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8 1995

FINANCE ACT, 1995

Chapter IV

Corporation Tax

Rate of corporation tax.

54. —(1) As respects any accounting period ending on or after the 1st day of April, 1995, section 1 (as amended by the Finance Act, 1990 ) of the Corporation Tax Act, 1976 , is hereby amended by the substitution of the following subsection for subsection (1):

“(1) For the financial year 1974 and each subsequent financial year there shall be charged on profits of companies a tax, to be called corporation tax, at the rate of—

(a) 40 per cent. for—

(i) each financial year until and including the year 1994, and

(ii) that part of the financial year 1995 beginning on the 1st day of January, 1995, and ending on the 31st day of March, 1995;

and

(b) 38 per cent. for—

(i) that part of the financial year beginning on the 1st day of April, 1995, and ending on the 31st day of December, 1995, and

(ii) each subsequent financial year.”.

(2) The Fourth Schedule shall have effect for the purpose of supplementing this section.

Amendment of section 162 (surcharge on undistributed income of service companies) of Corporation Tax Act, 1976.

55. —(1) Section 162 (as amended by section 48 of the Finance Act, 1990 ) of the Corporation Tax Act, 1976 , is hereby amended in subsection (4)—

(a) by the substitution in paragraph (a) of “one-half” for “four-fifths”, and

(b) by the substitution in paragraph (b) of “one-half” for “one-fifth”.

(2) This section shall have effect as respects accounting periods ending on or after the 1st day of April, 1995:

Provided that for the purposes of this section where an accounting period begins before the 1st day of April, 1995, and ends on or after that day, it shall be divided into two parts, one beginning on the day on which the accounting period begins and ending on the 31st day of March, 1995, and the other beginning on the 1st day of April, 1995, and ending on the day on which the accounting period ends, and both of the parts shall be treated as if they were separate accounting periods.

Amendment of section 45 (credit for bank levy) of Finance Act, 1992.

56. Section 45 of the Finance Act, 1992 , is hereby amended in subsection (1) (a)—

(a) by the insertion after “section 200,” in subparagraph (II) of paragraph (iii) of the definition of “accounting profit” of “ section 142 of the Finance Act, 1995,”, and

(b) by the insertion after “section 200” in the definition of “levy payment” of “or section 142 of the Finance Act, 1995,”.

Relief for certain payments to National Cooperative Farm Relief Services Ltd. and certain payments made to its members.

57. —(1) In this section—

the agreement” means the agreement in writing dated the 16th day of May, 1995, between the Minister for Agriculture, Food and Forestry and the National Co-operative for the provision of financial support for the development of agricultural services together with every amendment of the agreement in accordance with Article 9.1 thereof;

the commencement date” means the 12th day of December, 1994, being the date specified in the agreement as the commencement date;

a member co-operative”, “the Minister”, “the National Co-operative” and “society” have the meanings respectively assigned to them in section 52 (1) of the Finance Act, 1994 .

(2) Notwithstanding any provision of the Corporation Tax Acts—

(a) a payment made under Article 3.1 (a) of the agreement by the Minister on or after the commencement date to the National Co-operative, and

(b) a transmission of monies under Article 3.4 in respect of payments under Article 3.1 (a) of the agreement by the National Co-operative on or after the commencement date to a member co-operative,

shall be disregarded for all of the purposes of those Acts.

Amendment of section 141 (particulars to be supplied by new companies) of Corporation Tax Act, 1976.

58. Section 141 of the Corporation Tax Act, 1976 , is hereby amended—

(a) in the proviso to subsection (1), by the substitution for “trade or profession” of “trade, profession or business”,

(b) by the insertion, after subsection (1), of the following subsections:

“(1A) Subject to subsection (1B), every company which is incorporated in the State and is neither resident in the State nor carrying on a trade, profession or business therein shall, in every case within thirty days of—

(a) the date on which it commences to carry on a trade, profession or business, wherever carried on, and

(b) any time at which there is a material change in information previously delivered by the company under this subsection, and

(c) the giving of a notice to the company by an inspector requiring a statement under this subsection,

deliver to the Revenue Commissioners a statement in writing containing particulars of—

(i) the name of the company;

(ii) the address of its registered office in the State and the address of its principal place of business;

(iii) the nature of the trade, profession or business;

(iv) the name and address of the secretary of the company;

(v) (I) where the company is controlled by a company the shares in which are listed in the official list of a recognised stock exchange and have been the subject of dealings on the said exchange in the period of 12 months ending at the time at which the statement is delivered, the name of that company and the address of its registered office, and

(II) in any other case, the name and address of any individual or individuals who have control of the company;

(vi) the territory in which the central management and control of the company is normally carried out; and

(vii) such other information as the Revenue Commissioners consider necessary for the purposes of determining the territory in which the company is resident for the purposes of tax.

