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9 1984

FINANCE ACT, 1984

Chapter III

Income Tax: Relief for Investment in Corporate Trades

Interpretation ( Chapter III ).

11. — (1) In this Chapter—

associate” has the same meaning in relation to a person as it has by virtue of section 103 (3) of the Corporation Tax Act, 1976 , in relation to a participator;

control”, except in section 14 (7) and section 26 (2) (b), shall be construed in accordance with subsections (2) to (6) of section 102 of the Corporation Tax Act, 1976 ;

debenture” has the meaning assigned to it by section 2 of the Companies Act, 1963 ;

director” shall be construed in accordance with section 103 (5) of the Corporation Tax Act, 1976 ;

market value” shall be construed in accordance with section 49 of the Capital Gains Tax Act, 1975 ;

ordinary shares” means shares forming part of a company's ordinary share capital;

the relevant period” has the meaning assigned to it by section 12 (7);

the relief” and “relief” mean relief under section 12 and references to the amount of the relief shall be construed in accordance with subsection (3) of that section;

qualifying trading operations” has the meaning assigned to it by section 16 (2); and

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

(2) Section 157 of the Corporation Tax Act, 1976 , applies for the purposes of the provisions of this Chapter other than section 14 .

(3) References in this Chapter to a disposal of shares include references to a disposal of an interest or right in or over the shares and an individual shall be treated for the purposes of this Chapter as disposing of any shares which he is treated by virtue of paragraph 5 of Schedule 2 to the Capital Gains Tax Act, 1975 , as exchanging for other shares.

(4) References in this Chapter to the reduction of any amount include references to its reduction to nil.

The relief.

12. —(1) This Chapter has effect for affording relief from income tax where—

(a) an individual who qualifies for the relief subscribes for eligible shares in a qualifying company;

(b) those shares are issued to him for the purpose of raising money for a qualifying trade which is being carried on by the company or which it intends to carry on; and

(c) the company provides satisfactory evidence, and it appears to the Revenue Commissioners after such consultation, if any, as may seem to them to be necessary with such person or body of persons as in their opinion may be of assistance to them, that the money was used, is being used or is intended to be used—

(i) for the purposes of—

(I) enabling the company, or enlarging its capacity, to undertake qualifying trading operations,

(II) enabling the company to engage in, or assisting the company in, research and development, the acquisition of technological information and data, the development of new or existing products or services or the provision of new products or services,

(III) enabling the company to identify new markets, and to develop new and existing markets, for its products and services, or

(IV) enabling the company to increase its sales of products or provision of services,

and

(ii) with a view to the creation or maintenance of employment in the company.

(2) In this Chapter “eligible shares” means new ordinary shares which, throughout the period of five years beginning with the date on which they are issued, carry no present or future preferential right to dividends or to a company's assets on its winding up and no present or future preferential right to be redeemed.

(3) The relief in respect of the amount subscribed by an individual for any eligible shares shall be given as a deduction of that amount from his total income for the year of assessment in which the shares are issued, and references in this Chapter to the amount of the relief are references to the amount of that deduction.

(4) The relief shall be given on a claim and shall not be allowed—

(a) unless and until the company has carried on the trade for four months; and

(b) if the company is not carrying on that trade at the time when the shares are issued, unless the company begins to carry it on within two years after that time.

(5) A claim for the relief may be allowed at any time after the trade has been carried on by the company for four months if the conditions for the relief are then satisfied; but no claim shall be allowed before the 1st day of January, 1985.

(6) In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.

(7) In this Chapter “the relevant period”, in relation to relief in respect of any eligible shares issued by a company, means—

(a) as respects sections 14 , 17 , 18 , 19 , and 20 , the period beginning with the incorporation of the company (or, if the company was incorporated more than two years before the date on which the shares were issued, beginning two years before that date) and ending five years after the issue of the shares; and

(b) as respects sections 15 , 16 , and 26 , the period beginning with the date on which the shares were issued and ending either three years after that date or, where the company was not at that date carrying on a qualifying trade, three years after the date on which it subsequently began to carry on such a trade.

(8) Where by reason of its being wound up, or dissolved without winding up, the company carries on the qualifying trade for a period shorter than four months, subsection (4) (a) shall have effect as if it referred to that shorter period but only if it is shown that the winding up or dissolution was 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.

(9) All such provisions of the Income Tax Acts as apply in relation to the deductions specified in sections 138 to 143 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply in relation to relief under this Chapter.

