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10 1989

FINANCE ACT, 1989

PART VI

Anti-Avoidance

Transactions to avoid liability to tax.

86. —(1) (a) In this section—

the Acts” means—

(i) the Tax Acts,

(ii) the Capital Gains Tax Acts,

(iii) the Value-Added Tax Act, 1972 , and the enactments amending or extending that Act,

(iv) the Capital Acquisitions Tax Act, 1976 , and the enactments amending or extending that Act,

(v) Part VI of the Finance Act, 1983 , and the enactments amending or extending that Part, and

(vi) the statutes relating to stamp duty,

and any instrument made thereunder;

business” means any trade, profession or vocation;

notice of opinion” means a notice given by the Revenue Commissioners under the provisions of subsection (6);

tax” means any tax, duty, levy or charge which, in accordance with the provisions of the Acts, is placed under the care and management of the Revenue Commissioners and any interest, penalty or other amount payable pursuant to those provisions;

tax advantage” means—

(i) a reduction, avoidance or deferral of any charge or assessment to tax, including any potential or prospective charge or assessment, or

(ii) a refund of or a payment of an amount of tax, or an increase in an amount of tax, refundable or otherwise payable to a person, including any potential or prospective amount so refundable or payable,

arising out of, or by reason of, a transaction, including a transaction where another transaction would not have been undertaken or arranged to achieve the results, or any part of the results, achieved or intended to be achieved by the transaction;

tax avoidance transaction” has the meaning assigned to it by subsection (2);

tax consequences” means, in relation to a tax avoidance transaction, such adjustments and acts as may be made and done by the Revenue Commissioners pursuant to subsection (5) in order to withdraw or deny the tax advantage resulting from the tax avoidance transaction;

transaction” means—

(i) any transaction, action, course of action, course of conduct, scheme, plan or proposal, and

(ii) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable or intended to be enforceable by legal proceedings, and

(iii) any series of or combination of the circumstances referred to in paragraphs (i) and (ii),

whether entered into or arranged by one person or by two or more persons—

(I) whether acting in concert or not, or

(II) whether or not entered into or arranged wholly or partly outside the State, or

(III) whether or not entered into or arranged as part of a larger transaction or in conjunction with any other transaction or transactions.

(b) In subsections (2) and (3), for the purposes of the hearing or rehearing under subsection (8) of an appeal made under subsection (7) or for the purposes of the determination of a question of law arising on the statement of a case for the opinion of the High Court, the references to the Revenue Commissioners shall, subject to any necessary modifications, be construed as references to the Appeal Commissioners or to a judge of the Circuit Court or, to the extent necessary, to a judge of the High Court, as appropriate.

(2) For the purposes of this section and subject to subsection (3), a transaction is a “tax avoidance transaction” if, having regard to any one or more of the following, that is to say—

(a) the results of the transaction,

(b) its use as a means of achieving those results, and

(c) any other means by which the results or any part of the results could have been achieved,

the Revenue Commissioners form the opinion that—

(i) it gives rise to, or, but for this section, would give rise to, a tax advantage, and

(ii) the transaction was not undertaken or arranged primarily for purposes other than to give rise to a tax advantage,

and references in this section to the Revenue Commissioners forming an opinion that a transaction is a tax avoidance transaction shall be construed as references to them forming an opinion with regard to the transaction in accordance with the provisions of this subsection.

(3) Without prejudice to the generality of the provisions of subsection (2), in forming an opinion in accordance with that subsection and subsection (4), as to whether or not a transaction is a tax avoidance transaction, the Revenue Commissioners shall not regard the transaction as being a tax avoidance transaction if they are satisfied that—

(a) notwithstanding that the purpose or purposes of the transaction could have been achieved by some other transaction which would have given rise to a greater amount of tax being payable by the person, the transaction—

(i) was undertaken or arranged by a person with a view, directly or indirectly, to the realisation of profits in the course of the business activities of a business carried on by the person, and

(ii) was not undertaken or arranged primarily to give rise to a tax advantage,

or

(b) the transaction was undertaken or arranged for the purpose of obtaining the benefit of any relief, allowance or other abatement provided by any provision of the Acts and that transaction would not result directly or indirectly in a misuse of the provision or an abuse of the provision having regard to the purposes for which it was provided:

Provided that, in forming an opinion as aforesaid in relation to any transaction, the Revenue Commissioners shall have regard to—

(I) the form of that transaction,

(II) the substance of that transaction,

(III) the substance of any other transaction or transactions which that transaction may reasonably be regarded as being directly or indirectly related to or connected with, and

(IV) the final outcome and result of that transaction and any combination of those other transactions which are so related or connected.

