Income Tax Act , 1967

(7) For the purposes of this section, “life annuity” means an annuity payable for a term ending with (or at a time ascertainable only by reference to) the end of a human life, whether or not there is provision for the annuity to end during the life on the expiration of a fixed term or on the happening of any event or otherwise, or to continue after the end of the life in particular circumstances, and “purchased life annuity” means a life annuity granted for a consideration in money or money's worth in the ordinary course of a business of granting annuities on human life.

(8) This section shall not apply—

(a) to any annuity which would, apart from this section, be treated for the purposes of the provisions of this Act relating to tax on annuities and other annual payments as consisting to any extent in the payment or repayment of a capital sum,

(b) to any annuity where the whole or part of the consideration for the grant of the annuity consisted of sums satisfying the conditions for relief from tax under section 143, 151 or 236,

(c) to any annuity purchased in pursuance of any direction in a will, or to provide for an annuity payable by virtue of a will or settlement out of income of property disposed of by the will or settlement (whether with or without resort to capital), or

(d) to any annuity purchased under or for the purposes of any sponsored superannuation scheme as defined in section 235 (9), or any scheme approved under section 235, or in pursuance of any obligation imposed, or offer or invitation made, under or in connection with any such scheme, or to any other annuity purchased by any person in recognition of another's services (or past services) in any office or employment.

(9) This section shall extend to life annuities whenever purchased or commencing (and the references to sections 143, 151 and 236 shall be construed accordingly).

240 Supplementary provisions.

240.—(1) Any question whether an annuity is a purchased life annuity to which section 239 applies, or what is the capital element in such an annuity, shall be determined by the inspector, but any person aggrieved by any decision of the inspector on any such question may appeal within the prescribed time to the Special Commissioners.

(2) Save as otherwise provided in this Chapter, the procedure to be adopted in giving effect thereto shall be such as may be prescribed.

(3) The Revenue Commissioners may make regulations for prescribing anything which is to be prescribed under this Chapter; and the regulations may apply for the purposes of this Chapter or of the regulations any provision of this Act (with or without modifications), and in particular the provisions relating to the rehearing of an appeal and the statement of a case for the opinion of the High Court on a point of law.

(4) Regulations under subsection (3) may in particular make provision as to the time limit for making any claim for relief from or repayment of tax under this Chapter and as to all or any of the following matters:

(a) the information to be given in connection with the determination of any question whether an annuity is a purchased life annuity to which section 239 applies, or what is the capital element in an annuity, and the persons who may be required to give any such information;

(b) the manner of giving effect to the decision on any such question, and the making of assessments for the purpose on the person entitled to the annuity notwithstanding anything in section 433;

(c) the extent to which any decision on any such question is to be binding, and the circumstances in which it may be reviewed.

(5) If any person, for the purpose of obtaining for himself or any other person any relief from or repayment of tax under this Chapter, knowingly makes any false statement or false representation, he shall be liable to a penalty of £500.

PART XIII Wear and Tear and Obsolescence

241 Wear and tear of machinery, plant, etc.

241.—(1) Subject to the provisions of this Act, in charging the profits or gains of a trade, profession, employment or office, a deduction may be allowed of a sum equal to five-fourths of the amount considered by the Special Commissioners to be just and reasonable, as representing the diminished value by reason of wear and tear during the year of any machinery or plant used for the purposes of the trade, profession, employment or office and belonging to the person by whom it is carried on or held:

Provided that where a person is carrying on a trade which consists of or includes the working of a mine or quarry or the smelting of ore, the deduction to be allowed under this subsection in respect of machinery or plant belonging to him and used in connection with the working of the mine or quarry or the smelting of the ore shall, if the person so elects, be such sum as is considered just and reasonable having regard to the period at the expiration of which the mine or quarry is likely to cease to be worked or the smelting of ore is likely to be discontinued and the probable value of the machinery or plant at the expiration of that period to the person carrying on the trade:

Provided also that the deduction to be allowed under this subsection—

(a) in respect of a vehicle suitable for the conveyance by road of persons or goods or the haulage by road of other vehicles, or

(b) by virtue of an election under the first proviso to this subsection,

shall be computed as if “five-fourths of” in this subsection were deleted.

(2) Where machinery or plant is let to the person by whom the trade, profession, employment or office is carried on or held, on the terms of his being bound to maintain the same and deliver it over in good condition at the end of the lease, the machinery or plant shall be deemed to belong to that person for the purpose of this section, provided that the burden of the wear and tear of the machinery or plant will in fact fall directly on him.

(3) Where full effect cannot be given to any such deduction in any year owing to there being no profits or gains chargeable for that year, or owing to the profits or gains chargeable being less than the deduction, the deduction or part of the deduction to which effect has not been given, as the case may be, shall, for the purpose of making the assessment for the following year, be added to the amount of the deduction for wear and tear for that year, and deemed to be part of that deduction, or, if there is no such deduction for that year, be deemed to be the deduction for that year, and so on for succeeding years.

(4) Any claim in respect of the aforesaid deduction shall be included in the annual statement required to be delivered under this Act of the profits or gains of the trade, profession, employment or office for which the machinery or plant is used, and the inspector, in assessing those profits or gains, shall make such allowance in respect thereof as is due.

(5) Where machinery or plant is let upon such terms that the burden of the wear and tear thereof falls directly on the lessor, he shall be entitled, on making a claim to the inspector within twelve months after the end of the year of assessment, to an allowance on account of the wear and tear of the machinery or plant equal to the amount which might have been allowed if, during the period of the letting, the machinery or plant were in use for the purposes of a trade, profession, employment or office carried on or held by him.

(6) No deduction for wear and tear, or repayment on account of any such deduction, shall be allowed for any year if the deduction, when added to—

(a) the deductions on that account, and

(b) any initial allowances in relation to the machinery or plant under Chapter I of Part XV,

allowed for any previous years to the person by whom the trade, profession, employment or office is carried on or held, will make the aggregate amount of the deductions and allowances exceed the actual cost to that person of the machinery or plant, including in that actual cost any expenditure in the nature of capital expenditure on the machinery or plant by way of renewal, improvement, or reinstatement.

(7) Where, in charging the profits or gains of a trade or profession, a deduction is to be allowed to any person under subsection (1), as representing the diminished value by reason of wear and tear during the year of assessment of any machinery or plant, the value at the commencement of the year of such machinery or plant shall be taken to be the actual cost to that person of such machinery or plant reduced by the total of any deductions allowed on account of wear and tear and any initial allowances made under Chapter I of Part XV for previous years of assessment.

(8) Where an application is made to the Revenue Commissioners for the alteration of the amount of any deduction for wear and tear, the Revenue Commissioners, unless they are of opinion that the application is frivolous or vexatious, shall refer the case to the Board of Referees, and that Board shall, if they are satisfied that the application is made by or on behalf of any considerable number of persons engaged in or holding any class of trade, business, profession, employment or office take the application into their consideration, and determine the deduction to be allowed.

In this subsection the expression “Board of Referees” means a Board of Referees to be appointed for the purpose of this subsection by the Minister for Finance.

242 Machinery out of use during national emergency.

242.—The provisions of this Act relating to the deduction to be allowed in respect of diminished value by reason of wear and tear shall have effect as if the references therein to diminished value by reason of wear and tear during the year of any machinery or plant included references to diminished value by reason of any machinery or plant having been temporarily out of use at any time during the year through circumstances attributable directly or indirectly, to the national emergency to which the resolution passed by each House of the Oireachtas on the 2nd day of September, 1939, related (including circumstances continuing after the termination of that emergency).

