Chapter 5

Corporation Tax

75. —(1) Section 21A (inserted by the Finance Act, 1999 ) of the Principal Act is amended—

(a) in subsection (1)—

(i) by the substitution for paragraph (a) of the definition of “excepted operations” of the following:

“(a) dealing in or developing land, other than such part of that operation or activity as consists of—

(i) construction operations, or

(ii) dealing by a company in land which, in relation to the company, is qualifying land,”,

(ii) by the insertion after the definition of “excepted trade” of the following definition:

“‘exempt development’ means a development within Class 1 of Part 1 of the Second Schedule to the Local Government Planning and Development Regulations, 1994 (S.I. No. 86 of 1994), which complies with the conditions and limitations specified in column 2 of that Part which relate to that Class;”,

and

(iii) by the insertion, after the definition of “petroleum rights” of the following definition:

“‘qualifying land’, in relation to a company, means land which is disposed of at any time by the company, being land—

(a) on which a building or structure had been constructed by or for the company before that time, and

(b) which had been developed by or for the company to such an extent that it could reasonably be expected at that time that no further development (within the meaning of section 639) of the land would be carried out in the period of 20 years beginning at that time (other than a development which is not material and which is intended to facilitate the occupation of, and the use or enjoyment of, the building or structure for the purposes for which it was constructed) and for those purposes a development of land on which a building or buildings had been constructed shall not be material if it consists of one or both of the following—

(i) an exempt development, and

(ii) a development, not being an exempt development, if the total floor area of the building or buildings on the land after such development is not greater than 120 per cent of the total floor area of the building or buildings on the land calculated without regard to that development;”,

and

(b) by the substitution for subsections (3) and (4) of the following:

“(3) (a) Notwithstanding section 21, but subject to subsection (4), corporation tax shall be charged on the profits of companies, in so far as those profits consist of income chargeable to corporation tax under Case III, IV or V of Schedule D or of income of an excepted trade, at the rate of 25 per cent for the financial year 2000 and subsequent financial years.

(b) For the purposes of paragraph (a), the profits of a company for an accounting period shall be treated as consisting of income of an excepted trade to the extent of the income of the trade for the accounting period after deducting from the amount of that income the amount of charges on income paid in the accounting period wholly and exclusively for the purposes of that trade.

(4) This section shall not apply to the profits of a company for any accounting period—

(a) to the extent that those profits consist of income from the sale of goods within the meaning of section 454, and

(b) to the extent that those profits consist of income which arises in the course of any of the following trades—

(i) non-life insurance,

(ii) reinsurance, and

(iii) life business, in so far as the income is attributable to shareholders of the company.

(5)   (a) Notwithstanding subsection (1), as respects an accounting period ending before 1 January 2001, operations carried out in relation to residential development land (within the meaning of section 644A) shall be treated for the purposes of this section as not being construction operations if they consist of—

(i) the demolition or dismantling of any building or structure on the land,

(ii) the construction or demolition of any works forming part of the land, being roadworks, water mains, wells, sewers or installations for the purposes of land drainage, or

(iii) any other operations which are preparatory to residential development on the land other than the laying of foundations for such development.

(b) For the purposes of this subsection, where an accounting period of a company begins before 1 January 2001 and ends on or after that day, it shall be divided into two parts, one beginning on the day on which the accounting period begins and ending on 31 December 2000 and the other beginning on 1 January 2001 and ending on the day on which the accounting period ends, and both parts shall be treated for the purpose of this section as if they were separate accounting periods of the company.”.

(2) This section shall apply for the financial year 2000 and subsequent financial years.

76. —The Principal Act is amended in Chapter 2 of Part 2 by the insertion of the following section after section 22:

“22A.—(1) In this section—

‘income from the sale of goods’, in relation to an accounting period of a company, means such income as is income from the sale of those goods in the course of a trade carried on by the company for the purposes of a claim under section 448(3);

‘net relevant trading income’, in relation to an accounting period of a company, means the excess of the amount of relevant trading income of the company for the accounting period over the aggregate of the amounts of—

(a) relevant charges on income paid by the company in the accounting period, and

(b) any relevant trading loss incurred by the company in the accounting period;

‘relevant charges on income’, in relation to an accounting period of a company, means the charges on income paid by the company in the accounting period wholly and exclusively for the purposes of a trade carried on by the company other than so much of those charges as are—

(a) charges on income paid for the purposes of the sale of goods within the meaning of section 454, or

(b) charges on income paid for the purposes of an excepted trade within the meaning of section 21A;

