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3 2003

Finance Act 2003

Chapter 2

Income Tax

Age exemption.

2. —As respects the year of assessment 2003 and subsequent years of assessment, section 188 of the Principal Act is amended, in subsection (2), by substituting “€30,000” for “€26,000” (inserted by the Finance Act 2002 ) and “€15,000” for “€13,000” (as so inserted).

Employee tax credit.

3. —(1) As respects the year of assessment 2003 and subsequent years of assessment, section 472 of the Principal Act is amended, in subsection (4), by substituting “€800” for “€660” (inserted by the Finance Act 2002 ) in both places where it occurs.

(2) Section 3 of the Finance Act 2002 , shall have effect subject to the provisions of this section.

Amendment of section 122 (preferential loan arrangements) of Principal Act.

4. —Section 122 of the Principal Act is amended, as respects the year of assessment 2003 and subsequent years of assessment, by substituting in the definition of “the specified rate” in paragraph (a) of subsection (1)—

(a) “4.5 per cent” for “5 per cent” (inserted by the Finance Act 2002 ) in both places where it occurs, and

(b) “11 per cent” for “12 per cent” (inserted by the Finance Act 2001 ).

Amendment of section 126 (tax treatment of certain benefits payable under Social Welfare Acts) of Principal Act.

5. —Section 126 of the Principal Act is amended by substituting the following for paragraph (b) (inserted by the Finance Act 2002 ) of subsection (8):

“(b) Notwithstanding subsection (3) and the Finance Act 1992 (Commencement of Section 15) (Unemployment Benefit and Pay-Related Benefit) Order 1994 (S.I. No. 19 of 1994), subsection (3)(b) shall not apply in relation to unemployment benefit paid or payable, in the period commencing on 6 April 1997 and ending on 31 December 2004, to a person employed in short-time employment.”.

Application of PAYE to perquisites, benefits-in-kind, etc.

6. —(1) The Principal Act is amended—

(a) in section 119 by substituting the following for subsection (4):

“(4) For the purposes of subsection (3), the annual value of the use of an asset shall be taken to be—

(a) in the case of an asset being premises, the rent which might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all usual tenant's rates, and if the landlord undertook to bear the costs of repairs and insurance, and the other expenses, if any, necessary for maintaining the premises in a state to command that rent, and

(b) in the case of any other asset, 5 per cent of the market value (within the meaning of section 548) of the asset at the time when it was first applied by the body corporate in making any provision mentioned in section 118(1).”,

(b) in section 121—

(i) in subsection (1)(a)—

(I) by substituting the following for the definition of “car”:

“ ‘car’ means any mechanically propelled road vehicle designed, constructed or adapted for the carriage of the driver or the driver and one or more other persons other than—

(a) a motor-cycle,

(b) a van (within the meaning of section 121A), or

(c) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;”,

and

(II) by inserting the following definition after the definition of “employment”:

“ ‘motor-cycle’ means a mechanically propelled vehicle with less than four wheels and the weight of which unladen does not exceed 410 kilograms;”,

(ii) in subsection (2)(b), by substituting the following for subparagraph (ii)—

“(ii)  there shall be treated for that year as emoluments of the employment by reason of which the car is made available, and accordingly chargeable to income tax, the amount, if any, by which the cash equivalent of the benefit of the car for the year exceeds the aggregate for the year of the amount which the employee is required to make good and actually makes good to the employer in respect of any part of the costs of providing or running the car.”,

(iii) by substituting the following for paragraph (a) of subsection (3)—

“(a)  The cash equivalent of the benefit of a car for a year of assessment shall be 30 per cent of the original market value of the car.”,

(iv) in subsection (4)—

(I) by substituting the following for paragraph (a):

“(a) Where in relation to a person the business mileage for a year of assessment exceeds 15,000 miles the cash equivalent of the benefit of the car for that year, instead of being the amount ascertained under subsection (3) shall be the percentage of the original market value of the car applicable to the business mileage under the Table to this subsection.”,

(II) by inserting the following after paragraph (b):

“(c) Where a car in respect of which this section applies in relation to a person for a year of assessment is made available to the person for part only of that year, the cash equivalent of the benefit of that car as respects that person for that year shall be an amount determined by applying paragraph (a) as if—

(i) the figure 15,000 referred to in that paragraph were replaced by a figure (in this paragraph referred to as the ‘new figure’) determined by the formula—

A

15,000 ×

___

365

where—

A  is the number of days in the part of the year, and

(ii) each figure in columns (1), (2) and (3) of the Table to this section were reduced in the same proportion as the new figure bears to 15,000.”,

(III) by substituting the following for the Table to that subsection:

TABLE

Business Mileage

Percentage of original market value

lower limit

upper limit

(1)

(2)

(3)

miles

miles

per cent

15,000

20,000

24

20,000

25,000

18

25,000

30,000

12

30,000

6

”,

and

(v) in subsection (6), by deleting paragraph (c),

(c) by inserting the following after section 121:

“Benefit of use of van.

121A.—(1) In this section—

‘van’ means a mechanically propelled road vehicle which—

(a) is designed or constructed solely or mainly for the carriage of goods or other burden,

(b) has a roofed area or areas to the rear of the driver's seat, and

(c) has no side windows or seating fitted in that roofed area or areas.

(2) (a) In relation to a person chargeable to tax in respect of an employment, this section shall apply for a year of assessment in relation to a van which, by reason of the employment, is made available (without a transfer of the property in it) to the person and is available for his or her private use in that year.

