Chapter V

Capital Gains Tax

70 .—(1) Schedule 2 to the Capital Gains Tax Act, 1975 , is hereby amended by the insertion after paragraph 5 of the following paragraph:

“Demutualisation of assurance companies

5A. (1) This paragraph shall apply and have effect in respect of an arrangement between a company and its members, being an arrangement to which subparagraph (1) of paragraph 5 applies by virtue of subparagraph (2) of the said paragraph, and where the company is an assurance company which carries on a mutual life business.

(2) Where, in connection with the arrangement, there is conferred, on a member of the assurance company concerned, any rights—

(a) to acquire shares in another company (hereafter in this paragraph referred to as the ‘successor company’) in priority to other persons, or

(b) to acquire shares in the successor company for consideration of an amount or value lower than the market value of the shares, or

(c) to free shares in the successor company,

then, any such rights so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 47 of the Capital Gains Tax Act, 1975 ) granted to and acquired by such member for no consideration and having no value at the time of that grant and acquisition.

(3) Where, in connection with the arrangement, shares in the successor company are issued to a member of the assurance company concerned, and such shares are treated under paragraph 5 as having been exchanged by the member for the interest in the company possessed by the member, those shares shall, notwithstanding paragraph 2, be regarded for the purposes of subparagraph (1) of paragraph 3 of Schedule 1—

(a) as having been issued to the member for a consideration given by the member of an amount or value equal to the amount or value of any new consideration given by the member for the shares or, if no new consideration is given, as having been issued for no consideration, and

(b) as having, at the time of their issue to the member, a value equal to the amount or value of the new consideration so given or, if no new consideration is given, as having no value:

Provided that this subparagraph is without prejudice to the operation, where applicable, of subparagraph (2).

(4) Subparagraph (5) shall apply in any case where—

(a) in connection with the arrangement, shares in the successor company are issued by that company to trustees on terms which provide for the transfer of those shares to members of the assurance company concerned for no new consideration, and

(b) the circumstances are such that in the hands of the trustees the shares constitute settled property.

(5) (a) Where this subparagraph applies, then, for the purposes of capital gains tax—

(i) the shares shall be regarded as acquired by the trustees for no consideration;

(ii) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by the member for no consideration and as having no value at the time of its acquisition; and

(iii) where on the occasion of a member becoming absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on the member becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 8(3) for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees and, accordingly, section 15 (3) shall not apply in relation to that occasion.

(b) Reference in this subparagraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include reference to the case where the member would become so entitled but for being a minor or otherwise under a legal disability.

(6) In this paragraph—

‘assurance company’ has the meaning assigned to it in section 50 (2) of the Corporation Tax Act, 1976 ;

‘free shares’, in relation to a member of the assurance company, means any shares issued by the successor company to that member in connection with the arrangement but for no new consideration;

‘member’, in relation to the assurance company, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;

‘new consideration’ means consideration other than—

(a) consideration provided directly or indirectly out of the assets of the assurance company or the successor company, or

(b) consideration derived from a member's shares or other rights in the assurance company or the successor company.”.

(2) This section shall apply and have effect as on and from the 21st day of April, 1997.

71. —(1) Notwithstanding any other provision of the Capital Gains Tax Acts, where by virtue or in consequence of an order made under Part III of the Family Law (Divorce) Act, 1996, on or following the granting of a decree of divorce, either of the spouses concerned disposes of an asset to the other spouse then, subject to subsection (2), both spouses shall be treated for the purposes of those Acts as if the asset was acquired from the spouse making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the spouse making the disposal.

(2) Subsection (1) shall not apply if, until the disposal, the asset formed part of the trading stock of a trade carried on by the spouse making the disposal or if the asset is acquired as trading stock for the purposes of a trade carried on by the spouse acquiring the asset.

(3) Where subsection (1) applies in relation to a disposal of an asset by a spouse to the other spouse, then, in relation to a subsequent disposal of the asset (not being a disposal to which subsection (1) applies), the spouse making the disposal shall be treated for the purposes of the Capital Gains Tax Acts as if the other spouse's acquisition or provision of the asset had been his or her acquisition or provision of the asset.