(4) Subject to the provisions of this section, the Revenue Commissioners, as respects any transaction, may, at any time—

(a) form the opinion that the transaction is a tax avoidance transaction,

(b) calculate the tax advantage which they consider arises, or which, but for this section, would arise, from the transaction,

(c) determine the tax consequences which they consider would arise in respect of the transaction if their opinion were to become final and conclusive in accordance with subsection (5) (e), and

(d) calculate the amount of any relief from double taxation which they would propose to give to any person in accordance with the provisions of subsection (5) (c).

(5) (a) Where the opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction becomes final and conclusive they may, notwithstanding any other provision of the Acts, make all such adjustments and do all such acts as are just and reasonable (in so far as those adjustments and acts have been specified or described in a notice of opinion given under subsection (6) and subject to the manner in which any appeal made under subsection (7) against any matter specified or described in the notice of opinion has been finally determined, including any adjustments and acts not so specified or described in the notice of opinion but which form part of a final determination of any appeal as aforesaid) in order that the tax advantage resulting from a tax avoidance transaction shall be withdrawn from or denied to any person concerned.

(b) Subject to, but without prejudice to the generality of paragraph (a), the Revenue Commissioners may—

(i) allow or disallow, in whole or in part, any deduction or other amount which is relevant in computing tax payable, or any part thereof,

(ii) allocate or deny to any person any deduction, loss, abatement, relief, allowance, exemption, income or other amount, or any part thereof, or

(iii) recharacterize for tax purposes the nature of any payment or other amount.

(c) Where the Revenue Commissioners make any adjustment or do any act for the purposes of paragraph (a), they shall afford relief from any double taxation which they consider would, but for this paragraph, arise by virtue of any adjustment made or act done by them pursuant to the foregoing provisions of this subsection.

(d) Notwithstanding any other provision of the Acts, where—

(i) pursuant to subsection (4) (c), the Revenue Commissioners determine the tax consequences which they consider would arise in respect of a transaction if their opinion, that the transaction is a tax avoidance transaction, were to become final and conclusive, and

(ii) pursuant to that determination, they specify or describe in a notice of opinion any adjustment or act which they consider would be, or be part of, the said tax consequences,

then, in so far as any right of appeal lay under subsection (7) against any such adjustment or act so specified or described, no right or further right of appeal shall lie under the Acts against that adjustment or act when it is made or done in accordance with the provisions of this subsection or against any adjustment or act so made or done that is not so specified or described in the notice of opinion but which forms part of the final determination of any appeal made under the said subsection (7) against any matter specified or described in the notice of opinion.

(e) For the purposes of this subsection an opinion of the Revenue Commissioners that a transaction is a tax avoidance transaction shall be final and conclusive—

(i) if, within the time limited, no appeal is made under subsection (7) against any matter or matters specified or described in a notice or notices of opinion given pursuant to that opinion, or

(ii) as and when all appeals made under the said subsection (7) against any such matter or matters have been finally determined and none of the appeals has been so determined by an order directing that the opinion of the Revenue Commissioners to the effect that the transaction is a tax avoidance transaction is void.

(6) (a) Where, pursuant to subsections (2) and (4), the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction, they shall immediately thereupon give notice in writing of the opinion to any person from whom a tax advantage would be withdrawn or to whom a tax advantage would be denied or to whom relief from double taxation would be given, if the opinion became final and conclusive, and the notice shall specify or describe—

(i) the transaction which in the opinion of the Revenue Commissioners is a tax avoidance transaction,

(ii) the tax advantage, or part thereof, calculated by the Revenue Commissioners which would be withdrawn from or denied to the person to whom the notice is given,

(iii) the tax consequences of the transaction determined by the Revenue Commissioners, in so far as they would refer to the person, and

(iv) the amount of any relief from double taxation calculated by the Revenue Commissioners which they would propose to give to the person in accordance with subsection (5) (c).

(b) Section 542 of the Income Tax Act, 1967 , shall, with any necessary modifications, apply for the purposes of a notice given under this subsection, or subsection (10), as if it were a notice given under that Act.