(b) In relation to a van in respect of which this section applies for a year of assessment—

(i) Chapter 3 of this Part shall not apply for that year in relation to the expense incurred in connection with the provision of the van, and

(ii) there shall be treated for that year as emoluments of the employment by reason of which the van is made available, and accordingly chargeable to income tax, the amount, if any, by which the cash equivalent of the benefit of the van for the year exceeds the aggregate for the year of the amounts which the employee is required to make good and actually makes good to the employer in respect of any part of the costs of providing or running the van.

(3) The cash equivalent of the benefit of a van for a year of assessment shall be 5 per cent of the original market value of the van.

(4) The provisions of subsections (1) (other than the definition of car in paragraph (a)), paragraph (b) of subsection (3), (6) and (7) of section 121 shall apply, with any necessary modifications in relation to a van, for the purposes of this section as they apply in relation to a car for the purposes of that section.”,

and

(d) by inserting the following after section 985:

“Application of section 985 to certain perquisites, etc.

985A.—(1) This section applies to emoluments in the form of—

(a) perquisites and profits whatever which are chargeable to tax under section 112 excluding perquisites or profits whatever in the form of shares (including stock) in a company, but including—

(i) an expense incurred by a body corporate in the provision of a benefit, other than a contribution to a PRSA (within the meaning of Chapter 2A of Part 30), for an employee which is treated as a perquisite for the purposes of section 112 by virtue of section 118,

(ii) the benefit arising from a preferential loan which is treated as a perquisite for the purposes of section 112 by virtue of section 122, and

(iii) a perquisite to which section 112A applies,

(b) the benefit of the private use of a car which is chargeable to tax by virtue of section 121, and

(c) the benefit of the private use of a van which is chargeable to tax by virtue of section 121A.

(2) Where an employee is in receipt of any emolument to which this section applies, the employer shall be treated for the purposes of this Chapter and regulations under this Chapter as making a payment (in this section referred to as a ‘notional payment’) of an amount equal to the amount referred to in subsection (3).

(3) The amount referred to in this subsection, is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be chargeable to tax under Schedule E in respect of the emolument.

(4) Where, by reason of an insufficiency of payments actually made to or on behalf of an employee, the employer is unable to deduct the amount (or full amount) of the income tax required to be deducted by virtue of this Chapter and regulations made under this Chapter, the employer shall be liable to remit to the Revenue Commissioners at such time as may be prescribed by regulation an amount of income tax equal to the amount of income tax that the employer would be required, but is unable, to deduct.

(5) In any case where—

(a) an employee is in receipt of an emolument to which this section applies,

(b) the employer is required by virtue of this section and regulations made there-under to remit an amount of income tax (in this subsection referred to as the ‘due amount’) in respect of that emolument, and

(c) the employee does not, before the end of the year of assessment, make good the due amount to the employer,

the employee shall be chargeable to tax under Schedule E in respect of the due amount for the next following year of assessment and the due amount shall be treated for that year as an emolument to which this section applies.

(6) The Revenue Commissioners may make regulations to make provision—

(a) with respect to the deduction, collection and recovery of amounts to be accounted for in respect of notional payments;

(b) applying (with or without modifications) any specified provisions of regulations for the time being in force in relation to deductions from actual payments to amounts to be accounted for in respect of any notional payments.”.

(2) This section applies and has effect as on and from 1 January 2004.

Payment of tax in respect of share options in certain circumstances.

7. —Part 5 of the Principal Act is amended in section 128A—

(a) in subsection (1)(a), by deleting “on or after 6 April 2000” and substituting “in the period from 6 April 2000 to the date of the passing of the Finance Act 2003”,

(b) by inserting the following after subsection (4):

“(4A) (a) Notwithstanding subsection (4), where an election has been made in accordance with subsection (3) and—

(i) relevant shares are disposed of (in this subparagraph referred to as the ‘first-mentioned disposal’), and

(I) but for this subparagraph, tax would be payable, by reference to the first-mentioned disposal, in accordance with subsection (4)(a), and

(II) the market value of those shares at the date of the first-mentioned disposal is less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares,

then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned disposal or, if later, on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the date of the first-mentioned disposal, or

(ii) relevant shares are held at 31 December in the year of assessment beginning 7 years after the relevant year (in this subparagraph referred to as the ‘first-mentioned date’), and

(I) but for this subparagraph, tax would be payable in accordance with subsection (4)(b), and

(II) the market value of the relevant shares is, at the first-mentioned date, less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares,

then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned date and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the first-mentioned date.

(b) Where a person who is entitled to make an election in accordance with subsection (3), after 6 February 2003 and on or before 31 October in the year of assessment following the relevant year in respect of relevant shares, does not do so, or tax chargeable under section 128, in respect of any gain realised by the exercise before 6 February 2003 of a right to acquire shares, is due after 6 February 2003 but on or before 31 October in the year of assessment following the relevant year, and the market value of the shares on—

(i) that 31 October, or

(ii) where the shares are disposed of before that date, the date of the disposal (referred to in this paragraph as the ‘first-mentioned disposal’) of the shares,

is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the said 31 October, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the said 31 October or the date of the first-mentioned disposal of the shares, as the case may be.

(c) In all cases other than those referred to in paragraph (a) or (b), where tax is chargeable under section 128 on an amount equal to a gain realised by the exercise, at any time before 6 February 2003, of a right to acquire shares in a company, and the market value of the shares on—

(i) that date, or

(ii) where the shares are disposed of before that date, the date of the disposal of the shares,

is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after 6 February 2003.

