither section 28 (7) of the Finance Act, 1978 , nor section 28 (3) of the Finance Act, 1983 , shall apply to a distribution to which this paragraph applies.

(3) The reference to certain tax credits in the definition of “B” in subsection (2) of section 64 of the Corporation Tax Act, 1976 , shall, in relation to distributions which were received by a company which makes a distribution to which this paragraph applies, be construed—

(a) as a reference to such tax credits multiplied by .7222 in so far as they are tax credits in respect of distributions which were made before the 6th day of April, 1978, or which were made after the 5th day of April, 1983, and before the 6th day of April, 1988,

(b) as a reference to such tax credits multiplied by .9074 in so far as they are tax credits in respect of distributions made after the 5th day of April, 1978, and before the 6th day of April, 1983, and

(c) as a reference to such tax credits multiplied by .8264 in so far as they are tax credits in respect of distributions made in the year 1988-89.

Section 32 .

PART II

Amendments of Chapter VI (Corporation Tax: Relief in Relation to Certain Income of Manufacturing Companies) of Part I of Finance Act, 1980

1. Chapter VI of Part I of the Finance Act, 1980 , is hereby amended as respects distributions made on or after the 6th day of April, 1989—

(a) by the substitution for subsection (7) of section 45 of the following subsection:

“(7) Where it appears to the inspector, that the amount of the tax credit to which the recipient of a relevant distribution (including part of a distribution which is treated under subsection (2) as a relevant distribution) was shown to be entitled on the statement annexed to or accompanying any warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976 , or in any statement mentioned in section 83 (5) of that Act, exceeds the amount of the tax credit to which the recipient of the statement should have been shown to be entitled on that statement by reference to the provisions of this section, the inspector may make an assessment to income tax on the company under Case IV of Schedule D for the year of the assessment in which the statement is made, on an amount the income tax on which, at the standard rate for the said year of assessment, is equal to the amount by which the tax credit shown in the statement exceeds the tax credit to which the recipient of that statement should have been shown to be entitled on that statement:

Provided that—

(a) any amount on which, by virtue of this subsection, income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts, and

(b) the provisions of this subsection shall not apply if the inspector, or, on appeal, the Appeal Commissioners, is or are satisfied that, either by reason of a correction by the company of the statement annexed to or accompanying the relevant warrant or cheque or other order mentioned in section 5 of the Corporation Tax Act, 1976 , or of the statement mentioned in section 83 (5) of that Act, or for any other good and sufficient reason, it would be just and reasonable that they should not apply.”,

(b) by the deletion of “or C” from subsection (2) of section 46,

(c) by the substitution for paragraph (i) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982 ) of section 47 (2) of the following paragraph:

“(i) the amount of the company's income which, apart from this paragraph, falls to be taken into account in the definitions in section 45 (1) of A, in respect of the relevant accounting period and of R, in respect of the accounting period, shall be reduced as follows:

(I) as respects A, by the amount determined by the formula

G

×

5

_

4

×

H

_

J

where—

G is the amount of the reduction in the relief in respect of the trade for the accounting period under the provisions of the said paragraph (bb) of the said proviso,

H is the income of the accounting period within the meaning of section 28 (8) of the Corporation Tax Act, 1976 , and

J is the relevant corporation tax for the accounting period within the meaning of the said section 182, and

(II) as respects R, by an amount determined by the formula

V

×

H

_

J

where—

H and J have the same meanings as in subparagraph (I) of this paragraph, and

V is the amount of the relief for the accounting period under the said section 182 before any reduction in that relief under paragraphs (b) and (bb) of the proviso to subsection (3) (b) of that section, and”,

(d) by the deletion of “or D” from paragraph (ii) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982 ) of section 47 (2),

(e) by the substitution for paragraph (i) of subsection (2) of section 48 of the following paragraph:

“(i) the amount of the company's income which, apart from this paragraph, falls to be taken into account in the definition in section 45 (1) of A, in respect of the relevant accounting period, and of R, in respect of the accounting period, shall be reduced as follows:

(I) as respects A, by an amount determined by the formula

K

×

L

_

M

×

N

_

P

where—

K is the amount of the relief for the accounting period under the said section 184 before any reduction in that relief under the provisions of the proviso to subsection (3) (b) of that section,

L is the income of the accounting period within the meaning of section 28 (8) of the Corporation Tax Act, 1976 ,

M is the relevant corporation tax within the meaning of section 182 of the Corporation Tax Act, 1976 , in relation to the accounting period,

N is the income from the sale of goods, within the meaning of section 41, for the relevant accounting period, and

P is the total income brought into charge to corporation tax for the accounting period,

and

(II) as respects R, by an amount determined by the formula

K

×

L

_

M

where—

K, L, and M have the same meanings as in clause (I) of this paragraph,

and”,

(f) by the deletion of “or D” from paragraph (ii) (as amended by section 26 of, and Part II of Schedule 2 to, the Finance Act, 1982 ) of section 48 (2), and

(g) by the substitution for subsection (2) of section 49 of the following subsection:

“(2) Where the whole or part of a supplementary distribution under subsection (1) which is a relevant distribution within the meaning of section 45 is received by a company in an accounting period, then, for the purposes of that section—

(a) the whole or part, as the case may be, of the supplementary distribution shall be an amount taken into account under the definition of E, and

(b) the whole of the supplementary distribution shall be an amount taken into account under the definition of T

in the formulae in subsections (1) and (1B) of the said section.”.