(7) Any person aggrieved by an opinion formed or, in so far as it refers to the person, a calculation or determination made by the Revenue Commissioners pursuant to subsection (4) may, by notice in writing given to the Revenue Commissioners within 30 days of the date of the notice of opinion, appeal to the Appeal Commissioners on the grounds and, notwithstanding any other provision of the Acts, only on the grounds that, having regard to all of the circumstances, including any fact or matter which was not known to the Revenue Commissioners when they formed their opinion or made their calculation or determination, and to the provisions of this section—

(a) the transaction specified or described in the notice of opinion is not a tax avoidance transaction, or

(b) the amount of the tax advantage, or the part thereof, specified or described in the notice of opinion which would be withdrawn from or denied to the person is incorrect, or

(c) the tax consequences specified or described in the notice of opinion, or such part thereof as shall be specified or described by the appellant in the notice of appeal, would not be just and reasonable in order to withdraw or to deny the tax advantage, or part thereof, specified or described in the notice of opinion, or

(d) the amount of relief from double taxation which the Revenue Commissioners propose to give to the person is insufficient or incorrect.

(8) The Appeal Commissioners shall hear and determine an appeal made to them under subsection (7) as if it were an appeal against an assessment to income tax and, subject to subsection (9), all the provisions of the Income Tax Act, 1967 , relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications:

Provided that on the hearing or rehearing of the appeal—

(a) it shall not be lawful to go into any grounds of appeal other than those specified in subsection (7), and

(b) at the request of the appellants, two or more appeals made by two or more persons pursuant to the same opinion, calculation or determination formed or made by the Revenue Commissioners pursuant to subsection (4) may be heard or reheard together.

(9) (a) On the hearing of an appeal made under subsection (7) the Appeal Commissioners shall have regard to all matters to which the Revenue Commissioners may or are required to have regard under the provisions of this section and—

(i) in relation to an appeal made on the grounds referred to in paragraph (a) of subsection (7), they shall determine the appeal, in so far as it is made on those grounds, by ordering, if they, or a majority of them—

(I) consider that the transaction specified or described in the notice of opinion, or any part of that transaction, is a tax avoidance transaction, that the opinion, or the opinion in so far as it relates to that part, is to stand good, or

(II) consider that, subject to such amendment or addition thereto as the Appeal Commissioners, or the said majority of them, deem necessary and as they shall specify or describe the transaction, or any part of it, specified or described in the notice of opinion, is a tax avoidance transaction, that the transaction, or that part of it, be so amended or added to and that, subject to the amendment or addition, the opinion, or the opinion in so far as it relates to that part, is to stand good, or

(III) do not so consider as referred to in clause (I) or (II), that the opinion is void,

or

(ii) in relation to an appeal made on the grounds referred to in paragraph (b) of subsection (7), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the tax advantage, or the part thereof, specified or described in the notice of opinion be increased or reduced by such amount as they shall direct or that it shall stand good,

or

(iii) in relation to an appeal made on the grounds referred to in paragraph (c) of subsection (7), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the tax consequences specified or described in the notice of opinion shall be altered or added to in such manner as they shall direct or that they shall stand good,

or

(iv) in relation to an appeal made on the grounds referred to in paragraph (d) of subsection (7), they shall determine the appeal, in so far as it is made on those grounds, by ordering that the amount of the relief from double taxation specified or described in the notice of opinion shall be increased or reduced by such amount as they shall direct or that it shall stand good.

(b) The provisions of this subsection shall, subject to any necessary modifications, apply to the rehearing of an appeal by a judge of the Circuit Court and, to the extent necessary, to the determination by the High Court of any question or questions of law arising on the statement of a case for the opinion of the High Court.

(10) The Revenue Commissioners may, at any time, amend, add to or withdraw any matter specified or described in a notice of opinion by giving notice (hereafter in this subsection referred to as the “notice of amendment”) in writing of the amendment, addition or withdrawal to each and every person affected thereby, in so far as the person is so affected, and the foregoing provisions of this section shall apply in all respects as if the notice of amendment were a notice of opinion and any matter specified or described in the notice of amendment were specified or described in a notice of opinion:

Provided that no such amendment, addition or withdrawal may be made so as to set aside or alter any matter which has become final and conclusive on the determination of an appeal made with regard to that matter under subsection (7).