(d) (i) A payment that is to be made in the event of, and by reference to, disposals of any shares in a year of assessment shall be a payment which is the lesser of—

(I) the aggregate of the balances of unpaid tax referred to in paragraphs (a), (b) and (c), as reduced by tax payable in accordance with this paragraph by reference to disposals of shares in a previous year of assessment, and

(II) the aggregate of the net gains (if any) arising in respect of disposals of shares in the year of assessment.

(ii) For the purposes of subparagraph (i)(II), the net gain arising in relation to a disposal of shares shall be the market value at the date of disposal of those shares reduced by so much of the aggregate of—

(I) the amount of the consideration, if any, given for the shares (including, where relevant, the grant of a right to acquire the shares),

(II)(A) where this subsection does not apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the amount of the income tax so chargeable, or

(B) where this subsection does apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the total amount paid, before the date of the disposal, in respect of that income tax,

and

(III) capital gains tax chargeable by reference to the disposal of the shares,

as does not exceed that market value.

(iii) For the purposes of subparagraph (ii), the income tax or capital gains tax, as the case may be, so chargeable shall be the amount by which the income tax or capital gains tax, as the case may be, chargeable on the taxpayer for the year of assessment would have been reduced if the acquisition or disposal of the shares, as the case may be, had not taken place.

(iv) Payments referred to in paragraph (d)(i) which are to be made by reference to disposals of shares shall be due and payable to the Collector-General on or before 31 October in the year following the year of assessment in which the disposal of those shares takes place.

(e) (i) A taxpayer who wishes to be entitled to avail of the provisions of this subsection shall so elect, by giving notice in writing to the inspector, on or before 1 June 2003 in a form prescribed or authorised by the Revenue Commissioners, and the notice shall contain details of—

(I) the date of exercise of the option,

(II) the number of shares acquired by exercise of the option,

(III) the market value of the shares at date of exercise of that option, and

(IV) such further particulars for the purposes of this subsection as may be required or indicated by the Revenue Commissioners.

(ii) The inspector or such other officer as the Revenue Commissioners shall appoint in that behalf may admit a late election under subparagraph (i) in circumstances where he or she is satisfied that the delay in making the election was due to absence, illness or other reasonable cause.

(f) In any case where, at any time, the requirements of this subsection have not been fully complied with, any amount of tax chargeable under section 128 which is unpaid shall be due and payable as if this subsection had not been enacted.

(g) Any tax chargeable under section 128 which is due and payable in accordance with subsection (4) or this subsection, which remains unpaid at the date of death of the chargeable person, shall be discharged by the Revenue Commissioners.

(h) Any amount paid before 6 February 2003 in respect of tax chargeable under section 128 shall not be repaid by reference to any provision of this subsection.

(i) The reference in paragraph (d) to the disposal of shares includes a reference to the disposal of shares by the spouse of the person chargeable—

(I) in a case where section 1017 applies,

or

(II) in a case where that section does not apply, but the disposal by the spouse is subsequent to a transfer, on or after 25 February 2003, of the shares from the other spouse, except where the spouses are separated in the circumstances referred to in paragraph (a) or (b) of section 1015(2), or their marriage has been dissolved under either section 5 of the Family Law (Divorce) Act 1996 , or the law of a country or jurisdiction other than the State, being a dissolution that is entitled to be recognised as valid in the State.

(j) A person shall not, at any time, be entitled to avail of the provisions of this subsection where, at that time, he or she has not paid, or agreed an arrangement acceptable to the Collector-General for the payment of, tax due and payable which is chargeable under section 128 in respect of the exercise of a right to acquire shares to which this subsection does not apply.

(k) In this subsection—

‘market value’ shall be construed in accordance with section 548;

‘shares’ includes securities within the meaning of section 135 and stock.

(4B) In any case where the provisions of subsection (4A) apply, the amount by which the market value of the shares at the time of acquisition exceeds the market value at the date of disposal of those shares, or any part of that amount, shall not be an allowable loss for the purposes of the Capital Gains Tax Acts until such time as the tax liability of the person under section 128 has been paid in full to the Collector-General.”,

(c) in subsection (5), by substituting “subsections (4)(a) and (4A)” for “subsection (4)(a)”, and

(d) in subsection (7), by substituting “subsections (4) and (4A) but notwithstanding any provisions of subsection (4A) that subsection shall have no effect as respects the payment of any tax in relation to a gain realised by the exercise on or after 6 February 2003 of a right to acquire shares.” for “subsection (4).”.

Payment of tax under section 128 (tax treatment of directors of companies and employees granted rights to acquire shares or other assets) of Principal Act.

8. —(1) Chapter 5 of Part 5 of the Principal Act is amended—

(a) by inserting the following after section 128A:

“Payment of tax under section 128.

128B.—(1) This section applies where, by virtue of section 128, a person (in this section referred to as a ‘taxable person’) is chargeable to tax under Schedule E for a year of assessment on an amount equal to the gain realised by the exercise, on or after 30 June 2003, of a right to acquire shares (in this section referred to as ‘relevant shares’) in a company.

(2) Where this section applies for a year of assessment, the taxable person shall pay an amount of tax (in this section referred to as ‘relevant tax’) in respect of the gain realised by the exercise of the right to acquire relevant shares, and that amount of tax shall be determined by the formula—

A × B

where—

A is the amount of that gain computed in accordance with section 128(4), and

B is the percentage which is equal to the higher rate in force for the year of assessment in which the taxable person exercises the right to acquire the relevant shares.

