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21 1978

FINANCE ACT, 1978

Chapter IV

Income Tax and Corporation Tax

Amendment of ssection 26 (increase of wear and tear allowances for certain machinery and plant) of Finance Act, 1971.

22. Section 26 (1) (inserted by the Corporation Tax Act, 1976 ) of the Finance Act, 1971 , is hereby amended by the deletion of “and before the 1st day of April, 1979,” and the said section 26 (1), as so amended, is set out in the Table to this section.

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26.—(1) In this section—

qualifying machinery or plant” means machinery or plant (other than vehicles suitable for the conveyance by road of persons or goods or the haulage by road of other vehicles) which is provided for use on or after the 1st day of April, 1971, in any area other than a designated area for the purposes of a trade or profession and which, at the time it is so provided, is unused and not secondhand;

designated area” has the same meaning as in the Industrial Development Act, 1969 .

Amendment of section 8 (suspension of shipping investment allowance) of Finance Act, 1973.

23. Section 8 (1) (as amended by the Finance Act, 1977 ) of the Finance Act, 1973 , is hereby amended by the deletion of “and before the 1st day of April, 1979,” and the said section 8 (1), as so amended is set out in the Table to this section.

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8.—(1) Section 246 of the Income Tax Act, 1967 , shall not apply to any expenditure incurred on or after the 24th day of July, 1973, on the purchase of a new ship.

Amendment of section 40 (application of section 31 (building societies) of Corporation Tax Act, 1976, for certain years of assessment) of Finance Act, 1977s.

24. Section 40 of the Finance Act, 1977 , is hereby amended by the substitution of “four” for “two” in each place where it occurs in subsection (1), and the said subsection (1), as so amended, is set out in the Table to this section.

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(1) Notwithstanding the proviso to section 31 (1) of the Corporation Tax Act, 1976 , any arrangements entered into by the Revenue Commissioners and any building society as respects the year of assessment 1975-76, in so far as they provide for payment of an amount representing income tax calculated in part at the standard rate and in part at a reduced rate, may, with any necessary modifications, be continued for the four years of assessment immediately following for the purpose of determining, in relation to that building society, the amount representing income tax which is referred to in paragraph (a) of the said section 31 (1), and that section shall have effect in relation to any arrangements so continued for the said four years.

Increase of writing-down allowances for certain industrial buildings.

25. —(1) In this section “qualifying expenditure” means capital expenditure incurred, on or after the 2nd day of February, 1978, by a person to whom an allowance under section 264 (inserted by the Corporation Tax Act, 1976 ) of the Income Tax Act, 1967 , falls to be made on the construction of a building or structure which is to be an industrial building or structure occupied by the said person for a purpose specified in paragraph (a), (b) or (d) of section 255 (1) of the said Act:

Provided that where the expenditure is incurred for the purposes of the trade of hotel-keeping it shall not be regarded as qualifying expenditure unless it is incurred on the construction of premises which are registered in a register kept by Bord Fáilte Éireann under the Tourist Traffic Acts, 1939 to 1975.

(2) Where for any chargeable period an allowance falls to be made under the said section 264 in respect of qualifying expenditure, the allowance shall, subject to subsection (4) of that section, be increased by such amount as is specified by the person to whom the allowance is to be made and, in relation to a case in which this subsection has had effect, any reference in the Income Tax Acts to an allowance made under the said section 264 shall be construed as a reference to that allowance as increased under this section.

Allowances in respect of certain contributions to capital expenditure of local authorities.

26. —(1) In this section—

approved scheme” means a scheme undertaken by a local authority with the approval of the Minister for the Environment which has as its object or among its objects the treatment of trade effluents;

trade effluents” means liquid or other matter discharged into public sewers from premises occupied for the purposes of a trade.

(2) Where a person, for the purposes of a trade carried on or to be carried on by him, contributes a capital sum to expenditure by a local authority on the provision of an asset to be used for the purposes of an approved scheme, in so far as the scheme relates to the treatment of trade effluents, then such allowances, if any, shall be made to the person under the provisions of Part XIII, Part XV, or section 264 (inserted by the Corporation Tax Act, 1976 ) of the Income Tax Act, 1967 , as would have been made to him if the contribution had been expenditure on the provision, for the purposes of that trade, of a similar asset and the latter asset had continued at all material times to be in use for the purposes of the trade.

(3) The following provisions shall have effect in relation to a transfer of a trade or part of a trade for the purposes of which a contribution referred to in subsection (2) was made:

(a) where the transfer is of the whole trade, allowances which, if the transfer had not taken place, would have fallen to be made to the transferor under the said Part XIII or the said section 264 for chargeable periods ending after the date of the transfer shall be made to the transferee, and shall not be made to the transferor,

(b) where the transfer is of part only of the trade, paragraph (a) shall have effect with respect to so much of the allowance as is properly referable to the part of the trade transferred.

Amendment of provisions relating to relief in respect of increase in stock values.

27. —(1) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended by the substitution of “1978” for “1977s”—

(a) in paragraph (iii) of the proviso (inserted by the Finance Act, 1977 ) to subsection (4) (a),

(b) in subsection (7) (inserted by the Finance Act, 1977 ), and

(c) in subsection (9) (inserted by the Finance Act, 1977 ) in each place where it occurs,

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

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(iii) 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, 1978.