243 Obsolescence.

243.—(1) In estimating the profits or gains of any trade, profession, employment or office there shall, if the person carrying on or holding the same so elects by notice in writing to the inspector, be allowed to be deducted as expenses incurred in any year so much of any amount expended in that year in replacing any plant or machinery provided before the 15th day of April, 1959, which has become obsolete as is equivalent to the cost of the plant or machinery replaced after deducting from that cost the total amount of any allowances which have at any time been made in estimating profits or gains, as aforesaid on account of the wear and tear of that plant and machinery, any initial allowances made in respect of that plant and machinery under Chapter I of Part XV and any sum realised by the sale of that machinery or plant.

(2) The provisions of section 279 and 280 shall apply for the purpose of determining the amount which, under subsection (1), is to be allowed to be deducted as expenses in estimating the profits or gains of the trade, profession, employment or office as they apply for the purpose of determining the amount of a balancing allowance under Chapter II of Part XVI.

(3) Notwithstanding anything in section 34 or 36, the preceding provisions of this section shall not apply in relation to the occupation of lands (including woodlands) and, in estimating the profits or gains arising from the occupation of lands (including woodlands) for the purposes of section 34 or 36, there shall be allowed to be deducted as expenses incurred in any year so much of any amount expended in that year in replacing any plant or machinery which has become obsolete as is equivalent to the cost of the plant or machinery replaced after deducting from that cost—

(a) the total amount of any allowances which have at any time been made in estimating profits or gains as aforesaid, on account of—

(i) the wear and tear of that plant and machinery, and,

(ii) in the case of woodlands, any initial allowances in respect of that plant and machinery under Chapter I of Part XV, and

(b) any sum realised by the sale of that machinery or plant.

PART XIV Beliefs for Certain Expenditure on Scientific Research, on Mining Development and on the Purchase of New Ships

Chapter I Allowances for Expenditure on Scientific Research

244 Allowance for scientific research.

244.—(1) In this section—

the expression “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge;

the word “asset” includes a part of an asset;

the expression “expenditure on scientific research” does not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research.

(2) Where a person carrying on a trade either—

(a) incurs, on or after the 6th day of April, 1946, non-capital expenditure on scientific research relating to the trade, or

(b) pays, on or after that date, any sum to a body carrying on scientific research and approved for the purposes of this section by the Minister for Finance or to an Irish university, in order that such body or university may undertake scientific research relating to the trade,

then, the expenditure so incurred or the sums so paid shall be deducted as an expense in computing the profits or gains of the trade.

(3) Where—

(a) on or after the 6th day of April, 1946, a person incurs capital expenditure on scientific research, and

(b) either—

(i) he is then carrying on a trade to which such expenditure relates, or

(ii) he subsequently sets up and commences a trade which is related to such research, and

(c) he applies to the inspector for an allowance under this sub-section in respect of the said expenditure, and

(d) he so applies—

(i) in case the expenditure was incurred by him while carrying on the trade, within twelve months after the end of the year of assessment in which it was incurred, or

(ii) in case the expenditure was incurred by him before the setting up and commencement of the trade, within twelve months after the end of the year of assessment in which the trade was set up and commenced,

then, subject to the provisions of this section, there shall be allowed as a deduction in charging the profits or gains of the trade for the year of assessment mentioned in whichever of subparagraphs (i) and (ii) of paragraph (d) is applicable, and for each of the four following years of assessment, a sum equal to one-fifth of the amount of the expenditure.

(4) Where an asset, representing capital expenditure on scientific research, ceases at any time from any cause whatever to be used for such research, relating to the trade carried on by the person who incurred the expenditure, then—

(a) no allowance under this section in respect of that expenditure shall be made for any year of assessment after that in which the cessation takes place;

(b) if the total of the following, namely, the allowances already made under this section in respect of that expenditure and the value of the asset immediately before the cessation, is less than the said expenditure, there shall be allowed as a deduction in charging the profits or gains of the trade for the year of assessment in which the cessation takes place an additional allowance equal to the amount of the deficiency;

(c) if the said total exceeds the said expenditure, the amount of the excess or the total of the allowances so made, whichever is the less, shall be treated as a trading receipt of the trade accruing immediately before the cessation;

(d) in the application of section 241 to a claim in respect of the asset for any year of assessment after that in which the cessation takes place, the actual cost of the asset shall be treated as being reduced by the total of the allowances granted in respect of the asset under this section; and

(e) in the application of section 243 to any such claim, the cost of the asset shall be treated as being reduced by the said total.

(5) In relation to capital expenditure on scientific research incurred on or after the 6th day of April, 1965, this section shall have effect—

(a) as if in subsection (3) the words “and for each of the four following years of assessment,” and “one-fifth of” were omitted,

(b) as if paragraphs (a), (b) and (e) of subsection (4) were omitted and the following paragraph were substituted for paragraph (c)—

“(c) an amount equal to the allowance made under this section in respect of that expenditure, or, if the value of the asset immediately before the cessation is less than that allowance, equal to that value, shall be treated as a trading receipt of the trade accruing immediately before the cessation;”,

(c) as if “the amount of the allowance effectively granted” were substituted for “the total of the allowances granted” in subsection (4) (d).

(6) Where an allowance under this section is granted to a person for any year of assessment in respect of expenditure represented wholly or partly by assets, then, for that year of assessment—

(a) no deduction in respect of those assets shall be allowed to that person under section 67, 241, 243 or 306, and

(b) section 65 (3) shall have effect as regards those assets as if section 65 (4) were omitted.

(7) Section 241 (3) shall apply in relation to an allowance under subsection (3) of this section as it applies in relation to deductions in respect of wear and tear of plant and machinery.

(8) For the purposes of this section expenditure shall not be regarded as incurred by a person in so far as it is, or is to be, met directly or indirectly out of moneys provided by the Oireachtas or by any person other than the first-mentioned person.

(9) The same expenditure shall not be taken into account for any of the purposes of this section in relation to more than one trade.

Chapter II Allowances for Capital Expenditure on Mine Development

245 Allowance for mining development.

245.—(1) In this section—

“mine” means an underground excavation made for the purpose of getting minerals:

Provided that in relation to capital expenditure within the meaning of this section incurred on or after the 6th day of April, 1960, “mine” means a mine which is operated for the purpose of obtaining, whether by underground or surface working, any scheduled mineral, mineral compound or mineral substance as defined in section 2 of the Minerals Development Act, 1940;

references to capital expenditure incurred in connection with a mine shall be construed as references to capital expenditure incurred—

(a) in the development of the mine on searching for or on discovering and testing mineral deposits or winning access thereto, or

(b) on the construction of any works which are of such a nature that when the mine has ceased to be operated they are likely to have so diminished in value that their value will be little or nothing,

but as excluding references to—

(c) any expenditure on the acquisition of the site of the mine or of the site of any such works or of rights in or over any such site, or

(d) any expenditure on the acquisition of, or of rights over, the deposits, or

(e) any expenditure on works constructed wholly or mainly for subjecting the raw product of the mine to any process except a process designed for preparing the raw product for use as such;

references to assets representing capital expenditure incurred in connection with a mine shall—

(a) be construed as including, in relation to expenditure on searching for, discovering and testing deposits, references to any information or other results obtained from any search, exploration or enquiry upon which the expenditure was incurred, and

(b) be construed as also including references to any part of such assets, and

(c) be construed as also including, in the case of any such assets destroyed or damaged, references to any insurance moneys or other compensation moneys in respect of such destruction or damage.

(2) Expenditure shall not, for the purposes of this section, be regarded as having been incurred by a person carrying on the trade of working a mine in so far as it has been or is to be met directly or indirectly out of moneys provided by the Oireachtas or by any other person (not being a person who has carried on the trade of working that mine).

(3) Any person, who carries on the trade of working a mine and who has, on or after the 6th day of April, 1946, incurred any capital expenditure in connection with the said mine, may apply for the grant of an allowance (in this section referred to as a mine development allowance) in respect of such capital expenditure.