(11) Where pursuant to subsections (2) and (4), the Revenue Commissioners form the opinion that a transaction is a tax avoidance transaction and, pursuant to that opinion, notices are to be given under subsection (6) to two or more persons, any obligation on the Revenue Commissioners to maintain secrecy or any other restriction upon the disclosure of information by the Revenue Commissioners shall not apply with respect to the giving of the notices as aforesaid or to the performance of any acts or the discharge of any functions authorised by this section to be performed or discharged by them or to the performance of any act or the discharge of any functions, including any act or function in relation to an appeal made under subsection (7), which is directly or indirectly related to the acts or functions so authorised.

(12) The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions, including the forming of an opinion, authorised by this section to be performed or discharged by the Revenue Commissioners and references in this section to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to an officer so nominated.

(13) This section shall apply as respects any transaction where the whole or any part of the transaction is undertaken or arranged on or after the 25th day of January, 1989, and as respects any transaction undertaken or arranged wholly before that date in so far as it gives rise to, or would, but for this section, give rise to—

(a) a reduction, avoidance or deferral of any charge or assessment to tax, or part thereof, where the charge or assessment arises by virtue of any other transaction carried out wholly on or after a date, or

(b) a refund or a payment of an amount, or of an increase in an amount, of tax, or part thereof, refundable or otherwise payable to a person where that amount, or increase in the amount, would otherwise become first so refundable or otherwise payable to the person on a date,

which could not fall earlier than the said 25th day of January, 1989, as the case may be.

Amendment of section 33 (connected persons) of Capital Gains Tax Act, 1975.

87. Section 33 of the Capital Gains Tax Act, 1975 , is hereby amended by the insertion after subsection (5) of the following subsection:

“(5A) (a) Where a person disposes of an asset to another person in such circumstances that—

(i) the proviso to subsection (5) would, but for this subsection, apply in determining the market value of the asset, and

(ii) the person is not chargeable to capital gains tax under section 4 in respect of any gain accruing on his disposal of the asset,

then, as respects any subsequent disposal of the asset by the other person, that other person's acquisition of the asset shall, for the purposes of this Act, be deemed to be for an amount equal to the market value of the asset determined as if the said proviso to subsection (5) had not been enacted.

(b) This subsection shall—

(i) apply to disposals made on or after the 25th day of January, 1989, and

(ii) have effect for the purposes of the determination of any deduction to be made from a chargeable gain accruing on or after the 25th day of January, 1989, in respect of an allowable loss, notwithstanding that the loss accrued, or, but for this section, would have accrued, on a disposal made before that day.”.

Schemes to avoid liability to tax under Schedule F.

88. —(1) This section is for the purposes of counteracting any scheme or arrangement undertaken or arranged by a close company, or to which the close company is a party, being a scheme or arrangement the purpose of which, or one of the purposes of which, is to secure that any shareholder in the close company avoids or reduces a charge or assessment to income tax under Schedule F by converting into a capital receipt of the shareholder any amount which would otherwise be available for distribution by the close company to the shareholder by way of a dividend.

(2) Subject to subsection (6), this section shall apply to a disposal of shares in a close company by a shareholder if, following the disposal or the carrying out of a scheme or arrangement of which the disposal is a part, the interest of the shareholder in any trade or business (hereafter in this section referred to as the “specified business”) which was carried on by the close company at the time of the disposal, whether or not the specified business continues to be carried on by the close company after the disposal, is not significantly reduced.

(3) Subject to subsection (4) and notwithstanding subsection (1) of section 84 of the Act of 1976 or any provision of the Capital Gains Tax Acts, the amount of—

(a) the proceeds in either or both money and money's worth received by a shareholder in respect of a disposal of shares in a close company to which this section applies, or

(b) if it is less than those proceeds, the excess of those proceeds over any consideration, being consideration which—

(i) is new consideration received by the close company for the issue of those shares, and

(ii) has not previously been taken into account for the purposes of this subsection,

shall, for all the purposes of the Tax Acts, be treated as a distribution (within the meaning of the Act of 1976) made, at the time of the disposal, by the close company to the shareholder.

