PART VI

Capital Acquisitions Tax

Chapter I

Business Relief

124. —(1) In this Chapter—

“agricultural property” has the meaning assigned to it by section 19 of the Principal Act (as amended by the Finance Act, 1994);

“associated company” has the meaning assigned to it by section 16 (1) (b) of the Companies (Amendment) Act, 1986 ;

“business” includes a business carried on in the exercise of a profession or vocation, but does not include a business carried on otherwise than for gain;

“excepted asset” shall be construed in accordance with section 134 ;

“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” and “subsidiary” have the meanings assigned to them, respectively, by section 155 of the Companies Act, 1963 ;

“the Principal Act” means the Capital Acquisitions Tax Act, 1976 ;

“quoted”, in relation to any shares or securities, means quoted on a recognised stock exchange and “unquoted”, in relation to any shares or securities, means not so quoted;

“relevant business property” shall be construed in accordance with section 127 .

(2) In this Chapter a reference to a gift shall be construed as a reference to a taxable gift and a reference to an inheritance shall be construed as a reference to a taxable inheritance.

(3) For the purposes of this Chapter a company and all its subsidiaries and any associated company of that company or of any of those subsidiaries and any subsidiary of such an associated company are members of a group.

125. —The provisions of this Chapter shall have effect in relation to gifts and inheritances taken on or after the 11th day of April, 1994, but those provisions shall not have effect in relation to an inheritance taken by a relevant trust by virtue of section 110 (1) of the Finance Act, 1993 , or to an inheritance taken by a discretionary trust by virtue of section 106 (1) of the Finance Act, 1984 , or section 103 (1) of the Finance Act, 1986 .

126. —(1) Where the whole or part of the taxable value of any gift or inheritance is attributable to the value of any relevant business property, the whole or that part of the taxable value shall, subject to the other provisions of this Chapter, be treated as being reduced—

(a) by 25 per cent., and

(b) by a further 25 per cent. or £62,500, whichever is the lesser.

(2) In relation to the deduction referred to at paragraph (b) of subsection (1), the total amount deductible under that paragraph shall not exceed £62,500, in respect of the aggregate of all gifts and inheritances, which consist in whole or in part of relevant business property, taken on or after the 11th day of April, 1994, by the same person, as donee or successor.

127. —(1) In this Chapter and subject to the following provisions of this section and to sections 128 , 130 and 134 (3) “relevant business property” means, in relation to a gift or inheritance, any one or more of the following, that is to say:

(a) property consisting of a business or interest in a business;

(b) unquoted shares in or securities of a company incorporated in the State to which paragraph (c) does not relate, and which on the valuation date (either by themselves alone or together with other shares or securities in that company in the absolute beneficial ownership of the donee or successor on that date) give control of powers of voting on all questions affecting the company as a whole which if exercised would yield more than 25 per cent. of the votes capable of being exercised thereon;

(c) unquoted shares in or securities of a company incorporated in the State which on the valuation date (either by themselves alone or together with other shares or securities in that company in the absolute beneficial ownership of the donee or successor on that date) have an aggregate nominal value which represents 10 per cent. or more of the aggregate nominal value of the entire share capital and securities of the company, if but only if the company (after the taking of the gift or inheritance) is on that date a company controlled by the donee or successor within the meaning of section 16 of the Principal Act;

(d) unquoted shares in or securities of a company incorporated in the State which do not fall within paragraph (b) or (c) and which on the valuation date (either by themselves alone or together with other shares or securities in that company in the absolute beneficial ownership of the donee or successor on that date) have an aggregate nominal value which represents 10 per cent. or more of the aggregate nominal value of the entire share capital and securities of the company:

Provided that the donee or successor has been a full-time working officer or employee of the company, or if that company is a member of a group, of one or more companies which are members of the group, throughout the period of 5 years ending on the date of the gift or inheritance;

(e) in so far as is situated in the State, any land or building, machinery or plant which, immediately before the gift or inheritance was used wholly or mainly for the purposes of a business carried on by a company of which the disponer then had control or by a partnership of which the disponer then was a partner and for the purposes of this paragraph a person shall be deemed to have control of a company at any time if he then had control of powers of voting on all questions affecting the company as a whole which if exercised would have yielded a majority of the votes capable of being exercised thereon;

(f) quoted shares in or securities of a company which, but for the fact that they are quoted, would be shares or securities to which paragraph (b), (c) or (d) would relate:

Provided that such shares or securities, or other shares in or securities of the same company which are represented by those shares or securities, were in the beneficial ownership of the disponer immediately prior to the disposition and were unquoted at the date of the commencement of that beneficial ownership or at the date of the passing of this Act, whichever is the later date.