‘relevant trading income’, in relation to an accounting period of a company, means the trading income of the company for the accounting period (not being income chargeable to tax under Case III of Schedule D) other than so much of that income as is—

(a) income from the sale of goods, or

(b) income of an excepted trade within the meaning of section 21A;

‘relevant trading loss’, in relation to an accounting period of a company, means a loss incurred in the accounting period in a trade carried on by the company other than so much of the loss as is—

(i) a loss from the sale of goods within the meaning of section 455, or

(ii) a loss incurred in an excepted trade within the meaning of section 21A;

‘trading income’, in relation to an accounting period of a company, means the income which is to be included in respect of a trade or trades in the total profits of the company for the accounting period as reduced by the amount of any loss set off against that income under section 396(1).

(2) Subject to subsections (7) and (8), where in any accounting period ending on or after 1 January 2000 the net relevant trading income of a company does not exceed the upper relevant maximum amount, then the corporation tax charged on the company for that accounting period shall be reduced—

(a) where the net relevant trading income of the company does not exceed the lower relevant maximum amount, by such amount as will secure that the corporation tax charged on the company for the accounting period does not exceed the corporation tax which, apart from this section, would have been charged on the company for the accounting period if—

(i) in section 21 for paragraphs (c) to (f) of subsection (1) there were substituted the following paragraph:

‘(c) 12.5 per cent for the financial year 2000 and each subsequent financial year.’,

and

(ii) in section 448 for paragraphs (c) to (f) of subsection (2) there were substituted the following paragraph:

‘(c) by one-fifth, in so far as it is corporation tax charged on profits which under section 26(3) are apportioned to the financial year 2000 or any subsequent financial year,’,

and

(b) where the net relevant trading income of the company exceeds the lower relevant maximum amount, by a sum equal to—

(i) as respects an accounting period falling within the financial year 2000, 23 per cent,

(ii) as respects an accounting period falling within the financial year 2001, 15 per cent, and

(iii) as respects an accounting period falling within the financial year 2002, 7 per cent,

of the excess of the upper relevant maximum amount over the net relevant trading income for the accounting period.

(3) The lower and upper relevant maximum amounts mentioned in subsection (2) shall be determined as follows:

(a) where the company has no associated company in the accounting period, those amounts are £50,000 and £75,000, respectively,

(b) where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is £50,000 divided by one plus the number of those associated companies and the upper relevant maximum amount is £75,000 divided by one plus the number of those associated companies.

(4) (a) In this subsection ‘control’ shall be construed in accordance with section 432.

(b) In applying this section to any accounting period of a company, an associated company which has no net relevant trading income for that accounting period (or, if an associated company during part only of that accounting period, for that part of that accounting period) shall be disregarded and, for the purposes of this section, a company shall be treated as an ‘associated company’ of another company at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons.

(5) In determining how many associated companies a company has in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.

(6) For an accounting period of less than 12 months the relevant maximum amounts determined in accordance with subsection (3) shall be proportionately reduced.

(7) (a) Where, in the case of a company which has one or more associated companies in an accounting period—

(i) the accounting period of the company ends on a date on which accounting periods of all of the associated companies end, and

(ii) the company and all of the associated companies jointly elect in writing that this subsection shall apply,

then—

(I) the relief under subsection (2) shall be computed as if, in relation to the accounting period, the company and all of the associated companies were a single company (with no associated companies) with an accounting period ending on that date and beginning at the earliest date on which the accounting period of the company, or of any of the associated companies, begins, and

(II) the relief as so computed shall be allocated to the accounting period of the company and to the accounting periods of its associated companies in such manner as is specified in the election, and the amount so allocated to a company shall be deemed to be the relief under this section in relation to the accounting period of the company.

(b) Notwithstanding paragraph (a)—

(i) the aggregate of amounts allocated under subparagraph (II) of that paragraph for an accounting period shall not exceed the relief computed under subparagraph (I) of that paragraph, and

(ii) the amount allocated to an accounting period of a company shall not exceed the amount which would have been the relief in relation to the accounting period if the company had no associated companies in the accounting period.

