PART VIII.

Trades, Professions and Vocations carried on in Partnership: Income Tax and Sur-tax.

49. —(1) In this Part of this Act—

“annual payment” means any payment from which, apart from any insufficiency of profits or gains of the person making it, tax is deductible under Rule 19 of the General Rules;

“balancing charge” means a balancing charge under Part V of the Finance Act, 1959 ;

“basis period” means, in relation to a year of assessment, the period on the profits or gains of which income tax for that year falls to be finally computed under Case I of Schedule D in respect of the trade in question or, where, by virtue of any Act, the profits or gains of any other period are to be taken to be the profits or gains of the said period, that other period;

“capital allowance” means any allowance, other than an allowance falling to be made in computing profits or gains, under Rule 6 of the Rules applicable to Cases I and II of Schedule D, section 5 or section 6 of the Finance Act, 1946 , Part V of the Finance Act, 1956 , Part IV of the Finance (Miscellaneous Provisions) Act, 1956 , Part V of the Finance Act, 1957 , or Part V or section 74 of the Finance Act, 1959 ;

“partnership trade” means a trade which is carried on by two or more persons in partnership;

“precedent partner” means in relation to a partnership the partner who, being resident in the State—

(a) is first named in the partnership agreement, or

(b) if there is no agreement, is named singly or with precedence to the other partners in the usual name of the firm, or

(c) is the precedent acting partner, if the person named with precedence is not an acting partner,

and any reference to precedent partner shall, in a case in which no partner is resident in the State, be construed as a reference to the agent, manager, or factor of the firm resident in the State;

“relevant period” means in relation to a partnership trade a continuous period the whole or part of which is after the 5th day of April, 1965—

(a) beginning at a time when either the trade was not carried on immediately before it by two or more persons in partnership or none of the persons then carrying on the trade in partnership was one of the persons who immediately before it carried on the trade in partnership, and

(b) continuing so long as (but only so long as) there has not occurred a time when either the trade is not carried on immediately after it by two or more persons in partnership or none of the persons then carrying on the trade in partnership is one of the persons who immediately after it carry on the trade in partnership,

subject to the proviso that, in the case of any such period which, apart from this proviso, would have begun before the 6th day of April, 1965, “the relevant period” shall be taken as having begun at the time, or at the last of two or more times, at which, a change having occurred in the partnership of persons then engaged in carrying on the trade, the persons so engaged immediately after the time fell to be treated under the Income Tax Acts as having set up or commenced the trade at that time.

(2) In relation to a case in which a partnership trade is from time to time during a relevant period carried on by two or more different partnerships of persons, any reference in this Part to the partnership shall, unless the context otherwise requires, be construed as including a reference to any partnership of persons by whom the trade has been carried on since the beginning of the relevant period and any reference to a partner shall be construed correspondingly.

(3) The provisions of this Part shall, with any necessary modifications, apply in relation to professions and vocations, as they apply in relation to trades.

50. —(1) The precedent partner of any partnership, when required to do so by a notice given to him in relation to any year of assessment by an inspector of taxes, shall, within the time limited by the notice, prepare and deliver to the inspector a return in the prescribed form of—

(a) all the sources of income of the partnership for the year of assessment (in this section referred to as the preceding year) immediately preceding the year of assessment in relation to which the notice is given;

(b) the amount of income from each source for the preceding year computed in accordance with subsection (2) of this section;

(c) such further particulars for the purposes of income tax (including sur-tax) for the preceding year or the year of assessment as may be required by the notice or indicated by the prescribed form.

(2) The amount of income from any source to be included in a return under this section shall be computed in accordance with the provisions of the Income Tax Acts save that the computation shall be made in all cases by reference to the preceding year :

Provided that—

(a) in the case of such interest as is referred to in section 3 of the Finance Act, 1956 , the computation shall be made without regard to that section;

(b) where, in the case of a trade, an account has been made up to a date within the preceding year or more accounts than one have been made up to dates within that year, the computation shall be made by reference to the period or to all the periods, where there are more than one, for which accounts have been made up as aforesaid.

(3) If a person delivers to any inspector of taxes a return in a prescribed form, he shall be deemed to have been required by a notice under this section to prepare and deliver that return.

(4) The Third Schedule to the Finance Act, 1963 , is hereby amended by the insertion in the first column thereof of “Finance Act, 1965 Section 50”.