(4) Application for a mine development allowance for any year of assessment may be made to the inspector not later than twelve months after the end of such year.

(5) The following provisions shall have effect in relation to the amount of a mine development allowance for any year of assessment in respect of any capital expenditure incurred in connection with a mine—

(a) the inspector shall estimate to the best of his judgment the life (in this subsection referred to as the estimated life) of the deposits, but shall not estimate such life at more than twenty years,

(b) the inspector shall then estimate the amount of the difference (in this subsection referred to as the estimated difference) between the said capital expenditure and the amount which, in his opinion, the assets representing the said capital expenditure are likely to be worth at the end of the estimated life,

(c) the inspector shall, subject to the provisions of this section, allow, as the mine development allowance for the said year of assessment, an amount equal to a sum which bears to the estimated difference the same proportion as the length of the said year of assessment bears to the length of the estimated life,

(d) if the said capital expenditure was incurred during the said year of assessment, then the said year of assessment shall, for the purposes of paragraph (c), be taken to comprise so much only of the said year of assessment as is subsequent to the date on which the said capital expenditure was incurred:

Provided that the total of the allowances shall not exceed the estimated difference.

(6) A mine development allowance to any person carrying on the trade of working a mine shall be made as a deduction in charging the profits or gains of that trade and section 241 (3) shall apply in relation to the allowance as it applies in relation to deductions for wear and tear of plant and machinery.

(7) A mine development allowance shall not be granted in respect of any capital expenditure incurred in connection with a mine in any case where the asset representing such capital expenditure is an asset in respect of which a deduction could be claimed under section 241, 243 or 306.

(8) Where a mine development allowance for any year of assessment has been granted in respect of capital expenditure incurred in connection with a mine, then, for that year of assessment—

(a) section 65 (3) shall have effect as regards any asset which represents the said capital expenditure as if section 65 (4) were omitted, and

(b) section 67 shall not apply as respects any such asset.

(9) Any capital expenditure incurred, on or after the 6th day of April, 1946, in connection with a mine by a person about to carry on the trade of working the said mine but before commencing such trade shall, for the purposes of this section, be treated as if it had been incurred on the first day of the commencement of such trade.

(10) Where mine development allowances in respect of capital expenditure incurred in connection with a mine have been granted and the mine has finally ceased to be operated—

(a) the inspector shall review the said mine development allowances,

(b) if, on such review, it appears that the amount of the difference (in this subsection referred to as the said difference) between the said capital expenditure and the amount which the assets, representing the said capital expenditure at such cessation, were worth at such cessation exceeds the total of the said mine development allowances, then further mine development allowances totalling in amount the excess may be granted for any year of assessment (being the year in which the said mine has finally ceased to be operated or any previous year) so however that the total of such further mine development allowances shall not amount to more than the said excess, and if necessary effect may be given to this paragraph by way of repayment,

(c) if, on such review, it appears that the said difference is less than the total of the said mine development allowances, then, the deficiency or the total of the said mine development allowances, whichever is the less, shall be treated as a trading receipt of the trade of working the said mine accruing immediately before such cessation.

(11) Where the person (in this subsection referred to as the vendor) carrying on the trade of working a mine sells to any other person (not being a person who succeeds the vendor in the said trade) any asset representing capital expenditure incurred in connection with the said mine and by reference to which mine development allowances have been granted, the following provisions shall have effect—

(a) if the total of the said mine development allowances when added to the sum realised on the sale of the said asset is less than the said capital expenditure, by any amount (in this subsection referred to as the unexhausted allowance), then, further mine development allowances may be granted to the vendor in respect of any year of assessment (being the year of such sale or any previous year), so however that the total of such further mine development allowances shall not exceed the unexhausted allowance,

(b) if the total of the said mine development allowances when added to the sum realised on the sale of the said asset exceeds the said capital expenditure, then, the amount of such excess or the said total of the mine development allowances, whichever is the less, shall be treated as a trade receipt of the said trade accruing immediately before the said sale.

(12) Where—

(a) mine development allowances in respect of capital expenditure incurred in connection with a mine have been granted to a person (in this subsection referred to as the original trader) carrying on the trade of working the mine, and

(b) another person (in this subsection referred to as the successor) succeeds to the said trade,

mine development allowances may continue to be granted in respect of the said capital expenditure to the successor, but in no case shall the amount of such allowances exceed the amount to which the original trader would have been entitled if he had continued to carry on the said trade.

(13) Where for any year of assessment a company is entitled to relief from income tax by virtue of Chapter II or Chapter III of Part XXV then, for the purposes of subsections (5), (10), (11) and (12), there shall be deemed to have been granted, for that year in respect of any expenditure, the full mine development allowance which, on due claim, could have been granted for that year in respect of that expenditure, unless that allowance has in fact been granted.

(14) An appeal to the Special Commissioners shall lie on any question arising under this section in like manner as an appeal would lie against an assessment and the provisions of this Act relating to appeals shall apply and have effect accordingly.

Chapter III Allowances for Capital Expenditure on the Purchase of New Ships

246 Shipping investment allowances.

246.—(1) Where a person carrying on a trade incurs capital expenditure on the purchase of a new ship for the purposes of the trade, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance (in this Chapter referred to as a shipping investment allowance) equal to two-fifths of the expenditure, and such allowance shall be made as a deduction in charging the profits or gains of the trade and shall be in substitution for and not in addition to an initial allowance under Chapter I of Part XV:

Provided that this subsection shall not apply to any expenditure incurred before the 6th day of April, 1957.

(2) For the purposes of this Chapter, the day on which any expenditure is incurred shall be taken to be the day when the sum in question becomes payable.

(3) Any claim by a person for an allowance under this section in charging the profits or gains of his trade shall be included in the annual statement required to be delivered under this Act of the profits or gains thereof and shall be accompanied by a certificate signed by the claimant, which shall be deemed to form part of the claim, stating that the expenditure was incurred on the purchase of a new ship and giving such particulars as show that the allowance falls to be made.

(4) In this section and the subsequent sections of this Chapter “new” means unused and not secondhand.

247 Provisions relating to wear and tear and obsolescence.

247.—(1) For the purposes of ascertaining the amount of any deduction to be allowed to any person under section 241 (1) as representing the diminished value by reason of wear and tear during the year of assessment of any ship, no account shall be taken of a shipping investment allowance in determining the value of the ship at the commencement of the year.

(2) In section 241 (6) “the deductions on that account, and”, and the expression “the deductions” where that expression occurs before “and allowances”, shall each be construed as not including a reference to any shipping investment allowance made to the person by whom the trade is carried on.

(3) Section 243 shall be taken as not requiring a deduction of any shipping investment allowance from the cost of any ship for the purposes of that section.

248 Application of section 241 (3).

248.—Section 241 (3) shall apply in relation to a shipping investment allowance as it applies in relation to deductions allowable in respect of wear and tear of machinery or plant.

249 Meaning of “basis period”.

249.—(1) In this Chapter “basis period” has the meaning assigned to it by the following provisions of this section.

(2) In the case of a person to whom an allowance falls to be made under this Chapter, his basis period for any year of assessment shall be the period on the profits or gains of which income tax for that year falls to be finally computed under Case I of Schedule D in respect of the trade in question or, where, by virtue of any provision of this Act, the profits or gains of any other period are to be taken to be the profits or gains of the said period, that other period:

Provided that, in the case of any trade—

(a) where two basis periods overlap, the period common to both shall be deemed for the purposes of this subsection to fall in the first basis period only;

(b) where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, then, unless the second-mentioned year of assessment is the year of the permanent discontinuance of the trade, the interval shall be deemed to be part of the second basis period; and

(c) where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade is permanently discontinued and the basis period for the year in which it is permanently discontinued, the interval shall be deemed to form part of the first basis period.

