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12 1988

FINANCE ACT, 1988

Chapter III

Income Tax, Corporation Tax and Capital Gains Tax

Exemption of certain payments by Minister for Labour and An Foras Áiseanna Saothair.

22. —(1) A payment to which this section applies shall be disregarded for all the purposes of the Tax Acts.

(2) This section applies to any payment made, whether before or after the passing of this Act, to a person, being a payment made under—

(a) the Enterprise Allowance Scheme or the Enterprise Scheme of the Minister for Labour, or

(b) the Enterprise Scheme of An Foras Áiseanna Saothair.

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

23. —(1) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended by the substitution of “1988” for “1987” (inserted by the Finance Act, 1987 )—

(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.

TABLE

(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, 1988.

(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, 1988, 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, 1988, 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 B 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, 1988,

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, 1988, 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 “1988-89” for “1987-88” (inserted by the Finance Act, 1987 ), and

(b) by the substitution of “1988” for “1987” (inserted by the Finance Act, 1987 ) 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 1988-89.

(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, 1988, 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, 1988, 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 B 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, 1988,

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, 1988, 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, 1988:

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

Capital allowances for, and deduction in respect of, vehicles.

24. —(1) (a) Sections 25 to 29 of the Finance Act, 1973 , shall have effect, in relation to expenditure incurred on the provision or hiring of a vehicle to which those sections apply, as if for “£2,500”, in each place where it occurs in those sections, there were substituted “£6,000”.

(b) The reference in paragraph (a) to expenditure incurred on the provision or hiring of a vehicle does not include—

(i) as respects the said sections 25 to 27, a reference to expenditure incurred before the 28th day of January, 1988, or incurred within 12 months after that day under a contract entered into before that day, and

(ii) as respects subsections (2) and (3) of the said section 28 and the said section 29, a reference to expenditure under a contract entered into before the said 28th day of January, 1988.

(2) Section 32 of the Finance Act, 1976 , shall have effect, in relation to qualifying expenditure (within the meaning of that section) incurred after the 27th day of January, 1988, as if for “£3,500”, in each place where it occurs, there were substituted “£6,000”.

Amendment of section 44 (allowance to owner-occupiers in respect of certain premises) of Finance Act, 1986.

25. Section 44 of the Finance Act, 1986 , is hereby amended by the deletion from the definition of “qualifying owner-occupied dwelling” in section (1) (a) of “other than the Custom House Docks Area”.

Designated areas for urban renewal relief: extension of certain time limits.

26. —The provisions of the Finance Act, 1986 , specified in the Table to this section shall have effect as if, in the definition of “qualifying period”, the reference to the 31st day of May, 1989, were a reference to the 31st day of May, 1991.

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Subsection (1) of section 42 (allowance in relation to construction of certain commercial premises).

Subsection (1) (a) of section 44 (allowance to owner-occupier in respect of certain premises).

Subsection (1) (a) of section 45 (double rent allowance as a deduction in computing trading income).

Amendment of section 23 (deduction for certain expenditure on construction of rented residential accommodation) of Finance Act, 1981.

27. —(1) As respects expenditure to which this section applies, section 23 of the Finance Act, 1981 , shall apply as if—

(a) in subsection (1) (a) for the definition of “qualifying period” there were substituted the following definition—

“‘qualifying period’ means the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991;”, and

(b) in the definition of “qualifying premises” in the said subsection (1) (a) “90 square metres” were substituted for “75 square metres”.

(2) This section applies to expenditure incurred in the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991, on the construction of a qualifying premises.

(3) This section shall be construed together with section 23 of the Finance Act, 1981 .

Application of section 21 (rented residential accommodation: deduction for expenditure on refurbishment) of Finance Act, 1985, etc.

28. —As respects relevant expenditure (within the meaning of subsection (1) (a) of section 21 of the Finance Act, 1985 ) incurred in the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991, the said section 21 shall have effect as if—

(a) in subsection (2) (a) (iii) for the definition of “qualifying period” there were substituted the following definition—

“‘qualifying period’ means the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991;”, and

(b) the proviso to section 29 (2) of the Finance Act, 1983 , were deleted.

Application of section 22 (extension of application of relief for conversion of certain buildings) of Finance Act, 1985, etc.

29. —With respect to expenditure incurred in the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991, section 22 of the Finance Act, 1985 , shall have effect as if—

(a) (i) in subsections (1) and (2) of the said section 22, for “commencing on the 1st day of April, 1985, and ending on the 31st day of March, 1987,” and

(ii) in section 30 (2) of the Finance Act, 1983 , for “commencing on the 1st day of April, 1984, and ending on the 31st day of March, 1987,”

there were substituted “commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991,”,

(b) in subsection (4) of the said section 22 for the definition of “qualifying period” there were substituted the following definition—

“‘qualifying period’ means the period commencing on the 27th day of January, 1988, and ending on the 31st day of March, 1991;”,

and

(c) the proviso to section 29 (2) of the said Finance Act, 1983 , were deleted.

