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9 1984

FINANCE ACT, 1984

Chapter VIII

Stock Relief

Interpretation ( Chapter VIII ).

48. —In this Chapter—

accounting period”—

(a) in relation to a company, means an accounting period determined in accordance with the provisions of section 9 of the Corporation Tax Act, 1976 , and

(b) in relation to a person other than a company, means a period of one year ending on the date to which the accounts of the person are usually made up or, where accounts have not been made up or where accounts have been made up for a greater or lesser period than one year, such period not exceeding one year as the Revenue Commissioners may determine;

period of account” means the period for which a person's accounts are made up;

qualifying trade” means a trade which is carried on in the State and which during an accounting period consists wholly or mainly of any one or more of the following classes of trading operations (hereafter in this Chapter referred to as “qualifying trading operations”)—

(a) the manufacture of goods,

(b) the carrying out of construction operations within the meaning of section 17 of the Finance Act, 1970 , or

(c) the sale of machinery or plant (excluding vehicles suitable for the conveyance by road of persons) or goods to a person engaged in a trade consisting wholly or mainly of farming or of trading operations of a class specified in paragraph (a) or (b) for use for the purposes of that trade,

and a trade which during an accounting period consists partly of qualifying trading operations and partly of other trading operations shall be regarded for the purposes of this definition as a trade which consists wholly or mainly of qualifying trading operations if, but only if, the total amount receivable in the accounting period from sales made in the course of qualifying trading operations is not less than 75 per cent. of the total amount receivable in the accounting period from all sales made in the course of the trade;

trading stock”, in relation to a trade, has the same meaning as in section 62 of the Income Tax Act, 1967 , and in determining the value of trading stock at any time for the purposes of a deduction under section 49 or 51 , to the extent that, at or before that time, any payments on account have been received by the trader in respect of any trading stock, the value of that stock shall be reduced accordingly.

Stock relief: corporation tax.

49. —(1) Subject to the provisions of this Chapter, where a company which is resident in the State carries on in an accounting period a qualifying trade in respect of which it is within the charge to corporation tax under Case I of Schedule D it shall, in the computation for the purposes of corporation tax of its income from the qualifying trade, be entitled to a deduction under this section as if the deduction were a trading expense of the qualifying trade incurred in the accounting period.

(2) In any case where a company is entitled, in relation to an accounting period, to a deduction under this section in respect of a qualifying trade, that deduction shall be an amount determined by the formula

A

×

3

____

100

×

B

___

12

where—

A is the value at the beginning of the accounting period of the trading stock of the qualifying trade, and

B is the number of months or fractions of months comprised in the accounting period:

Provided that in no case shall the amount of the deduction as so computed exceed the amount of the income from the qualifying trade for the accounting period after account has been taken of all reductions of that income for that period by virtue of sections 16 and 18 of the Corporation Tax Act, 1976 , and all deductions from and additions to that income for that period by virtue of section 14 of that Act, but before any deduction is allowed under this section.

(3) A company shall not be entitled to a deduction under this section for any accounting period which ends before the 6th day of April, 1983, or after the 5th day of April, 1984.

(4) A company shall not be entitled to a deduction under this section for an accounting period unless it makes a claim for the deduction before—

(a) the date on which the assessment to corporation tax on the company for the accounting period becomes final and conclusive, or

(b) the 31st day of December next following the end of the year of assessment in which the accounting period ends,

whichever is the later.

Recovery of stock relief: corporation tax.

50. —Subject to section 56 , where in an accounting period (hereafter in this section referred to as “the first-mentioned accounting period”) a company carrying on a trade in respect of which a deduction under section 49 was allowed for any accounting period—

(a) ceases to carry on the trade, or

(b) ceases to be resident in the State, or

(c) ceases to be within the charge to corporation tax under Case I of Schedule D in respect of the trade,

then—

(i) the company shall not be entitled to a deduction under section 49 for the first-mentioned accounting period, and

(ii) there shall be treated as a trading receipt of the trade for the first-mentioned accounting period an amount equal to the aggregate of the deductions allowed to the company under section 49 in respect of the trade for preceding accounting periods ending in the period of five years which ends on the day immediately preceding the beginning of the first-mentioned accounting period.