(3) (a) Any reference in the proviso to subsection (2) to the permanent discontinuance of a trade shall be construed as including a reference to the occurring of any event which, under any of the provisions of this Act, is to be treated as equivalent to the permanent discontinuance of a trade.

(b) Any reference in the said proviso to the overlapping of two periods shall be construed as including a reference to the coincidence of two periods or to the inclusion of one period in another, and references to the period common to both of two periods shall be construed accordingly.

250 Withdrawal of shipping investment allowance.

250.—Where a shipping investment allowance has been made to any person in respect of expenditure incurred on the purchase of a new ship and the ship is sold by him without the ship having been used by him for the purposes of his trade or before the expiration of the period of five years from the day on which the ship began to be so used, the shipping investment allowance shall be withdrawn, and all such additional assessments and adjustments of assessments shall be made as may be necessary for or in consequence of the withdrawal of a shipping investment allowance or the substitution therefor of an initial allowance under Chapter I of Part XV.

PART XV Initial Allowances for Certain Capital Expenditure on Machinery and Plant and on Industrial Buildings and Structures

Chapter I Machinery and Plant: Initial Allowances

251 Initial allowances.

251.—(1) Subject to the provisions of this Act, where a person carrying on a trade the profits or gains of which are (otherwise than consequent upon an election under section 34) chargeable under Case I of Schedule D, incurs capital expenditure on the provision, for the purposes of the trade, of new machinery or new plant, other than vehicles suitable for the conveyance by road of persons or goods or the haulage by road of other vehicles, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance (in this Chapter referred to as an initial allowance) equal to one-fifth of the expenditure, and such allowance shall be made as a deduction in charging the profits or gains of the trade.

(2) Any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated for the purposes of subsection (1) as if it had been incurred by that person on the first day on which he does carry it on.

(3) Subsections (1) and (2) shall not apply to any expenditure incurred before the 6th day of April, 1956.

(4) Notwithstanding anything in the preceding provisions of this section, this Chapter shall have effect in relation to capital expenditure incurred on or after the 14th day of December, 1961, and before the 1st day of April, 1968, as if “two-fifths” were substituted for “one-fifth” in subsection (1).

(5) Any claim by a person for an allowance under this section in charging the profits or gains of his trade shall be included in the annual statement required to be delivered under this Act of the profits or gains thereof and shall be accompanied by a certificate signed by the claimant, which shall be deemed to form part of the claim, stating that the expenditure was incurred on new machinery or new plant and giving such particulars as show that the allowance falls to be made.

(6) In this section, “new” means unused and not secondhand, provided that a ship shall be deemed to be new even if it has been used or is secondhand.

252 Application of section 241 (2) (3) (5).

252.—Section 241 (2) (3) (5) shall apply in relation to an initial allowance as those subsections apply in relation to deductions allowable in respect of wear and tear of machinery or plant.

253 Application to professions.

253.—The preceding provisions of this Chapter shall, with any necessary adaptations, apply in relation to capital expenditure incurred by a person assessable under Case II of Schedule D of this Act.

Chapter II Industrial Buildings and Structures: Industrial Building Allowance

254 Industrial building allowance.

254.—(1) Subject to the provisions of this Act, where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade carried on by him, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance (in this Chapter referred to as an industrial building allowance) equal to one-tenth of the expenditure, and such allowance shall be made as a deduction in charging the profits or gains of the trade:

Provided that this subsection shall not apply to any expenditure incurred before the 30th day of September, 1956.

(2) Notwithstanding anything in subsection (1), in relation to capital expenditure incurred on or after the 14th day of December, 1961, and before the 1st day of April, 1968, this Chapter shall have effect as if “one-fifth” were substituted for “one-tenth” in subsection (1):

Provided that this subsection shall not have effect in relation to capital expenditure incurred on or after the 1st day of January, 1960, on the construction of a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping or in relation to capital expenditure incurred on the construction of a building or structure in respect of which an allowance under this Chapter falls to be made by virtue of section 255 (1) (c).

(3) Notwithstanding any other provision of this section, no industrial building allowance shall be made in respect of any expenditure on a building or structure if the building or structure, when it comes to be used, is not an industrial building or structure, and where an industrial building allowance has been granted in respect of any expenditure on any such building or structure, any necessary additional assessments may be made to give effect to this subsection.

(4) For the purposes of this section—

(a) any expenditure incurred for the purposes of a trade by a person about to carry it on shall be treated as if it had been incurred by that person on the first day on which he does carry it on, and

(b) expenditure shall not be regarded as having been incurred by a person in so far as it has been or is to be met directly or indirectly by the State, by any board established by statute or by any public or local authority:

Provided that paragraph (a) shall not apply to any expenditure incurred before the 30th day of September, 1956.

(5) Section 241 (3) shall apply in relation to a deduction under this section as it applies in relation to a deduction allowable in respect of wear and tear of machinery or plant.

(6) Any claim by a person for an allowance under this section in charging the profits or gains of his trade shall be included in the annual statement required to be delivered under this Act of the profits or gains thereof and shall be accompanied by a certificate signed by the claimant, which shall be deemed to form part of the claim, stating that the expenditure was incurred on the construction of an industrial building or structure and giving such particulars as show that the allowance falls to be made.

255 Meaning of “industrial building or structure”.

255.—(1) In this Chapter, “industrial building or structure” means a building or structure in use—

(a) for the purposes of a trade carried on in a mill, factory or other similar premises, or

(b) for the purposes of a dock undertaking, or

(c) for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, or

(d) for the purposes of the trade of hotel-keeping:

Provided that a building or structure in use as a holiday camp shall be deemed to be a building or structure in use for the purposes of the trade of hotel-keeping.

(2) In this section, “dock” includes any harbour, wharf, pier or jetty or other works in or at which vessels can ship or unship merchandise or passengers, not being a pier or jetty primarily used for recreation, and “dock undertaking” shall be construed accordingly.

(3) Subsection (1) shall apply in relation to a part of a trade as it applies in relation to a trade, but where part only of a trade complies with the conditions set out in that subsection, a building or structure shall not, by virtue of this subsection, be an industrial building or structure unless it is in use for the purposes of that part of that trade.

(4) (a) Notwithstanding anything in subsection (1) or (3), but subject to subsection (5), in this Chapter “industrial building or structure” does not include any building or structure in use as, or as part of, a dwelling-house, retail shop, showroom or office or for any purpose ancillary to the purposes of a dwelling-house, retail shop, showroom or office.

(b) In this subsection “retail shop” includes any premises of a similar character where retail trade or business (including repair work) is carried on.

(5) Where part of the whole of a building or structure is, and part thereof is not, an industrial building or structure, and the capital expenditure which has been incurred on the construction of the second-mentioned part is not more than one-tenth of the total capital expenditure which has been incurred on the construction of the whole building or structure, the whole building or structure and every part thereof shall be treated as an industrial building or structure.

(6) Any reference in this Chapter to a building or structure shall be construed as including a reference to a part of a building or structure except where the reference is comprised in a reference to the whole of a building or structure.

256 Meaning of “expenditure on construction of building or structure”.

256.—A reference in this Chapter to expenditure incurred on the construction of a building or structure does not include—

(a) any expenditure incurred on the acquisition of, or of rights in or over, any land, or

(b) any expenditure on the provision of machinery or plant or on any asset which is treated for any year of assessment as machinery or plant, or

(c) any expenditure in respect of which an allowance is or may be made, for the same or for any previous or subsequent year of assessment, under section 244 (3) or under section 245.

257 Expenditure on preparing site.

257.—Where capital expenditure is incurred on preparing, cutting, tunnelling or levelling land for the purposes of preparing the land as a site for the installation of machinery or plant, the machinery or plant shall, as regards that expenditure, be treated, for the purposes of this Chapter, as a building or structure.