(8) (a) Subject to paragraph (b), where, in the case of a company which has one or more associated companies in an accounting period, the end of the accounting period of the company and the end of an accounting period of each of its associated companies do not coincide—

(i) subsection (7) shall apply as respects any period (in this subsection referred to as a ‘relevant period’) which falls into the accounting period of the company and an accounting period of each of the associated companies as if the relevant period were an accounting period of the company and of the associated companies,

(ii) the relief allocated to any company in respect of a relevant period shall be deemed to be the relief in relation to that period, and

(iii) where an amount of relief has been allocated to a company in respect of a relevant period falling into an accounting period of the company, the relief for the accounting period of the company shall be the aggregate of—

(I) any relief in relation to relevant periods falling into the accounting period, and

(II) the amounts which would be the relief in relation to any periods (which are not relevant periods) within the accounting period if each of those periods was treated as an accounting period.

(b) The relief under paragraph (a) in relation to an accounting period of a company shall not exceed the amount which would be the relief in relation to the accounting period if the company had no associated companies in the accounting period.

(9) For the purposes of this section, where an accounting period of a company begins before 1 January of a financial year and ends on or after that date, it shall be divided into 2 parts, one beginning on the date on which the accounting period begins and ending on 31 December of the preceding financial year and the other beginning on 1 January of the financial year and ending on the date on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company.

(10) (a) A company shall include in the return required to be delivered under section 951—

(i) a statement specifying—

(I) the amount of relief to be given to it under this section, and

(II) the number of companies which are its associated companies in relation to the accounting period,

and

(ii) a copy of any election made under subsection (7).

(b) A company which has specified an amount under paragraph (a) shall not be entitled to alter the amount so specified.

(11) Subsection (2) of section 21A shall apply for the purposes of this section.”.

77. —(1) Section 23A (inserted by the Finance Act, 1999 ) of the Principal Act is amended in subsection (1)(b)(i)—

(a) by the substitution of the following for clause (II):

“(II) section 9 shall apply as it would apply for the purposes of the Tax Acts if in paragraph (b) of subsection (1) of that section ‘50 per cent’ were substituted for ‘75 per cent’ in both places where it occurs, and”,

and

(b) in subclause (B) of clause (III) by the deletion of “subparagraph (iii) of”.

(2) This section shall apply as on and from 10 February 2000.

78. —Section 882 (as amended by the Finance Act, 1999 ) of the Principal Act is amended by the substitution for subsection (3) of the following subsection:

“(3) Where a company fails to deliver a statement which it is required to deliver under this section, then, notwithstanding any obligations as to secrecy or other restriction upon disclosure of information imposed by or under any statute or otherwise—

(a) the Revenue Commissioners, or

(b) such officer of the Revenue Commissioners as is nominated by the Commissioners for the purposes of this section,

may give a notice in writing, or in such other form as the Revenue Commissioners may decide, to the registrar of companies (within the meaning of the Companies Act, 1963 ) stating that the company has so failed to deliver a statement under this section.”.

79. —Section 411 of the Principal Act is amended by the substitution in subsection (1)(a) of “a company shall be owned by a consortium if 75 per cent or more of the ordinary share capital” for “a company shall be owned by a consortium if all of the ordinary share capital”.

80. —Section 446 of the Principal Act is amended—

(a) by the insertion after subsection (2A) of the following:

“(2B) Where—

(a) on 31 March 2000 the relevant trading operations of a qualified company are the carrying on of a business of managing the activities or the whole or part of the assets of a specified collective investment undertaking (within the meaning of section 734(1)), and

(b) at any time after 31 March 2000 the specified collective investment undertaking ceases to be a specified collective investment undertaking but is an investment undertaking (within the meaning of section 739B),

then that business at that time, to the extent that the management can be directly attributed to be for the benefit of unit holders (within the meaning of section 739B) in the investment undertaking who are persons resident outside the State, shall be deemed to be relevant trading operations and to have been specified as relevant trading operations in the certificate given to the qualified company under subsection (2); and for the purposes of the Tax Acts, such apportionment as is just and reasonable may be made of any profits arising to the qualified company.

(2C) Where—

(a) on 31 December 2000 the relevant trading operations of a qualified company are the carrying on of a life business (within the meaning of section 706(1)), and

(b) at any time after 31 December 2000 the qualified company would be in breach of the conditions under which a certificate was given to the qualified company under subsection (2), solely by virtue of the qualified company commencing policies or contracts with persons who reside in the State,

then the trading operations of the qualified company at that time, to the extent that they are trading operations carried on with persons resident outside the State, shall be deemed to be relevant trading operations and the conditions under which the certificate was given shall be deemed not to have been breached; and for the purposes of the Tax Acts, such apportionment as is just and reasonable may be made of any profits arising to the qualified company.