Pension funds: extension of tax exemptions to dealings in financial futures and traded options.

30. —(1) In this section—

financial futures” and “traded options” mean, respectively, financial futures and traded options which are for the time being dealt in or quoted on a futures exchange or a stock exchange in the State.

(2) For the purposes of—

(a) section 16 (2) of the Finance Act, 1972 ,

(b) section 21 (1) of the Capital Gains Tax Act, 1975 , and

(c) section 41 (1) of the Corporation Tax Act, 1976 ,

a contract entered into in the course of dealing in financial futures or traded options shall be regarded as an investment.

Tax credits in respect of distributions.

31. —(1) The provisions of the Corporation Tax Act, 1976 , specified in paragraph 1 of Part I of the Second Schedule shall have effect—

(a) in relation to distributions made in the year 1988-89, as if the standard rate for that year of assessment were 32 per cent., and

(b) in relation to distributions made on or after the 6th day of April, 1989, as if the standard rate for the year 1989-90 and subsequent years of assessment were 28 per cent.

(2) Part I of the Second Schedule shall have effect for the purpose of supplementing subsection (1).

Amendment of section 45 (distributions) of Finance Act, 1980.

32. —(1) Section 45 of the Finance Act, 1980 , is hereby amended as respects distributions made by a company on or after the 6th day of April, 1989, by the substitution for subsections (1), (2) and (3) of the following subsections:

“(1) (a) There shall be treated as a specified distribution for the purposes of subsection (2) so much of a distribution (hereafter in this paragraph referred to as ‘the first-mentioned distribution’) treated under subsection (1A) as made by a company for an accounting period as is equal to the amount, which may be nil, determined by the formula

Y

×

(A−B)    +    E−U

______________

(R−S)    +    T−U

where, subject to sections 46 to 49—

A is the amount of the company's income, the corporation tax referable to which is reduced under section 41, for the relevant accounting period which coincides with or is included in the accounting period,

B is the amount of the corporation tax, as reduced under section 41, referable to the amount mentioned in the definition of A,

E is the amount of the relevant distributions, whether made before the 6th day of April, 1989, or on or after that day, received by the company in the accounting period, which is included in its franked investment income of the accounting period, other than franked investment income against which relief is given under section 15 (4), 25 or 26 of the Corporation Tax Act, 1976 , and which relief was not subsequently withdrawn under the provisions of those sections,

R is the amount of the income of the company charged to corporation tax for the accounting period as defined in section 28 (8) of the Corporation Tax Act, 1976 , with the addition of any amount of income of the company which would be charged to corporation tax for the accounting period but for the provisions of section 18 of the Finance Act, 1969 , section 34 of the Finance Act, 1973 , or section 71 of the Corporation Tax Act, 1976 ,

S is the amount of the corporation tax which, before any set-off of, or credit for, tax, including foreign tax, and after any relief under section 58 , 182 or 184 of the Corporation Tax Act, 1976 , or section 41 of the Finance Act, 1980 , is chargeable for the accounting period, exclusive of the corporation tax, before any credit for foreign tax, chargeable on the part of the company's profits attributable to chargeable gains for that period: and that part shall be taken to be the amount brought into the company's profits for that period for the purposes of corporation tax in respect of chargeable gains before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description,

T is the amount of the distributions received by the company in the accounting period which is included in its franked investment income of the accounting period, other than franked investment income against which relief is given under section 15 (4), 25 or 26 of the Corporation Tax Act, 1976 , and which relief was not subsequently withdrawn under the provisions of those sections, with the addition of any amount received by the company in the accounting period to which the provisions of section 76 (2) (a) (ii), section 81 (4), section 93 (3) or section 170 (3) of the Corporation Tax Act, 1976 , applies,

U is—

(i) the amount (hereafter in this definition referred to as the ‘first-mentioned amount’) of the distributable manufacturing income of the company for the accounting period reduced by the amount (hereafter in this definition referred to as the ‘second-mentioned amount’), if any, by which the total amount of the distributable manufacturing income of the company for that period and for any preceding accounting periods of the company exceeds the total amount of the relevant distributions made by the company before the 6th day of April, 1989, or

(ii) nil, if the second-mentioned amount is not less than the first-mentioned amount, and

Y is the amount of the first-mentioned distribution.

(b) Any reference in this section to a relevant distribution made by a company before the 6th day of April, 1989, shall be construed as a reference to a relevant distribution within the meaning of this section before it was amended by the Finance Act, 1988.