(1B) Subsection (1A) shall not apply to a company (hereafter in this subsection referred to as the ‘first-mentioned company’) if at the time at which a statement under that subsection would, apart from this subsection, fall to be delivered, there is a company, which is a 90 per cent, subsidiary of the first-mentioned company, carrying on a trade or profession in the State.”,

and

(c) by the addition, after subsection (2), of the following subsection:

“(3) For the purposes of this section—

(a) sections 108 to 114 of the Corporation Tax Act, 1976 , shall apply for the purposes of this paragraph as they would apply for the purposes of Part XI of that Act if subsection (7) of section 107 of the said Act were deleted, and

(b) control shall be construed in accordance with section 102 of the Corporation Tax Act, 1976 .”.

Deduction for certain expenditure on research and development.

59. —(1) (a) In this section—

appropriate inspector” has the meaning assigned to it in section 9 of the Finance Act, 1988 ;

base period” means the period of 12 months ending immediately before the commencement of the first relevant period;

expenditure on research and development” means non-capital expenditure incurred by a company being—

(i) an amount equal to 115 per cent, of the aggregate of the amounts of—

(I) such part of the emoluments paid by the company to employees of the company engaged in the carrying out of research and development activities related to the company's trade as is laid out for the purposes of the said activities, and

(II) expenditure incurred by the company on materials or goods used solely by the company in the carrying out of research and development activities related to the company's trade:

Provided that expenditure referred to in clauses (I) and (II) incurred by a company (hereafter in this definition referred to as “the first-mentioned company”) which is a member of a group on behalf of another company which is a member of the group, the other company shall be treated for the purposes of the Corporation Tax Acts as having incurred the expenditure and the first-mentioned company shall be treated for those purposes as not having incurred the said expenditure,

and

(ii) a sum paid to another person, not being a person connected with the company, in order that such person may carry out research and development activities related to the company's trade;

group base expenditure on research and development” means the aggregate of the amounts of expenditure on research and development incurred in the base period by qualified companies which throughout that period are members of the group;

group expenditure on research and development”, in relation to a relevant period, means the aggregate of the amounts of expenditure on research and development—

(i) incurred, or treated as incurred, in the relevant period by qualified companies which throughout the relevant period are members of the group, and

(ii) which is certified as having been incurred by the said companies in certificates given to the companies by persons who are auditors of the companies appointed under section 160 of the Companies Act, 1963 , or under the law of any territory where any such company is duly incorporated and which corresponds to that section;

qualified company”, in relation to a relevant period, means a company which—

(i) throughout the relevant period carries on a trade which consists wholly or mainly of the manufacture of goods in the State:

Provided that trading operations of a company shall not be treated for the purposes of this section as the manufacture of goods in the State by virtue of any section of the Tax Acts other than section 39 of the Finance Act, 1980 ,

(ii) holds a certificate, given to it by Forbairt, which certifies that, in the opinion of Forbairt, the research and development activities which are proposed to be carried on by or on behalf of the company have the potential to achieve the purposes set out in paragraph (iii) of the definition of research and development activities,

(iii) notifies the appropriate inspector, before the commencement of the research and development activities, of its intention to carry out such activities or to have such activities carried out on its behalf,

(iv) maintains a record of expenditure incurred in the carrying on by it or on its behalf of research and development activities in accordance with a system, approved by Forbairt, of recording such expenditure, and

(v) does not, at any time during the period commencing on the 10th day of May, 1995, and ending 3 years after the commencement of the first relevant period, raise any amount through the issue of eligible shares (within the meaning of section 12 of the Finance Act, 1984 );

qualifying expenditure on research and development attributable to a qualified company”, in relation to a relevant period, means so much of the amount of qualifying group expenditure on research and development in the relevant period as bears to that amount the same proportion as the amount of expenditure on research and development incurred by the company in the relevant period bears to the group expenditure on research and development in the relevant period;

qualifying group expenditure on research and development”, in relation to a relevant period (hereafter in this definition referred to as the “said relevant period”), means an amount determined by the formula

E — (D + £25,000)

where—

E is the amount of group expenditure on research and development in the relevant period, and

D is the greater of—

(i) the amount of group base expenditure on research and development, and

(ii) the amount of group expenditure on research and development in any relevant period preceding the said relevant period:

