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10 1985

FINANCE ACT, 1985

Chapter III

Income Tax, Corporation Tax and Capital Gains Tax

Amendment of section 550 (interest on overdue tax) of Income Tax Act, 1967.

12. Section 550 of the Income Tax Act, 1967 , shall have effect, and shall be deemed always to have had effect, as if in subsection (4) “and the provisions of section 4 of the Preferential Payments in Bankruptcy (Ireland) Act, 1889, and sections 98 and 285 of the Companies Act, 1963 ,” were inserted before “shall apply”.

Amendment of Chapter III (Income Tax: Relief for Investment in Corporate Trades) of Part I of Finance Act, 1984.

13. Chapter III of Part I of the Finance Act, 1984 , is hereby amended—

(a) in section 11 (1), in the definition of “associate”, by the insertion after “participator” of “, except that the reference in paragraph (a) of that section to a relative of a participator shall be excluded from such meaning”,

(b) in section 12 (4), by the substitution of the following paragraph for paragraph (b):

“(b) if the company is not carrying on that trade at the time when the shares are issued, unless the company—

(i) expends not less than 80 per cent. of the money subscribed for the shares on research and development work which is connected with and undertaken with a view to the carrying on of the trade, and begins to carry on the trade within three years after that time,

or

(ii) otherwise begins to carry on the trade within two years after that time.”,

(c) in section 15, by the insertion in paragraph (b) of subsection (7) of “and section 26 (2),” after “subsection”,

(d) in section 26—

(i) by the deletion in paragraph (b) of subsection (1)—

(I) of “was incorporated in the State and”, and

(II) in subparagraph (ii), of “wholly or mainly in the State”,

and

(ii) by the substitution, in subsection (2), of the following paragraph for paragraph (a):

“(a) that the subsidiary is a 51 per cent. subsidiary of the qualifying company;”,

and

(e) in section 27 (8), by the substitution of the following paragraphs for paragraphs (d) and (e):

“(d) that any amounts received by way of dividends or interest are, subject to a commission in respect of management expenses at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund has been established, to be paid without undue delay to the participants,

(e) that any charges to be made by way of management or other expenses in connection with the establishment, the running, the winding down or the terminating of the fund shall be at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund is established,”,

and the said definition of “associate”, the said paragraph (b) of subsection (7) of section 15, and the said paragraph (b) of subsection (1) of section 26, as so amended, are set out in the Table to this section.

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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, except that the reference in paragraph (a) of that section to a relative of a participator shall be excluded from such meaning;

(b) In this subsection and section 26 (2), “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 .

(b) the subsidiary or each subsidiary is a company—

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

(ii) which exists solely for the purpose of carrying on 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.

Amendment of section 18 (profits from the occupation of certain lands) of Finance Act, 1969.

14. —(1) Section 18 of the Finance Act, 1969 , is hereby amended—

(a) as respects income tax for the year 1985-86 and subsequent years of assessment, and

(b) as respects corporation tax for an accounting period ending on or after the 6th day of April, 1985—

by the substitution in subsection (2) of the following paragraph for paragraph (b):

“(b) (i) to the owner of a stallion which is ordinarily kept on land in the State from the sale of services of mares within the State by the stallion or to the part-owner of such a stallion from the sale of such services or of rights to such services, or

(ii) to the part-owner of a stallion which is ordinarily kept on land outside the State from the sale of services of mares by the stallion or of rights to such services where the part-owner carries on in the State a trade which consists of or includes bloodstock breeding, and it is shown to the satisfaction of the inspector or, on appeal, to the satisfaction of the Appeal Commissioners, that the part-ownership of the stallion was acquired and is held primarily for the purposes of the service by the stallion of mares owned or partly owned by the part-owner of the stallion in the course of that trade, or”.

(2) This section shall not apply to profits or gains arising before the 6th day of April, 1985.

Amendment of section 21 (payments to universities) of Finance Act, 1973.

15. —The Finance Act, 1973 , is hereby amended, as respects the year 1985-86 and subsequent years of assessment, by the substitution of the following section for section 21:

“Payments to universities and other approved bodies.