(1A) For the purposes of this subsection and subsections (1) and (2) and irrespective of the period of account for which a distribution is made by a company, a distribution or distributions, as the case may be, made by the company on a day (hereafter in this subsection referred to as the ‘first-mentioned day’) which is a day falling on or after the 6th day of April, 1989, shall be treated as having been made for the most recent accounting period of the company ending before the first-mentioned day:

Provided that a distribution that is—

(a) an interim dividend paid by the directors in respect of the profits of the accounting period in which it is paid, pursuant to powers conferred on them by the articles of association of the company, or

(b) a distribution by virtue only of subparagraph (ii), (iii) (I) or (v) of section 84 (2) (d) of the Corporation Tax Act, 1976 ,

shall be treated as having been made for the accounting period in which the first-mentioned day falls:

Provided also that—

(a) (i) where the first-mentioned day falls in an accounting period of the company which begins on the day on which the company commenced to be within the charge to corporation tax, the distribution or distributions, as the case may be, shall be treated as made for that accounting period and, where the total amount of distributions made by the company on or after the 6th day of April, 1989, which are treated as having been made for that accounting period would otherwise exceed the amount of the distributable income of the company for that accounting period, the excess shall be treated as a distribution or distributions, as the case may be, which has not or have not been made for any accounting period, and

(ii) where the first-mentioned day falls on or after the first day of an accounting period of the company which ends on a day on which the company ceases to be within the charge to corporation tax, the distribution or distributions, as the case may be, shall be treated as made for that accounting period;

(b) (i) where the total amount of distributions made by the company on or after the 6th day of April, 1989, which are treated as having been made for an accounting period, would otherwise exceed the amount of the distributable income of the company for that accounting period, the excess shall be treated as a distribution or distributions, as the case may be, made for the immediately preceding accounting period of the company, and

(ii) where the total amount of distributions made by the company on or after the 6th day of April, 1989, which are treated as having been made for the immediately preceding accounting period referred to in subparagraph (i), would otherwise exceed the amount of the distributable income of the company for that accounting period, the excess shall be treated as a distribution or distributions, as the case may be, made for the next immediately preceding accounting period of the company and so on,

and

(c) where by virtue of the application of the provisions of this subsection to the distribution or distributions, as the case may be, made by the company on the first-mentioned day there is an excess such as is mentioned in this proviso, that excess—

(i) where there is only one distribution made by the company on the first-mentioned day, shall be wholly attributed to that distribution, or

(ii) where there is more than one distribution so made on the first-mentioned day, shall be partly attributed to each of those distributions in the same respective proportion as the amount of each such distribution bears to the total amount of the distributions made by the company on that day,

so that any distribution made by the company on the first-mentioned day shall be treated as consisting of two or, if there is more than one such excess, more distributions each of which is made by the company for a different accounting period (if any).

(1B) For the purposes of this section—

(a) the amount of the distributable income of a company for an accounting period shall be the amount determined by the formula

(R−S)   +   T−U

where R, S, T and U have the same meanings as in subsection (1), and

(b) the amount of the distributable manufacturing income of a company for an accounting period shall be the amount determined by the formula

(A−B)   +   E

where A, B and E have the same meanings as in subsection (1).

(2) Where, by virtue of subsections (1) and (1A), a distribution made by a company on or after the 6th day of April, 1989 (hereafter in this subsection referred to as the first-mentioned distribution) is treated, as the case may be, as—

(i) consisting of, or including, a specified distribution, or

(ii) consisting of two or more distributions, one or more of which is treated as consisting of, or including, a specified distribution,

the first-mentioned distribution shall, notwithstanding any other provision of the Corporation Tax Acts, be treated for the purposes of those Acts as if it consisted of two distributions, either, but not both, of which may be nil, being respectively—

(a) a distribution which shall be a relevant distribution for the purposes of this section of an amount equal to the amount of the specified distribution mentioned in paragraph (i) or equal to the total amount of the specified distributions mentioned in paragraph (ii), as the case may be, and

(b) a distribution which is not a relevant distribution and which consists of the balance of the first-mentioned distribution.

(3) The tax credit to which a recipient of a relevant distribution is entitled in respect of it shall, notwithstanding any provision of the Corporation Tax Acts other than this section, be an amount equal to one-eighteenth of the amount of the relevant distribution.”.

(2) (a) In this subsection “the specified day” means the day, being a day not earlier than the 6th day of April, 1988, specified in a notice under paragraph (b).

(b) Where a company so elects by notice in writing given to the inspector, this section and section 45 of the Finance Act, 1980 (as amended by this section), shall have effect as respects any distributions made by the company on or after the specified day as if the date on which the specified day falls were substituted for “the 6th day of April, 1989” in each place where it occurs in this section, the said section 45 and Part II of the Second Schedule .

(3) Part II of the Second Schedule shall have effect for the purpose of supplementing subsection (1).