Chapter V

Investment Incentive Schemes

25. — Chapter III of Part I of the Finance Act, 1984 , is hereby amended—

(a) in subsection (1) of section 11—

(i) by the insertion of the following definition after the definition of “factory building” (inserted by the Finance Act, 1990 ):

“‘full-time employee’ and ‘full-time director’ have the meanings assigned to them by section 8 of the Finance Act, 1978 ;”,

and

(ii) by the insertion of the following definitions after the definition of “ordinary shares”:

“‘relevant company’, in relation to a specified individual, means a qualifying company incorporated on or after the passing of the Finance Act, 1993—

(a) in which he makes a relevant investment,

(b) with which he commences a relevant employment, and

(c) which intends to carry on relevant trading operations;

‘relevant employment’, in relation to a specified individual, means employment throughout the relevant period by a relevant company where the individual is a full-time employee or full-time director of the company;

‘relevant investment’, in relation to a specified individual, means the amount, or the aggregate of the amounts, subscribed by him for eligible shares in a relevant company in the year of assessment in which he commences relevant employment with the company;

‘relevant shares’ means eligible shares issued in respect of a relevant investment;

‘relevant trading operations’ means qualifying trading operations (other than such operations as are referred to in subparagraph (iiib) (inserted by the Finance Act, 1990 ) of paragraph (a) of subsection (2) of section 16) to be carried on by a relevant company in respect of which a certificate has been issued by an industrial development agency or by Bord Fáilte Éireann (hereinafter referred to as ‘the Bord’), as may be appropriate, certifying that the agency or the Bord, as may be the case, is, on the basis of such information as is supplied to it by the company or which it may reasonably require the company to furnish, satisfied that the carrying on of such operations by the company is, or will be, a bona fide new venture which, having regard to—

(a) the potential for the creation of additional sustainable employment, and

(b) the desirability of minimising the displacement of existing employment,

may be eligible, based on guidelines agreed, with the consent of the Minister for Finance, between (as may be appropriate in the circumstances)—

(i) the agency and the Minister for Enterprise and Employment or the Minister for Arts, Culture and the Gaeltacht, or

(ii) the Bord and the Minister for Tourism and Trade,

to be grant-aided under a scheme of assistance administered by such agency or the Bord:

Provided that—

(I) the carrying on of such qualifying trading operations shall not be regarded as not being a bona fide new venture by reason only that they were carried on as, or as part of, a trade by another person at any time before the issue of the relevant shares in respect of which relief is claimed, and

(II) such a certificate shall not be issued—

(A) by the Bord where the value of the relevant company's interests in land and buildings (excluding fixtures and fittings) is or is intended to be greater than half the value of its assets as a whole, or

(B) unless the relevant company undertakes in writing to furnish the agency or the Bord, as may be appropriate, when requested to do so with such details in relation to the carrying on of the relevant trading operations as the agency or the Bord may specify;

‘specified individual’ means an individual qualifying for relief who—

(a) exercises a relevant employment, and

(b) in each of the three years of assessment immediately prior to the year of assessment in which such employment commences—

(i) was, in respect of not less than 75 per cent. of his total income, if any, chargeable to tax under Schedule E, and

(ii) was not otherwise chargeable to tax in respect of income in excess of £5,000,

and

(c) throughout the relevant period possesses at least 15 per cent. of the issued ordinary share capital of the relevant company concerned, and

(d) at the date of the commencement of the relevant employment or within the period of 12 months immediately preceding that date, either directly or indirectly, does not possess or has not possessed, or was not or is not entitled to acquire, more than 15 per cent. of—

(i) the issued ordinary share capital of any other company, or

(ii) the loan capital (within the meaning of section 14 (5)) and the issued share capital of any other company, or

(iii) the voting power in any other company:

Provided that an individual shall not be regarded as ceasing to comply with paragraph (a) or (c) if he does so by reason of the relevant company concerned being wound up or dissolved without winding up before the end of the appropriate relevant period but only if it is shown that the winding up or dissolution is for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.”,

(b) in section 12—

(i) in paragraph (c) of subsection (1), by the substitution of the following proviso for the proviso inserted by the Finance Act, 1990 :

“Provided that where the money raised was used, is being used or is intended to be used—

(i) for the purpose of the construction and the leasing of an advance factory building, the aforementioned evidence shall include a certificate by an industrial development agency certifying that it has satisfied itself—

(I) that the building is or will be an advance factory building, and

(II) that—

(A) the advance factory building is or will be situated in an area which, on the basis of guidelines agreed between it and the Minister for Enterprise and Employment or the Minister for Arts, Culture and the Gaeltacht (as may be appropriate in the circumstances) and with the consent of the Minister for Finance, was or is in particular need of development and of the creation of opportunities for employment, and