21.—(1) Where a person carrying on a trade or profession—

(a) pays any sum—

(i) on or after the 6th day of April, 1973, to an Irish university, or

(ii) on or after the 6th day of April, 1985, to an approved body,

for the purpose of enabling the university or the approved body to undertake research in, or engage in the teaching of, approved subjects, and

(b) the sum so paid is not income to which section 439 of the Income Tax Act, 1967 , applies,

the sum so paid shall, if not otherwise so deductible, be deducted as an expense in computing the profits or gains of the person's trade or profession.

(2) For the purposes of this section—

approved body’ means—

(a) the National Institute for Higher Education, Dublin,

(b) the National Institute for Higher Education, Limerick,

(c) the College of Industrial Relations, Ranelagh, Dublin, or

(d) any of the following colleges established under the provisions of the Vocational Education Act, 1930

(i) colleges forming part of the Dublin Institute of Technology,

(ii) the Limerick College of Art, Commerce and Technology, or

(iii) regional technical colleges;

'approved subjects' means—

(a) industrial relations,

(b) marketing, or

(c) any other subject which is approved for the purposes of this section by the Minister for Finance.”.

Gifts to the President's Award Scheme.

16. —(1) (a) In this section—

tax” means income tax or corporation tax, as the case may be;

the President's Award Scheme” means the award scheme known as “‘Gaisce’—The President's Award” established under the patronage of Uachtarán na hÉireann by trust deed dated the 28th day of March, 1985.

(b) This section applies to a gift of money which—

(i) is made on or before the 5th day of April, 1986, to the trustees of the President's Award Scheme to be applied by them for the purposes of that scheme, and

(ii) is not deductible in computing for the purposes of tax the profits or gains of a trade or profession or is not income to which the provisions of section 439 of the Income Tax Act, 1967 , apply.

(2) Where a person proves that he has made a gift to which this section applies and claims relief from tax by reference thereto, the provisions of subsection (3) or, as the case may be, subsection (4) shall apply.

(3) For the purposes of income tax for the year of assessment in which a person makes a gift to which this section applies, the amount thereof shall, subject to subsection (4), be deducted from or set off against any income of the person chargeable to income tax for that year and tax shall, where necessary, be discharged or repaid accordingly; and the total income of the person or, where the person is a wife whose husband is assessed to income tax in accordance with the provisions of section 194 (inserted by the Finance Act, 1980 ) of the Income Tax Act, 1967 , the total income of the husband shall be calculated accordingly:

Provided that relief under this section shall not be given to a person for a year of assessment—

(a) if the amount of the gift (or the aggregate of the amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, does not exceed £100, or

(b) to the extent to which the amount of the gift (or the aggregate of the amounts of gifts) made by him in that year, being a gift or gifts, as the case may be, to which this section applies, exceeds £10,000.

(4) (a) Subject to paragraph (b), where a gift to which this section applies is made by a company the amount thereof shall, for the purposes of corporation tax, be deemed to be a loss incurred by the company in a separate trade in the accounting period of the company in which the gift is made.

(b) No relief under this section shall be given to a company in respect of a gift (or the aggregate of the amounts of gifts) made by it in any period of twelve months ending on the 5th day of April, being a gift or gifts, as the case may be, to which this section applies—

(i) if the amount of the gift (or the aggregate of the amounts of those gifts) does not exceed £100, or

(ii) to the extent to which the amount of the gift (or the aggregate of the amounts of those gifts) exceeds £10,000.

Farming: amendment of provisions relating to relief in respect of increase in stock values.

17. —(1) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended by the substitution of “1985” for“1984” (inserted by the Finance Act, 1984 )—

(a) in paragraph (iv) (inserted by the Finance Act, 1979 ) of the proviso to subsection (4) (a), and

(b) in each place where it occurs in subsections (7) and (9) (inserted by the Finance Act, 1984 ),

and the said paragraph (iv), the said subsection (7) (apart from the proviso) and the said subsection (9) (apart from the proviso), as so amended, are set out in the Table to this subsection.

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(iv) a deduction shall not be allowed under the provisions of this section in computing a company's trading income for any accounting period which ends on or after the 6th day of April, 1985.