(4) Section 35 of the Family Law (Divorce) Act, 1996, is hereby repealed.

(5) This section shall apply and have effect as on and from the passing of this Act.

72. —(1) Notwithstanding any other provision of the Capital Gains Tax Acts, where by virtue or in consequence of—

(a) an order made under Part II of the Family Law Act, 1995, on or following the granting of a decree of judicial separation within the meaning of that Act, or

(b) an order made under Part II of the Judicial Separation and Family Law Reform Act, 1989 , on or following the granting of a decree of judicial separation where such order is treated, by virtue of section 3 of the Family Law Act, 1995, as if made under the corresponding provision of the Family Law Act, 1995, or

(c) a deed of separation, or

(d) a relief order (within the meaning of the Family Law Act, 1995) made following the dissolution of a marriage,

either of the spouses concerned disposes of an asset to the other spouse then, subject to subsection (2), both spouses shall be treated for the purposes of those Acts as if the asset was acquired from the spouse making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the spouse making the disposal.

(2) Subsection (1) shall not apply if, until the disposal, the asset formed part of the trading stock of a trade carried on by the spouse making the disposal or if the asset is acquired as trading stock for the purposes of a trade carried on by the spouse acquiring the asset.

(3) Where subsection (1) applies in relation to a disposal of an asset by a spouse to the other spouse, then, in relation to a subsequent disposal of the asset (not being a disposal to which subsection (1) applies), the spouse making the disposal shall be treated for the purposes of the Capital Gains Tax Acts as if the other spouse's acquisition or provision of the asset had been his or her acquisition or provision of the asset.

(4) Section 52 of the Family Law Act, 1995, is hereby repealed.

(5) This section shall apply and be deemed to have effect as on and from the 1st day of August, 1996.

73. —(1) Section 15 of the Capital Gains Tax Act, 1975 is hereby amended by the insertion after subsection (5) of the following subsection:

“(5A)(a) Subject to paragraph (b), where—

(i) as a consequence of a termination, on the death of the person entitled to it, of a life interest in settled property, subsection (5) applies, and

(ii) an asset, which forms the whole or any part of that settled property—

(I) is comprised in an inheritance (within the meaning of the Capital Acquisitions Tax Act, 1976 ) taken on the death, and

(II) is exempt from tax in relation to the inheritance under section 55 of the said Act of 1976, or that section as applied by section 39 of the Finance Act, 1978 ,

that asset shall, for the purposes of subsection (5), be excluded from the assets deemed to be disposed of and immediately reacquired.

(b) Where in a year of assessment, in respect of an asset an exemption from tax in relation to an inheritance referred to in paragraph (a) ceases to apply, then the chargeable gain which, but for the provisions of paragraph (a), would have accrued to the trustee on the termination of the life interest in accordance with subsection (5) shall be deemed to accrue to the trustee in that year of assessment and shall accordingly be included in the return required to be made by the trustee concerned under section 10 of the Finance Act, 1988 , for that year of assessment.”.

(2) This section shall apply and have effect as respects the year of assessment 1997-98 and subsequent years of assessment.

74. —(1) Section 20A (inserted by section 24 of the Finance Act, 1993 ) of the Capital Gains Tax Act, 1975 , is hereby amended—

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

“(a) (i) Subsection (2) applies to any policy of assurance or contract for a deferred annuity on the life of any person which is a policy issued or a contract made, as the case may be, on or after the 20th day of May, 1993—

(I) otherwise than by an assurance company which is a relevant company, or

(II) being a policy or contract which is an excluded policy issued or made, as the case may be, by a relevant company to which subsection (1A) of section 35 of the Corporation Tax Act, 1976 , applies.

(ii) In this paragraph and in subsection (3)—

‘assurance company’ and ‘life assurance fund’ have the meanings assigned to them, respectively, in section 50 (2) of the Corporation Tax Act, 1976 ;

‘an excluded policy’ means a policy of assurance or contract for a deferred annuity on the life of any person where the policy is issued to or the contract is made with, as the case may be, a person who did not continuously reside outside the State throughout the period of six months commencing on the date of issue or the date of contract, as the case may be;

a ‘relevant company’ means a company which is—

(I) resident in the State, or

(II) chargeable under Case III of Schedule D, by virtue of section 43 of the Corporation Tax Act, 1976 , in respect of its income from the investment of its life assurance fund.”,

and

(b) in subsection (3), by the substitution for paragraph (a) of the following paragraph:

“(a) (i) to a relevant company, and

(ii) to every person carrying on in the State a trade or business in the ordinary course of the operations of which he acts as an intermediary in or in connection with the issue of such a policy, or the making of such a contract,

in the same manner as it applies to every intermediary within the meaning of that section, and”.

