First Previous (CHAPTER 5 Computational provisions: corporation tax) Next (CHAPTER 7 Special measures on discontinuance of, and change of basis of computation of profits or gains of, a trade or profession)

39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 6

Computational provisions: general

General rule as to deductions.

[ITA67 s57 and s61; FA69 s 65(1) and Sch 5 PtI; FA74 s42(1); FA97 s146(1) and Sch9 PtI par1 (3)]

81. —(1) The tax under Cases I and II of Schedule D shall be charged without any deduction other than is allowed by the Tax Acts.

(2) Subject to the Tax Acts, in computing the amount of the profits or gains to be charged to tax under Case I or II of Schedule D, no sum shall be deducted in respect of—

(a) any disbursement or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade or profession;

(b) any disbursements or expenses of maintenance of the parties, their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of such trade or profession;

(c) the rent of any dwelling house or domestic offices or any part of any dwelling house or domestic offices, except such part thereof as is used for the purposes of the trade or profession, and, where any such part is so used, the sum so deducted shall be such as may be determined by the inspector and shall not, unless in any particular case the inspector is of the opinion that having regard to all the circumstances some greater sum ought to be deducted, exceed two-thirds of the rent bona fide paid for that dwelling house or those domestic offices;

(d) any sum expended for repairs of premises occupied, or for the supply, repairs or alterations of any implements, utensils or articles employed, for the purposes of the trade or profession, over and above the sum actually expended for those purposes;

(e) any loss not connected with or arising out of the trade or profession;

(f) any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade or profession;

(g) any capital employed in improvements of premises occupied for the purposes of the trade or profession;

(h) any interest which might have been made if any such sums as aforesaid had been laid out at interest;

(i) any debts, except bad debts proved to be such to the satisfaction of the inspector and doubtful debts to the extent that they are respectively estimated to be bad and, in the case of the bankruptcy or insolvency of a debtor, the amount which may reasonably be expected to be received on any such debts shall be deemed to be the value of any such debts;

(j) any average loss over and above the actual amount of loss after adjustment;

(k) any sum recoverable under an insurance or contract of indemnity;

(l) any annuity or other annual payment (other than interest) payable out of the profits or gains;

(m) any royalty or other sum paid in respect of the user of a patent.

Pre-trading expenditure.

[FA97 s29(1) and (4) to (6)]

82. —(1) This section shall apply to expenditure incurred for the purposes of a trade or profession set up and commenced on or after the 22nd day of January, 1997.

(2) Subject to subsection (3), where a person incurs expenditure for the purposes of a trade or profession before the time that the trade or profession has been set up and commenced by that person, and such expenditure—

(a) is incurred not more than 3 years before that time, and

(b) is apart from this section not allowable as a deduction for the purpose of computing the profits or gains of the trade or profession for the purposes of Case I or II of Schedule D, but would have been so allowable if it had been incurred after that time,

then, the expenditure shall be treated for that purpose as having been incurred at that time.

(3) The amount of any expenditure to be treated under subsection (1) as incurred at the time that a trade or profession has been set up and commenced shall not be so treated for the purposes of section 381 , 396 (2), 420 , 455 (3) or 456 .

(4) An allowance or deduction shall not be made under any provision of the Tax Acts other than this section in respect of any expenditure or payment which is treated under this section as incurred on the day on which a trade or profession is set up and commenced.

Expenses of management of investment companies.

CTA76 s15.

83. —(1) For the purposes of this section and of the other provisions of the Corporation Tax Acts relating to expenses of management, “investment company” means any company whose business consists wholly or mainly of the making of investments, and the principal part of whose income is derived from the making of investments, but includes any savings bank or other bank for savings.

(2) In computing for the purposes of corporation tax the total profits for any accounting period of an investment company resident in the State—

(a) there shall be deducted any sums disbursed as expenses of management (including commissions) for that period, except any such expenses as are deductible in computing income for the purposes of Case V of Schedule D; but

(b) there shall be deducted from the amount treated as expenses of management the amount of any income derived from sources not charged to tax, other than franked investment income.

(3) Where in any accounting period of an investment company the expenses of management deductible under subsection (2), together with any charges on income paid in the accounting period wholly and exclusively for the purposes of the company's business, exceed the amount of the profits from which they are deductible, the excess shall be carried forward to the succeeding accounting period, and the amount so carried forward shall be treated for the purposes of this section (other than subsection (5)), including any further application of this subsection, as if it had been disbursed as expenses of management for that accounting period.

(4) For the purposes of subsections (2) and (3), there shall be added to a company's expenses of management in any accounting period the amount of any allowances to be made to the company for that period by virtue of section 109 or 774 .

(5) (a) Where an investment company proves that in any accounting period it has received franked investment income, it shall be entitled to claim payment of the amount of the tax credit comprised in so much of that income as is equal to the amount of any excess for the accounting period computed under subsection (3), but excluding any amount carried forward from a previous accounting period.

(b) Any excess in respect of which relief is given under this subsection shall not be carried forward undersubsection (3).

(6) (a) Notice of any claim under subsection (5), together with the particulars of that claim, shall be given in writing to the inspector within 2 years after the end of the accounting period in respect of which the claim is made.

(b) Where the inspector objects to such claim, the Appeal Commissioners shall hear and determine the claim in the like manner as in the case of an appeal to them against an assessment under Schedule D, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications.

Expenses in relation to establishment or alteration of superannuation schemes.