258 Commencement of sections 255 (1) (b), 255 (2), 256 (b) (c) and 257.

258.—In relation to industrial building allowances for years of assessment beginning on or after the 6th day of April, 1959, other than amounts carried forward from any year of assessment ended before that date, the following provisions of this Chapter shall have effect as from the commencement of the Finance (Miscellaneous Provisions) Act, 1956—

(a) section 255 (1) (b) section 255 (2),

(b) section 256 (b) (c), and

(c) section 257.

259 Appeals.

259.—An appeal to the Special Commissioners shall lie on any question arising under this Chapter in like manner as an appeal would lie against an assessment to income tax, and the provisions of this Act relating to appeals shall apply and have effect accordingly.

Chapter III Miscellaneous and General

260 “Capital expenditure” under sections 251 and 254.

260.—For the purposes of sections 251 and 254, capital expenditure shall not include any expenditure which is allowed, to be deducted in computing, for the purposes of income tax, the profits or gains of a trade or profession carried on by the person incurring the expenditure.

261 Date on which expenditure incurred.

261.—For the purposes of this Part, the day on which any expenditure is incurred shall be taken to be the day when the sum in question becomes payable.

262 Meaning of “basis period”.

262.—(1) In this Part, “basis period” has the meaning assigned to it by the following provisions of this section.

(2) In the case of a person to whom an allowance falls to be made under this Part, his basis period for any year of assessment shall be the period on the profits or gains of which income tax for that year falls to be finally computed under Case I or Case II of Schedule D in respect of the trade or profession in question or, where, by virtue of any provision of this Act, the profits or gains of any other period are to be taken to be the profits or gains of the said period, that other period:

Provided that, in the case of any trade or profession—

(a) where two basis periods overlap, the period common to both shall be deemed for the purposes of this subsection to fall in the first basis period only;

(b) where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, then, unless the second-mentioned year of assessment is the year of the permanent discontinuance of the trade or profession, the interval shall be deemed to be part of the second basis period; and

(c) where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade or profession is permanently discontinued and the basis period for the year in which it is permanently discontinued, the interval shall be deemed to form part of the first basis period.

(3) (a) Any reference in the proviso to subsection (2) to the permanent discontinuance of a trade or profession shall be construed as including a reference to the occurring of any event which, under any of the provisions of this Act, is to be treated as equivalent to the permanent discontinuance of a trade or profession.

(b) Any reference in the said proviso to the overlapping of two periods shall be construed as including a reference to the coincidence of two periods or to the inclusion of one period in another, and references to the period common to both of two periods shall be construed accordingly.

PART XVI Annual Allowances for Certain Capital Expenditure on Industrial Buildings and Structures, on Machinery and Plant, on Patents and on Dredging

Chapter I Industrial Buildings and Structures: Annual Allowances and Balancing Allowances and Charges

263 Interpretation.

263.—(1) In this Chapter—

“industrial building allowance” means an allowance made under Chapter II of Part XV;

“industrial building or structure” has the same meaning as, by virtue of section 255, that expression has in Chapter II of Part XV.

(2) A person who has incurred expenditure on the construction of a building or structure shall be deemed, for the purposes of any provision of this Chapter referring to his interest therein at the time when the expenditure was incurred, to have had the same interest therein as he would have had if the construction thereof had been completed at that time.

(3) Without prejudice to any of the other provisions of this Part relating to the apportionment of sale, insurance, salvage or compensation moneys, the sum paid on the sale of the relevant interest in a building or structure, or any other sale, insurance, salvage or compensation moneys payable in respect of any building or structure, shall, for the purposes of this Chapter, be deemed to be reduced by an amount equal to so much thereof, as, on a just apportionment, is attributable to assets representing expenditure other than expenditure in respect of which an allowance can be made under Chapter II of Part XV or under this Chapter.

(4) Sections 256 and 257 shall apply in relation to allowances and charges under this Chapter as they apply in relation to industrial building allowances.

264 Annual allowances.

264.—(1) Subject to the provisions of this Part, where—

(a) any person is, at the end of his basis period for any year of assessment, entitled to an interest in a building or structure to which this section applies,

(b) at the end of the said basis period, the building or structure is an industrial building or structure, and

(c) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure,

an allowance (in this Chapter referred to as an annual allowance) equal to one-fiftieth of that expenditure shall be made to him for that year of assessment:

Provided that in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping and in relation to a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, this Part shall have effect as if “one-tenth” were substituted for “one-fiftieth” in the foregoing provisions of this subsection.

(2) A building or structure is one to which this section applies, if, and only if, the capital expenditure incurred on the construction of it has been incurred on or after the 30th day of September, 1956.

(3) Where, at any time on or after the 15th day of April, 1959, the interest in a building or structure which is the relevant interest in relation to any expenditure is sold while the building or structure is an industrial building or structure, the annual allowance in respect of that expenditure shall, in the case of years of assessment the basis periods for which end after the time of that sale,—

(a) be computed by reference to the residue (as defined in the provisions of this Chapter relating to the writing off of expenditure) of that expenditure immediately after the sale, and

(b) be the fraction of the said residue the numerator of which is one and the denominator of which is the number of years of assessment comprised in the period which—

(i) begins with the first year of assessment for which the buyer is entitled to an annual allowance in respect of the expenditure or would be so entitled if the building or structure had at all material times continued to be an industrial building or structure, and

(ii) ends with the fiftieth year of assessment after that in which the building or structure was first used,

and so on for any subsequent sales:

Provided that in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping and in relation to a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, this Part shall have effect as if “tenth year” were substituted for “fiftieth year” in the foregoing provisions of this subsection.

(4) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance made to a person for any year of assessment in respect of any expenditure exceed what, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of his basis period for that year of assessment.

265 Balancing allowances and balancing charges.

265.—(1) Where any capital expenditure has been incurred, on or after the 30th day of September, 1956, on the construction of a building or structure, and any of the following events occurs while the building or structure is an industrial building or structure:

(a) the relevant interest in the building or structure is sold,

(b) that interest, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon,

(c) the building or structure is demolished or destroyed, or, without being demolished or destroyed, ceases altogether to be used,

an allowance or charge (in this Chapter referred to as a balancing allowance or a balancing charge) shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, the person entitled to the relevant interest immediately before that event occurs, for the year of assessment in his basis period for which that event occurs:

Provided that—

(i) no balancing allowance or balancing charge shall be made to or on any person for any year of assessment by reason of any event occurring after the end of his basis period for the fiftieth year of assessment after that in which the building or structure was first used, and

(ii) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping and in relation to a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, this Part shall have effect as if “tenth year” were substituted for “fiftieth year” in the foregoing provisions of this subsection.

(2) Where there are no sale, insurance, salvage or compensation moneys, or where the residue of the expenditure immediately before the event exceeds those moneys, a balancing allowance shall be made and the amount thereof shall be the amount of the said residue or, as the case may be, of the excess thereof over the said moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the residue, if any, of the expenditure immediately before the event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess, or, where the residue is nil, to the said moneys.

(4) If, for any of the relevant years of assessment (as defined for the purposes of this subsection) an annual allowance has not been made, subsections (2) and (3) shall have effect subject to the modification that the amount of the balancing allowance, or, as the case may be, the amount on which the balancing charge is to be made, shall be reduced by applying thereto the fraction, the numerator of which is the number of the relevant years of assessment for which an annual allowance has been made in respect of the expenditure and the denominator of which is the total number of the relevant years of assessment.