(10) Subject to the provisions of section 25 , no account shall be taken of the relief, in so far as it is not withdrawn, in determining whether any sums are excluded by virtue of paragraph 4 of Schedule 1 to the Capital Gains Tax Act, 1975 , from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(11) This section applies only where the shares concerned are issued in the year 1984-85 or either of the two years of assessment immediately following.

Limits on relief.

13. —(1) Subject to section 27 , the relief shall not be given in respect of any amount subscribed by an individual for eligible shares issued to him by any company in any year of assessment unless the amount or total amount subscribed by him for the eligible shares issued to him by the company in that year is £200 or more:

Provided that in the case of an individual who is a husband assessed to tax for a year of assessment in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , any amount subscribed by his spouse for eligible shares issued to her in that year of assessment by the company shall be deemed to have been subscribed by him for eligible shares issued to him by the company.

(2) The relief shall not be given to the extent to which the amount or total amount subscribed by an individual for eligible shares issued to him in any year of assessment (whether or not by the same company) exceeds £25,000.

(3) Section 198 (1) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , is hereby amended by the insertion in paragraph (a) of the following subparagraph after subparagraph (vii):

“(viii) so far as it flows from relief under Chapter III of Part I of the Finance Act, 1984, in the proportions in which they subscribed for the eligible shares giving rise to the relief,”.

Individuals qualifying for relief.

14. —(1) (a) An individual qualifies for the relief if he subscribes on his own behalf for the eligible shares in a qualifying company, is not at any time in the relevant period connected with the company and does not during that period receive from the company any dividend which is a distribution to which either section 64 or 76 of the Corporation Tax Act, 1976 , applies.

(b) For the purposes of this section and paragraph 2 of the Second Schedule , any question whether an individual is connected with a company shall be determined in accordance with the following provisions of this section.

(2) An individual is connected with a company if he, or an associate of his, is—

(a) a partner of the company; or

(b) subject to subsection (3), a director or employee of the company or of another company which is a partner of that company.

(3) An individual is not connected with a company by reason only that he, or an associate of his, is a director or employee of the company or of another company which is a partner of that company unless he or his associate (or a partnership of which he or his associate is a member) receives a payment from either company during the period of five years beginning with the date on which the shares are issued or is entitled to receive such a payment in respect of that period or any part of it; but for that purpose there shall be disregarded—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by him or his associate in the performance of his duties as such director or employee;

(b) any interest which represents no more than a reasonable commercial return on money lent to either company;

(c) any dividend or other distribution paid or made by either company which does not exceed a normal return on the investment;

(d) any payment for the supply of goods to either company which does not exceed their market value; and

(e) any reasonable and necessary remuneration which—

(i) (I) is paid for services rendered to either company in the course of a trade or profession (not being secretarial or managerial services or services of a kind provided by the company itself), and

(II) is taken into account in computing the profits or gains of the trade or profession under Case I or II of Schedule D or would be so taken into account if it fell in a period on the basis of which those profits or gains are assessed under that Schedule,

or

(ii) in case he is a director or an employee of either company and is not otherwise connected with either company, is paid for service rendered to the company of which he is a director or an employee in the course of the directorship or the employment.

(4) An individual is connected with a company if he directly or indirectly possesses or is entitled to acquire more than 30 per cent. of—

(a) the issued ordinary share capital of the company; or

(b) the loan capital and issued share capital of the company; or

(c) the voting power in the company.

(5) For the purposes of subsection (4) (b) the loan capital of a company shall be treated as including any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company; or

(b) for any right to receive income created in favour of the company; or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon).

(6) An individual is connected with a company if he directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive more than 30 per cent. of the assets of the company which would at that time be available for distribution to equity holders of the company, and for the purposes of this subsection—

(a) the persons who are equity holders of the company; and

(b) the percentage of the assets of the company to which the individual would be entitled,

shall be determined in accordance with sections 109 and 111 of the Corporation Tax Act, 1976 , taking references in section 111 to the first company as references to an equity holder and references to a winding up as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.

(7) An individual is connected with a company if he has control of it within the meaning of section 158 of the Corporation Tax Act, 1976 .

(8) For the purposes of this section an individual shall be treated as entitled to acquire anything which he is entitled to acquire at a future date or will at a future date be entitled to acquire; and there shall be attributed to any person any rights or powers of any other person who is an associate of his.

(9) In determining, for the purposes of this section, whether an individual is connected with a company, no debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall be treated as loan capital of the company if the debt arose in the ordinary course of that business.