(3) Relevant tax shall be due and payable to the Collector-General within 30 days after the exercise of the right to acquire the relevant shares, and shall be so due and payable without the making of an assessment, but relevant tax which has become so due and payable may be assessed on the taxable person (whether or not it has been paid when the assessment is made) if the tax or any part of it is not paid on or before the due date.

(4) Each payment of relevant tax shall be accompanied by a return containing, in relation to the taxable person by whom the payment is made, details of the amount of the gain referred to in subsection (1) and of the relevant tax due in respect of that gain and such other particulars as may be required by the return.

(5) Every return under this section shall be in a form prescribed or authorised by the Revenue Commissioners, and shall include a declaration to the effect that the return is correct and complete.

(6) The Collector-General shall give the taxable person a receipt for the amount of relevant tax paid by the taxable person.

(7) Where it appears to an officer of the Revenue Commissioners that there is any amount of relevant tax which ought to have been but has not been included in a return under subsection (4), or where such officer is dissatisfied with any such return, such officer may make an assessment on the taxable person concerned to the best of such officer's judgement, and any amount of relevant tax due under an assessment made by virtue of this subsection shall be treated for the purposes of interest on unpaid tax as having been payable at the time specified in subsection (3).

(8) Where any item has been incorrectly included in a return under subsection (4) as a gain in respect of which relevant tax is required to be paid, an officer of the Revenue Commissioners may make such assessments, adjustments or set-offs as may in his or her judgement be required for securing that the resulting liability to relevant tax, including interest on unpaid tax, of the taxable person is, in so far as possible, the same as it would have been if the item had not been so included.

(9) (a) The provisions of the Income Tax Acts relating to—

(i) assessments to income tax,

(ii) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court), and

(iii) the collection and recovery of income tax,

shall, in so far as they are applicable, apply to the assessment, collection and recovery of relevant tax.

(b) Any amount of relevant tax payable in accordance with this section without the making of an assessment shall carry interest at the rate of 0.0322 per cent for each day or part of a day from the date when the amount becomes due and payable until payment.

(c) Subsections (3) and (4) of section 1080 shall apply in relation to interest payable under paragraph (b) as they apply in relation to interest payable under that section.

(d) In its application to any relevant tax charged by any assessment made in accordance with this section, section 1080 shall apply as if subsection (1)(b) of that section were deleted.

(10) Where a taxable person has paid relevant tax in respect of a gain realised by the exercise, in any year of assessment, of a right to acquire relevant shares, the taxable person may claim to have that relevant tax set against the income tax chargeable on the taxable person for that year of assessment and, where that relevant tax exceeds such income tax, to have the excess refunded to the taxable person.

(11) Relevant tax payable by a taxable person in respect of a gain realised by the exercise, in any year of assessment, of a right to acquire relevant shares shall not be regarded as a payment of, or on account of, preliminary tax for the purposes of sections 952 and 958.

(12) Relevant tax payable by a taxable person in respect of a gain realised by the exercise, in any year of assessment, of a right to acquire relevant shares—

(a) shall not, for the purpose of section 952(2), form part of the income tax which in the opinion of the taxable person is likely to become payable by that person for that year of assessment,

(b) shall not, for the purposes of section 958(3A), be regarded as either part of the income tax paid or part of the income tax payable by that person for that year of assessment, and

(c) shall not, for the purposes of section 958(4), be regarded as income tax payable by the taxable person for that year of assessment.

(13) Notwithstanding any other provision of this section, any gain realised by the exercise, in any year of assessment, of a right to acquire relevant shares and in respect of which relevant tax is payable by a taxable person shall be included in the return required to be delivered by that person under section 951.

(14) Where, on an application in writing having been made to them in that behalf, the Revenue Commissioners are satisfied that an individual is likely to be chargeable to income tax for a year of assessment at the standard rate only, the reference in the meaning of B in subsection (2) to the higher rate shall be construed for the purposes of the payment or payments required to be made by the individual for that year in accordance with subsection (2), as a reference to the standard rate.”,

and

(b) in section 128(2A), by deleting paragraph (a).

(2) (a) Paragraph (a) of subsection (1) shall come into operation as on and from 30 June 2003.

(b) Paragraph (b) of subsection (1) shall apply as respects the exercise, assignment or release of a right (within the meaning of section 128 of the Principal Act) on or after 30 June 2003.

Amendment of section 244 (relief for interest paid on certain home loans) of Principal Act.

9. —(1) Section 244(1)(a) of the Principal Act is amended, in the definition of “relievable interest”, by substituting—

(a) “7 years” for “5 years”,

(b) “€8,000” for “€6,350”, and

(c) “€4,000” for “€3,175”.

(2) Subsection (1) shall not apply to an individual for whom the fifth year of assessment for which he or she had an entitlement to relief under section 244 of the Principal Act in respect of a qualifying loan (within the meaning of that section) was prior to the year of assessment 2002.

Amendment of Chapter 1 (payments in respect of professional services by certain persons) of Part 18 of, and Schedule 13 to, Principal Act.