In this subsection, “the relevant years of assessment” means all years of assessment after that in which the building or structure was first used for any purpose up to and including that in which the event takes place which gives rise to the allowance or charge:

Provided that where, before the said event but on or after the 15th day of April, 1959, the building or structure has been sold while an industrial building or structure, the said expression means all years of assessment for which either—

(a) an annual allowance is made by reason of the building or structure being an industrial building or structure at any time between the sale and the event, or, where there has been more than one such sale, between the last such sale and the event, or

(b) an annual allowance would have fallen to be made if the building or structure had been an industrial building or structure at all times between the sale, or, as the case may be, the last such sale, and the event.

(5) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount on which a balancing charge is made on a person in respect of any expenditure on the construction of a building or structure exceed the amount of the industrial building allowance, if any, made to him in respect of that expenditure together with the amount of any annual allowances made to him in respect of that expenditure for years of assessment his basis periods for which end on or before the date of the event which gives rise to the charge.

266 Writing off of expenditure and meaning of “residue of expenditure”.

266.—(1) Any expenditure incurred on the construction of any building or structure shall be treated for the purposes of this Chapter to be written off to the extent and as at the times hereafter specified in this section, and references in this Chapter to the residue of any such expenditure shall be construed accordingly.

(2) If an industrial building allowance is made in respect of the expenditure, the amount of that allowance shall be written off as at the time when the building or structure is first used.

(3) If, by reason of the building or structure being at any time an industrial building or structure, an annual allowance is made for any year of assessment in respect of the expenditure, the amount of that allowance shall be written off as at the said time:

Provided that where at the said time an event occurs which gives rise or may give rise to a balancing allowance or balancing charge, the amount directed to be written off by this subsection as at the said time shall be taken into account in computing the residue of that expenditure immediately before that event for the purpose of determining whether any and if so what balancing allowance or balancing charge is to be made.

(4) If, in the case of any year of assessment after that in which the building or structure is first used, no annual allowance falls to be made to any person in respect of the expenditure, then, subject to the provisions of this subsection and subsection (5), an amount equal to one-fiftieth of the expenditure shall be treated as written off as at the end of the previous year of assessment,:

Provided that—

(a) in the case of a year of assessment beginning on or after the 6th day of April, 1960, this subsection shall not apply for any purpose if the building or structure was an industrial building or structure on the day preceding the beginning of the year of assessment;

(b) where this subsection does apply in the case of a year of assessment beginning as aforesaid, the amount to be written off shall, if the building or structure has been sold on or after the 15th day of April, 1959, while an industrial building or structure, be the amount which would have fallen to be written off if—

(i) the building or structure had been an industrial building or structure in use on the said preceding day for the purposes of a trade carried on by a person entitled to the relevant interest in the building or structure,

(ii) the basis period of that person for the year of assessment had ended on the said preceding day, and

(iii) an annual allowance had been made to him for the year of assessment accordingly, and

(c) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure by reason of its use for the purposes of the trade of hotel-keeping and in relation to a building or structure which falls to be regarded as an industrial building or structure by reason of its use for the purposes of growing fruit, vegetables or other produce in the course of a trade of market gardening within the meaning of section 54, this Part shall have effect as if “one-tenth” were substituted for “one-fiftieth” in the foregoing provisions of this subsection.

(5) If, on the occasion of a sale, a balancing allowance is made in respect of the expenditure, there shall be written off as at the time of the sale the amount by which the residue of the expenditure before the sale exceeds the net proceeds of the sale.

(6) If, on the occasion of a sale, a balancing charge is made in respect of the expenditure, the residue of the expenditure shall be deemed for the purposes of this Chapter to be increased as at the time of the sale by the amount on which the charge is made.

267 Manner of making allowances and charges.

267.—(1) Except in the cases mentioned in the following provisions of this section, any allowance or charge made to or on a person under the preceding provisions of this Chapter shall be made to or on him in charging the profits or gains of his trade.

(2) An annual allowance shall be made to a person for a year of assessment by way of discharge or repayment of tax if his interest is subject to any lease at the end of his basis period for that year of assessment.

(3) A balancing allowance shall be made to a person by way of discharge or repayment of tax if his interest is subject to any lease immediately before the event giving rise to the allowance.

(4) A balancing charge shall be made on a person under Case IV of Schedule D if his interest is subject to any lease immediately before the event giving rise to the charge.

(5) Any allowance which, under the preceding provisions of this section, is to be made by way of discharge or repayment of tax shall be available primarily against the following income:

(a) income charged to tax under Schedule A in respect of any premises which at any time in the year consist of or include an industrial building or structure,

(b) income charged to tax under Case IV of Schedule D in respect of any rent payable for any such premises as aforesaid, or

(c) income which is the subject of a balancing charge under this Chapter.

268 Meaning of “the relevant interest”.

268.—(1) Subject to the provisions of this section, in this Chapter “the relevant interest” means, in relation to any expenditure incurred on the construction of a building or structure, the interest in that building or structure to which the person who incurred the expenditure was entitled when he incurred it.

(2) Where, when he incurs expenditure on the construction of a building or structure, a person is entitled to two or more interests in the building or structure, and one of those interests is an interest which is reversionary on all the others, that interest shall be the relevant interest for the purposes of this Chapter.

(3) An interest shall not cease to be the relevant interest for the purposes of this Chapter by reason of the creation of any lease or other interest to which that interest is subject, and where the relevant interest is a leasehold interest and is extinguished by reason of the surrender thereof, or on the person entitled thereto acquiring the interest which is reversionary thereon, the interest into which that leasehold interest merges shall thereupon become the relevant interest.

269 Special provisions in regard to leases.

269.—(1) Where, with the consent of the lessor, a lessee of any building or structure remains in possession thereof after the termination of the lease without a new lease being granted to him, that lease shall be deemed for the purposes of this Chapter to continue so long as he remains in possession as aforesaid.

(2) Where, on the termination of a lease, a new lease is granted to the lessee consequent upon his being entitled by statute to a new lease or in pursuance of an option available to him under the terms of the first lease, the provisions of this Chapter shall have effect as if the second lease were a continuation of the first lease.

(3) Where, on the termination of a lease, the lessor pays any sum to the lessee in respect of a building or structure comprised in the lease, the provisions of this Chapter shall have effect as if the lease had come to an end by reason of the surrender thereof in consideration of the payment.

270 Temporary disuse of building or structure.

270.—(1) For the purpose of this Chapter, a building or structure shall not be deemed to cease altogether to be used by reason that it falls temporarily out of use on or after the 15th day of April, 1959, and where, immediately before any period of temporary disuse beginning on or after that day, a building or structure is an industrial building or structure, it shall be deemed to continue to be an industrial building or structure during the period of temporary disuse.

(2) Notwithstanding any other provision of this Part as to the manner of making allowances and charges, where by reason of the provisions of subsection (1) a building or structure is deemed to continue to be an industrial building or structure while temporarily out of use then, if—

(a) upon the last occasion upon which the building or structure was in use as an industrial building or structure, it was in use for the purposes of a trade which has since been permanently discontinued, or

(b) upon the last occasion upon which the building or structure was in use as an industrial building or structure, the relevant interest therein was subject to a lease which has since come to an end,

any annual allowance or balancing allowance falling to be made to any person in respect of the building or structure during any period for which the temporary disuse continues after the discontinuance of the trade or the coming to an end of the lease shall be made by way of discharge or repayment of tax, and any balancing charge falling to be made on any person in respect of the building or structure during that period shall be made under Case IV of Schedule D.

(3) The reference in this section to the permanent discontinuance of a trade does not include a reference to the happening of any event which, by virtue of any of the provisions of this Act, is to be treated as equivalent to the discontinuance of the trade.