(10) Where an individual subscribes for shares in a company with which he is not connected (either within the meaning of this section or by virtue of paragraph 2 (2) (b) of the Second Schedule ) he shall nevertheless be treated as connected with it if he subscribes for the shares as part of any arrangement which provides for another person to subscribe for shares in another company with which the individual or any other individual who is a party to the arrangement is connected (within the meaning of this section or by virtue of that paragraph).

Qualifying companies.

15. —(1) A company is a qualifying company if it is incorporated in the State and complies with the requirements of this section.

(2) The company must, throughout the relevant period, be an unquoted company which is resident in the State and not resident elsewhere, and be—

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

(b) a company whose business consists wholly of—

(i) the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company; or

(ii) both the holding of such shares or securities, or the making of such loans and the carrying on wholly or mainly in the State of one or more qualifying trades.

(3) In this section “qualifying subsidiary”, in relation to a company, means a subsidiary of that company of a kind which a company may have by virtue of section 26 .

(4) Without prejudice to the generality of subsection (2) but subject to subsection (5), a company ceases to comply with subsection (2) if before the end of the relevant 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.

(5) A company shall not be regarded as ceasing to comply with subsection (2) if it does so by reason of being wound up or dissolved without winding up and—

(a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax; and

(b) the company's net assets, if any, are distributed to its members before the end of the relevant period or, in the case of a winding up, the end (if later) of three years from the commencement of the winding up.

(6) The company's share capital must not, at any time in the relevant period, include any issued shares that are not fully paid up.

(7) (a) Subject to section 26 , the company must not at any time in the relevant period—

(i) control (or together with any person connected with it control) another company or be under the control of another company (or of another company and any person connected with that other company); or

(ii) be a 51 per cent. subsidiary of another company or itself have a 51 per cent. subsidiary;

and no arrangements must be in existence at any time in that period by virtue of which the company could fall within subparagraph (i) or (ii).

(b) In this subsection “51 per cent. subsidiary”, in relation to any company, has the meaning assigned to it, for the purposes of the Corporation Tax Acts, by section 156 of the Corporation Tax Act, 1976 .

(8) A company is not a qualifying company if—

(a) (i) an individual has acquired a controlling interest in the company's trade after the 5th day of April, 1984; and

(ii) at any time in the period mentioned in subsection (11) he has, or has had, a controlling interest in another trade; and

(b) the trade carried on by the company, or a substantial part of it—

(i) is concerned with the same or similar types of property or parts thereof or provides the same or similar services or facilities as the other trade; or

(ii) serves substantially the same or similar outlets or markets as the other trade.

(9) For the purposes of this section a person has a controlling interest in a trade—

(a) in the case of a trade carried on by a company if—

(i) he controls the company;

(ii) the company is a close company for the purposes of the Corporation Tax Acts and he or an associate of his is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent. of the ordinary share capital of the company; or

(iii) not less than half of the trade could in accordance with section 20 (12) of the Corporation Tax Act, 1976 , be regarded as belonging to him;

(b) in any other case, if he is entitled to not less than half of the assets used for, or the income arising from, the trade.

(10) For the purposes of subsection (9) there shall be attributed to any person any rights or powers of any other person who is an associate of his.

(11) The period referred to in subsection (8) (a) (ii) is the period beginning two years before and ending three years after—

(a) the date on which the shares were issued; or

(b) if later, the date on which the company began to carry on the trade.

(12) In subsections (8) and (11) references to a company's trade include references to the trade of any of its subsidiaries.

Qualifying trades.

16. —(1) A trade is a qualifying trade if it complies with the requirements of this section.

(2) The trade must throughout the relevant period—

(a) consist wholly or mainly of either or both of the following trading operations (in this Chapter referred to as “qualifying trading operations”)—

(i) the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980 , or

(ii) the rendering of services in the course of a service undertaking in respect of which an employment grant was made by the Industrial Development Authority under section 2 of the Industrial Development (No. 2) Act, 1981 ,

and

(b) where the trade consists wholly or partly of the manufacture of goods referred to in paragraph (a) (i), be a trade in respect of which the company which carries it on has claimed and is entitled, or would, but for an insufficiency of profits, have claimed and been entitled, to relief from corporation tax under the provisions of the said Chapter VI:

Provided that a trade which during the relevant period consists partly of qualifying trading operations and partly of other trading operations shall be regarded for the purposes of this subsection as a trade which consists wholly or mainly of qualifying trading operations if, but only if, the total amount receivable in the relevant period from sales made and services rendered in the course of qualifying trading operations is not less than 75 per cent. of the total amount receivable by the company from all sales made and services rendered in the course of the trade in the relevant period.

