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10 1990

FINANCE ACT, 1990

Chapter III

Income Tax, Corporation Tax and Capital Gains Tax

Amendment of section 421 (procedure on appeals) of Income Tax Act, 1967 .

28. Section 421 of the Income Tax Act, 1967 , is hereby amended by the substitution of the following subsection for subsection (2):

“(2) Upon any appeal the Appeal Commissioners shall permit any barrister or solicitor to plead before them on behalf of the appellant or officers, either viva voce or in writing, and shall hear any accountant, being any person who has been admitted a member of an incorporated society of accountants, or any person who has been admitted a member of the body incorporated under the Companies Act, 1963 , on the 31st day of December, 1975, as ‘The Institute of Taxation in Ireland’:

Provided that the Commissioners may permit any other person representing the appellant to plead before them where they are satisfied that such permission should be given.”.

Tax treatment of profits, losses and capital gains arising from activities of a grouping (EEIG).

29. —(1) In this section “grouping” means a European Economic Interest Grouping formed upon the terms, in the manner and with the effects laid down in—

(a) Council Regulation (EEC) No. 2137/85 of 25 July 1985** on the European Economic Interest Groupings (EEIG), and

(b) the European Communities (European Economic Interest Groupings) Regulations, 1989 (S.I. No. 191 of 1989),

and references to members of a grouping shall be construed accordingly.

(2) Notwithstanding anything in the Tax Acts or in the Capital Gains Tax Acts, a grouping shall be neither—

(a) charged to income tax, corporation tax or capital gains tax, as the case may be, in respect of profits or gains or chargeable gains arising to it, nor

(b) entitled to relief for a loss sustained by it,

and any assessment required to be made on such profits or gains or chargeable gains, and any relief for a loss, shall, as appropriate, be made on and allowed to the members of a grouping in accordance with the provisions of this section.

(3) Section 2 (1) of the Capital Gains Tax Act, 1975 , is hereby amended by the substitution of the following definition for the definition of “company”—

“‘company’ means any body corporate but does not include a grouping within the meaning of section 29 of the Finance Act, 1990;”.

(4) Section 1 (5) of the Corporation Tax Act, 1976 , is hereby amended by the insertion in the definition of “company” of the following subparagraph after subparagraph (i)—

“(iA) a grouping within the meaning of section 29 of the Finance Act, 1990,”.

(5) The provisions of—

(a) Chapter III of Part IV of the Income Tax Act, 1967 , other than section 72 (8) of that Act, and

(b) section 4 (5) of, and paragraph 3 (5) of Schedule 4 to, the Capital Gains Tax Act, 1975 ,

shall apply, with any necessary modifications, to the activities of a grouping in the same manner as they apply to a trade or profession which is carried on by two or more persons in partnership.

(6) In particular, but without prejudice to the generality of subsection (5), the provisions mentioned therein shall, in their application for the purposes of this section, have effect as if—

(a) references to a partnership agreement were references to the contract forming or providing for the formation of a grouping,

(b) references to a partner were references to a member of a grouping, and

(c) anything done or required to be done by the precedent acting partner was done or required to be done by the grouping.

(7) This section shall be deemed to have come into effect on the 1st day of July, 1989.

Designated areas for urban renewal relief: extension of certain time limits.

30. —(1) For the purposes of the definition of “qualifying period” in each of the provisions of the Finance Act, 1986 , specified in the Table to this subsection, the reference to the 31st day of May, 1991 (as provided for by section 26 of the Finance Act, 1988 ) shall have effect as if it were a reference to the 31st day of May, 1993.

TABLE

Subsection (1) of section 42 (allowance in relation to construction of certain commercial premises).

Subsection (1) (a) of section 44 (allowance to owner-occupiers in respect of certain premises).

Subsection (1) (a) of section 45 (double rent allowance as a deduction in computing trading income).

(2) For the purposes of the definition of “qualifying period” in section 4 of the Finance Act, 1989 , the reference to the 31st day of May, 1991, shall have effect as if it were a reference to the 31st day of May, 1993.

Amendment of section 27 (designated areas for urban renewal relief) of Finance Act, 1987 .

31. Section 27 of the Finance Act, 1987 , is hereby amended by the substitution in subsection (1) (a) (ii) of “31st day of May, 1993,” for “31st day of May, 1991,”.

Amendment of section 45 (double rent allowance as a deduction in computing trading income) of Finance Act, 1986 .

32. Section 45 (as amended by section 30 ) of the Finance Act, 1986 , is hereby amended by the addition of the following proviso to subsection (2):

“Provided that—

(a) the aggregate of the amount by which the tax liability of an individual is reduced by reason of an allowance under this section and the amount by which his tax liability is reduced by reason of the deduction of the rent giving rise to the allowance shall not exceed the amount of the rent and there shall be made such adjustments in the amount of the relief as is necessary to give effect to this proviso, and

(b) where a person, being a person who holds an interest in a qualifying premises out of which interest a qualifying lease is created (directly or indirectly) in respect of that qualifying premises and in respect of the qualifying lease a claim for a further deduction under this section is made—

(i) takes under a qualifying lease a qualifying premises (hereafter in this proviso referred to as ‘the second-mentioned premises’) which is occupied by him for the purposes of his trade or profession, and

(ii) is, apart from this section, entitled, in the computation of the amount of the profits or gains of that trade or profession, to a deduction on account of rent, in respect of the second-mentioned premises,

then, unless the person shows that the taking on lease of the second-mentioned premises was not undertaken for the sole or main benefit of obtaining for him a further deduction on account of rent under the provisions of this section, he shall not be entitled in the computation of the amount of the profits or gains of his trade or profession to any further deduction on account of rent in respect of the second-mentioned premises.”.