(5) In proceedings for recovery of a penalty by virtue of subsection (4) of this section—

(a) a certificate signed by an inspector of taxes which certifies that he has examined his relevant records and that it appears from them that a stated notice was duly given to the defendant on a stated day shall be evidence until the contrary is proved that that person received that notice in the ordinary course,

(b) a certificate signed by an inspector of taxes which certifies that he has examined his relevant records and that it appears from them that, during a stated period, a stated return was not received from the defendant shall be evidence until the contrary is proved that the defendant did not, during that period, deliver that return,

(c) a certificate certifying as provided for in paragraph (a) or paragraph (b) of this subsection and purporting to be signed by an inspector of taxes may be tendered in evidence without proof and shall be deemed until the contrary is proved to have been signed by such inspector.

(6) In this section “prescribed” means prescribed by the Revenue Commissioners.

51. —(1) In the case of a partnership trade the Income Tax Acts shall, subject to the provisions of this Part of this Act, have effect in relation to any partner in the partnership as if for any relevant period—

(a) any profits or gains arising to him from the trade and any loss sustained by him therein were respectively profits or gains of, and loss sustained in, a trade (hereafter in this Part referred to as a several trade) carried on solely by him being a trade—

(i) set up or commenced at the beginning of the relevant period, or if he commenced to be engaged in carrying on the partnership trade at some time in the relevant period other than the beginning thereof, at the time when he so commenced, and

(ii) when he ceases to be engaged in carrying on the partnership trade, either during the relevant period or at the end thereof, permanently discontinued at the time when he so ceases, and

(b) he had paid the part he was liable to bear of any annual payment paid by the partnership.

(2) (a) For any year or period within the relevant period the amount of the profits or gains arising to any partner from his several trade, or the amount of loss sustained by him therein, shall, for the purposes of subsection (1) of this section, be taken to be so much of the full amount of the profits or gains of the partnership trade or, as the case may be, of the full amount of the loss sustained in the partnership trade as would fall to his share on an apportionment thereof made in accordance with the terms of the partnership agreement as to the sharing of profits and losses.

(b) Where the year or period (hereafter in this paragraph referred to as the period of computation) for which the profits or gains of, or the loss sustained in, the several trade of a partner is to be computed under this subsection, is, or is part of, a year or period for which an account of the partnership trade has been made up, sections 15 and 16 of the Finance Act, 1929 , shall apply in relation to the partner as if an account of his several trade had been made up for the period of computation.

(c) Where in the case of the several trade of a partner the basis period for any year of assessment begins before the 6th day of April, 1965, the profits or gains of that basis period shall be computed in accordance with the foregoing provisions of this subsection notwithstanding that those provisions were not in force in that period or some part thereof.

(3) For the purposes of subsection (2) of this section, the full amount of the profits or gains of the partnership trade for any year or period, or the full amount of the loss sustained in such trade in any year or period, shall, subject to section 53 of this Act, be determined by the inspector of taxes and any such determination shall be made as it would have fallen to be made if the trade—

(a) had been set up or commenced at the beginning of the relevant period, and

(b) where the relevant period has come to an end, had been permanently discontinued at the end of that period, and

(c) had at all times within the relevant period been carried on by one and the same person and everything done in the carrying on thereof to or by the persons by whom it was in fact carried on had been done to or by that person:

Provided that in a case in which the relevant period began at some time before the 6th day of April, 1965, and the trade did not fall to be treated for the purposes of income tax as having been set up or commenced at that time, the relevant period shall, for the purposes of this subsection, be deemed to have begun at the time at which the trade was treated for the purposes of income tax as having been set up or commenced and, in any such case, any profits or gains arising to any person from the trade, or any loss sustained by him in the trade, for any year or period within the relevant period during which he was engaged in the trade on his own account shall be deemed to be profits or gains arising to him from, or, as the case may be, loss sustained by him in, a partnership trade in which he was entitled during the year or period in question to the full amount of the profits or gains arising or was liable to bear the full amount of the loss.

(4) Where the several trade of a partner is, under subsection (1) of this section, deemed to have been set up or commenced before the 6th day of April, 1965, section 5 of the Finance Act, 1942 , shall apply as if this section had always had effect save that for the year 1964-65, where the claim under the said section 5 is for the year 1965-66, the amount of the assessment in respect of the profits or gains of the several trade shall, for the purposes of the said section 5, be taken to be the partner's share, computed in accordance with the Income Tax Acts, of the amount of the profits or gains of the partnership trade on which the partnership was assessed for the year 1964-65, no regard being had to any deduction made therefrom in respect of a loss or to any capital allowance or balancing charge made to or on the partnership.

(5) Where in relation to a partnership trade, the relevant period, having begun before the 6th day of April, 1964, ends within the year 1965-66, any additional assessment in respect of the profits or gains of the trade which, if this Part had not been enacted and the trade had fallen to be treated as permanently discontinued within the year 1965-66, might have been made, under paragraph (b) of subsection (1) of section 12 of the Finance Act, 1929 , for the year 1964-65 may be made notwithstanding the enactment of this Part.

