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FINANCE ACT, 1990
Building Societies: Change of Status
Section 57 (1).
1. (1) For the purposes of the allowances and charges provided for by section 14 of the Corporation Tax Act, 1976 , the trade of the society concerned shall not be treated as permanently discontinued and the trade of the successor company shall not be treated as a new trade set up and commenced by the successor company.
(2) There shall be made to or on the successor company in accordance with the said section 14 all such allowances and charges as would, if the society had continued to carry on the trade, have fallen to be made to or on it, and the amount of any such allowance or charge shall be computed as if the successor company had been carrying on the trade since the society began to do so and as if everything done to or by the society had been done to or by the successor company.
(3) The conversion of the society into the successor company shall not be treated as giving rise to any such allowance or charge.
2. (1) For the purposes of section 62 (which relates to trading stock of discontinued trade) of the Income Tax Act, 1967 , the financial trading stock of the society concerned shall be valued at an amount equal to its cost to the society.
(2) Where a society converts itself into the successor company, the vesting in the successor of any financial assets, the profits or gains on the disposal of which would be chargeable to tax under Case I of Schedule D, shall be treated, for the purposes of corporation tax, as not constituting a disposal of those assets by the society; but on the disposal of any of those assets by the successor, the profits or gains accruing to the successor shall be calculated (for the purposes of corporation tax) as if those assets had been acquired by the successor at their cost to the society.
(3) In this paragraph—
Capital gains: assets vested in the successor company, etc.
3. (1) For the purposes of capital gains tax and corporation tax on capital gains, the conversion of a society into the successor company shall not constitute—
(a) a disposal by the society of assets owned by it immediately before the conversion, or
(b) the acquisition at that time by the successor company of assets which, immediately before the conversion, were owned by the society.
(2) The provisions of the Capital Gains Tax Acts and of the Corporation Tax Act, 1976 , in so far as it relates to capital gains, shall apply where a society has converted itself into the successor company as if the successor company—
(a) had acquired the assets which vested in the successor company on conversion at the same time and for the same consideration at which they were acquired by the society,
(b) had been in existence as a company at all times since the society was incorporated,
(c) had done all things done by the society relating to the acquisition and disposal of the assets which vested in the successor company on conversion, and
(d) had done all other things done by the society prior to the conversion.
Capital gains: shares, and rights to shares, in successor company
4. (1) Where, in connection with the conversion, there are conferred on members of the society concerned any rights—
(a) to acquire shares in the successor company in priority to other persons, or
(b) to acquire shares in that company for consideration of an amount or value lower than the market value of the shares, or
(c) to free shares in that company,
any such rights so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 47 of the Capital Gains Tax Act, 1975 ) granted to and acquired by him for no consideration and having no value at the time of that grant and acquisition.
(2) Where, in connection with the conversion, shares in the successor company are issued by that company to a member of the society concerned, those shares shall be regarded for the purposes of capital gains tax—
(a) as acquired by the member for a consideration of an amount or value equal to the amount or value of any new consideration given by him for the shares or, if no new consideration is given, as acquired for no consideration, and
(b) as having, at the time of their acquisition by the member, a value equal to the amount or value of the new consideration so given or, if no new consideration is given, as having no value:
Provided that this subparagraph is without prejudice to the operation, where applicable, of subparagraph (1).
(3) Subparagraph (4) shall apply in any case where—
(a) in connection with the conversion, shares in the successor company are issued by that company to trustees on terms which provide for the transfer of those shares to members of the society for no new consideration, and
(b) the circumstances are such that in the hands of the trustees the shares constitute settled property, within the meaning of the Capital Gains Tax Acts.
(4) Where this subparagraph applies, then, for the purposes of capital gains tax—
(a) the shares shall be regarded as acquired by the trustees for no consideration;
(b) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by him for no consideration and as having no value at the time of its acquisition; and
(c) where on the occasion of a member becoming absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on his becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 8 (3) of the Capital Gains Tax Act, 1975 , for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees and, accordingly, section 15 (3) of that Act shall not apply in relation to that occasion.
(5) In this paragraph—
“free shares”, in relation to a member of the society, means any shares issued by the successor company to that member in connection with the conversion but for no new consideration;
“member”, in relation to the society, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;
“new consideration” means consideration other than—
(a) consideration provided directly or indirectly out of the assets of the society or the successor company, or
(b) consideration derived from a member's shares or other rights in the society or the successor company.
(6) Reference in this paragraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include references to the case where he would become so entitled but for being a minor or otherwise under a legal disability.