(B) the construction of the advance factory building contributes or will contribute significantly to meeting those needs,

(ii) for the purpose of qualifying trading operations such as are referred to in subparagraph (iiic) (inserted by the Finance Act, 1993) of paragraph (a) of subsection (2) of section 16 (hereafter in this proviso referred to as ‘the operations’) the aforementioned evidence shall include a certificate by an industrial development agency certifying that it is satisfied that the operations—

(I) have the potential to result in the commencement of qualifying trading operations such as are referred to in subparagraphs (i) (as amended by the Finance Act, 1990 ), (ii) (inserted by the Finance Act, 1990 ) and (iiia) (inserted by the Finance Act, 1988 ) of the said paragraph (a), and

(II) have commenced, and

(iii) for the purposes of a relevant investment, the aforementioned evidence shall include the certificate referred to in the definition of relevant trading operations (inserted by the Finance Act, 1993) in section 11(1).”,

(ii) in subsection (3), by the insertion, as respects a subscription for eligible shares made on or after the passing of this Act, of the following additional proviso:

“Provided also that a specified individual may, in relation to one, and only one, relevant investment made by him, elect, by notice in writing to the inspector, to have the relief due given as a deduction from his total income for any one of the five years of assessment immediately prior to the year of assessment in which the relevant shares are issued which he nominates for that purpose and, accordingly, subject to section 13 and paragraphs (a) and (b), for the purposes of granting such relief, but for no other purpose of this Chapter, the shares shall be deemed to have been issued in the year of assessment so nominated, and—

(a) where any of the years of assessment following the year of assessment nominated as aforesaid precede the year of assessment in which the relevant shares are, in fact, issued, subsections (2A), (2B) and (2C) (inserted by the Finance Act, 1987 ) of section 13 shall not operate to give relief in more than two such years of assessment which shall be nominated by the specified individual for that purpose, and

(b) to the extent that the amount of the relief which would be due in respect of the relevant investment by virtue of the said subsections (2A), (2B) and (2C) has not been given in accordance with the foregoing provisions, it shall, subject to the provisions of the aforesaid subsections, be given for the year of assessment in which the relevant shares are, in fact, issued or, if appropriate, a subsequent year of assessment.”,

(iii) in subsection (4)—

(I) by the substitution of the following paragraph for paragraph (a):

“(a) (i) in the case of a relevant investment, unless and until the company commences to carry on the trade, and

(ii) in any other case, unless and until the company has carried on the trade for four months, and”,

and

(II) by the insertion of the following additional proviso:

“Provided also that, in the case of qualifying trading operations to which section 16 (2) (a) (iiic) (inserted by the Finance Act, 1993) relates, the trade shall be deemed to have commenced on the date on which the certificate referred to in paragraph (ii) of the proviso (inserted by the Finance Act, 1993) to paragraph (c) of subsection (1) of section 12 was issued.”,

(iv) by the substitution of the following subsection for subsection (5):

“(5) Subject to subsection (4) (a) (inserted by the Finance Act, 1993), a claim for relief may be allowed at any time if the conditions for the relief are then satisfied.”,

(v) in subsection (7)—

(I) in paragraph (a), by the substitution for “shares; and” of “shares;”,

(II) in paragraph (b), by the substitution for “such a trade.” of “such a trade;”, and

(III) by the addition after paragraph (b) of the following paragraphs:

“(c) as respects a relevant employment, the period beginning on the date on which the shares are issued or, if later, the date on which the employment commences and ending 12 months after that date; and

(d) as respects a specified individual, the period beginning with the date on which the shares are issued and ending either two years after that date or, where the company was not at that date carrying on relevant trading operations, two years after the date on which it subsequently began to carry on such operations.”,

and

(vi) by the substitution of the following subsection for subsection (11) (inserted by the Finance Act, 1991 ):

“(11) This section applies only where the shares concerned are issued in the period commencing on the 6th day of April, 1984, and ending on the 5th day of April, 1996.”,

(c) in section 13—

(i) as respects subscriptions for eligible shares made on or after the 24th day of February, 1993, by the deletion of the proviso (inserted by the Finance Act, 1991 ) to subsection (2), and

(ii) by the substitution in the provisos to subsections (2A) and (2B) (inserted by the Finance Act, 1987 ) of “the year 1995-96” for “the year 1992-93” (inserted by the Finance Act, 1991 ), and the said provisos, as so amended, are set out, respectively, in the Table to this section,