(6) Where the shares to which the partners are entitled in the basis period for a year of assessment do not exhaust the profits of the trade carried on by the partnership for that period, an assessment shall be made under Case VI of Schedule D on the precedent partner in respect of the unexhausted portion of the profits and the precedent partner shall, if and when such balance falls to be paid to a person entitled thereto, be entitled to deduct from such balance any amounts of tax which have been assessed on and paid by him and he shall be acquitted and discharged of any such amounts.

(7) This section shall not cause any income which, apart from this section, is not earned income to become earned income.

52. —(1) The provisions of the Income Tax Acts as regards the making of capital allowances and balancing charges in charging the profits or gains of a trade shall, in relation to the several trade of a partner in a partnership, have effect subject to the following provisions of this section.

(2) Where for any year of assessment a claim has been made, as provided by subsection (9) of this section, by the precedent partner for the time being of any partnership, there shall be made to any partner in the partnership in charging the profits or gains of his several trade a capital allowance in respect of any expenditure or property equal to his appropriate share of any capital allowance for that year (excluding any amount carried forward from an earlier year) (hereafter in this section referred to as a joint allowance) which, apart from any insufficiency of profits or gains, might have been made in respect thereof in charging the profits or gains of the partnership trade if the Income Tax Acts had provided that those profits should be charged by joint assessment on the persons carrying on the trade in the year of assessment as if—

(a) those persons had at all times been carrying on the trade and everything done to or by their predecessors in, or in relation to, the carrying on thereof had been done to or by them, and

(b) the trade had been set up or commenced at the beginning of the relevant period and, where the relevant period has come to an end, had been permanently discontinued at the end of that period.

(3) For any year of assessment there shall be made on any partner in a partnership in charging the profits or gains of his several trade a balancing charge equal to his appropriate share of any balancing charge (hereafter in this section referred to as a joint charge) which would have fallen to be made for that year in charging the profits or gains of the partnership trade if the Income Tax Acts had provided that those profits should be charged as specified in subsection (2) of this section.

(4) Where at the end of the relevant period a person or a partnership of persons succeeds to a partnership trade and any property which, immediately before the succession takes place, was in use for the purposes of the partnership trade and, without being sold is, immediately after the succession takes place, in use for the purposes of the trade carried on by the successor or successors, subsection (1) of section 63 of the Finance Act, 1959 , shall apply as it applies where, by virtue of any of the provisions of Rule 11 of the Rules applicable to Cases I and II of Schedule D, a trade is to be treated as discontinued.

(5) Where for a partnership trade the relevant period began at some time before the 6th day of April, 1965, and the trade did not fall to be treated for the purposes of income tax as having been set up or commenced at that time, the relevant period shall, for the purposes of subsections (2) and (3) of this section, be deemed to have begun at the time at which the trade was treated for the purposes of income tax as having been set up or commenced.

(6) (a) In relation to any partnership trade the total amount of all joint allowances for any year of assessment and the total amount of all joint charges for that year shall, subject to section 53 of this Act, be determined by the inspector of taxes.

(b) Where after a determination has been made under paragraph (a) of this subsection the inspector becomes aware of any facts or events by reference to which the determination is in his opinion incorrect, he may from time to time and as often as appears to him to be necessary make a revised determination, and any such revised determination shall supersede any earlier determination and any such additional assessments or repayments of tax shall be made as may be necessary.

(7) (a) Subject to the provisions of paragraph (b) of this subsection, for any year of assessment the partners' appropriate shares of a joint allowance, or of a joint charge, shall be arrived at by apportioning the full amount thereof between the partners on the same basis as a like amount of profits arising in the trading period from the partnership trade, and accruing from day to day over that period, would fall to be apportioned in accordance with the terms of the partnership if any salary, interest on capital or other sum to which any partner was entitled without regard to the amount of the profits arising from the partnership trade had already been provided for.

In this paragraph “trading period” means, where the relevant period begins or ends during the year of assessment for which the joint allowance or joint charge is computed, the part of that year of assessment which falls within the relevant period or, in any other case, that year of assessment.

(b) If for any year of assessment all the partners (any deceased partner being represented by his legal representatives) allege, by notice in writing signed by them and sent to the inspector of taxes within twelve months after the end of the year of assessment, that hardship is caused to one or more partners by the apportionment of a joint allowance or joint charge on the basis set out in paragraph (a) of this subsection, the Revenue Commissioners may, on being satisfied that hardship has been caused, give such relief as in their opinion is just by making a new apportionment of the joint allowance or joint charge, and any such new apportionment shall for all the purposes of the Income Tax Acts have effect as if it were an apportionment made under paragraph (a) of this subsection and such additional assessments or repayments of tax shall be made as may be necessary.