10. —(1) Chapter 1 of Part 18 of the Principal Act is amended:

(a) in section 520(1), in the definition of “relevant payment”—

(i) in subparagraph (i) by substituting “applies,” for “applies, and”,

(ii) in subparagraph (ii) by substituting “section, and” for “section;”, and

(iii) by inserting the following after subparagraph (ii):

“(iii) a payment by one accountable person to another in reimbursement of a relevant payment;”, and

(b) in section 525 by substituting the following for subsection (6):

“(6) The provisions of Chapter 2 relating to the assessment, collection and recovery of tax deductible under section 531(1) shall apply to the assessment, collection and recovery of appropriate tax.”.

(2) Schedule 13 to the Principal Act is amended—

(a) by substituting “79. Horse Racing Ireland.” for paragraph 79,

(b) by deleting “104. The National Pensions Reserve Fund Commission.”, and

(c) by adding the following after paragraph 120:

“121. Human Rights Commission.

122. Pensions Ombudsman.

123. Refugee Appeals Tribunal.

124. The Dublin Institute for Advanced Studies.

125. Pre-Hospital Emergency Care Council.

126. Sustainable Energy Ireland — The Sustainable Energy Authority of Ireland.

127. The Health Insurance Authority.

128. Commission for Aviation Regulation.

129. Railway Procurement Agency.

130. The National Council on Ageing and Older People.

131. National Qualifications Authority of Ireland (NQAI).

132. BreastCheck, The National Breast Screening Programme.

133. The National Council for the Professional Development of Nursing and Midwifery.

134. Mater and Children's Hospital Development Ltd.

135. The National Consultative Commission on Racism and Interculturalism.

136. Office of Tobacco Control.

137. The Marine Casualty Investigation Board.

138. National Treasury Management Agency as regards the performance of functions by it conferred on, or delegated to, it by or under Part 2 of the National Treasury Management Agency (Amendment) Act 2000 . (State Claims Agency).

139. National Development Finance Agency.”.

(3) (a) Paragraph (a) of subsection (2) applies with effect from 18 December 2001.

(b) Paragraph (c) of subsection (2) applies with effect from 1 May 2003.

Amendment of section 65 (Cases I and II: basis of assessment) of Principal Act.

11. —Section 65 of the Principal Act is amended in subsection (3) by inserting “notwithstanding anything to the contrary in section 66(2),” after “then,”.

Restriction of reliefs where individual is not actively participating in certain trades.

12. —(1) Chapter 4 of Part 12 of the Principal Act is amended by inserting the following after section 409C:

“409D.—(1) In this section—

‘active trader’, in relation to a trade, means an individual who works for the greater part of his or her time on the day-to-day management or conduct of the trade;

‘electronic’ includes electrical, digital, magnetic, optical, electromagnetic, biometric, photonic and any other form of related technology;

‘specified provisions’ means sections 305 and 381;

‘specified trade’ means a trade consisting of or including—

(a) the generation of electricity,

(b) trading operations which are petroleum activities (within the meaning of section 21A),

(c) the development or production of—

(i) films,

(ii) film projects,

(iii) film properties, or

(iv) music properties,

(d) the acquisition of rights to participate in the revenues of—

(i) film properties, or

(ii) music properties,

or

(e) the production of, the distribution of, or the holding of an interest in—

(i) either or both a film negative and its associated soundtrack, a film tape or a film disc,

(ii) an audio tape or audio disc, or

(iii) a film property produced by electronic means or a music property produced by electronic means;

‘relevant year of assessment’ means—

(a) in relation to a trade consisting of or including the generation of electricity, the year of assessment 2002 or any subsequent year during which the individual carried on such trade otherwise than as an active trader, and

(b) in relation to any other specified trade, the year of assessment 2003 or any subsequent year during which the individual carried on that trade otherwise than as an active trader.

(2) Where, in the case of an individual who carries on a specified trade otherwise than as an active trader, an amount may apart from this section be given or allowed under any of the specified provisions—

(a) in respect of a loss sustained by the individual in the specified trade in a relevant year of assessment, including a loss which is computed taking account of interest laid out or expended by the individual in respect of a loan where the proceeds of the loan were used to incur expenditure on machinery or plant used for the purposes of the specified trade concerned, or

(b) as an allowance to be made to the individual for a relevant year of assessment either in taxing the specified trade or by means of discharge or repayment of tax to which he or she is entitled by reason of the individual carrying on the specified trade concerned,

then, notwithstanding any other provision of the Tax Acts, such an amount may be given or allowed only against income from the specified trade concerned and shall not be allowed in computing any other income or profits or in taxing any other trade or in charging any other income to tax.”.

(2) This section applies as respects—

(a) an allowance under Part 9 in respect of machinery or plant to be made—

(i) for the year of assessment 2002 or any subsequent year in relation to a trade consisting of or including the generation of electricity, and

(ii) for the year of assessment 2003 or any subsequent year in relation to any other trade,

and

(b) any loss sustained in—

(i) a trade consisting of or including the generation of electricity in the year of assessment 2002 or any subsequent year, and

(ii) any other trade in the year of assessment 2003 or any subsequent year.

Income tax: ring-fence on use of certain capital allowances on certain industrial buildings and other premises.