(2) Where a company has shares or securities of any class giving powers of voting limited to either or both—

(a) the question of winding-up the company, and

(b) any question primarily affecting shares or securities of that class,

the reference in subsection (1) to all questions affecting the company as a whole shall have effect as a reference to all such questions except any in relation to which those powers are capable of being exercised.

(3) A business or interest in a business, or shares in or securities of a company, shall not be relevant business property in relation to a gift or inheritance if, on the date of the gift or inheritance, the business or, as the case may be, the business carried on by the company was wholly or mainly carried on outside the State, and where the business concerned was carried on by a holding company, the business of that holding company shall be treated as having been carried on wholly or mainly outside the State on that date if that business and the business carried on by any subsidiary of that holding company were, taken as a whole, carried on wholly or mainly outside the State.

(4) A business or interest in a business, or shares in or securities of a company, shall not be relevant business property if the business or, as the case may be, the business carried on by the company consists wholly or mainly of one or more of the following, that is to say, dealing in currencies, securities, stocks or shares, land or buildings, or making or holding investments.

(5) Subsection (4) shall not apply to shares in or securities of a company if the business of the company consists wholly or mainly in being a holding company of one or more companies whose business does not fall within that subsection.

(6) Any land, building, machinery or plant in the beneficial ownership of the disponer and used wholly or mainly for the purposes of a business carried on as mentioned in subsection (1) (e) shall not be relevant business property in relation to a gift or inheritance taken by a donee or successor, unless the disponer's interest in the business is, or shares in or securities of the company carrying on the business immediately before the gift or inheritance are, relevant business property in relation to that gift or inheritance or in relation to a simultaneous gift or inheritance taken by that donee or successor from the same disponer.

128. —In relation to a gift or an inheritance, property shall not be relevant business property unless it was comprised in the disposition continuously—

(a) in the case of an inheritance, which is taken on the date of death of the disponer, for a period of two years immediately prior to the date of the inheritance, or

(b) in any other case, for a period of five years immediately prior to the date of the gift or inheritance,

and any period immediately before the date of the disposition during which the property was continuously in the beneficial ownership of the disponer, or of the spouse of the disponer, shall be deemed, for the purposes of this Chapter, to be a period or part of a period immediately before the date of the gift or inheritance during which it was continuously comprised in the disposition.

129. —(1) Property shall be treated as complying with section 128 if—

(a) the property replaced other property and the said property, that other property and any property directly or indirectly replaced by that other property were comprised in the disposition for periods which together comprised—

(i) in a case referred to at paragraph (a) of section 128 , at least two years falling within the three years immediately preceding the date of the inheritance, or

(ii) in a case referred to at paragraph (b) of section 128 , at least five years falling within the six years immediately preceding the date of the gift or inheritance, and

(b) any other property concerned was such that, had the gift or inheritance been taken immediately before it was replaced, it would, apart from section 128 , have been relevant business property in relation to the gift or inheritance.

(2) In a case to which subsection (1) relates, relief under this Chapter shall not exceed what it would have been had the replacement or any one or more of the replacements not been made.

(3) For the purposes of subsection (2) changes resulting from the formation, alteration or dissolution of a partnership, or from the acquisition of a business by a company controlled (within the meaning of section 16 of the Principal Act) by the former owner of the business, shall be disregarded.

130. —For the purposes of sections 128 and 129 , where a disponer became beneficially entitled to any property on the death of another person the disponer shall be deemed to have been beneficially entitled to it from the date of that death.

131. —(1) Where—

(a) a gift or inheritance (in this section referred to as “the earlier benefit”) was eligible for relief under this Chapter or would have been so eligible if such relief had been capable of being given in respect of gifts and inheritances taken at that time, and

(b) the whole or part of the property which, in relation to the earlier benefit was relevant business property became, through the earlier benefit, the property of the person or of the spouse of the person who is the disponer in relation to a subsequent gift or inheritance (in this section referred to as “the subsequent benefit”), and

(c) that property, or part, or any property directly or indirectly replacing it, would, apart from section 128 , have been relevant business property in relation to the subsequent benefit, and

(d) the subsequent benefit is an inheritance taken on the death of the disponer,

then the property which would have been relevant business property but for section 128 shall be relevant business property notwithstanding that section.