Stock relief: income tax.

51. —(1) In this section—

relevant year” means the year 1984-85;

trading profits”, in relation to a trade, means the profits or gains of the trade computed in accordance with the rules applicable to Case I of Schedule D.

(2) Subject to the provisions of this Chapter, where a person (other than a body corporate) who is resident in the State and not resident elsewhere carries on in an accounting period a qualifying trade in respect of which he is chargeable to income tax under Case I of Schedule D for a relevant year on the trading profits of that accounting period he shall, in the computation for the purposes of income tax of the trading profits of the qualifying trade, be entitled to a deduction under this section as if the deduction were a trading expense of the qualifying trade incurred in the accounting period.

(3) In any case where a person is entitled, in relation to an accounting period, to a deduction under this section in respect of a qualifying trade, that deduction shall be an amount determined by the formula

A

×

3

____

100

×

B

___

12

where A and B have the same meanings as in section 49 (2):

Provided that in no case shall the amount of the deduction as so computed exceed the amount of the trading profits of the qualifying trade for the accounting period before any deduction is allowed under this section.

(4) Where a deduction allowed under this section in computing a person's trading profits of a qualifying trade for an accounting period has effect for a relevant year—

(a) the person shall not be entitled to relief—

(i) under section 309 of the Income Tax Act, 1967 , for any year of assessment later than the relevant year in respect of a loss sustained in the trade before the commencement of the relevant year, or

(ii) under section 311 of that Act for any year of assessment earlier than the relevant year in respect of a loss sustained in the trade,

(b) the provisions of section 241 (3) of that Act or of that section as applied by any other provision of the Income Tax Acts, shall not apply as respects a capital allowance or part of a capital allowance which is, or is deemed to be, all or part of a capital allowance for the relevant year and to which full effect has not been given in that year owing to there being no profits or gains chargeable for that year or an insufficiency of profits or gains chargeable for that year, and

(c) the provisions of section 318 of that Act shall not apply to the capital allowances or any part thereof for the relevant year.

(5) A person shall not be entitled to a deduction under this section in respect of an assessment made for a relevant year unless he makes a claim before—

(a) the date on which the assessment becomes final and conclusive, or

(b) the 31st day of December in the relevant year,

whichever is the later.

Recovery of stock relief: income tax.

52. —Subject to section 56 , where in an accounting period (hereafter in this section referred to as “the first-mentioned accounting period”) a person carrying on a trade in respect of which a deduction under section 51 was allowed for any accounting period—

(a) ceases to carry on the trade, or

(b) ceases to be resident in the State, or

(c) ceases to be within the charge to income tax under Case I of Schedule D in respect of the trade,

then—

(i) he shall not be entitled to a deduction under section 51 for the first-mentioned accounting period, and

(ii) there shall be treated as a trading receipt of the trade for the first-mentioned accounting period an amount equal to the aggregate of the deductions allowed to him under section 51 in respect of the trade for preceding accounting periods ending in the period of five years which ends on the day immediately preceding the beginning of the first-mentioned accounting period.

Valuation of stock other than at beginning of period of account.

53. —Where for the purposes of this Chapter it is necessary to ascertain the value of a person's trading stock at a date other than the beginning of a period of account and that value has not in fact been ascertained, the person shall be treated as having at that date trading stock of such value as appears to the inspector (or, on appeal, to the Appeal Commissioners) to be reasonable and just having regard to all the relevant circumstances of the case and in particular to—

(a) the values of trading stock at the beginning and end of the period of account which includes the date in question,

(b) movements during that period of account in the costs of items of a kind comprised in the person's trading stock during the period, and

(c) changes during that period in the volume of the trade carried on by him.

Opening stock of a new business.