(4) (a) The amount which at any time may be treated, under subsection (3), as a distribution made by a close company to a shareholder in respect of any disposal of shares in the close company shall not exceed the amount of the capital receipt, or the aggregate of the amounts of the capital receipts, which at such time has, or have, been received by the shareholder—

(i) in respect of the disposal, or

(ii) by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part:

Provided that—

(I) a capital receipt received by a shareholder at any time on or after the disposal shall in respect of such time result in so much of the amount mentioned in subsection (3) being treated as a distribution (which is made by the close company to the shareholder at the time of the disposal) as does not exceed the amount of the capital receipt, or the aggregate of the amounts of such capital receipts, which at such time on or after the disposal has or have been received by the shareholder, and

(II) if, as a result of a shareholder having received a capital receipt, a close company is treated as having made a distribution to him under subsection (3), any provision of the Income Tax Acts in respect of interest on unpaid tax shall apply, for the purposes of tax due in respect of that distribution, as if the tax were due and payable only from the day on which the shareholder received the capital receipt.

(b) For the purposes of this subsection, “capital receipt” means, as appropriate in the circumstances, any amount of either or both money and money's worth (other than shares issued by a close company carrying on the specified business) which—

(i) is received by a shareholder in respect of a disposal of shares or by reason of any act done pursuant to a scheme or arrangement of which the disposal is a part, and

(ii) is not, apart from this section, chargeable to income tax in the hands of the shareholder.

(5) Notwithstanding the provisions of section 88 (1) of the Act of 1976, where a shareholder in a close company is treated under this section as having received a distribution from the close company, the shareholder shall only be entitled to a tax credit in respect of the distribution to the extent that the close company has paid advance corporation tax in respect of the distribution in accordance with Chapter VII of Part I of the Finance Act, 1983 :

Provided that where a close company would but for the application of the provisions of section 41 of the said Finance Act, 1983 , have paid an amount or an additional amount of advance corporation tax in respect of a distribution, then the close company shall be treated as having paid such an amount or additional amount of advance corporation tax in respect of that distribution for the purposes of this subsection.

(6) This section shall not apply as respects a disposal of shares in a close company by a shareholder where it is shown to the satisfaction of the inspector or, on the hearing, or the rehearing, of an appeal, to the satisfaction of the Appeal Commissioners, or the judge of the Circuit Court, as the case may be, that the disposal was made for bona fide commercial reasons and not as part of a scheme or arrangement the purpose, or one of the purposes, of which was the avoidance of tax.

(7) (a) In this section—

the Act of 1976” means the Corporation Tax Act, 1976 ;

appeal” means an appeal made pursuant to the provisions of section 416 of the Income Tax Act, 1967 ;

close company” has the same meaning as it has, by reason of sections 94 and 95 of the Act of 1976, for the purposes of that Act;

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

new consideration” has the meaning assigned to it by section 87 of the Act of 1976;

shares” includes loan stock, debentures and any interest or rights in or over, or any option in relation to, shares, loan stock or debentures, and references to “shareholder” shall be construed accordingly.

(b) (i) For the purposes of this section, there shall be a disposal of shares by a shareholder where the shareholder disposes of shares, or is treated under the provisions of the Capital Gains Tax Acts as disposing of shares, and references to a disposal of shares shall include references to a part disposal of shares within the meaning of those Acts.

(ii) Where under any arrangement between a close company (hereafter in this subparagraph referred to as “the first-mentioned company”) and its, or some of its, shareholders (being any arrangement similar to an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation) another close company issues shares to those shareholders in respect of or in proportion to (or as nearly as may be in proportion to) their holdings of shares in the first-mentioned company, but the shares in the first-mentioned company are either retained by the shareholders or are cancelled, then those shareholders shall, for the purposes of this section, be treated as making a disposal, or a part disposal, as the case may be, of the shares in the first-mentioned company in exchange for those shares held by them in consequence of such arrangement.