13. —(1) Chapter 4 of Part 12 of the Principal Act is amended by inserting the following section after section 409D (inserted by section 12 ):

“409E.—(1) In this section—

‘company’ has the same meaning as in section 4;

‘rent’ has the same meaning as in Chapter 8 of Part 4;

‘relevant interest’ has the same meaning as in section 269;

‘residue of expenditure’ shall be construed in accordance with section 277;

‘specified amount of rent’, in relation to a specified building and an individual for a year of assessment, means the amount of the surplus in respect of the rent from the specified building to which the individual becomes entitled for the year of assessment, as computed in accordance with section 97(1);

‘specified building’ means—

(a) a building or structure, or a part of a building or structure, which is or is to be an industrial building or structure by reason of its use or deemed use for a purpose specified in section 268(1) and in relation to which an allowance has been, or is to be, made to a company under Chapter 1 of Part 9, or

(b) any other building or structure, or a part of any other building or structure, in relation to which an allowance has been, or is to be, so made to a company by virtue of Part 10 or section 843 or 843A,

in respect of—

(i) the capital expenditure incurred or deemed to be incurred on the construction or refurbishment of the building or structure or, as the case may be, the part of the building or structure, or

(ii) the residue of that expenditure.

(2) This section applies where—

(a) at any time beginning on or after 1 January 2003 a company is entitled to the relevant interest in relation to any capital expenditure incurred or deemed to be incurred on the construction or refurbishment of a specified building,

(b) subsequent to the time referred to in paragraph (a) an individual becomes entitled to that relevant interest or any part of that relevant interest, whether or not subsequent to that time any other person or persons had previously become so entitled, and

(c) the individual is entitled, in charging income under Case V of Schedule D, to an allowance under Chapter 1 of Part 9 in respect of the capital expenditure referred to in paragraph (a) or the residue of that expenditure.

(3) Where this section applies, then, notwithstanding any other provision of the Income Tax Acts—

(a) any allowance to be made to the individual for any year of assessment (being the year of assessment 2003 or any subsequent year of assessment) under Chapter 1 of Part 9, in respect of the capital expenditure referred to in subsection (2)(a) or the residue of that expenditure, shall—

(i) not exceed the specified amount of rent for that year of assessment,

(ii) be made in charging the specified amount of rent under Case V of Schedule D for that year of assessment, and

(iii) be available only in charging the specified amount of rent,

(b) section 278 shall apply with any modifications necessary to give effect to paragraph (a), and

(c) section 305(1)(c) shall apply in relation to an allowance to be made in accordance with paragraph (a).”.

(2) Section 305(1) of the Principal Act is amended by inserting the following after paragraph (b):

“(c) Notwithstanding any other provision of this subsection, where under this Part an allowance, the amount of which has been determined in accordance with section 409E(3)(a)(i), is to be made to an individual for any year of assessment and the allowance is to be—

(a) made in charging the specified amount of rent (within the meaning of section 409E) under Case V of Schedule D for that year of assessment, and

(b) is to be available only in charging that specified amount of rent,

then—

(i) in charging income under Case V of Schedule D the amount of that allowance shall be deducted from or set off against that specified amount of rent, and

(ii) if the amount of the allowance which would have been made in charging income under Case V of Schedule D if section 409E had not been enacted is greater than that specified amount of rent, the excess shall—

(I) be added to the amount of the allowance to be made to the individual for the next year of assessment under Chapter 1 of this Part in respect of the capital expenditure incurred on the construction or refurbishment of the specified building (within the meaning of section 409E) or the residue of that expenditure (within the meaning of section 409E), and be deemed to be part of the allowance to be so made for that next year, or

(II) if there is no such allowance for that next year, be deemed to be the allowance for that next year,

and so on for subsequent years of assessment, and section 409E(3) shall apply in relation to the resulting allowance to be made for that next year or, as the case may be, for any subsequent year of assessment.”.

Pension arrangements.

14. —(1) The Principal Act is hereby amended—

(a) in Part 19, by substituting the following for subsection (2) of section 608:

“(2) A gain shall not be a chargeable gain if accruing to a person from the person's disposal of assets held by that person as part of a fund approved under section 774, 784(4) or 785(5) or held by that person as PRSA assets (within the meaning of section 787A).”,

(b) in Chapter 1 of Part 30—

(i) in section 774—

(I) by substituting in subsection (7)(b)(ii), “in the case of a contribution to which paragraph (ba) applies, be apportioned” for “be apportioned”,

(II) by inserting the following after paragraph (b) of subsection (7):

“(ba) This paragraph applies to a contribution, which is not an ordinary annual contribution, and which—

(i) is required by the rules of the scheme to be made, in respect of a benefit to which section 772(3)(b) applies, by way of deduction from a lump sum payable to the employee in accordance with section 772(3)(f), or

(ii) is, following resumption of or change of employment, made, on retirement, in connection with the repayment by the employee to the scheme of superannuation contributions previously refunded to the employee or of relevant benefits provided to the employee on the employee's leaving an employment in relation to service in which the superannuation contributions or, as the case may be, the relevant benefits related.”,

(III) by inserting the following after paragraph (c) of subsection (7):

“(d) Where in any year of assessment a reduction or a greater reduction would be made under this section in the remuneration of an individual but for an insufficiency of remuneration, the amount of the reduction which would have been made but for that reason, less the amount of the reduction which is made in that year, shall be carried forward to the next year of assessment, and shall be treated for the purposes of relief under this section as the amount of an annual contribution paid in the next year of assessment.