(d) in section 13A (inserted by the Finance Act, 1989 ), as respects eligible shares issued on or after the 6th day of May, 1993—

(i) in subsection (1) (inserted by the Finance Act, 1991 )—

(I) by the substitution of “the 6th day of May, 1993” for “the 30th day of January, 1991”, and

(II) by the substitution of “£1,000,000” for “£500,000” in both places where it occurs,

and

(ii) in subsection (1A) (inserted by the Finance Act, 1991 )—

(I) by the substitution of “the 6th day of May, 1993” for “the 12th day of March, 1991”, and

(II) by the substitution of “£1,000,000” for “£500,000” in both places where it occurs,

(e) in section 14, by the insertion, as respects eligible shares issued on or after the passing of the Finance Act, 1993, of the following subsection after subsection (7):

“(7A) An individual shall not be connected with a company by reason only of the provisions of subsection (4), (6) or (7)—

(a) if, throughout the relevant period, the aggregate of all amounts subscribed for the issued share capital and the loan capital (within the meaning of subsection (5)) of the company does not exceed £150,000, or

(b) in the case of a specified individual, by virtue only of a relevant investment in respect of which he has been given relief in accordance with the provisions of the second proviso (inserted by the Finance Act, 1993) to subsection (3) of section 12:

Provided that relief granted to an individual in respect of a subscription for eligible shares at a time when by virtue of this subsection he was not connected with the company shall not be withdrawn by reason only that he subsequently became connected with the company by virtue of the said subsection (4), (6) or (7).”,

(f) in section 15, by the insertion in subsection (8) after “is not a qualifying company if” of “in the case of a relevant company, any transactions in the relevant period between the company and another company (being the immediate former employer of the individual), or a company which controls or is under the control of that other company, is otherwise than by way of a transaction at arm's length, or if”,

(g) in section 16—

(i) in paragraph (a) of subsection (2)—

(I) by the insertion in subparagraph (i) of the following additional proviso:

“Provided also that the production of a film (within the meaning of section 35 of the Finance Act, 1987 ) shall not, as respects a subscription for eligible shares made on or after the 6th day of May, 1993, be regarded as qualifying trading operations for the purposes of this Chapter,”, and

(II) by the insertion of the following subparagraph after subparagraph (iiib) (inserted by the Finance Act, 1990 ):

“(iiic) in respect of a subscription for eligible shares made on or after the passing of the Finance Act, 1993, the research and development or other similar activity undertaken with a view to the carrying on of trading operations referred to in subparagraphs (i) (as amended by the Finance Act, 1990 ), (ii) (inserted by the Finance Act, 1990 ) and (iiia) (inserted by the Finance Act, 1988 ),”,

and

(ii) by the substitution of the following paragraph for paragraph (b) of subsection (4) (inserted by the Finance Act, 1990 ):

“(b) as including—

(i) the construction and leasing of an advance factory building, and

(ii) the research and development or other similar activity as is referred to in subparagraph (iiic) (inserted by the Finance Act, 1993) of paragraph (a) of subsection (2):”,

(h) in subsection (1) of section 22, by the substitution of the following paragraph for paragraph (a):

“(a) not earlier than—

(i) in the case of a relevant investment, the date on which the company commences to carry on the trade, and

(ii) in any other case, the end of the period of four months mentioned in section 12 (4) (a) (ii) (inserted by the Finance Act, 1993),

and”,

and

(i) in subsection (7) of section 23—

(i) in paragraph (d) (ii) by the substitution for “was granted.” of “was granted;”, and

(ii) by the addition of the following paragraph after paragraph (d):

“(e) in the case of relief withdrawn by virtue of—

(i) a specified individual ceasing to hold a relevant employment, or

(ii) an individual ceasing to be a specified individual,

the date of the cessation.”.

TABLE

Provided that this subsection shall not apply or have effect for any year of assessment subsequent to the year 1995-96.

Provided that this subsection shall not apply or have effect for any year of assessment subsequent to the year 1995-96.

26. —As respects the year of assessment 1993-94 and subsequent years of assessment, section 12 of the Finance Act, 1986 , is hereby amended by the substitution, in the proviso to subsection (2), of “£3,000” for “£750”, and the said proviso, as so amended, is set out in the Table to this section.

TABLE

Provided that a deduction shall not be given to the extent to which the amount subscribed by an eligible employee for eligible shares issued to him in all years of assessment exceeds £3,000.