(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, 1978, 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, 1978, 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, 1978,

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, 1978, 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 “1978-79” for “1977-78” (inserted by the Finance Act, 1977 ),

(b) by the substitution of the following subsection for subsection (5) (inserted by the Finance Act, 1977 )—

“(5) In the computation of a person's trading income 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, 1978, the amount of that decrease shall be treated as a trading receipt of the trade for that accounting period:

Provided that the amount which is so treated for any accounting period shall not exceed an amount determined by the formula—

A−C

where—

A is the aggregate amount of the deductions which, under the provisions of this section, the person was entitled to make in computing his trading income for preceding accounting periods which ended on or after the 6th day of April, 1975, and

C is the aggregate of the amounts which, under the provisions of this subsection, were treated as trading receipts of the person's trade for preceding accounting periods.”,

(c) by the substitution of “1978” for “1977” in each place where it occurs in subsection (6) (inserted by the Finance Act, 1977 ), and

(d) by the insertion of the following subsection after subsection (7) (inserted by the Finance Act, 1977 )—

“(7A) Where a deduction allowed by virtue of this section in computing a person's trading profits of a trade for an accounting period has effect for the year 1978-79, the provisions of paragraphs (a), (b) and (c) of subsection (7) shall apply as they apply where a deduction allowed by virtue of this section has effect for the year 1977-78 with the modifications that—

(a) the reference to 1978-79 shall be construed as a reference to 1979-80,

(b) the reference to 1977 shall be construed as a reference to 1978,

(c) the reference to 1976-77 shall be construed as a reference to 1977-78, and

(d) the reference to 1977-78 shall be construed as a reference to 1978-79.”,

and the said subsection (3) and the said subsection (6) (other than 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 1978-79.

(6) In the computation of a person's trading income for any accounting period in which there is a decrease in stock value and which ends on or after the 6th day of April, 1978, 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, 1978,

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, 1978, 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, 1978:

Tax credit in respect of distributions.

28. —(1) In relation to distributions made on or after the 6th day of April, 1978, the provisions of the Corporation Tax Act, 1976 , specified in subsection (2) shall have effect as if the standard rate for the year 1978-79 and subsequent years of assessment were 30 per cent.

(2) The provisions referred to in subsection (1) are the following:

(a) sections 64 (2), 66 (2), 67, 82 (2), 82 (7), 83 (4), 88 (2), 167 (2) and 178,

(b) in subparagraph (ii) (as amended by the Finance Act, 1977 ) of section 66 (3) (b), the expression “income tax at the standard rate”,

(c) in subparagraph (iii) (inserted by the Finance Act, 1977 ) of the said section 66 (3) (b), the expression “standard rate per cent.” in each place where it occurs, and

(d) in section 79 (6), the definition of A in paragraph (b).

(3) Subsection (5) of section 45 of the Corporation Tax Act, 1976 , is hereby amended by the substitution for the words from “but the restriction” to the end of the subsection of “but the amount of the tax credit which may be so set off shall not exceed an amount determined by the formula

30 × (A − B)

__________

100

where—

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 43 (3), or, as the case may be, the portion, determined in accordance with subsection (4), of the income from investments which is included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 8 (3).”,

and the subsection, as so amended, is set out in the Table to this subsection.

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(5) Where an overseas life assurance company receives a distribution in respect of which it is entitled to a tax credit the company may claim to have that credit set off against any corporation tax assessed on the company under section 43 or 44 for the accounting period in which the distribution is received, but the amount of the tax credit which may be so set off shall not exceed an amount determined by the formula

30 × (A − B)

__________

100

where—

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 43 (3), or, as the case may be, the portion, determined in accordance with subsection (4), of the income from investments which is included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 8 (3).

(4) Section 64 (3) (c) (ii) of the Corporation Tax Act, 1976 , is hereby amended by the addition of the following proviso:

“Provided that the tax credit in respect of a distribution to which subparagraph (i) applies shall not exceed the amount which would be the amount of the tax credit in respect of the distribution if that tax credit were determined in accordance with the provisions of section 88 (2).”.

(5) Section 79 (6) of the Corporation Tax Act, 1976 , is hereby amended by the substitution in paragraph (b) for “determined by the formula /images/en.act.1978.0021.sec28.1.png” of “the income tax on which at the standard rate for that year is equal to an amount determined by the formula

D ×

A

______

100 − A

and the said paragraph (b), as so amended, is set out in the Table to this subsection.

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(b) where the company distributes, on or after the 27th day of November, 1975, its assets amongst its members or proprietors on the winding up or dissolution of the company the company shall be assessed to income tax for the year of assessment in which the winding up or dissolution occurs at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for that year is equal to an amount determined by the formula

D ×

A

______

100 − A

where—

A is the standard rate per cent. for the year of assessment in which the winding up or dissolution occurs, and

D is the amount by which the total value of the assets distributed to the members or proprietors on the winding up or dissolution exceeds the amount of the paid up share capital of the company.

(6) Section 178 (1) of the Corporation Tax Act, 1976 , is hereby amended by the substitution in the definition of A of “of assessment in which the dividend is paid” for “1976-77” and the said definition, as so amended, is set out in the Table to this subsection.

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A is the standard rate per cent. for the year of assessment in which the dividend is paid,

(7) (a) This subsection applies to a distribution that is made by a company on or after the 6th day of April, 1978, and to which section 64 of the Corporation Tax Act, 1976 , applies.

(b) The reference to certain tax credits in the definition of B in subsection (2) of the said section 64 shall, in relation to distributions to which the said section 64 applies and which—

(i) were received by a company that makes a distribution to which this subsection applies, and

(ii) were made before the date aforesaid, be construed as a reference to thirty-nine-forty-ninths of those tax credits.