(3) The trade must, during the relevant period, be conducted on a commercial basis and with a view to the realisation of profits.

(4) References in this section to a trade shall be construed without regard to so much of the definition of “trade” in section 1 (1) of the Income Tax Act, 1967 , as relates to adventures or concerns in the nature of trade.

Disposal of shares.

17. —(1) Where an individual disposes of any eligible shares before the end of the relevant period, then—

(a) in a case where the disposal is otherwise than by way of a bargain made at arm's length, he shall not be entitled to any relief in respect of those shares; and

(b) in any other case, the amount of relief to which he is entitled in respect of those shares shall be reduced by the amount or value of the consideration which he receives for them.

(2) Subsection (1) shall not apply to a disposal made by a wife to her husband at a time when she is treated as living with him for income tax purposes as provided in section 192 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , or to a disposal made at such a time by him to her; but where shares issued to one of them have been transferred to the other by a transaction inter vivos

(a) that subsection shall apply on the disposal of the shares by the transferee to a third person; and

(b) if at any time the wife ceases to be treated as living with her husband for the aforementioned purposes and any of those shares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.

(3) Where an individual holds ordinary shares of any class in a company and the relief has been given in respect of some shares of that class but not others, any disposal by him of ordinary shares of that class in the company shall be treated for the purposes of this section as relating to those in respect of which relief has been given under this Chapter rather than to others.

(4) Where the relief has been given to an individual in respect of shares of any class in a company which have been issued to him at different times, any disposal by him of shares of that class shall be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

(5) Where shares in respect of which the relief was given have by virtue of any such allotment as is mentioned in subparagraph (1) (a) (i) of paragraph 2 of Schedule 2 to the Capital Gains Tax Act, 1975 (not being an allotment for payment) fallen to be treated under subparagraph (2) of that paragraph as the same asset as a new holding—

(a) the new holding shall be treated for the purposes of subsection (3) as shares in respect of which the relief has been given, and

(b) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares.

(6) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

Value received from company.

18. —(1) Where an individual who subscribes for eligible shares in a company—

(a) has, before the issue of the shares but within the relevant period, received any value from the company; or

(b) on or after their issue but before the end of the relevant period, receives any such value;

the amount of the relief to which he is entitled in respect of the shares shall be reduced by the value received.

(2) For the purposes of this section an individual receives value from the company if the company—

(a) repays, redeems or repurchases any of its share capital or securities which belongs to the individual or makes any payment to him for giving up his right to any of the company's share capital or any security on its cancellation or extinguishment;

(b) repays any debt owed to the individual other than—

(i) an ordinary trade debt incurred by the company, or

(ii) any other debt which was incurred by the company—

(I) on or after the earliest date on which he subscribed for the shares in respect of which the relief is claimed; and

(II) otherwise than in consideration of the extinguishment of a debt incurred before that date;

(c) makes to the individual any payment for giving up his right to any debt on its extinguishment, other than—

(i) a debt in respect of a payment of the kind mentioned in section 14 (3) (d) or (e), or

(ii) a debt of the kind mentioned in paragraph (b) (i) or (ii);

(d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of his to a third person;

(e) makes a loan or advance to the individual;

(f) provides a benefit or facility for the individual;

(g) transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from him for consideration exceeding its market value; or

(h) makes to him any other payment except a payment of the kind mentioned in section 14 (3) (a), (b), (c), (d) or (e) or a payment in discharge of an ordinary trade debt.

(3) For the purposes of this section an individual also receives value from the company if he receives in respect of ordinary shares held by him any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution falling within section 15 (5).

(4) For the purposes of this section an individual also receives value from the company if any person who would, for the purposes of section 14 , be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the individual; or

(b) makes any payment to him for giving up any right in relation to any of the company's share capital or securities.

(5) The value received by an individual is—

(a) in a case within paragraph (a), (b) or (c) of subsection (2) the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question;

(b) in a case within paragraph (d) of that subsection, the amount of the liability;

(c) in a case within paragraph (e) of that subsection, the amount of the loan or advance;

(d) in a case within paragraph (f) of that subsection, the cost to the company of providing the benefit or facility less any consideration given for it by the individual;

(e) in a case within paragraph (g) of that subsection, the difference between the market value of the asset and the consideration (if any) given for it;

(f) in a case within paragraph (h) of that subsection, the amount of the payment;

(g) in a case within subsection (3), the amount of the payment or, as the case may be, the market value of the asset; and

(h) in a case within subsection (4), the amount receivable by the individual or, if greater, the market value of the shares or securities in question.