Provided that—

(I) the qualifying group expenditure on research and development in relation to a relevant period shall not in any case exceed £150,000, and

(II) the aggregate of the amounts of qualifying group expenditure on research and development in all relevant periods shall not exceed the aggregate of the amounts specified in certificates given by Forbairt to companies which are members of the group;

relevant period” means—

(i) in the case of a company which is a member of a group the end of the accounting periods of the members of which coincide, the period of 12 months throughout which one or more members of the group carried on a trade and ending at the end of the first accounting period of the company which commences on or after the 1st day of June, 1995,

(ii) in the case of a company which is a member of a group the end of the accounting periods of which do not coincide, the period specified in a notice in writing made jointly by companies which are members of the group and given to the appropriate inspector within a period of 9 months after the end of the period so specified, being a period of 12 months throughout which one or more members of the group carries on a trade and ending at the end of the first accounting period of a company which is a member of the group which accounting period commences on or after the 1st day of June, 1995, and

(iii) in any other case, the period of 12 months commencing on the 1st day of June, 1995,

and each subsequent period of 12 months, commencing immediately after the end of the preceding relevant period, which falls wholly into the period of 3 years commencing at the beginning of the first relevant period;

research and development activities” means systematic, investigative or experimental activities which—

(i) are carried on wholly or mainly in the State,

(ii) involve innovation or technical risk, and

(iii) are carried on for the purpose of—

(I) acquiring new knowledge with a view to that knowledge having a specific commercial application, or

(II) creating new or improved materials, products, devices, processes or services,

and other activities carried on wholly or mainly in the State for a purpose directly related to the carrying on of activities of the kind referred to in paragraph (iii):

Provided that activities that are carried on by way of—

(A) market research, market testing, market development, sales promotion or consumer surveys,

(B) quality control,

(C) the making of cosmetic modifications or stylistic changes to products, processes or production methods,

(D) management studies or efficiency surveys, or

(E) research in social sciences, arts or humanities,

shall not be research and development activities.

(b) For the purposes of this section—

(i) two companies shall be deemed to be members of a group if one is an associated company (within the meaning of section 102 of the Corporation Tax Act, 1976 ) of the other,

(ii) a company and all its associated companies form a group:

Provided that a company which is not a member of a group shall be treated as if it were a member of a group which consists of that company and, accordingly, references to group expenditure on research and development, group base expenditure, and qualifying group expenditure on research and development shall be construed as if they were, respectively, references to expenditure on research and development, base expenditure and qualifying expenditure on research and development, and

(iii) systematic, investigative or experimental activities, or other activities, shall be regarded as carried on wholly or mainly in the State if, and only if, not less than 75 per cent, of the total amount expended in the course of such activities is expended in the State,

(iv) expenditure on research and development shall not be regarded as having been incurred by a company which is a member of a group if any expenditure on research and development incurred in a relevant period or in the base period by a company which is a member of the group has been or is to be met directly or indirectly by the State or any person other than a company which is a member of the group.

(2) (a) On making a claim in that behalf, a qualified company shall be entitled, in computing the trading income for an accounting period of a trade carried on by it, to deduct an amount equal to treble the qualifying expenditure on research and development attributable to the qualified company as is referable to the accounting period and the company shall be entitled to such a deduction in addition to any deduction to which the qualified company may be otherwise entitled in respect of expenditure incurred on research and development:

Provided that where the amount referred to in paragraph (a) exceeds an amount which would, apart from this subsection, be the income from the sale of goods of the trade so referred to, for the said accounting period, then the excess—

(i) shall not be deductible by virtue of the foregoing provisions of this subsection, and

(ii) shall be treated as a loss incurred in that trade, which is a loss from the sale of goods, for the purposes of relief under—

(I) section 16A or section 116A of the Corporation Tax Act, 1976 , or

(II) to the extent that such relief does not exceed the income from the sale of goods in the course of that trade in the accounting period for which that relief is given, section 16 (1) of the Corporation Tax Act, 1976 .

(b) In this subsection “income from the sale of goods” and “a loss from the sale of goods” have the same meaning respectively as they have in section 116A of the Corporation Tax Act, 1976 .

(3) For the purposes of subsection (2)

(a) where a relevant period coincides with an accounting period of a qualified company, the amount of qualifying expenditure on research and development attributable to the qualified company which relates to the accounting period of the company shall be the amount of the said qualifying expenditure attributable to the qualified company, and

(b) where the relevant period does not coincide with an accounting period of the company—

(i) the qualifying expenditure on research and development attributable to the qualified company shall be apportioned to the accounting periods which fall wholly or partly into the relevant period, and

(ii) the amount so apportioned to an accounting period shall be treated as the amount of qualifying expenditure on research and development attributable to the qualified company which relates to that accounting period of the company.