(2D) Where on 31 March 2000 the trading operations of a qualified company are the carrying on of a business of managing the activities or the whole or part of the assets of a qualifying company (within the meaning of section 110), then such management shall, at any time after 31 March 2000 and to the extent referred to in subsection (7)(c)(ii)(V)(C) (inserted by the Finance Act, 2000), be deemed to be relevant trading operations and to have been specified as relevant trading operations in the certificate given to the qualified company under subsection (2); and for the purposes of the Tax Acts such apportionment as is just and reasonable may be made of any profits arising to the qualified company.”,

(b) in subsection (7)(c)(ii) by the substitution for clause (V) of the following:

“(V) the management of the activities or the whole or part of the assets of—

(A) a specified collective investment undertaking (within the meaning of section 734),

(B) an investment undertaking (within the meaning of section 739B) to the extent that the management can be directly attributed to be for the benefit of unit holders (within the said meaning) in the investment undertaking who are persons resident outside the State; and for the purposes of the Tax Acts, such apportionment as is just and reasonable may be made of any profits arising to a qualified company,

(C) a qualifying company (within the meaning of section 110), to the extent that the management directly relates to assets of the qualifying company which the qualifying company acquired directly or indirectly from an originator (within the said meaning) not being assets which were created, acquired or held by or in connection with a branch or agency through which the originator carries on a trade in the State.”,

and

(c) by the insertion after subsection (8) of the following:

“(8A) Where the trading operations of a qualified company, for the purposes of carrying on its relevant trading operations, include the procurement of services from a person who is resident in the State and, in the opinion of the Minister such procurement will contribute to the development of the Area as an International Financial Services Centre, the procurement shall be regarded for the purposes of the Tax Acts as part of the relevant trading operations of the qualified company and to have been specified as relevant trading operations in the certificate given to the qualified company under subsection (2) where they are not so specified.”.

81. —(1) The Principal Act is amended in Chapter 1 of Part 26—

(a) by the substitution in section 711 for subsection (1) of the following:

“(1) For the purposes of computing corporation tax on chargeable gains accruing to a fund or funds maintained by an assurance company in respect of its life business—

(a) (i) section 556, and

(ii) section 607,

shall not apply,

(b) section 581 shall, as respects—

(i) subsections (1) and (2) of that section, and

(ii) subsection (3) of that section, in so far as a chargeable gain is not thereby disregarded for the purposes of that subsection,

apply as if paragraph 24 of Schedule 32, section 719, section 723(7)(a) and paragraph (a)(ii) had not been enacted,

(c) the amount of capital gains tax computed for the purposes of section 78(2), otherwise than in respect of the special investment fund, is the amount so computed as if, notwithstanding section 28(3), the rate of capital gains tax were—

(i) throughout the financial year 1999, subject to paragraph (d), 40 per cent, and

(ii) throughout each subsequent financial year, the rate of corporation tax specified in section 21(1) for that financial year,

and

(d) where for an accounting period the expenses of management (within the meaning of section 83 as applied by section 707), deductible exceeds the amount of profits from which they are deductible, the reference in paragraph (c)(i) to 40 per cent shall be a reference to the rate of corporation tax referred to in section 21(1) for the financial year 1999.”,

and

(b) in section 713—

(i) by the deletion of subsection (2),

(ii) by the substitution for subsection (3) of the following:

“(3) Notwithstanding sections 21(1) and 21A and subject to subsection (6)(b), corporation tax shall be charged in respect of the part specified in subsection (6)(a) of unrelieved profits of an accounting period of an assurance company from investments referable to life business, other than special investment business, at the rate determined by the formula—

(N2 x SR1) + (N3 x SR2)

_____________________

N1

where—

N1 is the number of months in the accounting period,

N2 is the number of months from the day of the commencement of the accounting period to the earlier of—

(a) the end of the year of assessment (in this subsection referred to as the ‘first year of assessment’) in which that day falls, and

(b) the end of the accounting period,

N3 is N1 reduced by N2,

SR1 is the standard rate for the first year of assessment, and

SR2 is the standard rate for the year of assessment immediately subsequent to the first year of assessment.”,

and

(iii) by the deletion of subsection (4).

(2) Subsection (1)—

(a) as respects paragraph (a), is deemed to apply for the financial year 1999 and subsequent financial years, and

(b) as respects paragraph (b), is deemed to have effect for the financial year 2000 and subsequent financial years.