Chapter II Machinery and Plant: Balancing Allowances and Charges

271 Interpretation.

271.—In this Chapter—

“initial allowance” means an allowance made under Chapter I of Part XV;

“scientific research allowance” means—

(a) in relation to any expenditure incurred prior to the 6th day of April, 1965, the total amount of any allowances made in respect of that expenditure under section 244 (3) increased by the amount of any allowance made under section 244 (4) (b) or, as the case may be, reduced by any amount treated as a trading receipt pursuant to section 244 (4) (c), and

(b) in relation to any expenditure incurred on or after the 6th day of April, 1965, the amount of any allowance made in respect of that expenditure under section 244 (3) reduced by any amount treated as a trading receipt pursuant to section 244 (4) (c) as it applies to expenditure incurred on or after that date;

“wear and tear allowance” means a deduction allowed under section 241.

272 Balancing allowances and balancing charges.

272.—(1) Subject to the provisions of this section, where any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or a wear and tear allowance has been made for any year of assessment to a person carrying on a trade:

(a) any event occurring after the setting up and before the permanent discontinuance of the trade whereby the machinery or plant ceases to belong to the person carrying on the trade (whether on a sale of the machinery or plant or in any other circumstances of any description),

(b) any event occurring as aforesaid whereby the machinery or plant (while continuing to belong to the person carrying on the trade) permanently ceases to be used for the purposes of a trade carried on by him,

(c) the permanent discontinuance of the trade, the machinery or plant not having previously ceased to belong to the person carrying on the trade,

an allowance or charge (in this Chapter referred to as a balancing allowance or a balancing charge) shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, that person for the year of assessment in his basis period for which that event occurs.

(2) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the machinery or plant still unallowed as at the time of the event exceeds those moneys, a balancing allowance shall be made, and the amount thereof shall be the amount of the expenditure still unallowed as aforesaid, or, as the case may be, of the excess thereof over the said moneys.

(3) If the sale, insurance, salvage or compensation moneys exceed the amount, if any, of the said expenditure still unallowed as at the time of the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys.

(4) Notwithstanding anything in subsection (3), in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts:

(a) the amount of the initial allowance, if any, made to him in respect of the expenditure in question,

(b) the amount of any wear and tear allowance made to him in respect of the machinery or plant in question,

(c) the amount of any scientific research allowance made to him in respect of the expenditure, and

(d) the amount of any balancing allowance previously made to him in respect of the expenditure.

(5) Where, as respects any machinery or plant, an event falling within any of the paragraphs (a), (b) and (c) of subsection (1) is followed by another event falling within any of those paragraphs, the later event shall not be treated as an event giving rise to a balancing allowance or balancing charge in respect of that machinery or plant.

273 Option in case of replacement.

273.—(1) Where machinery or plant in the case of which any of the events mentioned in section 272 (1) has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event, or, but for the provisions of this subsection, would have fallen to be made on him by reason thereof, then, if by notice in writing to the inspector he so elects, the following provisions shall have effect:

(a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant—

(i) the charge shall be made only on an amount equal to the difference,

(ii) no initial allowance, no balancing allowance and no wear and tear allowance shall be made in respect of the new machinery or plant or the expenditure on the provision thereof, and

(iii) in considering whether any, and if so what, balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure;

(b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made—

(i) the charge shall not be made,

(ii) the amount of any initial allowance in respect of the said expenditure and the amount of any wear and tear allowance shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made, and

(iii) in considering whether any, and if so what, balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, there shall be deemed to have been granted in respect thereof an initial allowance equal to the amount on which the charge would have been made, in addition to any initial allowance actually granted in respect thereof.

(2) Where any such election is made as is mentioned in section 243, no balancing allowance shall be made in respect of the machinery or plant which is replaced.

274 Meaning of “amount still unallowed”.

274.—References in this Chapter to the amount still unallowed as at any time of any expenditure on the provision of machinery or plant shall be construed as references to the amount of that expenditure less—

(a) any initial allowance made or deemed under this Chapter to have been made in respect thereof to the person who incurred it,

(b) any wear and tear allowances made or deemed under this Chapter to have been made to him in respect of the machinery or plant on the provision of which the expenditure was incurred, being allowances for the year of assessment in the basis period for which the time in question falls or for any previous year of assessment,

(c) any scientific research allowance made to him in respect of the expenditure, and

(d) any balancing allowance made to him in respect of the expenditure.

275 Application to partnerships.

275.—(1) Where, after the setting up and on or before the permanent discontinuance of a trade which at any time is carried on in partnership, any event occurs which gives rise or may give rise to a balancing allowance or balancing charge in respect of machinery or plant, any balancing allowance or balancing charge which, if the trade had at all times been carried on by one and the same person, would have fallen to be made to or on him in respect of that machinery or plant by reason of that event shall, subject to section 72, be made to or on the person or persons carrying on the trade in the year of assessment in the basis period for which that event occurs, and the amount of any such allowance or charge shall be computed as if that person or those persons had at all times been carrying on the trade and as if everything done to or by his or their predecessors in the carrying on thereof had been done to or by him or them:

Provided that in applying the provisions of section 272 (4) to any such balancing charge, the deductions and allowances allowed or made in respect of the machinery or plant for the year beginning on the 6th day of April, 1959, or for any earlier year of assessment shall not be taken to include deductions or allowances made to, or attributable to the shares of, persons who were not, either alone or in partnership with other persons, carrying on the trade at the beginning of the year beginning on the 6th day of April, 1959.

(2) In charging the profits or gains arising to any partner from a trade carried on in partnership, the same allowances, deductions and charges shall be allowed or made in respect of machinery or plant used for the purposes of that trade and belonging to one or more of the partners but not being partnership property as would fall to be allowed or made if the machinery or plant had at all material times belonged to all the partners and been partnership property and everything done by or to any of the partners in relation thereto had been done by or to all the partners.

(3) Notwithstanding anything in section 272, a sale or gift of machinery or plant used for the purposes of a trade carried on in partnership, being a sale or gift by one or more of the partners to one or more of the partners, shall not be treated as an event giving rise to a balancing allowance or a balancing charge if the machinery or plant continues to be used after the sale or gift for the purposes of that trade.

(4) References in subsections (2) and (3) to use for the purposes of a trade do not include references to use in pursuance of a letting by the partner or partners in question to the partnership or to use in consideration of the making to the partner or partners in question of any payment which may be deducted in computing under section 71 (3) the profits or gains of the trade.

276 Machinery or plant used partly for non-trading purposes.

276.—Where an event occurs which gives rise or might give rise to a balancing allowance or balancing charge to or on any person and the machinery or plant concerned is machinery or plant which has been used by that person for the purposes of a trade carried on by him and has also been used for other purposes, then, in determining the amount of the allowance, or, as the case may be, the amount on which the charge is to be made, regard shall be had to all the relevant circumstances and, in particular, to the extent of the use for the said other purposes, and there shall be made to or on him an allowance of such an amount, or, as the case may be, a charge on such an amount, as may be just and reasonable.

277 Calculation of balancing allowances and balancing charges in certain cases.

277.—(1) Where an event occurs which gives rise or might give rise to a balancing allowance or balancing charge in respect of machinery or plant, the event is the permanent discontinuance of a trade, and at or about the time of the discontinuance there occurs in relation to the machinery or plant any event such as is mentioned in paragraphs (a) to (c) of the definition of “sale, insurance, salvage or compensation moneys” in section 304, not being a sale at less than open-market price other than a sale to which section 299 applies then, for the purpose of determining—

(a) whether the discontinuance gives rise to a balancing allowance or balancing charge, and, if so,

(b) the amount of the allowance or, as the case may be, the amount on which the charge is to be made,

the amount of the net proceeds, compensation, receipts or insurance moneys mentioned in the said paragraphs (a) to (c) which arise on the last-mentioned event shall be deemed to be an amount of sale, insurance, salvage or compensation moneys arising on the permanent discontinuance of the trade.