(6) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

(7) For the purposes of subsection (2) (d) a company shall be treated as having released or waived a liability if the liability is not discharged by payment within twelve months of the time when it ought to have been discharged by payment.

(8) For the purposes of subsection (2) (e) there shall be treated as if it were a loan made by the company to the individual—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company; and

(b) the amount of any debt due from the individual to a third person which has been assigned to the company.

(9) In this section “an ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where the credit given does not exceed six months and is not longer than that normally given to the customers of the person carrying on the trade or business.

(10) In this section—

(a) any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to him indirectly or to his order or for his benefit; and

(b) any reference to an individual includes a reference to an associate of his and any reference to the company includes a reference to any person connected with the company.

Replacement capital.

19. —(1) An individual to whom subsection (2) applies is not entitled to relief in respect of any shares in a company where, at any time in the relevant period, the company or any of its subsidiaries—

(a) begins to carry on as its trade or as a part of its trade a trade which was previously carried on at any time in that period otherwise than by the company or any of its subsidiaries; or

(b) acquires the whole, or greater part, of the assets used for the purposes of a trade previously so carried on.

(2) This subsection applies to an individual where—

(a) any person or group of persons to whom an interest amounting in the aggregate to more than a half share in the trade (as previously carried on) belonged, at any time in the relevant period, is a person, or a group of persons, to whom such an interest in the trade carried on by the company or any of its subsidiaries belongs or has, at any such time, belonged; or

(b) any person or group of persons who controls or, at any such time, has controlled the company is a person, or a group of persons, who, at any such time, controlled another company which previously carried on the trade;

and the individual is that person or one of those persons.

(3) An individual is not entitled to relief in respect of any shares in a company where—

(a) the company comes to acquire all of the issued share capital of another company, at any time in the relevant period; and

(b) any person or group of persons who controls or has, at any such time, controlled the company is a person, or a group of persons, who, at any such time, controlled that other company;

and the individual is that person, or one of those persons.

(4) For the purposes of subsection (2)

(a) the person or persons to whom a trade belongs and, where a trade belongs to two or more persons, their respective shares in that trade shall be determined in accordance with subsections (11) (a) and (b), (12) and (13) of section 20 of the Corporation Tax Act, 1976 ; and

(b) any interest, rights or powers of a person who is an associate of another person shall be treated as those of that other person.

(5) In this section—

subsidiary” means a subsidiary of a kind which a qualifying company may have by virtue of section 26 ; and

trade” includes any business, profession or vocation and references to a trade previously carried on include references to part of such a trade.

Value received by persons other than claimants.

20. —(1) The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with subsection (2) if at any time in the relevant period the company repays, redeems or repurchases any of its share capital which belongs to any member other than—

(a) that individual; or

(b) another individual whose relief is thereby reduced by virtue of section 18 (2),

or makes any payment to any such member for giving up his right to any of the company's share capital on its cancellation or extinguishment.

(2) Where subsection (1) applies, the amount of relief to which an individual is entitled shall be reduced by the amount receivable by the member or, if greater, the nominal value of the share capital in question; and where, apart from this subsection, two or more individuals would be entitled to relief the reduction shall be made in proportion to the amounts of relief to which they would, apart from this subsection, have been entitled.

(3) Where at any time in the relevant period a member of a company receives or is entitled to receive any value from the company within the meaning of this subsection, then, for the purposes of the provisions of section 14 (4) in their application to any subsequent time—

(a) the amount of the company's issued ordinary share capital; and

(b) the amount of the part of that capital which consists of the shares relevant to those provisions and the amount of the part consisting of the remainder,

shall each be treated as reduced in accordance with subsection (4).

(4) The amount of each of the parts mentioned in subsection (3) (b) shall be treated as equal to such proportion of that amount as the amount subscribed for that part less the relevant value bears to the amount subscribed; and the amount of the issued share capital shall be treated as equal to the sum of the amounts treated under this subsection as the amount of those parts respectively.

(5) In subsection (3) (b) the reference to the part of the capital which consists of the shares relevant to the provisions of section 14 (4) is a reference to the part consisting of shares which (within the meaning of that section) the individual directly or indirectly possesses or is entitled to acquire; and in subsection (4) the relevant value”, in relation to each of the parts mentioned therein, means the value received by the member or members entitled to the shares of which that part consists.

(6) For the purposes of subsection (3) a member of a company receives or is entitled to received value from the company within the meaning of that subsection in any case in which an individual would receive value from the company by virtue of paragraph (d), (e), (f), (g) or (h) of subsection (2) of section 18 (but treating as excepted from paragraph (h) all payments made for full consideration) and the value received shall be determined as for the purposes of that section.