(4) Where a company makes a claim under this section the company shall be treated for the purpose of Chapter III of Part I of the Finance Act, 1984 , as not being a qualifying company in respect of any amount raised, at any time during the period commencing on the 10th day of May, 1995, and ending 3 years after the commencement of the first relevant period, by the issue of eligible shares (within the meaning of section 12 of the said Act of 1984).

(5) Section 157 of the Corporation Tax Act, 1976 , shall apply for the purposes of this section.

Amendment of section 23 (double taxation relief: supplementary) of Corporation Tax Act, 1976.

60. Section 23 of the Corporation Tax Act, 1976 , is hereby amended, as respects accounting periods ending on or after the 1st day of January, 1995—

(a) in subsection (2) by the substitution for “the corporation tax attributable to any income or gain (‘the relevant income or gain’) shall be determined in accordance with subsections (3) and (4).” of the following:

“the corporation tax attributable to any income or gain (hereafter in this subsection referred to as ‘the said income’ or ‘the said gain’, as the case may be) of a company shall, subject to subsections (3) and (4), be the corporation tax attributable to so much (hereafter in this section referred to as ‘the relevant income’ or ‘the relevant gain’, as the case may be) of the income or chargeable gains of the company computed in accordance with the Tax Acts and the Capital Gains Tax Acts, as is attributable to the said income or the said gain, as the case may be:

Provided that, for the purposes of this subsection, the relevant income of a company attributable to an amount receivable from the sale of goods, within the meaning of section 39C (inserted by the Finance Act, 1994 ) of the Finance Act, 1980 , shall be the sum which would, for the purposes of that section, be taken to be the amount of the income of the company referable to the amount so receivable.”,

(b) in subsection (3) by the addition of the following proviso:

“Provided that, where the corporation tax payable by the company for the relevant accounting period on the relevant income or gain is reduced by virtue of—

(a) section 41 (as amended by the Finance Act, 1994 ) of the Finance Act, 1980 , by any fraction, the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as reduced by that fraction,

(b) section 36 (2) (as amended by the Finance Act, 1993 ) of the Corporation Tax Act, 1976 , or section 17 (2) of the Finance Act, 1993 , the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as the standard rate of income tax by reference to which the corporation tax so payable is reduced, and

(c) section 36A (6) (inserted by the Finance Act, 1993 ) of the Corporation Tax Act, 1976 , the rate of corporation tax payable by the company on its income and chargeable gains for the relevant accounting period shall be treated as 10 per cent.,

for the purposes of computing the corporation tax attributable to that relevant income or gain, as the case may be.”,

and

(c) in subsection (4) by the substitution for paragraphs (a) and (b) of the following paragraphs:

“(a) the company shall, for the purposes of this section and sections 39C and 39D of the Finance Act, 1980 , allocate every such deduction in such amounts and to such of its profits for that period as it thinks fit, and

(b) (i) the amount of the relevant income or gain shall be treated for the purposes of subsection (3),

(ii) the amount of any income of a company which is treated for the purposes of that section as referable to an amount receivable from the sale of goods, within the meaning of that section, shall be treated for the purposes of the said section 39C, and

(iii) the amount of the income of a company which is treated for the purposes of that section as attributable to relevant payments, within the meaning of that section, shall be treated for the purposes of the said section 39D,

as reduced or, as the case may be, extinguished by so much (if any) of the deduction as is allocated to it.”.

Amendment of section 41 (basis of relief from corporation tax) of Finance Act, 1980.

61. Section 41 of the Finance Act, 1980 , is hereby amended in paragraph (b) of subsection (1) (inserted by the Finance Act, 1992 ) by the insertion before “sections 25 and 26” of “section 22 and”.

Double taxation relief.