54. —Where a person (hereafter in this section referred to as “the first-mentioned person”) carries on in an accounting period a trade in respect of which a deduction under section 49 or 51 is claimed and, immediately before the beginning of that accounting period, the trade was not being carried on by him, then, unless—

(a) the first-mentioned person acquired the initial trading stock of the qualifying trade on a sale or transfer from another person on that person's ceasing to carry on the trade, and

(b) the stock so acquired is, or is included in, the first-mentioned person's trading stock as valued at the beginning of the accounting period,

the first-mentioned person shall be treated for the purposes of this Chapter as having at the beginning of the accounting period trading stock of such value as appears to the inspector (or, on appeal, to the Appeal Commissioners) to be reasonable and just having regard to all the relevant circumstances of the case and in particular to—

(i) movements during the accounting period in the costs of items of a kind comprised in the first-mentioned person's trading stock during the period, and

(ii) changes during that period in the volume of the trade carried on by him.

Adjustment of value of stock in certain circumstances.

55. —Where, before or after the beginning of a period of account, a person has acquired or disposed of trading stock otherwise than in the normal conduct of his trade, he shall be treated for the purposes of this Chapter as having at any relevant date in the period of account trading stock of such value as appears to the inspector (or, on appeal, to the Appeal Commissioners) to be reasonable and just having regard to all the circumstances of the case.

Successions, etc., to trade.

56. —(1) Subject to subsection (3), this section applies to a relevant disposal of a trade.

(2) There shall be a relevant disposal of a trade where—

(a) a trade carried on by one company (hereafter in this section referred to as “the predecessor”) is transferred to another company (hereafter in this section referred to as “the successor”) and section 20 of the Corporation Tax Act, 1976 , has effect in relation to the transfer, or

(b) a trade carried on by an individual or by persons in partnership (hereafter in this section referred to as “the predecessor”) is transferred to a company (hereafter in this section referred to as “the successor”) and at the date of the transfer not less than three-quarters of the ordinary share capital of the company is held by that individual or those persons, as the case may be, or

(c) a person (hereafter in this section referred to as “the successor”) succeeds to a trade on the death of a deceased person (hereafter in this section referred to as “the predecessor”) who carried on that trade, or

(d) a trade carried on by an individual (hereafter in this section referred to as “the predecessor”) is disposed of in his lifetime to a child of his (hereafter in this section referred to as “the successor”).

(3) This section shall not apply unless—

(a) in a case where subsection (2) (a) or (2) (b) applies, the trading stock of the trade is transferred at cost or market value, and

(b) in any case, the successor is resident in the State (and, if he is an individual, not resident elsewhere) and is within the charge to tax under Case I of Schedule D in respect of the trade.

(4) Where there is a relevant disposal of a trade and the predecessor (or, where subsection (2) (c) applies, the personal representatives of the predecessor) and the successor so elect, section 50 or 52 , as the case may be, shall not apply to the accounting period of the predecessor which ends with or includes the date of the relevant disposal but, for the purposes of section 50 or 52 , as the case may be, the successor shall be treated as if he were the person who had carried on the trade since the predecessor began to do so (or was treated by virtue of a previous application of this section as having begun to do so).

(5) An election under subsection (4) shall be made by notice in writing signed by both the predecessor (or where subsection (2) (c) applies, the personal representatives of the predecessor) and the successor and sent to the inspector not later than two years after the date of the relevant disposal.

(6) For the purposes of subsection (2) (c), a person shall be treated as succeeding on a death if he so succeeds—

(a) under a will or an intestacy (including a partial intestacy),

(b) by virtue of any provision of Part IX of the Succession Act, 1965 ,

(c) by survivorship, in the case of a joint tenancy, or

(d) as remainderman on the death of a tenant for life.

(7) In subsection (2) (d)child” has the same meaning as in section 27 (inserted by the Capital Gains Tax (Amendment) Act, 1978 ) of the Capital Gains Tax Act, 1975 .

Trade carried on by a partnership.

57. —The provisions of this Chapter shall apply with any necessary modifications to a trade carried on by a partnership as they apply to a trade carried on otherwise than by a partnership.

Assessments, etc.

58. —There shall be made such assessments, additional assessments, reductions of assessments or repayments of tax as are required to give effect to this Chapter.