(7) For the purposes of subsection (6) a person shall be treated as entitled to receive anything which he is entitled to receive at a future date or will at a future date be entitled to receive.

(8) Subsection (1) does not apply in relation to the redemption of any share capital for which the redemption date was fixed before the 26th day of January, 1984.

(9) Where—

(a) after the 5th day of April, 1984, a company issues share capital (“the original shares”) of nominal value equal to the authorised minimum (within the meaning of the Companies (Amendment) Act, 1983) for the purposes of complying with the requirements of section 6 of that Act; and

(b) after the registrar of companies has issued the company with a certificate under the said section 6 it issues eligible shares,

subsection (1) shall not apply in relation to any redemption of any of the original shares within twelve months of the date on which those shares were issued.

(10) Where, by virtue of this section, any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in the company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

Prevention of misuse.

21. —An individual is not entitled to relief in respect of any shares unless the shares are subscribed for and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

Claims.

22. —(1) A claim for the relief in respect of eligible shares issued by a company in any year of assessment shall be made—

(a) not earlier than the 1st day of January, 1985, or, if later, the end of the period of four months mentioned in section 12 (4) (a), and

(b) not later than two years after the end of that year of assessment or, if that period of four months ended after the end of that year, not later than two years after the end of that period.

(2) A claim for relief in respect of eligible shares in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, so far as applying to the company and the trade, are satisfied in relation to those shares.

(3) Before issuing a certificate for the purposes of subsection (2) a company shall furnish the inspector with a statement to the effect that it satisfies the conditions for the relief, so far as they apply in relation to the company and the trade, and has done so at all times since the beginning of the relevant period.

(4) No such certificate shall be issued without the authority of the inspector or where the company, or a person connected with the company, has given notice to the inspector under section 24 (2).

(5) Any statement under subsection (3) shall contain such information as the Revenue Commissioners may reasonably require, shall be in such form as the Revenue Commissioners may direct and shall contain a declaration that it is correct to the best of the company's knowledge and belief.

(6) Where a company has issued a certificate for the purposes of subsection (2) or furnished a statement under subsection (3) and—

(a) the certificate or statement is made fraudulently or negligently; or

(b) the certificate was issued in contravention of subsection (4); the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the same manner as in summary proceedings for recovery of any fine or penalty under any Act relating to the excise.

(7) For the purpose of regulations made under section 127 of the Income Tax Act, 1967 , no regard shall be had to the relief unless a claim for it has been duly made and admitted.

(8) For the purposes of section 550 of the Income Tax Act, 1967 , tax charged by an assessment—

(a) shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief; but

(b) shall, unless paid earlier or due and payable later, be regarded as paid, to the extent that relief from tax is due under this Chapter, on the date of the making of the claim on which the relief is given;

and section 551 of that Act shall not apply in consequence of any discharge or repayment for giving effect to the relief.

Assessments for withdrawing relief.

23. —(1) Where any relief has been given which is subsequently found not to have been due, it shall be withdrawn by the making of an assessment to tax under Case IV of Schedule D for the year of assessment for which the relief was given.

(2) Where any relief given in respect of shares for which either a husband or his wife has subscribed and which were issued while he was assessed in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , falls to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them and at the time of the disposal the husband is not so assessable, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that reduction under section 198 (1) and (2) (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , or any allocation of a repayment of tax under section 195A (inserted by the Finance Act, 1983 ) of the Income Tax Act, 1967 .

(3) Subject to the following provisions of this section, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within ten years after the end of the year of assessment in which that event occurs.

(4) No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his death.

(5) Where a person has, by a disposal or disposals to which section 17 (1) (b) applies, disposed of all the ordinary shares issued to him by a company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when he is connected with the company within the meaning of section 14 .

(6) Subsection (3) is without prejudice to the proviso to section 186 (2) (a) of the Income Tax Act, 1967 .

(7) In its application to an assessment made by virtue of this section, section 550 of the Income Tax Act, 1967 , shall have effect as if the date on which the tax charged by the assessment becomes due and payable were—

(a) in the case of relief withdrawn by virtue of section 14 , 15 , 16 , 19 or 20 (1) in consequence of any event after the grant of the relief, the date of that event;

(b) in the case of relief withdrawn by virtue of section 17 (1) in consequence of a disposal after the grant of the relief, the date of the disposal;

(c) in the case of relief withdrawn by virtue of section 18 in consequence of a receipt of value after the grant of the relief, the date of the receipt;

(d) in the case of relief withdrawn by virtue of section 21

(i) so far as effect has been given to the relief in accordance with regulations under section 127 of the Income Tax Act, 1967 , the 5th day of April in the year of assessment in which effect was so given; and

(ii) so far as effect has not been so given, the date on which the relief was granted.