(c) For the purposes of this section, the interest of a shareholder in a trade or business is not significantly reduced following a disposal of shares or the carrying out of a scheme or arrangement of which the disposal is a part, if, but only if, at any time after the disposal, the percentage—

(i) of the ordinary share capital of the close company carrying on the trade or business at such time which is beneficially owned by the shareholder at such time, or

(ii) of any profits, which are available for distribution to equity holders, of the close company carrying on the trade or business at such time to which the shareholder is beneficially entitled at such time, or

(iii) of any assets, available for distribution to equity holders on a winding up, of the close company carrying on the trade or business at such time to which the shareholder would be beneficially entitled at such time on a winding up of the close company,

is not significantly less than the percentage of the said ordinary share capital, profits or assets, as the case may be, of the close company carrying on the trade or business at any time prior to the disposal—

(I) which the shareholder beneficially owned, or

(II) to which the shareholder was beneficially entitled,

at such time prior to the disposal, and sections 109 to 111 and section 114 of the Act of 1976 shall apply, but without regard to section 107 (7) of the Act of 1976 in so far as it relates to those sections, with any necessary modifications, to the determination, for the purposes of this paragraph, of the percentage of share capital, or other amount, which a shareholder beneficially owns or is beneficially entitled to, as they apply to the determination for the purposes of Part XI of the Act of 1976 of the percentage of any such amount which a company so owns or is so entitled to.

(d) The value of any amount received in money's worth shall, for the purposes of this section, be the market value of the money's worth at the time of its receipt.

(8) This section shall apply to any disposal of shares made on or after the 25th day of January, 1989.

Annual payments for non-taxable consideration.

89. —(1) Section 433 of the Income Tax Act, 1967 , is hereby amended, as respects any yearly interest of money, annuity or other annual payment paid on or after the 9th day of May, 1989, by the deletion in subsection (1) of the words “>no assessment shall be made upon the person entitled to such interest, annuity, or annual payment, but” and the said subsection (1), as so amended, is set out in the Table to this subsection.

TABLE

(1) Where any yearly interest of money, annuity, or any other annual payment (whether payable within or outside the State, either as a charge on any property of the person paying the same by virtue of any deed or will or otherwise, or as a reservation thereout, or as a personal debt or obligation by virtue of any contract, or whether payable half-yearly or at any shorter or more distant periods), is payable wholly out of profits or gains brought into charge to tax, the whole of those profits or gains shall be assessed and charged with tax on the person liable to the interest, annuity, or annual payment, without distinguishing the same, and the person liable to make such payment, whether out of the profits or gains charged with tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled, on making such payment, to deduct and retain thereout a sum representing the amount of the tax thereon at the rate or rates of tax in force during the period through which the said payment was accruing due. The person to whom such payment is made shall allow such deduction upon the receipt of the residue of the same, and the person making such deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid.

(2) (a) Any payment to which this subsection applies—

(i) shall be made without deduction of income tax,

(ii) shall not be allowed as a deduction in computing the income or total income of the person by whom it is made, and

(iii) shall not be a charge on income for the purposes of corporation tax.

(b) This subsection applies to any payment made on or after the 9th day of May, 1989, which is—

(i) an annuity or other annual payment charged with tax under Case III of Schedule D, other than—

(I) interest,

(II) an annuity granted in the ordinary course of a business of granting annuities, or

(III) a payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest,

and

(ii) made under a liability incurred for consideration in money or money's worth, where all or any part of such consideration is not required to be brought into account in computing for the purposes of income tax or corporation tax the income of the person making the payment.

Arrangements reducing value of company shares.

90. —(1) In this section—

arrangement” includes—

(a) any act or omission by a person or by the trustees of a disposition;

(b) any act or omission by any person having an interest in shares in a company;

(c) the passing by any company of a resolution; or

(d) any combination of acts, omissions or resolutions referred to in paragraphs (a), (b) and (c);

company” means a private company within the meaning assigned by section 16(2) of the Principal Act;

company controlled by a donee or successor” has the same meaning as is assigned to “company controlled by the donee or the successor” by section 16 of the Principal Act;

event” includes—

(a) a death; and

(b) the expiration of a specified period;

the Principal Act” means the Capital Acquisitions Tax Act, 1976 ;

related shares” means the shares in a company, the market value of which shares is increased by any arrangement;

related trust” has the meaning assigned to it by subsections (2) and (4);

specified amount” means an amount equal to the difference between—

(a) the market value of shares in a company immediately before an arrangement is made, and ascertained under the provisions of section 16 or 17 of the Principal Act as if each share were a share in a company controlled by a donee or successor; and

(b) the market value of those shares, or of property representing those shares, immediately after the arrangement is made, and ascertained under the provisions of section 15 of the Principal Act,

and such specified amount shall be deemed to be situate where the company is incorporated.