62. —Chapter VI of Part I of the Finance Act, 1980 , is hereby amended, as respect accounting periods ending on or after the 1st day of January, 1995, by the insertion after section 39C (inserted by the Finance Act, 1994 ) of the following section—

“39D.—(1) (a) In this section—

appropriate inspector’, ‘chargeable period’ and ‘specified return date for the chargeable period’ have the meanings assigned to them, respectively, in Chapter II of Part I of the Finance Act, 1988 ;

arrangements’ and ‘foreign tax’ have the meanings assigned to them, respectively, in paragraph 1 (1) of Schedule 10 to the Income Tax Act, 1967 ;

credit institution’ means an undertaking whose business it is to receive deposits or other repayable funds from the public and to grant credit on its own account;

group relevant payment’ means a relevant payment made to a relevant company by a company which is related to the relevant company;

qualified company’ and ‘relevant trading operations’ have, subject to paragraph (d), the meanings assigned to them, respectively, in section 39B;

relevant company’ means a qualified company, other than a credit institution or a 25 per cent. subsidiary of a credit institution, the relevant trading operations of which—

(i) are wholly carried on by persons—

(I) who are employees of the qualified company or a company related to it and who are not employees of any employer other than the qualified company or the company related to it, as the case may be, and

(II) in respect of whom there does not exist any understanding or arrangement the purpose of which, or one of the purposes of which, is to provide for the engagement of the services of those persons, whether as employees or otherwise, should they cease to be employed by the qualified company or the company related to it, as the case may be,

and

(ii) are not managed or directed, whether directly or indirectly, by another qualified company other than a company related to the first-mentioned qualified company;

relevant foreign tax’ means so much of the amount of foreign tax as—

(i) has been deducted from relevant payments,

(ii) would have been so deducted if the laws of the territory under which the tax was deducted prohibited the deduction of tax from such payments at a rate in excess of 10 per cent., and

(iii) has not been repaid;

relevant payment’ means a payment of interest which—

(i) arises from a source within a territory in regard to which arrangements have the force of law, and

(ii) is regarded, subject to paragraph (d), by virtue of subsection (8) (b) of section 39B as receivable by a relevant company from the sale of goods for the purposes of relief under this Chapter.

(b) For the purposes of this section a company shall be treated as related to another company at any relevant time if at that time one of the two companies is a 25 per cent. subsidiary of the other, or both are 25 per cent. subsidiaries of the same company.

(c) For the purposes of this section a company shall be deemed to be a 25 per cent. subsidiary of another company if and so long as not less than 25 per cent. of its ordinary share capital would be treated as owned directly or indirectly by that other company if the provisions of section 156 of the Corporation Tax Act, 1976 , other than subsection (1) of that section, were to apply for the purposes of this paragraph as they apply for the purposes of section 156:

Provided that—

(i) where a company (hereafter in this subparagraph referred to as ‘the said company’) would be treated, for the purposes of this section, as a 25 per cent. subsidiary of a credit institution, which is not a company, if the credit institution were a company, the said company shall be so treated for the said purposes, and

(ii) for the purposes of paragraph (b) a company (hereafter in this proviso referred to as ‘the subsidiary company’) shall not be deemed to be a 25 per cent. subsidiary of another company (hereafter in this proviso referred to as ‘the parent company’) at any time if the percentage—

(I) of any profits, which are available for distribution to equity holders, of the subsidiary company at such time to which the parent company is beneficially entitled at such time, or

(II) of any assets, which are available for distribution to equity holders on a winding up, of the subsidiary company at such time to which the parent company would be beneficially entitled at such time on a winding up of the subsidiary company,

is less than 25 per cent. of such profits or assets, as the case may be, of the subsidiary company at such time, and, for the purposes of this subparagraph of this proviso, sections 109 , 110 , 111 and 114 of the Corporation Tax Act, 1976 , shall apply, but without regard to section 107 (7) of that Act in so far as it relates to those sections, with any necessary modifications, to the determination of the percentage of those profits or assets, as the case may be, which a company is beneficially entitled to, as they apply to the determination for the purposes of Part XI of the said Act of 1976 of the percentage of any such profits or assets to which a company is so entitled.

(d) For the purpose of this section, apart from this paragraph—

(i) a payment made to a company in the course of relevant trading operations (within the meaning of section 39A) being a payment which is regarded, by virtue of subsection (7) (b) of section 39A, as receivable from the sale of goods for the purposes of relief under this Chapter shall be treated as so regarded by virtue of subsection (8) (b) of section 39B, and

(ii) if the company is a qualified company carrying on relevant trading operations (within the meaning of section 39A) it shall be treated as being a qualified company carrying on relevant trading operations within the meaning of section 39B,

so long as the relevant trading operations within the meaning of section 39A could be certified by the Minister for Finance as relevant trading operations for the purposes of section 39B if they were carried out in the Area (within the meaning of section 39B) rather than in the airport (within the meaning of section 39A).