82. —(1) Section 110 of the Principal Act is amended—

(a) in the definition of “qualifying company” in subsection (1), by the insertion after “arm's length” of “, apart from a transaction where the provisions of paragraph (a) of subsection (3) apply to any interest or other distribution payable under the transaction unless the transaction concerned is excluded from the provisions of that paragraph (a) by virtue of paragraph (b) of that subsection”,

and

(b) by the insertion after subsection (2) of the following:

“(3) (a) Any interest or other distribution which—

(i) is paid out of assets of a qualifying company, directly or indirectly, to—

(I) an original lender or, as the case may be, an originator,

(II) a company which is a 75 per cent subsidiary of the original lender or the originator,

(III) a company of which the original lender or the originator is a 75 per cent subsidiary, or

(IV) a company (other than the original lender or the originator) which is a 75 per cent subsidiary of a company such as is referred to in clause (III),

and

(ii) is so paid in respect of a security falling within section 130(2)(d)(iii),

shall not be a distribution by virtue only of section 130(2)(d)(iii) unless the application of this paragraph is excluded by paragraph (b).

(b) Paragraph (a) shall not apply where—

(i) an original lender or, as the case may be, an originator,

(ii) a company which is a 75 per cent subsidiary of the original lender or the originator,

(iii) a company of which the original lender or the originator is a 75 per cent subsidiary, or

(iv) a company (other than the original lender or the originator) which is a 75 per cent subsidiary of a company such as is referred to in subparagraph (iii),

(in this paragraph referred to as the ‘lender’) advances an amount or amounts of money to a qualifying company in respect of securities falling within section 130(2)(d)(iii) held, directly or indirectly, by the lender which amount or the total of which amounts, at any time, is in excess of 25 per cent of the market value of all qualifying assets acquired by the qualifying company from that original lender or originator at the time of the acquisition of the qualifying assets.”.

(2) Subsection (1) shall apply as respects any interest paid on or after 10 February 2000.

83. —(1) Part 14 of the Principal Act is amended—

(a) in section 445, by the substitution for subsection (6) of the following:

“(6) Where the Minister and a company in relation to which a certificate under subsection (2) has been given—

(a) agree to the revocation of that certificate, or

(b) agree to the revocation of that certificate and its replacement by another certificate to be given to the company under subsection (2),

the Minister may by notice in writing served by registered post on the company, revoke the first-mentioned certificate with effect from such date as may be specified in the notice; but this subsection shall not affect the operation of subsection (4) or (5).”,

(b) in section 446—

(i) by the substitution in subsection (2) of “subsection (4), (5), (5A) or (6)” for “subsection (4), (5) or (6)”,

(ii) by the insertion after subsection (5) of the following:

“(5A) Notwithstanding subsection (5), where, in the case of a company in relation to which a certificate under subsection (2) has been given, the Minister receives a notification from the Central Bank of Ireland in accordance with section 96 of the Central Bank Act, 1989, as to the non-compliance by the company with any obligation imposed on it by the Central Bank of Ireland under Chapter VII of the Central Bank Act, 1989, the Minister shall, by notice in writing served by registered post on the company, revoke the certificate with effect from such date as may be specified in the notice.”,

and

(iii) by the substitution for subsection (6) of the following:

“(6) Where the Minister and a company in relation to which a certificate under subsection (2) has been given—

(a) agree to the revocation of that certificate, or

(b) agree to the revocation of that certificate and its replacement by another certificate to be given to the company under subsection (2),

the Minister may by notice in writing served by registered post on the company, revoke the first-mentioned certificate with effect from such date as may be specified in the notice; but this subsection shall not affect the operation of subsection (4), (5) or (5A).”,

(c) by the substitution for section 447 of the following:

(d) in section 448—

(i) by the substitution in subsection (1) of “sections 22A, 157, 158, 239, 241, 440, 441, 449, 644B” for “sections 157, 158, 239, 241, 440, 441, 442”, and

(ii) by the deletion of subsection (7),

and

(e) by the deletion of section 449(4) and section 450(5).

(2) (a) Paragraphs (a) and (b (iii) of subsection (1) shall apply as on and from 1 January 2000.

(b) Paragraphs (b)(i), (b)(ii) and (c) of subsection (1) shall apply as on and from the date of the passing of this Act.

(c) Subsection (1)(d)(i) shall apply as respects accounting periods ending on or after 1 January 2000.

(d) Paragraphs (d)(ii) and (e) of subsection (1) shall apply as respects accounting periods beginning after 1 April 2000.

84. —(1) Section 220 of the Principal Act is amended in the Table to the section by the insertion of the following after paragraph 7:

“8. The Commission for Electricity Regulation.”.

(2) This section shall be deemed to have applied as on and from 14 July 1999.