(8) For any year of assessment the aggregate amount of all capital allowances brought forward shall, for the purpose of making the assessments on the partners, be deemed to be a joint allowance for that year and subsection (7) of this section shall apply accordingly.

In this subsection a capital allowance brought forward means—

(a) any capital allowance or part of a capital allowance falling to be made to the partnership for the year 1964-65 or any earlier year of assessment which might, if this Part had not been enacted, have been carried forward and made as a deduction in charging the profits or gains of the partnership trade for the year 1965-66, and

(b) any capital allowance or part of a capital allowance falling to be made to a partner for 1965-66 or a later year of assessment which, but for this subsection, might have been carried forward and made as a deduction in charging the profits or gains of the several trade of the partner for a year of assessment subsequent to that for which the capital allowance was computed.

(9) In relation to a partnership trade—

(a) any claim for a joint allowance for any year of assessment shall be made by the precedent partner as if it were a claim for a capital allowance falling to be made to him and shall be included in the return delivered by him, under section 50 of this Act, in relation to that year of assessment, and

(b) any claim for a joint allowance shall be deemed to be a claim by every partner for a capital allowance falling to be made to him being a capital allowance equal to his appropriate share of that joint allowance.

53. —(1) The inspector of taxes may give notice to the partnership concerned of any determination made by him under subsection (3) of section 51 or subsection (6) of section 52 of this Act by delivering a statement in writing thereof to the precedent partner for the time being of the partnership and all the provisions of the Income Tax Acts relating to appeals against assessments to income tax shall, with any necessary modifications, apply in relation to any determination and any notice of a determination as if they were respectively such an assessment and notice of such an assessment.

(2) Where a determination has become final and conclusive or, in the case of a determination under subsection (6) of section 52 of this Act has become final and conclusive subject to paragraph (b) of that subsection, no question as to its correctness shall be raised on the hearing or on the rehearing of an appeal by any partner either against an assessment in respect of the profits or gains of his several trade or against a determination by the inspector of taxes on a claim under section 34 of the Income Tax Act, 1918.

(3) Where on any appeal such as is mentioned in subsection (2) of this section any question arises as to an apportionment falling to be made under subsection (2) of section 51 or subsection (7) of section 52 of this Act and it appears that the question is material as respects the liability to income tax (for whatever year of assessment) of two or more persons, all those persons shall be notified of the time and place of the hearing and shall be entitled to appear and be heard by the Special Commissioners or to make representations to them in writing.

54. —(1) Where for any year of assessment a charge under section 50 of the Finance Act, 1959 (hereafter in this section referred to as a joint charge) would have fallen to be made in charging the profits or gains of a partnership trade if the Income Tax Acts had provided that those profits or gains should be charged as specified in subsection (2) of section 52 of this Act, there shall be made on any partner in the partnership in charging the profits or gains of his several trade a charge under the said section 50 equal to his appropriate share of the joint charge.

(2) For the purposes of subsection (1) of this section a partner's appropriate share of a joint charge shall be arrived at in the same way as his appropriate share of a joint charge within the meaning of section 52 of this Act is to be arrived at by virtue of subsection (7) of that section.

(3) Section 56 of the Finance Act, 1959 , is hereby amended by the substitution for subsection (2) of the following subsection:

“(2) Where, under the provisions of Chapter V of this Part of this Act as modified by Part VIII of the Finance Act, 1965 , charges under section 50 of this Act fall to be made on two or more persons as being the persons for the time being carrying on a trade, and the relevant period, within the meaning of the said Part VIII, comes to an end, the provisions of subsection (1) of this section shall have effect in relation to the ending of the relevant period as they have effect where a body corporate commences to be wound up :

Provided that—

(a) the additional sums which, under the said subsection, fall to be charged for the year in which the relevant period ends shall be aggregated and apportioned among the members of the partnership immediately before the ending of the relevant period according to their respective interests in the partnership profits at that time and each partner (or, if he is dead, his personal representatives) charged for his proportion, and

(b) each partner (or, if he is dead, his personal representatives) shall have the same right to require a reduction of the total income tax (including sur-tax) payable by him or out of his estate by reason of the increase as would have been exercisable by the personal representatives under the said subsection (1) in the case of a death, and the proviso to that subsection shall have effect accordingly but as if references to the amount of income tax (including sur-tax) which would have been payable by the deceased or out of his estate in the event therein mentioned were a reference to the amount of income tax (including sur-tax) which would in that event have fallen to be paid or borne by the partner in question or out of his estate.”