(2) This section shall apply and have effect as on and from the 6th day of April, 1997.

75. —(1) Section 27 (as amended by section 74 of the Finance Act, 1995) of the Finance Act, 1993 , is hereby amended—

(a) in subsection (1)—

(i) by the substitution for the meanings assigned to “eligible shares”, “ordinary shares” and “unquoted company” of the following:

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

and

(ii) by the insertion, after the definition of “trading group” of the following definition—

“‘unquoted company’ means a company none of whose shares, stocks or debentures are listed in the official list of a stock exchange or quoted on an unlisted securities market of a stock exchange;”,

and

(b) in subsection (6) by the insertion after paragraph (a) of the following paragraph—

“(aa) A company shall be deemed not to have ceased to be a qualifying company solely by virtue of shares in the company commencing, at any time in the specified period, to be quoted on the market known as the Developing Companies Market of the Irish Stock Exchange.”.

(2) This section shall apply and have effect as on and from the 6th day of April, 1997.

76. —Section 66 (as amended by section 63 of the Finance Act, 1996) of the Finance Act, 1994 , is hereby amended as respects disposals made on or after the 6th day of April, 1997—

(a) by the substitution in the definition of “the specified period” in subsection (1) of “3 years” for “5 years”,

(b) by the substitution of the following definition in subsection (1) for the definition of “unquoted company”:

“‘unquoted company’ means a company none of whose shares, stocks or debentures are listed in the official list of a stock exchange or quoted on an unlisted securities market.”,

and

(c) by the substitution in subsection (6) of “26 per cent.” for “27 per cent.”.

77. —(1) Section 39 of the Finance Act, 1982 , is hereby amended by the insertion after subsection (3) of the following subsection:

“(3A) (a) Subject to the following provisions of this subsection, subsection (1) shall not apply to consideration obtained for a relevant disposal where—

(i) throughout a period of five years ending with the time of disposal, the old assets, and

(ii) the new assets within the meaning of section 28 of the Principal Act,

are assets of an authorised racecourse.

(b) Section 28 of the Principal Act shall apply in relation to assets of an authorised racecourse as if—

(i) references in subsections (1) and (2) of that section to new assets ceasing to be used for the purposes of a trade included a reference to new assets ceasing to be assets of an authorised racecourse, and

(ii) paragraph (b) of section (8) had not been enacted.

(c) In this subsection—

‘assets of an authorised racecourse’ means assets of a racecourse which is an authorised racecourse where the assets are used for the provision of appropriate facilities or services to carry on horseracing at race meetings or to accommodate persons associated with horseracing, including members of the public;

‘authorised racecourse’ has the same meaning as it has in section 2 of the Irish Horseracing Industry Act, 1994 .”.

(2) This section shall be deemed to apply and have effect in respect of relevant disposals made on or after the 6th day of April, 1995.

78. —(1) Section 46 of the Capital Gains Tax Act, 1975 , is hereby amended in subsection (7) (inserted by section 61 of the Finance Act, 1996)—

(a) by the deletion of “or” in paragraph (c), and

(b) by the substitution of the following paragraphs for paragraph (d):

“(d) in connection with any transfer of assets as is referred to in section 65 of the Finance Act, 1992 ,

(e) in connection with any disposal of assets as is referred to in section 66 of the Finance Act, 1992 ,

(f) in the course of a transaction which is the subject of an application under section 72 of the Finance Act, 1992 , or

(g) in pursuance of rights attached to any debenture falling within paragraph (a), (b), (c), (d), (e) or (f).”.

(2) Subsection (1) shall apply and have effect as respects the disposal of a debenture on or after the 26th day of March, 1997.