(2) Where the property which, by virtue of subsection (1), is relevant business property replaced the property or part referred to in subsection (1) (c), relief under this Chapter shall not exceed what it would have been had the replacement or any one or more of the replacements not been made, and section 129 (3) shall apply with the necessary modifications for the purposes of this subsection.

(3) Where, in relation to the earlier benefit, the amount of the taxable value of the gift or inheritance which was attributable to the property or part referred to in subsection (1) (c) was part only of its value, a like part only of the value which, apart from this subsection, would fall to be reduced under this Chapter by virtue of this section shall be so reduced.

132. —For the purposes of this Chapter—

(a) the value of a business or of an interest in a business shall be taken to be its net value;

(b) subject to paragraph (c), the net value of a business shall be taken to be the market value of the assets used in the business (including goodwill) reduced by the aggregate market value of any liabilities incurred for the purposes of the business;

(c) in ascertaining the net value of an interest in a business, no regard shall be had to assets or liabilities other than those by reference to which the net value of the entire business would fall to be ascertained.

133. —(1) Where a company is a member of a group and the business of any other company which is a member of the group falls within section 127 (4), then, unless that business consists wholly or mainly in the holding of land or buildings wholly or mainly occupied by members of the group whose business does not fall within section 127 (4), the value of shares in or securities of the company shall be taken for the purposes of this Chapter to be what it would be if that other company were not a member of the group.

(2) (a) In this subsection “shares” include securities and “shares in a company” include other shares in the same company which are represented by those shares.

(b) Where unquoted shares in a company which is a member of a group are comprised in a gift or inheritance and shares in another company which is also a member of the group are quoted on the valuation date, the value of the first-mentioned shares shall be taken, for the purpose of this Chapter, to be what it would be if that other company were not a member of the group, unless those unquoted shares were in the beneficial ownership of the disponer immediately prior to the disposition and those quoted shares were—

(i) unquoted at some time prior to the gift or inheritance when they were in the beneficial ownership of the disponer or a member of that group, while being a member of such group, or

(ii) at the date of the passing of this Act,

whichever is the later date.

134. —(1) In determining for the purposes of this Chapter what part of the taxable value of a gift or inheritance is attributable to the value of relevant business property, so much of the last-mentioned value as is attributable to—

(a) agricultural property,

(b) any excepted assets within the meaning of subsection (2), or

(c) any excluded property within the meaning of subsection (7),

shall be left out of account.

(2) An asset shall be an excepted asset in relation to any relevant business property if it was not used wholly or mainly for the purposes of the business concerned throughout the whole or the last two years of the relevant period, but where the business concerned is carried on by a company which is a member of a group, the use of an asset for the purposes of a business carried on by another company which at the time of the use and immediately prior to the gift or inheritance was also a member of that group shall be treated as use for the purposes of the business concerned, unless that other company's membership of the group falls to be disregarded under section 133 :

Provided that the use of an asset for the purposes of farming (within the meaning of section 13 of the Finance Act, 1974 ) or for the purposes of a business to which section 127 (4) relates shall not be treated as use for the purposes of the business concerned.

(3) Subsection (2) shall not apply in relation to an asset which is relevant business property by virtue only of section 127 (1) (e), and an asset shall not be relevant business property by virtue only of that provision unless either—

(a) it was used in the manner referred to in that provision—

(i) in the case where the disponer's interest in the business or the shares in or securities of the company carrying on the business are comprised in an inheritance taken on the date of death of the disponer, throughout the two years immediately preceding the date of the inheritance, or

(ii) in any other case, throughout the five years immediately preceding the date of the gift or inheritance,

or

(b) it replaced another asset so used and it and the other asset and any asset directly or indirectly replaced by that other asset were so used for periods which together comprised—

(i) in the case referred to at paragraph (a) (i), at least two years falling within the three years immediately preceding the date of the inheritance, or

(ii) in any other case, at least five years falling within the six years immediately preceding the date of the gift or inheritance;

but where section 131 applies paragraphs (a) and (b) shall be deemed to be complied with if the asset, or that asset and the asset or assets replaced by it, was or were so used throughout the period between the earlier and the subsequent benefit mentioned in that section, or throughout the part of that period during which it or they were in the beneficial ownership of the disponer or the disponer's spouse.