(e) In so far as an amount once carried forward under paragraph (d) (and treated as an amount of an annual contribution paid in the next year of assessment) is not deducted from or set off against the individual's remuneration for that year of assessment, it shall be carried forward again to the following year of assessment (and treated as the amount of an annual contribution paid in that year of assessment) and so on for succeeding years.”,

and

(IV) by inserting the following after subsection (7):

“(8) Subject to paragraphs (b) and (ba) of subsection (7) where in relation to a year of assessment any contribution, which is not an ordinary annual contribution, is paid by an employee under the scheme after the end of the year of assessment but before the specified return date for the chargeable period (within the meaning of Part 41), the contribution may, if the individual so elects on or before that date, be treated for the purposes of this section as paid in the earlier year (and not in the year in which it is paid); but where the amount of that contribution, together with any other contribution to the scheme paid by the individual in the year to which the contribution relates (or treated as so paid by virtue of any previous election under this subsection), exceeds the maximum amount of contributions allowed to be deducted in that year, the election shall have no effect as respects the excess.”,

(ii) in section 776—

(I) by substituting in subsection (2)(b)(ii), “in the case of a contribution to which paragraph (ba) applies, be apportioned” for “be apportioned”,

(II) by the insertion after subsection (2)(b) of the following paragraph:

“(ba) This paragraph applies to a contribution, which is not an ordinary annual contribution, and which—

(i) is required by the statute under which the scheme is established or by any other statute or regulation to be made in respect of the provision of a pension for any widow, widower, children or dependants of the officer or employee by way of a deduction from a lump sum payable to the employee on retirement, or

(ii) is, following resumption of or on change of employment, made, on retirement, in connection with the repayment by the officer or employee to the scheme of superannuation contributions previously refunded to the officer or employee or of relevant benefits provided to the officer or employee on the officer or employee's leaving the office or employment in relation to service in which the superannuation contributions or, as the case may be, the relevant benefits related.”,

(III) by inserting the following after paragraph (c) of subsection (2):

“(d) Where in any year of assessment a reduction or a greater reduction would be made under this section in the remuneration of an individual but for an insufficiency of remuneration, the amount of the reduction which would have been made but for that reason, less the amount of the reduction which is made in that year, shall be carried forward to the next year of assessment, and shall be treated for the purposes of relief under this section as the amount of an annual contribution paid in the next year of assessment.

(e) In so far as an amount once carried forward under paragraph (d) (and treated as an amount of an annual contribution paid in the next year of assessment) is not deducted from or set off against the individual's remuneration for that year of assessment, it shall be carried forward again to the following year of assessment (and treated as the amount of an annual contribution paid in that year of assessment) and so on for succeeding years.”,

and

(IV) by inserting the following after subsection (2):

“(3) Subject to paragraphs (b) and (ba) of subsection (2), where in relation to a year of assessment any contribution, which is not an ordinary annual contribution, is paid by an employee under the scheme after the end of the year of assessment but before the specified return date for the chargeable period (within the meaning of Part 41), the contribution may, if the individual so elects on or before that date, be treated for the purposes of this section as paid in the earlier year (and not in the year in which it is paid); but where the amount of that contribution, together with any other contribution to the scheme paid by the individual in the year to which the contribution relates (or treated as so paid by virtue of any previous election under this subsection), exceeds the maximum amount of contributions allowed to be deducted in that year, the election shall have no effect as respects the excess.”,

(c) in Chapter 2 of Part 30—

(i) in section 783—

(I) in subsection (1)(a)—

(A) by substituting “In this Chapter” for “In this section”,

(B) by inserting the following after the definition of “approved retirement fund”:

“ ‘close company’ has the same meaning as in section 430;

‘connected person’ has the same meaning as in section 10;”,

and

(C) by inserting the following after the definition of “investment income”:

“ ‘participator’ has the same meaning as in section 433;”,

(II) in subsection (2)—

(a) by substituting in paragraph (a), “benefits of a kind referred to in paragraphs (b) and (c) of section 772(3), including any similar benefit provided under a statutory scheme established under a public statute,” for “a lump sum payable on the termination of the service through death before the age of 70 years or some lower age or disability before the age of 70 or some lower age”,

and

(b) by inserting the following after paragraph (b):

“(c) For the purposes of calculating the amount of any reduction in net relevant earnings in respect of any qualifying premium or of any PRSA contribution (within the meaning of Chapter 2A of this Part) this Chapter and Chapter 2A shall apply as if any contribution by an employee to a sponsored superannuation scheme relating to service in an office or employment, which is not a pensionable office or employment within the meaning of paragraph (a), were a payment of a qualifying premium for which relief had been given under this Chapter.”,

(ii) in section 784A, by inserting the following after subsection (1):

“(1A) Without prejudice to the generality of subsection (1)(d), where assets of an approved retirement fund are used in connection with any of the transactions referred to in subsection (1B), the transaction shall be regarded as a distribution for the purposes of this section of the amount specified in that subsection.

(1B) The transactions referred to in subsection (1A) and the amount to be regarded as a distribution in relation to any such transaction are as follows—

(a) in the case of a loan made to the individual beneficially entitled to the assets in an approved retirement fund or to any person connected with that individual, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the assets of the approved retirement fund used to make such a loan or used as security for such a loan,

(b) in the case of the acquisition of property from the individual beneficially entitled to the assets in an approved retirement fund or from any person connected with that individual, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the assets in the approved retirement fund used in or in connection with that acquisition,

(c) in the case of the sale of any asset in an approved retirement fund to the individual beneficially entitled to the assets in an approved retirement fund or to any person connected with that individual, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the asset sold,