27. —(1) In this section—

“eligible shares”, “ordinary shares” and “unquoted company” have, respectively, the meanings assigned to them in Chapter III of Part I of the Finance Act, 1984 ;

“full-time working officer or employee”, in relation to one or more companies, means any officer or employee who devotes substantially the whole of his time to the service of that company, or those companies taken together, in a managerial or technical capacity;

“holding company” means a company whose business consists wholly or mainly in the holding of shares in, or securities of, one or more companies which are trading companies and which are its 51 per cent. subsidiaries;

“ordinary share capital”, in relation to a company, has the meaning assigned to it in section 155 of the Corporation Tax Act, 1976 ;

“the original holding” has the meaning assigned to it in subsection (2);

“personal company”, in relation to an individual, means any company the voting rights in which are exercisable by the individual as respects not less than 15 per cent. of the total voting rights;

“the re-investor” has the meaning assigned to it in subsection (2);

“the specified period” has the meaning assigned to it in subsection (5) (b);

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

“trading group” means a holding company and one or more trading companies which are 51 per cent. subsidiaries of the holding company;

“51 per cent. subsidiary” has the meaning assigned to it in section 156 of the Corporation Tax Act, 1976 .

(2) Subject to the provisions of this section, if the consideration which an individual (hereafter in this section referred to as “the re-investor”) obtains for any material disposal by him of shares in or securities of any company (hereafter in this section referred to as “the original holding”) is applied by him, within the period of 3 years from the date of that disposal, in acquiring a qualifying investment, he shall, on making a claim in that behalf, be treated for the purposes of the Capital Gains Tax Acts as if the chargeable gain accruing on the disposal of the original holding did not accrue until he disposes of the qualifying investment:

Provided that—

(a) if the disposal of the qualifying investment is a material disposal for the purposes of this section, and

(b) if the consideration for that disposal is applied by the re-investor, within the period of 3 years from the date of that disposal, in acquiring another qualifying investment,

the re-investor shall be treated as if the chargeable gain accruing on the disposal of the original holding did not accrue until he disposes of the other qualifying investment and any further qualifying investment which is acquired in a similar manner.

(3) Subsection (2) shall not apply if part only of the amount or value of the consideration for the material disposal of the original holding is applied, within the period of 3 years from the date of that disposal, in acquiring a qualifying investment, but, if all of the amount of that consideration except for a part which is less than the amount of the gain accruing on the disposal is so applied, then, the re-investor shall, on making a claim in that behalf, be treated for the purposes of the Capital Gains Tax Acts as if the amount of the gain accruing on the disposal were reduced to the amount of the consideration not applied in acquiring a qualifying investment and the balance of the gain shall be treated as if it did not accrue until the re-investor disposes of the qualifying investment.

(4) For the purposes of this section, the disposal of shares in or securities of a company shall be a material disposal if—

(a) throughout the period of 3 years ending with the date of the disposal, or

(b) in a case where the company commenced to trade at any time in the period mentioned in paragraph (a), throughout the period beginning at that time and ending with the date of the disposal,

the following conditions are satisfied, that is to say—

(i) the company has been a trading company or a holding company,

(ii) the company has been an unquoted company,

(iii) the company has been the re-investor's personal company, and

(iv) the re-investor has been a full-time working officer or employee of the company or, if that company is a member of a trading group, of one or more companies which are members of the trading group.

(5) For the purposes of this section, an individual shall be regarded as acquiring a qualifying investment where he acquires any eligible shares in a qualifying company if—

(a) he holds not less than 5 per cent. of the ordinary share capital of the company at any time in the period beginning on the date of the acquisition of the eligible shares and ending on the date which is one year after the date of the disposal of the original holding (hereafter in this subsection referred to as “the initial period”),

(b) he holds not less than 15 per cent. of the ordinary share capital of the company at any time in the period beginning on the date of the acquisition of the eligible shares and ending on the date which is 3 years after the date of the disposal of the original holding (hereafter in this section referred to as “the specified period”),

(c) the company is not—

(i) the company in which the original holding has subsisted, or

(ii) a company that was a member of the same trading group as the company mentioned in subparagraph (i),

and

(d) he becomes, at any time within the initial period, and is throughout the period beginning at that time and—

(i) ending at the end of the specified period, or

(ii) in a case where the company is wound up or dissolved without winding up and the conditions mentioned in the proviso to paragraph (b) of subsection (6) are satisfied, ending at the time of the commencement of the winding up or dissolution of the company,

a full-time working officer or employee of the company.

(6) (a) For the purposes of this section and subject to paragraph (b), a company shall be a qualifying company if it is incorporated in the State and if—

(i) it is throughout the specified period—

(I) an unquoted company which is resident in the State and not resident elsewhere, and

(II) a company which exists wholly for the purposes of carrying on wholly or mainly in the State of one or more qualifying trades,

and

(ii) it is not, at any time in the specified period—

(I) under the control of another company (or of another company and any person connected with that other company), or

(II) without being under the control of it, a 51 per cent. subsidiary of another company.