Finance leases.

33. —(1) A finance lease, that is to say—

(a) a lease in respect of a qualifying premises where at the inception of the lease the aggregate of the current value of the minimum lease payments, including any initial payment but excluding any payment or part thereof for which the lessor will be accountable to the lessee, payable by the lessee in relation to the lease amounts to an amount equal to 90 per cent. or more of the fair value of the qualifying premises, or

(b) a lease which, in all the circumstances, is considered to provide in substance for the lessee the risks and benefits associated with ownership of the qualifying premises other than legal title to that premises,

shall not be a qualifying lease for the purposes of section 45 of the Finance Act, 1986 .

(2) (a) In this section—

current value”, in relation to minimum lease payments, means the value of those payments discounted to their present value at a rate which, when applied at the inception of the lease to—

(i) those payments, including any initial payment but excluding any payment or part thereof for which the lessor will be accountable to the lessee, and

(ii) any unguaranteed residual value of the qualifying premises, excluding any part of such value for which the lessor will be accountable to the lessee,

produces discounted present values the aggregate amount of which equals the amount of the fair value of the qualifying premises;

fair value”, in relation to a qualifying premises, means an amount equal to such consideration as might be expected to be paid for the premises on a sale negotiated on an arm's length basis less any grants receivable towards the purchase of the qualifying premises;

inception of the lease” means the earlier of the time the qualifying premises is brought into use or the date from which rentals under the lease first accrue;

minimum lease payments” means the minimum payments over the remaining part of the term of the lease to be paid to the lessor and includes any residual amount which is to be paid to the lessor at the end of the term of the lease and which is guaranteed by the lessee or by a person who is connected with the lessee;

qualifying premises” has the meaning assigned to it by section 45 of the Finance Act, 1986 ;

unguaranteed residual value”, in relation to a qualifying premises, means that part of the residual value of that premises at the end of a term of a lease, as estimated at the inception of the lease, the realisation of which by the lessor is not assured or is guaranteed solely by a person who is connected with the lessor.

(b) For the purposes of this section a person shall be regarded as connected with another person if he would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 .

Restriction of certain reliefs.

34. —(1) (a) In this section—

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

distribution” has the same meaning as it has for the purposes of the Act of 1976.

(b) For the purposes of this section—

(i) any question whether a person is connected with another shall be determined in accordance with section 157 of the Act of 1976, and

(ii) an amount specified or implied shall include an amount specified or implied in a foreign currency.

(2) (a) This section shall apply to shares in a company where any agreement, arrangement or understanding exists which could reasonably be considered to eliminate the risk that the person beneficially owning those shares—

(i) might, at or after a time specified in or implied by that agreement, arrangement or understanding, be unable to realize directly or indirectly, in money or money's worth, an amount so specified or implied, other than a distribution, in respect of those shares, or

(ii) might not receive an amount so specified or implied of distributions in respect of those shares.

(b) The reference in this subsection to the person beneficially owning shares shall be deemed to be a reference to both that person and any person connected with that person.

(3) Where any person receives a distribution on or after the 21st day of July, 1989, in respect of shares to which this section applies and, apart from the application of the provisions of this subsection to the distribution, section 64, 76 (2) (a), 93 (3) (a) or 170 (3) (a) of the Act of 1976 would apply to the distribution, then, notwithstanding any provision of the Tax Acts, other than subsection (5), and for all the purposes of those Acts—

(a) none of the said sections of the Act of 1976 shall apply to the distribution,

(b) that person shall not be entitled to a tax credit in respect of the distribution, and

(c) the distribution shall be treated as income chargeable to income tax or corporation tax, as the case may be, under Case IV of Schedule D.

(4) Notwithstanding any provision of Chapter III of Part I of the Finance Act, 1984 , relief from income tax shall not be allowed under that Chapter in respect of the amount subscribed for any shares to which this section applies issued on or after the 20th day of April, 1990.

(5) The provisions of subsection (3) shall not apply to a distribution received—

(a) by a company—

(i) none of the shares of which is beneficially owned by a person resident in the State, and

(ii) which, if this subsection had not been enacted, would not be chargeable to corporation tax in respect of any profits other than distributions which would be so chargeable by virtue of this section, or

(b) by a person who is not resident in the State.

(6) Notwithstanding subsection (5), the liability to income tax or corporation tax, as the case may be, of any person resident in the State, other than a company to which paragraph (a) of that subsection relates, shall be determined as if that subsection had not been enacted.

Certain unit trusts not to be collective investment undertakings.

35. —(1) This section shall apply to any unit trust scheme, within the meaning assigned to it by section 1 (1) of the Unit Trusts Act, 1972 , where there is, or was at any time, in respect of any or all units issued after the 14th day of June, 1973, a requirement for participation in that unit trust scheme that a policy of assurance upon human life be effected (but without those units becoming the property of the owner of the policy either as benefits or otherwise).

(2) Notwithstanding section 18 of the Finance Act, 1989 , a unit trust scheme to which this section applies, shall be deemed not to be a collective investment undertaking for the purposes of that section and the First Schedule to the said Act.

(3) This section shall have effect as on and from the 6th day of April, 1990.

Tax credits in respect of distributions.

36. —(1) The provisions of the Corporation Tax Act, 1976 , specified in paragraph 1 of the First Schedule shall have effect in relation to distributions made on or after the 6th day of April, 1991, as if the standard rate for the year 1991-92 and subsequent years of assessment were 25 per cent.

(2) The First Schedule shall have effect for the purpose of supplementing subsection (1).

O.J. No. L 199 of 31.7.1985.