(d) in the case of the acquisition of—

(i) any property which is to be used as holiday property, or

(ii) property which is to be used as a residence,

by the individual beneficially entitled to the assets in the approved retirement fund or by any person connected with that individual, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the assets in the approved retirement fund used in or in connection with that acquisition, but where property is acquired, on or after 6 February 2003, in relation to the acquisition of which a distribution is not treated as arising under this Chapter and that property commences to be used for one of the purposes mentioned in subparagraphs (i) or (ii) of this paragraph, the distribution shall be treated as arising at the date such use commences and the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the assets of the approved retirement fund used in or in connection with the acquisition together with any assets used in or in connection with any expenditure on the improvement or repair of the property in question,

(e) in the case of the acquisition of shares or any other interest in a company, which is a close company or which would be a close company but for the fact that the company is not resident in the State, in relation to which the individual beneficially entitled to the assets in the approved retirement fund or a person connected with that individual is a participator, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of assets in the approved retirement fund used in or in connection with that acquisition, and

(f) in the case of the acquisition of tangible moveable property, the amount to be regarded as a distribution for the purposes of this section is an amount equal to the value of the assets in the approved retirement fund used in or in connection with that acquisition.

(1C) An amount which has been regarded as a distribution from an approved retirement fund, in accordance with this section, shall not be regarded as an asset in that approved retirement fund for any purpose.

(1D) Any property, the acquisition or sale of which is regarded as giving rise to a distribution of assets in an approved retirement fund, shall not be regarded as an asset in that approved retirement fund.

(1E) For the purposes of subsection (1B) references to the value of an asset in an approved retirement fund shall, except where the asset is cash, be construed as references to the market value of the asset, within the meaning of section 548.”,

(iii) in section 784A, by inserting the following after subsection (7):

“(8) (a) Within one month of commencing to act as manager of approved retirement funds, a qualifying fund manager shall give notice to that effect to the Revenue Commissioners.

(b) A qualifying fund manager who commenced to act as manager of an approved retirement fund prior to the passing of the Finance Act 2003 shall give notice to that effect to the Revenue Commissioners within three months of the passing of that Act.

(c) A notice under paragraph (a) or (b) shall specify the date the qualifying fund manager commenced to so act.”,

and

(iv) in section 784C(5), by substituting “, including any distribution or amount regarded under this Chapter as a distribution, other than—” for “other than—”,

(d) in Chapter 2A of Part 30—

(i) in subsection (1) of section 787E, by substituting the following for subparagraphs (a) to (c):

“(a) in the case of an individual who at any time during the year of assessment was of the age 30 years or over but had not attained the age of 40 years, 20 per cent,

(b) in the case of an individual who at any time during the year of assessment was of the age 40 years or over but had not attained the age of 50 years, 25 per cent,

(c) in the case of an individual who at any time during the year of assessment was of the age 50 years or over or who for the year of assessment was a specified individual, 30 per cent,

and

(d) in any other case, 15 per cent,”,

(ii) in subsection (3) of section 787E, by substituting “Where during a year of assessment an individual is a member either of an approved scheme or of a statutory scheme (hereafter referred to as a ‘scheme’) in relation to an office or employment, not being a scheme under which the benefits provided in respect of that service are limited to benefits of a kind referred to in paragraphs (b) and (c) of section 772(3), including any similar benefit provided under a statutory scheme established under a public statute,” for “Where during a year of assessment an individual is a member either of an approved scheme or of a statutory scheme (hereafter referred to as a ‘scheme’) in relation to an office or employment”,

(iii) in section 787G, by inserting the following after subsection (4):

“(4A) Without prejudice to the generality of subsection (4), the circumstances in which a PRSA administrator shall, for the purposes of this Chapter, be treated as making assets of a PRSA available to an individual shall include the use of those assets in connection with any transaction which would, if the assets were assets of an approved retirement fund, be regarded under section 784A as giving rise to a distribution for the purposes of that section and the amount to be regarded as made available shall be calculated in accordance with that section.”,

(e) in Chapter 4 of Part 30, by inserting the following after section 790:

“Limit on earnings.

790A.—Notwithstanding anything in this Part, for the purposes of giving relief to an individual under—

(a) Chapter 1 of this Part in respect of an employee's contribution to a retirement benefits scheme,

(b) Chapter 2 of this Part in respect of a qualifying premium under an annuity contract, and

(c) Chapter 2A of this Part in respect of a PRSA contribution,

the aggregate of the individual's remuneration, within the meaning of Chapter 1, and net relevant earnings, within the meaning of Chapter 2 and 2A, shall not exceed €254,000.”,

(f) in Part 42, by substituting in subparagraph (ii) of paragraph (g) (inserted by the Pensions (Amendment) Act 2002 ) of section 986(1), “Chapter 1, Chapter 2 or Chapter 2A of Part 30” for “Chapter 1 or Chapter 2A of Part 30”,

and

(g) in Schedule 29, in column 3, by inserting “section 784A(8)”, after “section 734(5)”.

(2) (a) Paragraphs (c)(i)(II) and (d) of subsection (1) shall apply as on and from 1 January 2003;

(b) paragraphs (b), (c)(i)(I), (c)(ii) and (c)(iv) of subsection (1) shall be taken to have come into force and have effect as on and from 6 February 2003;

(c) paragraph (e) of subsection (1) shall be taken to have come into force and have effect as on and from 1 January 2002, but shall not apply in respect of any employee's contribution, qualifying premium or PRSA contribution made before 4 December 2002;

(d) subsection (1) (other than paragraphs (b), (c)(i), (c)(ii), (c)(iv), (d) and (e)) shall have effect as on and from the passing of this Act.