(2) Notwithstanding paragraph 4 of Schedule 10 to the Income Tax Act, 1967 , and section 23 (as amended by the Finance Act, 1995) of the Corporation Tax Act, 1976 , where a relevant company elects to have the amount of the credit, which is to be allowed to the company in respect of foreign tax deducted from group relevant payments made to the company in a relevant accounting period, computed as if, for the purposes of the said paragraph 4 and the said section 23, the amount of the corporation tax attributable to the income attributable to those group relevant payments were deemed to be increased by an amount which—

(a) shall be allocated by the company in such amounts and to such part of that income as the company thinks fit, and

(b) shall not exceed seven-twentieths of the amount of corporation tax which—

(i) would, apart from this section, be payable by the company, and

(ii) is attributable to all relevant payments made to the company in the course of the trade in the accounting period,

the amount of that credit shall be so computed for those purposes:

Provided that, where an election is made by a company under this subsection in respect of a relevant accounting period—

(I) any credit for foreign tax deducted from group relevant payments made to the company in the accounting period shall be computed as if the amount of foreign tax deducted from those group relevant payments were the amount of relevant foreign tax comprised in that amount, and

(II) so much of that credit as would not have been allowed to the company apart from this section shall be ignored for the purposes of subparagraph (3) (c) of paragraph 8 of the said Schedule 10.

(3) (a) For the purposes of subsection (2) the amount of corporation tax which would, apart from this section, be payable by a company and which is attributable to relevant payments made to the company shall be an amount determined by the formula—

A − B

where—

A is an amount equal to 10 per cent, of the amount of the income of the company attributable to relevant payments; and

B is the credit which would, apart from this section, be allowed to the company in respect of foreign tax deducted from those payments.

(b) For the purposes of paragraph (a)—

(i) the amount of the income of a company attributable to relevant payments made to the company in the course of a trade in a relevant accounting period shall, subject to section 23 (4) (as amended by the Finance Act, 1995) of the Corporation Tax Act, 1976 , be taken to be such sum as bears to the total amount of the income of the company from the sale of goods in the course of the trade in the relevant accounting period the same proportion as the said relevant payments bear to the total amount receivable by the company from the sale of goods in the course of the trade in the accounting period, and

(ii) the total amount of income of a company from the sale of goods in the course of a trade in a relevant accounting period shall be taken to be the sum referred to in subsection (3) of section 41 which, for the purposes of subsection (2) of that section, is to be taken to be the income of the trade for the relevant accounting period referred to in the expression ‘the income from the sale of those goods’ in subsection (2) of that section.

(4) Where, as respects a relevant accounting period, corporation tax payable by a company is, by virtue of subsection (9) (inserted by the Finance (No. 2) Act, 1992 ) of section 41, reduced by a fraction, which is referred to in the said subsection (9) as the ‘revised relief,’ then, this section shall apply to the company as if the references to 10 per cent., in subsection (1) in the definition of ‘relevant foreign tax’ and in subsection (3) (a) in the definition of ‘A’, were references to a rate per cent, determined by the formula—

C × (1 − D)

where—

C is the rate per cent, of corporation tax, specified in section 1 (1) of the Corporation Tax Act, 1976 , for the financial year in which the relevant accounting period ends, and

D is the fraction so referred to.

(5) An election referred to in subsection (2) shall be made in writing to the appropriate inspector in relation to the company making the election on or before that company's specified return date for the chargeable period in respect of which it is making the election.”.

Amendment of section 39C (credit for foreign tax) of Finance Act, 1980.

63. Section 39C (inserted by the Finance Act, 1994 ) of the Finance Act, 1980 , is hereby amended, as respects accounting periods ending on or after the 1st day of January, 1995—

(a) in subsection (1)—

(i) in paragraph (a), in the definition of “relevant foreign tax” by the insertion after paragraph (i) of that definition of the following:

“(ia) which corresponds to income tax or corporation tax,”,

(ii) in paragraph (b)—

(I) by the substitution for subparagraph (i) of the following subparagraph:

“(i) the amount of the corporation tax which would, apart from subsection (2), be payable by a company and which is attributable to an amount receivable from the sale of goods shall be an amount equal to 10 per cent, of the amount of the income of the company referable to the amount so receivable;”,

(II) in subparagraph (ii) by the insertion after “shall” of “, subject to section 23 (4) (as amended by the Finance Act, 1995) of the Corporation Tax Act, 1976 ,”, and

(III) in subparagraph (iii) by the insertion after “which” of “, for the purposes of subsection (2) of the said section,”,

(b) in subsection (2) by the substitution for “nine-tenths of so much of” of “so much of nine-tenths of”, and

(c) by the insertion of the following subsection:

“(3) Where, as respects a relevant accounting period, corporation tax payable by a company is, by virtue of subsection (9) (inserted by the Finance (No. 2) Act, 1992 ) of section 41, reduced by a fraction, which is referred to in the said subsection (9) as the ‘revised relief’, then, in computing the reduction, if any, under subsection (2) of corporation tax payable by the company for the relevant accounting period, being corporation tax attributable to an amount receivable from the sale of goods which is an amount receivable in the course of relevant trading operations, within the meaning of section 39B, this section shall apply as if—

(a) in subparagraph (i) (as inserted by the Finance Act, 1995) of subsection (1) (b) the reference to 10 per cent, were a reference to a rate per cent, determined by the formula—

C × (1 − D)

where—

C is the rate per cent, of corporation tax, specified in section 1 (1) of the Corporation Tax Act, 1976 , for the financial year in which the relevant accounting period ends, and

D is the fraction so referred to,

and

(b) the reference in subsection (2) to nine-tenths were a reference to a fraction determined by the formula—

100 − [C × (1 − D)]

where C and D have the meanings assigned to them in paragraph (a).”.

Amendment of section 43 (overseas life assurance companies: investment income) of Corporation Tax Act, 1976.

64. Section 43 of the Corporation Tax Act, 1976 , is hereby amended, as respects accounting periods beginning on or after the 1st day of January, 1995, by the insertion after subsection (2) of the following subsection:

“(2A) Where an overseas life assurance company is entitled to an amount (hereafter in this subsection referred to as ‘the said amount’), being an amount which corresponds to a tax credit, by virtue of having received a distribution from a company which is not resident in the State, the distribution shall be treated, for the purposes of this section, as representing income equal to the aggregate of the amount or value of that distribution and the said amount.”.

Amendment of section 39B (relief in relation to income from certain trading operations carried on in Custom House Docks Area) of Finance Act, 1980.

65. Section 39B is hereby amended in paragraph (c) of subsection (6) by the substitution for subparagraph (iiia) (inserted by the Finance Act, 1988 ) of the following subparagraph:

“(iiia) dealing by a company in commodity futures or commodity options on behalf of persons not ordinarily resident in the State—

(I) other than on behalf of persons who—

(A) carry on a trade in which commodities of a type which are the subject of the futures or options, as the case may be, are used in the course of the carrying on of the trade, or

(B) would be regarded for the purposes of the Corporation Tax Acts as connected with a person who carries on such a trade,

or

(II) where dealing in futures and options, some or all of which are commodity futures or commodity options, as the case may be, is the principal relevant trading operation carried on by the company;”.

Amendment of section 55 (late submission of returns: restriction of certain claims of relief) of Finance Act, 1992.

66. —(1) Subject to subsection (2), any restriction or reduction imposed by paragraph (a), (b), (c), (d) or (e) of subsection (1) of section 55 of the Finance Act, 1992 , in respect of a chargeable period in the case of a company which fails to deliver a return of income on or before the specified return date for that chargeable period shall apply and have effect subject to—

(a) in the case of the restrictions or reductions imposed by paragraph (a), (b) or (c) of the said subsection, a maximum restriction or reduction, as the case may be, of £125,000 in each case for the chargeable period, and

(b) in the case of the restrictions imposed by paragraph (d) or (e) of the said subsection, a maximum restriction of £50,000 in each case for the chargeable period.

(2) Where in relation to a chargeable period a company, having failed to deliver a return of income on or before the specified return date for that chargeable period, delivers the said return before the expiry of two months from the specified return date, paragraphs (a) to (e) of subsection (1) of section 55 of the Finance Act, 1992 , shall apply and have effect—

(a) as if the references therein to “50 per cent.” were references to “75 per cent.” in the case of paragraphs (a), (b), (d) and (e) and “25 per cent.” in the case of paragraph (c), and

(b) subject to—

(i) in the case of the restrictions or reductions imposed by paragraph (a), (b) or (c) of the said subsection, a maximum restriction or reduction, as the case may be, of £25,000 in each case for the chargeable period, and

(ii) in the case of the restrictions imposed by paragraph (d) or (e) of the said subsection, a maximum restriction of £10,000 in each case for the chargeable period.

(3) This section shall apply and have effect as respects chargeable periods ending on or after the 6th day of April, 1995.

Amendment of section 51 (relief for gifts to First Step) of Finance Act, 1993.

67. Section 51 of the Finance Act, 1993 , is hereby amended—

(a) by the substitution in paragraph (a) of subsection (2) of “1st day of June, 1997” for “1st day of June, 1995”, and

(b) in the proviso to subsection (3) by the substitution of the following subparagraph for subparagraphs (iii) and (iv) of paragraph (b):

“(iii) in respect of a gift made at any time in the year ended on the 31st day of May in the year 1994, 1995,1996 or 1997, if, at that time, the aggregate of the net amounts of all gifts to which this section applies made to First Step within that year exceeds £1,500,000.”.