(8) For the purposes of subsection (7) the date on which the relief is granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.

Information.

24. —(1) Where an event occurs by reason of which any relief given to an individual falls to be withdrawn by virtue of section 14 , 17 or 18 , the individual shall within sixty days of his coming to know of the event give a notice in writing to the inspector containing particulars of the event.

(2) Where an event occurs by reason of which any relief in respect of any shares in a company falls to be withdrawn by virtue of section 15 , 16 , 18 , 19 , 20 or 21

(a) the company; and

(b) any person connected with the company who has knowledge of that matter;

shall within sixty days of the event or, in the case of a person within paragraph (b), of his coming to know of it, give a notice in writing to the inspector containing particulars of the event or payment.

(3) If the inspector has reason to believe that a person has not given a notice which he is required to give under subsection (1) or (2) in respect of any event, the inspector may by notice in writing require that person to furnish him within such time (not being less than sixty days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Chapter.

(4) Where relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any such arrangement or scheme as is mentioned in section 14 (10), 15 (7) or 21 , he may by notice in writing require any person concerned to furnish him within such time (not being less than sixty days) as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed;

(b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

(5) References in subsection (4) to the person concerned are, in relation to sections 14 (10) and 21 , references to the claimant and, in relation to sections 15 (7) and 21 , references to the company and any person controlling the company.

(6) Where relief has been given in respect of shares in a company—

(a) any person who receives from the company any payment or asset which may constitute value received (by him or another) for the purposes of section 18 or 20 (3); and

(b) any person on whose behalf such a payment or asset is received,

shall, if so required by the inspector, state whether the payment or asset received by him or on his behalf is received on behalf of any person other than himself and, if so, the name and address of that person.

(7) Where relief has been claimed in respect of shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by him or on his behalf are or were held on behalf of any person other than himself and, if so, the name and address of that person.

(8) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.

(9) Schedule 15 to the Income Tax Act, 1967 , is hereby amended by the insertion—

(a) in column 2 of “Finance Act, 1984, section 24 (3) and (4)”; and

(b) in column 3 of “Finance Act, 1984, section 24 (1) and (2)”.

Capital gains tax.

25. —(1) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to—

(a) the amount of that relief, or

(b) the excess,

whichever is the less, but the foregoing provisions of this subparagraph shall not apply to a disposal falling within section 13 (5) of the Capital Gains Tax Act, 1975 .

(2) In relation to shares in respect of which relief has been given and not withdrawn, any question—

(a) as to which of any such shares issued to a person at different times a disposal relates; or

(b) whether a disposal relates to such shares or to other shares;

shall for the purposes of capital gains tax be determined as for the purposes of section 17 .

(3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some but not others, then, if there is within the meaning of paragraph 2 (1) of Schedule 2 to the Capital Gains Tax Act, 1975 , a reorganisation affecting those shares, paragraph 2 (2) of that Schedule shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind are treated as a separate holding of original shares and identified with a separate new holding).

(4) There shall be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

Application to subsidiaries.

26. —(1) A qualifying company may in the relevant period have one or more subsidiaries if—

(a) the conditions in subsection (2) are satisfied in respect of the subsidiary or each subsidiary and, except as provided in subsection (3), continue to be so satisfied until the end of the relevant period; and

(b) the subsidiary or each subsidiary was incorporated in the State and is a company—

(i) falling within section 15 (2) (a), or

(ii) which exists solely for the purpose of carrying on wholly or mainly in the State any trade which consists solely of any one or more of the following trading operations—

(I) the purchase of goods or materials for use by the qualifying company or its subsidiaries,

(II) the sale of goods or materials produced by the qualifying company or its subsidiaries,

or

(III) the rendering of services to or on behalf of the qualifying company or its subsidiaries.

(2) The conditions referred to in subsection (1) (a) are—

(a) that the qualifying company possesses all the issued share capital of, and all the voting power in, the subsidiary; and

(b) that no other person has control of the subsidiary within the meaning of section 158 of the Corporation Tax Act, 1976 ; and

(c) that no arrangements are in existence by virtue of which the conditions in paragraphs (a) and (b) could cease to be satisfied.