(b) A company ceases to be a qualifying company if, at any time in the specified period, a resolution is passed, or an order is made, for the winding up of the company (or in the case of a winding up otherwise than under the Companies Act, 1963 , any other act is done for the like purpose) or the company is dissolved without winding up:

Provided that a company shall be deemed not to have ceased to be a qualifying company solely by virtue of the application of this paragraph where—

(i) it is shown that the winding up or dissolution is for bona fide commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of income tax, corporation tax or capital gains tax, and

(ii) the company's net assets, if any, are distributed to its members within 3 years from the commencement of the dissolution or the winding up.

(7) Section 16 (as amended by this Act) of the Finance Act, 1984 , shall apply for the purposes of this section as if references therein to the relevant period were references to the specified period.

(8) A claim for relief under this section may be made after the making of a material disposal and the acquisition of eligible shares in a qualifying company if all the conditions for the relief are or will be satisfied, but the relief shall be withdrawn if, by reason of the subsequent happening of any event or failure of an event to happen which at the time the relief was claimed was expected to happen, the individual by whom the relief was claimed is not entitled to the relief so claimed.

(9) The withdrawal of relief under subsection (8) shall be made—

(a) for the year of assessment in which the happening, or failure to happen, as the case may be, of the event giving rise to the withdrawal of the relief occurred, and

(b) in accordance with the provisions of subsection (10),

and both—

(i) details of the happening, or the failure to happen, as the case may be, of the event giving rise to the withdrawal of relief, and

(ii) the amount to be treated as a gain under subsection (10),

shall be included in the return required to be made by the individual concerned under section 10 of the Finance Act, 1988 , for that year of assessment.

(10) (a) Notwithstanding any other provision of the Capital Gains Tax Acts, where relief falls to be withdrawn under subsection (8) for any year of assessment, such amount (hereafter in this subsection referred to as “the relevant amount”) of the chargeable gain which accrued to the re-investor on the disposal of the original holding as was treated under subsection (2) or (3) as not accruing at that time—

(i) reduced in accordance with paragraph (b), and

(ii) increased in accordance with paragraph (c),

shall be treated as a gain which accrued in that year of assessment.

(b) The amount by which the relevant amount is to be reduced under subparagraph (i) of paragraph (a) is an amount equal to the aggregate of—

(i) to the extent that such excess has not been deducted in years of assessment subsequent to the year of assessment in which the disposal of the original holding occurred, the excess of the amount of the losses which would have fallen to be deducted under section 5 (1) of the Capital Gains Tax Act, 1975 , in the year of assessment in which the disposal of the original holding occurred, if relief under this section had not been claimed, over the amount of such losses which were so deducted in that year, and

(ii) any amount of chargeable gains in the year of assessment in which the disposal of the original holding occurred in respect of which the re-investor would not, by virtue of section 16 of the Capital Gains Tax Act, 1975 , have been charged to capital gains tax, if relief under this section had not been claimed.

(c) The amount by which the relevant amount is to be increased under subparagraph (ii) of paragraph (a) is an amount determined by the formula—

where—

G is the relevant amount reduced in accordance with paragraph (b),

R is the rate per cent. specified in subsection (1) of section 550 of the Income Tax Act, 1967 , and

M is the number of months in the period beginning on the date on which capital gains tax for the year of assessment in which the disposal of the original holding occurred was due and payable and ending on the date on which capital gains tax for the year of assessment for which the withdrawal of relief falls to be made is due and payable.

(11) A chargeable gain or the balance of a chargeable gain which, under the provisions of subsection (2) or (3), as may be appropriate, is treated as accruing at a date later than the date of the disposal on which it accrued shall not be so treated for the purposes of section 3 of the Capital Gains Tax (Amendment) Act, 1978 .

(12) Without prejudice to the provisions of the Capital Gains Tax Acts providing generally for apportionments, where consideration is given for the acquisition or disposal of any assets some or part of which are shares or other securities to the acquisition or disposal of which a claim under this section relates and some or part of which are not, the consideration shall be apportioned in such manner as is just and reasonable.

(13) This section shall not apply unless the acquisition of a qualifying investment was made for bona fide commercial reasons and not wholly or partly for the purposes of realising a gain from the disposal of the qualifying investment.

(14) Section 157 of the Corporation Tax Act, 1976 , shall apply for the purposes of this section.

(15) This section shall apply as respects disposals made on or after the 6th day of May, 1993.