(7) Where in relation to an accounting period a company's opening stock value exceeds its closing stock value, the amount of the excess (in this section referred to as the company's “decrease in stock value”) shall, if the accounting period ends on a date before the 6th day of April, 1985, be treated in the computation of the company's trading income for the purposes of corporation tax, as a trading receipt of the company's trade for that accounting period:

(9) In the computation of a company's trading income for the purposes of corporation tax for any accounting period which ends on or after the 6th day of April, 1985, in which there is a decrease in stock value, there shall be treated as a trading receipt of the company's trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the company's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1985,

B is the aggregate amount of the company's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1985, and

C is the aggregate of the amounts which under this subsection are treated as trading receipts of the company's trade for preceding accounting periods:

(2) Section 12 of the Finance Act, 1976 , is hereby amended—

(a) by the substitution in subsection (3) of “1985-86” for “1984-85” (inserted by the Finance Act, 1984 ), and

(b) by the substitution of “1985” for “1984” in each place where it occurs in subsections (5) and (6) (inserted by the Finance Act, 1984 ),

and the said subsection (3), the said subsection (5) (apart from the proviso) and the said subsection (6) (apart from the proviso), as so amended, are set out in the Table to this subsection.

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(3) Any deduction allowed by virtue of this section in computing a person's trading profits for an accounting period shall not have effect for any purpose of the Income Tax Acts for any year of assessment prior to the year 1974-75 or later than the year 1985-86.

(5) In the computation of a person's trading profits for an accounting period in which there is a decrease in stock value and which ends on a date in the period from the 6th day of April, 1976, to the 5th day of April, 1985, the amount of that decrease shall be treated as a trading receipt of the trade for that accounting period:

(6) In the computation of a person's trading profits for any accounting period in which there is a decrease in stock value and which ends on or after the 6th day of April, 1985, there shall be treated as a trading receipt of the trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the person's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1985,

B is the aggregate amount of the person's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1985, and

C is the aggregate of the amounts which are treated as trading receipts of the person's trade for preceding accounting periods which ended on or after the 6th day of April, 1985:

(3) This section shall have effect only as respects a trade of farming.

Amendment of Chapter VIII (stock relief) of Part I of Finance Act, 1984.

18. —Chapter VIII of Part I of the Finance Act, 1984 , is hereby amended—

(a) in subsection (3) of section 49, by the substitution of “1985” for “1984”, and

(b) in the definition of “relevant year” in section 51, by the insertion after “1984-85” of “or 1985-86”,

and the said subsection and the said definition, as so amended, are set out in the Table to this section.

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(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, 1985.

relevant year” means the year 1984-85 or 1985-86;

Application of section 31 (building societies) of Corporation Tax Act, 1976.

19. —(1) Subject to subsections (2) and (3), section 40 (1) of the Finance Act, 1977 (as extended by section 52 of the Finance Act, 1980 ) shall have effect in relation to the year 1985-86 as it has effect in relation to the years 1980-81 and 1981-82 with the modification that the reduced rate which, by virtue of the said section 40 (1) (as extended by this section) would, for the year 1985-86, be 70 per cent. of the standard rate shall, for that year, be 80 per cent. of the standard rate.

(2) The Revenue Commissioners and any building society may, as respects the year 1985-86, enter into relevant arrangements but modified, to such extent as shall be directed by the Minister for Finance, in so far as they relate to the sums on which tax is to be calculated in part at the standard rate and in part at a reduced rate.

(3) Any amount representing income tax which, under an assessment made for a year of assessment (being the year 1985-86 or any subsequent year of assessment), a building society is liable to account for and pay by virtue of relevant arrangements entered into by the Revenue Commissioners and the society as respects that year of assessment shall be payable in two equal instalments as follows—

(a) the first instalment on the 1st day of October in that year of assessment or, if it is later, on the day next after the day on which the assessment is made, and

(b) the second instalment on the 1st day of April in that year of assessment or, if it is later, on the day next after the day on which the assessment is made,

and the provisions of the Income Tax Acts as to the recovery of tax shall apply to each instalment of the tax in the same manner as they apply to the whole amount of the tax.

(4) In this section—

building society” has the same meaning as in section 31 of the Corporation Tax Act, 1976 ;

relevant arrangements” means arrangements of the kind referred to in the said section 31.

Continuation of certain capital allowances.