55. —(1) The following rule shall be substituted for Rule 11 of the Rules applicable to Cases I and II of Schedule D :

“11. (1) If at any time after the 5th day of April, 1965, a trade, profession or vocation which immediately before that time was carried on by an individual person (hereafter in this paragraph referred to as the predecessor) becomes carried on by another individual person or by a partnership of persons (including a partnership in which the predecessor is a partner), the tax payable for all years of assessment by the predecessor shall be computed as if the trade, profession or vocation had been permanently discontinued at that time.

(2) If at any time after the 5th day of April, 1965, an individual person (hereafter in this paragraph referred to as the successor) succeeds to a trade, profession or vocation which immediately before that time was carried on by another individual person or by a partnership of persons (including a partnership in which the successor was a partner), the tax payable for all years of assessment by the successor shall be computed as if he had set up or commenced the trade, profession or vocation at that time.

(3) In the case of the death of a person who, if he had not died, would, under the provision of this rule, have become chargeable to income tax for any year, the tax which would have been so chargeable shall be assessed and charged upon his executors or administrators, and shall be a debt due from and payable out of his estate.”

(2) Paragraph (2) of Rule 19 of the Rules applicable to Cases I and II of Schedule D is hereby amended by the substitution of “any of the provisions of the Income Tax Acts” for “Rule 11 of these Rules (as amended by section 13 of the Finance Act, 1929 (No. 32 of 1929))”.

(3) Rule 5 of the General Rules is hereby amended by the addition of the following proviso:

“Provided that in the case of a partnership, the precedent partner, or if there is no precedent partner, the factor, agent, receiver, branch, or manager shall be deemed to be the agent of a non-resident partner.”

(4) Subsection (3) of section 31 of the Finance Act, 1959 , is hereby amended by the substitution of “of the provisions of the Income Tax Acts” for “provisions in Rule 11 of the Rules applicable to Cases I and II of Schedule D”.

(5) Subsection (1) of section 37 of the Finance Act, 1959 , is hereby amended by the insertion of “, subject to section 52 of the Finance Act, 1965 ,” before “be made to or on the person”.

(6) Subsection (2) of section 37 of the Finance Act, 1959 , is hereby amended by the substitution of “arising to any partner from” for “of” where that word occurs firstly.

(7) Subsection (4) of section 37 of the Finance Act, 1959 , is hereby amended by the insertion of “, under subsection (3) of section 51 of the Finance Act, 1965 ,” before “the profits and gains”.

(8) Subsection (3) of section 57 of the Finance Act, 1959 , is hereby amended by the substitution of “any of the provisions of the Income Tax Acts” for “Rule 11 of the Rules applicable to Cases I and II of Schedule D”.

(9) Subsection (2) of section 63 of the Finance Act, 1959 , is hereby amended by the insertion of “Rule 6 of the Rules applicable to Cases I and II of Schedule D, Part V of the Finance Act, 1956 , Part IV of the Finance (Miscellaneous Provisions) Act, 1956 , or” before “any of the provisions” and the insertion of “, subject to section 52 of the Finance Act, 1965 ,” before “be made to or on the person”.

(10) Subsection (7) of section 4 of the Finance Act, 1960 , is hereby amended by the insertion of “prior to 1965-66” in paragraph (a) before “for which” and the insertion of “for the year of assessment 1964-65” in paragraph (b) before “shall be”.

(11) Subsection (8) of section 4 of the Finance Act, 1960 , is hereby amended by the insertion of “or where by reference to subparagraph (ii) of paragraph (a) of subsection (1) of section 51 of the Finance Act, 1965 , a several trade of a partner has been deemed to have been permanently discontinued,” after “Cases I and II of Schedule D”.

(12) Subsection (2) of section 5 of the Finance Act, 1963 , is hereby amended by the addition of the following proviso:

“Provided that, where a claim under section 34 of the Income Tax Act, 1918, is made for 1964-65 by a person who is a partner in a partnership in respect of a loss sustained in the partnership trade, then, if the year 1964-65 is the basis year for an assessment on him for the year 1965-66 in respect of the profits arising to him from the same partnership trade, he may require his share of the loss for 1964-65 to be determined as if an amount equal to his appropriate share of a joint allowance under subsection (7) of section 52 of the Finance Act, 1965 , were to be deducted in computing his share of the profits or gains or losses of the trade for the year of claim 1964-65, and a claim may be so made notwithstanding that apart from this allowance a loss has not been sustained in the trade by the partner making the claim.”