Amendment of section 20A (foreign life assurance and deferred annuities: taxation and returns) of Capital Gains Tax Act, 1975.

68. Section 20A (inserted by the Finance Act, 1993 ) of the Capital Gains Tax Act, 1975 , is hereby amended, as respects disposals of assets on or after the 20th day of May, 1993, by the addition of the following subsection:

“(4) (a) In this subsection ‘reinsurance contract’ means any contract or other agreement for reassurance, or reinsurance, in respect of—

(i) any policy of assurance on the life of any person, or

(ii) any class of such policies.

(b) Where apart from this paragraph a reinsurance contract would not be a policy of assurance on the life of any person for the purposes of this Act it shall be deemed to be such a policy for those purposes.

(c) Subsections (2) and (3) shall not apply to, and shall be deemed never to have applied to, reinsurance contracts:

Provided that where, apart from this paragraph, a reinsurance contract would not be a relevant policy within the meaning of section 20B (inserted by the Finance Act, 1994 ) for the purposes of that section, it shall be deemed not to be such a policy for those purposes.

(d) (i) Subject to paragraph (e), where, apart from paragraph (c) of this subsection, subsection (2) would apply to a reinsurance contract in respect of any policy of assurance on the life of any person, being a policy issued on or after the 1st day of January, 1995, section 20 (2) shall not have effect in respect of any disposal or deemed disposal on or after the 1st day of January, 1995, of, or any interest in, rights of the insured company under the reinsurance contract to the extent that—

(I) those rights refer to the said policy, and

(II) the insured company could receive, otherwise than on the death, disablement or disease of any person, or one of a class of persons, to whom the said policy refers, payment on a disposal of those rights the aggregate amount of which would exceed the aggregate amount of payment made by it in respect of those rights:

Provided that this subparagraph shall apply—

(A) as respects any reinsurance contract made before the 20th day of May, 1993, as if that contract were made on that day, and

(B) as respects any reinsurance contract made or modified on or after the 1st day of January, 1995, as if there were deleted from this subparagraph ‘being a policy issued on or after the 1st day of January, 1995,’.

(ii) Subparagraphs (i) and (ii) of subsection (1) (b) shall apply for the purposes of this paragraph as if for ‘the 20th day of May, 1993’ there were substituted ‘the 1st day of January, 1995’.

(e) Paragraph (d) shall not apply to any disposal of, or any interest in, rights under a reinsurance contract, being a disposal resulting directly from the death, disablement or disease of a person, or one of a class of persons, to whom the reinsurance contract refers:

Provided that in computing any gain or loss in respect of a disposal or deemed disposal of, or any interest in, rights of the insured company under a reinsurance contract—

(i) there shall be excluded from the sums allowable under paragraph 3 of Schedule 1 to the Capital Gains Tax Act, 1975 , so much of any payment made by the insured company under the reinsurance contract as is paid in respect of an entitlement to a payment on the death, disablement, or disease of a person, or one of a class of persons, and

(ii) there shall be added to the consideration taken into account under the said Schedule the market value of an entitlement for any period, commencing on or after the most recent acquisition or deemed acquisition by the insured company of the said rights, to a payment on the death, disablement or disease of a person, or one of a class of persons, to the extent that the insured company held the entitlement for that period in place of any return which would otherwise have accrued under the reinsurance contract and increased the said consideration.”.

Amendment of section 46B (gains or losses arising by virtue of section 46A) of Corporation Tax Act, 1976.

69. Section 46B of the Corporation Tax Act, 1976 , is hereby amended in subsection (1) by the insertion of the following proviso:

“Provided that as respects chargeable gains or allowable losses accruing on disposals of rights under reinsurance contracts (within the meaning of section 20A (4) (inserted by the Finance Act, 1995) of the Capital Gains Tax Act, 1975 ) deemed by virtue of section 46A to have been made in the accounting period or part of an accounting period falling wholly within the year ending on—

(i) the 31st day of December, 1995, this section shall not apply to five-sevenths,

(ii) the 31st day of December, 1996, this section shall not apply to four-sevenths,

(iii) the 31st day of December, 1997, this section shall not apply to three-sevenths,

(iv) the 31st day of December, 1998, this section shall not apply to two-sevenths, or

(v) the 31st day of December, 1999, this section shall not apply to one-seventh,

of those chargeable gains and allowable losses.”.