20. —Each of the provisions of the Income Tax Act, 1967 , which are specified in the Table to this section and which were inserted by the Corporation Tax Act, 1976 , shall have effect as if the reference therein to the 1st day of April, 1985 (as provided for in section 35 of the Finance Act, 1984 ) were a reference to the 1st day of April, 1988.

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Subsection (4) (d) of section 251 (initial allowances)

Subsection (2A) (a) of section 254 (industrial building allowance)

Paragraph (ii) of the proviso to subsection (1) and paragraph (ii) of the proviso to subsection (3) of section 264 (annual allowances)

Paragraph (iii) of the proviso to subsection (1) of section 265 (balancing allowances and balancing charges)

Rented residential accommodation: deduction for expenditure on refurbishment.

21. —(1) (a) In this section—

the principal section” means section 23 of the Finance Act, 1981 ;

refurbishment”, in relation to a building, means either or both of the following, that is to say:

(i) the carrying out of any works of construction, reconstruction, repair or renewal, and

(ii) the provision or improvement of water, sewerage or heating facilities,

where the carrying out of such works, or the provision of such facilities, is certificate by the Minister for the Environment, in any certificate of reasonable cost granted by him in relation to any house contained in the building, to have been necessary for the purposes of ensuring the suitability as a dwelling of any house in the building and whether or not the number of houses in the building, or the shape or size of any such house, is altered in the course of such refurbishment;

relevant expenditure” means expenditure incurred in the qualifying period on the refurbishment of a specified building, other than expenditure attributable to any part (hereafter in this section referred to as a “non-residential unit”) of the building which, upon completion of the refurbishment, is not a house; and, for the purposes of this definition, where expenditure is attributable to the specified building in general (and not directly to any particular house or nonresidential unit comprised in the building upon completion of the refurbishment) such an amount of that expenditure shall be deemed to be attributable to a non-residential unit as bears to the whole of that expenditure the same proportion as the total floor area of the non-residential unit bears to the total floor area of the building;

specified building” means a building in which, prior to the refurbishment to which relevant expenditure relates, there are two or more houses and which, upon completion of the refurbishment, contains (whether in addition to any non-residential unit or not) two or more houses.

(b) This section shall be construed together with the principal section.

(2) As respects relevant expenditure, the principal section and subsections (2) to (4) of section 29 of the Finance Act, 1983 , shall, with any necessary modifications, apply as if the relevant expenditure had been incurred on the construction of the specified building to which that expenditure relates and as if—

(a) in the principal section—

(i) in paragraph (ii) of the definition of “qualifying lease”, the reference to the relevant cost of a house were a reference to the market value of the house on the date of completion of the refurbishment to which the relevant expenditure relates:

Provided that, in the case of a house which is a part of a building and which is not saleable apart from the building of which it is a part, the market value of the house on that date shall, for the purposes of this paragraph, be taken to be an amount which bears to the market value of the building on that date the same proportion as the total floor area of the house bears to the total floor area of the building,

(ii) in the said paragraph (ii) and in the proviso to subsection (2), respectively, the references to a premium or, as the case may be, to a premium or other sum were references to a premium, or a premium or other sum, which is payable on or subsequent to the date of completion of the refurbishment to which the relevant expenditure relates or which, if payable before that date, is so payable by reason of, or otherwise in connection with, the carrying out of the refurbishment,

(iii) the following definition were substituted for the definition of “qualifying period”:

“‘qualifying period’ means the period commencing on the 1st day of April, 1985, and ending on the 31st day of March, 1987;”,

(iv) the following paragraph were substituted for paragraph (iv) of the definition of “qualifying premises”:

“(iv) which, on the date of completion of the refurbishment to which the relevant expenditure (within the meaning of section 21 of the Finance Act, 1985) relates, is let (or, if it is not let on that date, is, without having been used after that date, first let) in its entirety under a qualifying lease and thereafter throughout the remainder of the relevant period (save for reasonable periods of temporary disuse between the ending of one qualifying lease and the commencement of another such lease) continues to be let under such a lease;”,

(v) the definition of “relevant cost” and subsections (6) (b) and (7) (b) were deleted,