(3) The conditions referred to in subsection (1) (a) shall not be regarded as ceasing to be satisfied by reason only of the subsidiary or the qualifying company being wound up or dissolved without winding up if—

(a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax; and

(b) the net assets, if any, of the subsidiary or, as the case may be, the qualifying company are distributed to its members before the end of the relevant period, or in the case of a winding up, the end (if later) of three years from the commencement of the winding up.

(4) Where a qualifying company has one or more subsidiaries in the relevant period this Chapter shall have effect subject to the Second Schedule .

Nominees and designated investment funds.

27. —(1) Shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Chapter as subscribed for, issued to, held by or disposed of by that individual.

(2) (a) Relief shall be given, and section 13 (1) (apart from the proviso thereto) shall not apply, in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund designated by the Revenue Commissioners for the purposes of this section (“the managers of a designated fund”) where the amount so subscribed forms part of the fund.

(b) Save as provided by paragraph (a), relief shall not be given in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund where the amount so subscribed forms part of the fund.

(3) The Revenue Commissioners may, if they think fit, having regard to the facts of the particular case and after such consultation, if any, as may seem to them to be necessary with such person or body of persons as in their opinion may be of assistance to them and subject to such conditions, if any, as they think proper to attach to the designation, designate an investment fund for the purposes of this Chapter.

(4) (a) The Revenue Commissioners may, by notice in writing given to the managers of a designated investment fund, withdraw the designation given for the purposes of this section to the fund in accordance with subsection (3) and, upon the giving of the notice, the fund shall cease to be a designated fund as respects any subscriptions made after the date of the notice referred to in paragraph (b).

(b) Where the Revenue Commissioners withdraw the designation of any fund for the purposes of this section, notice of the withdrawal shall be published, as soon as may be in Iris Oifigiúil.

(5) Where an individual claims relief in respect of eligible shares in a company which have been issued to the managers of a designated fund as nominee for that individual, section 22 (2) shall apply as if it required—

(a) the certificate referred to in that paragraph to be issued by the company to the managers; and

(b) the claim for relief to be accompanied by a certificate issued by the managers, in such form as the Revenue Commissioners may authorise, furnishing such information as the Revenue Commissioners may require and certifying that the managers hold certificates issued to them by the companies concerned, for the purposes of section 22 (2) in respect of the holdings of eligible shares shown on the managers' certificate.

(6) The managers of a designated fund may be required by a notice given to them by an inspector or other officer of the Revenue Commissioners to deliver to the officer, within the time limited by the notice, a return of the holdings of eligible shares shown on certificates issued by them in accordance with subsection (5) in the year of assessment to which the return relates.

(7) Section 22 (6) shall not apply in relation to any certificate issued by the managers of a designated fund for the purposes of subsection (5).

(8) Without prejudice to the generality of subsection (3), the Revenue Commissioners shall designate a fund for the purposes of this Chapter if, but only if, they are satisfied that the fund is established under irrevocable trusts for the sole purpose of enabling individuals who qualify for the relief (hereafter in this subsection referred to as “qualifying individuals”) to invest in eligible shares of a qualifying company and that under the terms of the trusts it is provided—

(a) that the entire fund is to be invested without undue delay in eligible shares,

(b) that the fund is to subscribe only for shares which, subject to the circumstances of the qualifying individuals participating in the fund (hereafter in this subsection referred to as “participants”), qualify those participants for relief,

(c) that, pending investment in eligible shares, any moneys subscribed for the purchase of shares are to be placed on deposit in a separate account with a bank licensed, to transact business in the State,

(d) that any amounts received by way of dividends or interest are, subject to a commission in respect of management expenses not exceeding 5 per cent. of such income, to be paid without undue delay to the participants,

(e) that in connection with the establishment of the fund any charges made by way of management expenses do not in relation to any participant exceed a reasonable amount but in any case do not exceed five per cent. of the amounts subscribed to the fund by that participant,

(f) that audited accounts of the fund are submitted annually to the Revenue Commissioners as soon as may be after the end of each period for which accounts of the fund are made up,

(g) that the managers, the trustees of the fund and any of their associates are not for the time being connected either directly or indirectly with any company whose shares comprise part of the fund,

(h) that any discounts on eligible shares received by the trustees or managers of the fund are accepted solely for the benefit of the participants,

(i) that the fund is a closed fund and that the closing date for participation precedes the making of the first investment,

(j) if a limit is placed on the size of the fund or a minimum amount for investment is stipulated, that any subscriptions not accepted are to be returned without undue delay, and

(k) that no participant is allowed to have any shares in any company in which the fund has invested transferred into his name until five years have elapsed from the date of the issue of the shares to the fund.