(2) Where—

(a) a person has an absolute interest in possession in shares in a company; and

(b) any arrangement results in the market value of those shares, or of property representing those shares, immediately after that arrangement is made, being less than it would be but for that arrangement,

then, tax shall be payable in all respects as if a specified amount which relates to that arrangement were a benefit taken, immediately after that arrangement is made, from that person, as disponer, by—

(i) the beneficial owners of the related shares in that company; and

(ii) so far as the related shares in that company are held in trust (in this section referred to as the “related trust”) and have no ascertainable beneficial owners, by the disponer in relation to that related trust as if, immediately after that arrangement is made, that disponer was the absolute beneficial owner of those related shares,

in the same proportions as the market value of the related shares, which are beneficially owned by them or are deemed to be so beneficially owned, is increased by that arrangement.

(3) Where—

(a) an interest in property is limited by the disposition creating it to cease on an event;

(b) immediately before the making of an arrangement to which paragraph (c) relates, the property includes shares in a company; and

(c) the arrangement results in the market value of those shares, or of property representing those shares, immediately after that arrangement is made, being less than it would be but for that arrangement,

then, tax shall be payable under that disposition in all respects—

(i) where the interest in property is an interest in possession, as if such property included a specified amount which relates to that arrangement;

(ii) where the interest in property is not an interest in possession, as if it were an interest in possession and such property included a specified amount which relates to that arrangement; and

(iii) as if the event on which the interest was limited to cease under that disposition had happened, to the extent of the specified amount, immediately before that arrangement is made.

(4) Where—

(a) shares in a company are, immediately before the making of an arrangement to which paragraph (b) relates, subject to a discretionary trust under or in consequence of any disposition; and

(b) the arrangement results in those shares, or property representing those shares, remaining subject to that discretionary trust but, immediately after that arrangement is made, the market value of those shares, or of property representing those shares, is less than it would be but for that arrangement,

then, tax shall be payable under that disposition in all respects as if a specified amount, which relates to that arrangement, were a benefit taken immediately after that arrangement is made—

(i) by the beneficial owners of the related shares in that company; and

(ii) so far as the related shares in that company are held in trust (in this section referred to as the “related trust”) and have no ascertainable beneficial owners, by the disponer in relation to that related trust as if, immediately after that arrangement is made, that disponer was the absolute beneficial owner of those related shares,

in the same proportions as the market value of the related shares, which are beneficially owned by them or are deemed to be so beneficially owned, is increased by that arrangement.

(5) The provisions of subsections (2), (3) and (4) shall not prejudice any charge for tax in respect of any gift or inheritance taken under any disposition on or after the making of an arrangement referred to in those subsections and comprising shares in a company, or property representing such shares.

(6) Where shares in a company, which are held in trust under a disposition made by any disponer, are related shares by reason of any arrangement referred to in this section, any gift or inheritance taken under the disposition on or after the arrangement is made and comprising those related shares, or property representing those related shares, shall be deemed to be taken from that disponer.

(7) In relation to the tax due and payable in respect of any gift or inheritance taken under the provisions of paragraph (ii) of subsection (2) or paragraph (ii) of subsection (4), and notwithstanding the provisions of the Principal Act—

(a) the disponer in relation to the related trust shall not be a person primarily accountable for the payment of such tax; and

(b) a person who is a trustee of the related trust concerned for the time being at the date of the gift or at the date of the inheritance, or at any date subsequent thereto, shall be so primarily accountable.

(8) A person who is accountable for the payment of tax in respect of any specified amount, or part of a specified amount, taken as a gift or an inheritance under this section shall, for the purpose of paying the tax, or raising the amount of the tax when already paid, have power, whether the related shares are or are not vested in him, to raise the amount of such tax and any interest and expenses properly paid or incurred by him in respect thereof, by the sale or mortgage of, or a terminable charge on, the related shares in the relevant company.

(9) Tax due and payable in respect of a taxable gift or a taxable inheritance taken under this section shall be and remain a charge on the related shares in the relevant company.

(10) Where related shares are subject to a discretionary trust immediately after an arrangement is made in accordance with the provisions of this section, the amount by which the market value of such shares is increased by such arrangement shall be property for the purposes of a charge for tax arising by reason of the provisions of section 106 of the Finance Act, 1984 .

(11) This section shall apply only as respects a gift or an inheritance taken as a result of an arrangement which is made on or after the 25th day of January, 1989.