(vi) the definition of “relevant period” had effect as if the period mentioned in the definition were a period of ten years beginning with the date of the completion of the refurbishment to which the expenditure relates or, if the premises was not let under a qualifying lease on that date, the period of ten years beginning with the date of the first such letting after the date of such completion,

(vii) in subsection (1) (c), the reference to the date of the first letting of the premises under a qualifying lease were a reference to the date of commencement of the relevant period, in relation to the premises, determined as respects the refurbishment to which the relevant expenditure relates,

(viii) the references in subsection (3) to relevant cost were deleted and the references therein to expenditure were references to relevant expenditure,

(ix) the references in subsections (6) (a) and (7) (a) to the relevant price paid on the sale were references to—

(I) the net price paid on the sale, or

(II) in case only a part of the relevant expenditure falls to be treated, for the purposes of subsection (2) of that section, as having been incurred in the qualifying period, the amount which bears to the said net price the same proportion as that part bears to the whole of that expenditure,

(x) the references in subsection (7) (a) to a house being used were references to the house being used subsequent to the incurring of the relevant expenditure,

(xi) in subsection (9) (a), “section 5” were substituted for “section 4”, and

(xii) in subsection (11), “or under section 21 of the Finance Act, 1985” were inserted after “section 24”,

and

(b) in subsections (2), (3) and (4) of the said section 29, references to expenditure to which that section applies were references to relevant expenditure.

(3) This section shall not apply in the case of any refurbishment unless it is shown that planning permission, in so far as it is required, in respect of the work carried out in the course of the refurbishment has been granted under the Local Government (Planning and Development) Acts, 1963 to 1983, or that such planning permission was not required.

(4) Expenditure in respect of which a person is entitled, by virtue of this section, to relief under the principal section shall not include any expenditure in respect of which any person is entitled to a deduction, relief or allowance under any provision of the Tax Acts other than the principal section.

(5) For the purposes of this section, expenditure shall not be regarded as incurred by a person in so far as it has been or is to be met directly or indirectly by the State, by any board established by statute or by any public or local authority.

Extension of application of relief for conversion of certain buildings.

22. —(1) Section 24 of the Finance Act, 1981 , and section 30 of the Finance Act, 1983 , shall apply with any necessary modifications to expenditure incurred in the period commencing on the 1st day of April, 1985, and ending on the 31st day of March, 1987, on the conversion into a house of a building not previously in use as a dwelling as they apply to expenditure incurred on the conversion into two or more houses of a building which, prior to the conversion, had not been in use as a dwelling or had been in use as a single dwelling.

(2) For the purposes of section 24 of the Finance Act, 1981 , and section 30 of the Finance Act, 1983 , or, as the case may be, of those sections as applied by subsection (1), expenditure incurred on the conversion of a building shall be deemed to include expenditure incurred in the period commencing on the 1st day of April, 1985, and ending on the 31st day of March, 1987, in the course of the conversion, on either or both of the following, that is to say:

(a) the carrying out of any works of construction, reconstruction, repair or renewal, and

(b) the provision or improvement of water, sewerage or heating facilities,

in relation to the building or any outoffice appurtenant thereto or usually enjoyed therewith, but shall not be deemed to include—

(i) any expenditure in respect of which any person is otherwise entitled to a deduction, relief or allowance under any provision of the Tax Acts, or

(ii) any expenditure attributable to any part (hereafter in this section referred to as a “non-residential unit”) of the building which, upon completion of the conversion, is not a house.

(3) For the purposes of paragraph (ii) of subsection (2), where expenditure is attributable to a building in general (and not directly to any particular house or non-residential unit comprised in the building upon completion of the conversion) such an amount of that expenditure shall be deemed to be attributable to a non-residential unit as bears to the whole of that expenditure the same proportion as the total floor area of the non-residential unit bears to the total floor area of the building.

(4) For the purposes of the application, by virtue of this section, of relief under section 23 of the Finance Act, 1981 , to any expenditure, that section shall have effect as if the following definition were substituted for the definition of “qualifying period”:

“‘qualifying period’ means the period commencing on the 1st day of April, 1985, and ending on the 31st day of March, 1987;”.

(5) For the purposes of this section, expenditure shall not be regarded as incurred by a person in so far as it has been or is to be met directly or indirectly by the State, by any board established by statute or by any public or local authority.