(4) Where part but not the whole of any land or building is used exclusively for the purposes of any business and the land or building would, but for this subsection, be an excepted asset, or, as the case may be, prevented by subsection (3) from being relevant business property, the part so used and the remainder shall for the purposes of this section be treated as separate assets, and the value of the part so used shall (if it would otherwise be less) be taken to be such proportion of the value of the whole as may be just.

(5) For the purposes of this section the relevant period, in relation to any asset, shall be the period immediately preceding the gift or inheritance during which the asset or, if the relevant business property is an interest in a business, a corresponding interest in the asset, was comprised in the disposition (within the meaning of section 128 ) or, if the business concerned is that of a company, was beneficially owned by that company or any other company which immediately before the gift or inheritance was a member of the same group.

(6) For the purposes of this section an asset shall be deemed not to have been used wholly or mainly for the purposes of the business concerned at any time when it was used wholly or mainly for the personal benefit of the disponer or of a relative of the disponer.

(7) Where, in relation to a gift or an inheritance—

(a) relevant business property consisting of shares in or securities of a company are comprised in the gift or inheritance on the valuation date, and

(b) property consisting of a business, or interest in a business, not falling within section 127 (4) (hereinafter in this section referred to as “company business property”) is on that date beneficially owned by that company or, where that company is a holding company of one or more companies within the same group, by any company within that group,

that company business property shall, for the purposes of subsection (1), be excluded property in relation to those shares or securities unless it would have been relevant business property if—

(i) it had been the subject matter of that gift or inheritance, and

(ii) it and any other company business property directly or indirectly replaced by it had been comprised in the disposition for the periods during which they were in the beneficial ownership of any member of that group, while being such a member, or actually comprised in the disposition,

and shares in or securities of a company which replace, or which are replaced by, other such shares or company business property shall be treated as company business property for the purposes of this section if the company was the beneficial owner of the company business property and a member of that group at the time of the replacement:

Provided that where, by virtue of the provisions of this subsection, company business property would have been excluded property but for the conditions of paragraphs (i) and (ii) having been complied with, the provisions of subsection (2) of section 129 shall, with any necessary modifications, apply to that company business property as to a case to which subsection (1) of section 129 relates.

135. —(1) In this section “relevant period”, in relation to relevant business property comprised in a gift or inheritance, means the period of six years after the valuation date or the period between the date of the gift or inheritance and the date of a subsequent gift or inheritance consisting of the same property or of property representing that property, whichever is the lesser period.

(2) The reduction which would fall to be made under section 126 in respect of relevant business property comprised in a gift or inheritance shall cease to be applicable if and to the extent that the property, or any property which directly or indirectly replaces it—

(a) would not be relevant business property (apart from section 128 and the provisos to paragraphs (d) and (f) of subsection (1) of section 127 and other than by reason of bankruptcy or a bona fide winding-up on grounds of insolvency) in relation to a notional gift of such property taken by the same donee or successor from the same disponer at any time within the relevant period, unless it would be relevant business property (apart from section 128 and the provisos to paragraphs (d) and (f) of subsection (1) of section 127 ) in relation to another such notional gift taken within a year after the first-mentioned notional gift;

(b) is sold, redeemed or compulsorily acquired within the relevant period and is not replaced, within a year of the sale, redemption or compulsory acquisition, by other property (other than quoted shares or securities or unquoted shares or securities to which section 133 (2) (b) relates) which would be relevant business property (apart from section 128 and the proviso to section 127 (1) (d)) in relation to a notional gift of that other property taken by the same donee or successor from the same disponer on the date of the replacement,

and tax shall be chargeable in respect of the gift or inheritance as if the property were not relevant business property:

Provided that any land, building, machinery or plant which are comprised in the gift or inheritance and which qualify as relevant business property by virtue of section 127 (1) (e) shall, together with any similar property which has replaced such property, continue to be relevant business property for the purposes of this section for so long as they are used for the purposes of the business concerned.