[ITA67 s63; FA72 s13(4) and Sch1 PtIII par 1, and s46(2) and Sch4 PtII]

84. —Where a superannuation scheme is established in connection with a trade or undertaking or a superannuation scheme so established is altered, and the person by whom the trade or undertaking is carried on makes a payment in respect of expenses (including a payment in respect of professional fees, but not including a payment by means of contribution towards the cost of providing the benefits payable under the scheme) in connection with such establishment or alteration, then, if the scheme or, as the case may be, the altered scheme is approved by the Revenue Commissioners under section 772 , the amount of the payment shall be allowed to be deducted in the computation, for the purposes of assessment to tax, of the profits or gains of the trade or undertaking as an expense incurred when the payment is made.

Deduction for certain industrial premises.

[ITA67 s67(1), (2), (3) and (3A); FA69 s31]

85. —(1) In this section, “premises” means an industrial building or structure within the meaning of section 268 which is not a building or structure to which section 272 applies.

(2) In estimating the amount of annual profits or gains arising or accruing from any trade the profits of which are chargeable to tax under Case I of Schedule D, there shall be allowed to be deducted, as expenses incurred in any year on account of any premises owned by the person carrying on that trade and occupied by such person for the purposes of that trade, a deduction equal to five-twelfths of the rateable valuation of those premises.

(3) In estimating the profits for any year of any of the concerns which by virtue of section 18 (2) are charged under Case I(b) of Schedule D, there shall be allowed to be deducted, as expenses incurred in any year on account of any premises owned by the person carrying on the concern and occupied by such person for the purposes of that concern, a deduction equal to five-twelfths of the rateable valuation of those premises.

(4) (a) Where, in the case of property valued under the Valuation Acts as a unit, a part is and a part is not premises, the rateable valuation of each part shall be arrived at by apportionment of the rateable valuation of the property.

(b) Any apportionment required by this subsection shall be made by the inspector according to the best of his or her knowledge and judgment.

(c) An apportionment made under paragraph (b) may be amended by the Appeal Commissioners or by the Circuit Court on the hearing or the rehearing of an appeal against an assessment made on the basis of the apportionment; but, on the hearing or the rehearing of any such appeal, a certificate of the Commissioner of Valuation tendered by either party to the appeal and stating, as regards property valued under the Valuation Acts as a unit, the amount of the rateable valuation of the property attributable to any part of the property shall be evidence of the amount so attributable.

Cost of registration of trade marks.

[FA71 s5]

86. —Notwithstanding anything in section 81 , in computing the amount of the profits or gains of any trade, there shall be allowed to be deducted as expenses any fees paid or expenses incurred in obtaining for the purposes of the trade the registration of a trade mark or the renewal of registration of a trade mark.

Debts set off against profits and subsequently released.

[FA70 s24(1) and (2)(a)]

87. —(1) Where, in computing for tax purposes the profits or gains of a trade or profession, a deduction has been allowed for any debt incurred for the purposes of the trade or profession, then, if the whole or any part of that debt is thereafter released, the amount released shall be treated as a receipt of the trade or profession arising in the period in which the release is effected.

(2) If in any case referred to in subsection (1) the trade or profession has been permanently discontinued at or after the end of the period for which the deduction was allowed and before the release was effected, or is treated for tax purposes as if it had been so discontinued, section 91 shall apply as if the amount released were a sum received after the discontinuance.

Deduction for gifts to Enterprise Trust Ltd.

[FA92 s56; FA96 s56(b); FA97 s64]

88. —(1) In this section, “the company” means the company incorporated on the 30th day of October, 1991, as The Enterprise Trust Limited.

(2) This section shall apply to a gift of money which—

(a) on or before the 31st day of December, 1999, is made to the company and accepted by it,

(b) is to be applied by the company solely for the objects set out in its memorandum of association,

(c) apart from subsection (3) would not be deductible in computing for the purposes of corporation tax the profits or gains of a trade or profession, and

(d) is not income to which section 792 applies.

(3) (a) Subject to paragraph (b) and subsection (2), where a company (in this section referred to as a “donor”) makes a gift to which this section applies and claims relief from tax by reference to the gift, the net amount of the gift shall be treated for the purposes of corporation tax as—

(i) a deductible trading expense of a trade carried on by the donor, or

(ii) an expense of management deductible in computing the total profits of the donor,

incurred by it in the accounting period in which the gift is made.

(b) In determining for the purposes of paragraph (a) the net amount of the gift, the amount or value of any consideration received by a donor as a result of making the gift, whether received directly or indirectly from the company or any other person, shall be deducted from the amount of the gift, and relief under this section shall not be given to a donor for an accounting period—

(i) if the net amount of the gift (or the aggregate of the net amounts of gifts) made by the donor in that accounting period, being a gift or gifts, as the case may be, to which this section applies, does not exceed £500,

(ii) to the extent to which the net amount of the gift (or the aggregate of the net amounts of gifts) made by the donor in that accounting period, being a gift or gifts, as the case may be, to which this section applies, exceeds £100,000,

(iii) in respect of a gift made at any time in the year ending on the 31st day of December in the year 1998 or 1999, if at that time the aggregate of the net amounts of all gifts to which this section applies made to the company within that year exceeds £1,500,000.

(4) A claim under this section shall be made with the return required to be delivered under section 951 for the accounting period in which the payment is made.

(5) Where a donor makes a gift in respect of which relief is not to be given by virtue of subparagraph (iii) of subsection (3)(b), the company shall, by notice in writing given to the donor within 30 days of the making of the gift, advise the donor accordingly.

(6) Where a gift to which this section applies is made by a donor in an accounting period of the donor which is less than 12 months, the amounts specified in subparagraphs (i) and (ii) of subsection (3)(b) shall be proportionately reduced.