(2) (a) Subject to subsections (3) and (5), paragraph (b) of this subsection shall have effect where an event occurs which gives rise or might give rise to a balancing allowance or balancing charge in respect of machinery or plant, and either—

(i) the event is the permanent discontinuance of the trade and immediately after the time of the discontinuance the machinery or plant continues to belong to the person by whom the trade was carried on immediately before the said time and the case is one not falling within subsection (1),

(ii) the event is the permanent discontinuance of the trade and at the time of the discontinuance the machinery or plant is either sold at less than the open-market price, the sale not being one to which section 299 applies, or the machinery or plant is given away,

(iii) the event is the sale of the machinery or plant at less than the open-market price, not being a sale to which section 299 applies, or is the gift of the machinery or plant, or

(iv) the event is that, after the setting up and before the permanent discontinuance of the trade, the machinery or plant permanently ceases to be used for the purposes of a trade carried on by the person by whom the first-mentioned trade is being carried on, and so ceases either by reason of that person's transferring the machinery or plant to other use or; on a transfer of the trade which is not treated as involving a discontinuance thereof, by reason of the retention of the machinery or plant by the transferor.

(b) For the purpose of determining whether a balancing allowance or balancing charge falls to be made and, if so, the amount of the allowance or, as the case may be, the amount on which the charge is to be made, the event shall be treated as if it had given rise to sale, insurance, salvage or compensation moneys of an amount equal to the open-market price of the machinery or plant.

(3) References in subsection (2) to the sale of machinery or plant at less than the open-market price do not include references to the sale thereof in such circumstances that there is a charge to income tax under Schedule E by virtue of the provisions of Chapter III of Part V and subsection (2) (b) shall not apply by reason of the gift of machinery or plant if the machinery or plant is given away in such circumstances as aforesaid.

(4) Subject to the provisions of subsection (5), where subsection (2) (b) has effect by reason of the gift or sale of machinery or plant to any person, and that person receives or purchases it with a view to using it for the purposes of a trade carried on by him, then, in determining whether any, and if so what, wear and tear allowances, balancing allowances or balancing charges are to be made in connection with that trade the like consequences shall ensue as if the recipient or purchaser had purchased the machinery or plant at the open-market price.

(5) Where, in a case falling within subsection (4), the recipient or purchaser and the donor or seller by notice in writing to the inspector jointly so elect the following provisions shall have effect:

(a) subsection (2) (b) and subsection (4) shall have effect as if for the references to the open-market price there were substituted references to that price or the amount of the expenditure on the provision of the machinery or plant still unallowed immediately before the gift or sale, whichever is the lower;

(b) notwithstanding anything in this Chapter, such balancing charge, if any, shall be made on the recipient or purchaser on any event occurring after the date of the gift or sale as would have fallen to be made on the donor or seller if the donor or seller had continued to own the machinery or plant and had done all such things and been allowed all such allowances in connection therewith as were done by or allowed to the recipient or purchaser.

(6) In this section “open-market price”, in relation to any machinery or plant, means the price which the machinery or plant would have fetched if sold in the open market at the time of the event in question.

278 Option in case of succession under will or intestacy.

278.—Where a person succeeds to a trade as a beneficiary under the will or on the intestacy of a deceased person who carried on that trade, the following provisions shall, if the beneficiary by notice in writing to the inspector so elects, have effect in relation to any machinery or plant previously owned by the deceased person and used by him for the purposes thereof:

(a) the reference in section 300 to the price which the machinery or plant would have fetched if sold in the open market shall, in relation to the succession and any previous succession occurring on or after the death of the deceased, be deemed to be a reference to that price or the amount of the expenditure on the provision of the machinery or plant still unallowed immediately before the succession in question, whichever is the lower; and

(b) notwithstanding anything in that section, such balancing charge, if any, shall be made on the beneficiary on any event occurring after his succession as would have fallen to be made on the deceased if he had not died and had continued to own the machinery or plant and had done all such things and been allowed all such allowances in connection therewith as were done by or allowed to the beneficiary or the successor on any such previous succession as is mentioned in paragraph (a).

279 Wear and tear allowance deemed to have been made in certain cases.

279.—(1) In determining whether any, and if so what, balancing allowance or balancing charge falls to be made to or on any person for any year of assessment in charging the profits or gains of a trade, there shall be deemed to have been made to that person, for every previous year of assessment in which the machinery or plant belonged to him and which is a year of assessment to be taken into account for the purpose of this section, such wear and tear allowance or greater wear and tear allowance, if any, in respect of the machinery or plant as would have fallen to be made to him if all the conditions specified in subsection (3) had been fulfilled in relation to every such previous year.

(2) There shall be taken into account for the purposes of this section every previous year of assessment in which the machinery or plant belonged to the person and—

(a) during which the machinery or plant was not used by the person for the purposes of the trade,

(b) during which the trade was not carried on by him,

(c) during which the trade was carried on by him in such circumstances that, otherwise than by virtue of Chapter I of Part XXV, the full amount of the profits or gains thereof was not liable to be charged to income tax,

(d) for which the whole or a part of the income tax chargeable in respect of the profits of the trade was not payable by virtue of Chapter II of Part XXV, or

(e) for which the income tax payable in respect of the profits of the trade was reduced by virtue of Chapter III or Chapter IV of Part XXV.

(3) The conditions referred to in subsection (1) are:

(a) that the trade had been carried on by the person in question ever since the date on which he acquired the machinery or plant and had been so carried on by him in such circumstances that the full amount of the profits or gains thereof was liable to be charged to income tax,

(b) that the trade had at no time consisted wholly or partly of exempted trading operations within the meaning of Chapter I of Part XXV,

(c) that the machinery or plant had been used by him solely for the purposes of the trade ever since that date, and

(d) that a proper claim had been duly made by him for wear and tear allowance in respect of the machinery or plant for every relevant year of assessment.

(4) Nothing in this section shall affect the provisions of section 272 (4).

280 Subsidies towards wear and tear.

280.—(1) Where—

(a) an event occurs which gives rise or might give rise to a balancing allowance or balancing charge to or on any person in respect of any machinery or plant provided or used by him for the purposes of a trade; and

(b) any sums (hereafter in this section referred to as the said sums) which—

(i) are in respect of, or take account of, the wear and tear to the machinery or plant occasioned by its use for the purposes of the trade, and

(ii) do not fall to be taken into account as his income or in computing the profits or gains of any trade carried on by him,

have been paid, or are to be payable, to him directly or indirectly,

then, in determining whether and, if so what, balancing allowance or balancing charge falls to be made to or on that person, there shall be deemed to have been made to him for the years of assessment during which the machinery or plant was used for the purposes of the trade wear and tear allowances in respect thereof the total amount of which is equal to the total amount of the said sums, over and above the wear and tear allowances, if any, which have been made to him in respect of the machinery or plant.

(2) Nothing in this section shall affect the provisions of section 272 (4).

281 Application to lessors.

281.—Where machinery or plant is let upon such terms that the burden of the wear and tear thereof falls directly upon the lessor, the preceding provisions of this Chapter shall apply in relation to the lessor as if the machinery or plant were, during the term of the letting, in use for the purposes of a trade carried on by him.

282 Manner of making allowances and charges.

282.—(1) Any balancing allowance or balancing charge made to or on any person under the preceding provisions of this Chapter shall, unless it is made under or by virtue of section 281, be made to or on that person in charging the profits or gains of his trade.

(2) Any wear and tear allowance made under or by virtue of section 241 (5) or any balancing allowance made under or by virtue of section 281 shall be made by way of discharge or repayment of tax and shall be available primarily against income from the letting of machinery or plant.

(3) Any balancing charge made under or by virtue of section 281 shall be made under Case IV of Schedule D.

283 Application to professions and employments.

283.—(1) The preceding provisions of this Chapter shall, with any necessary adaptations, apply in relation to professions, employments and offices, as they apply in relation to trades.

(2) Notwithstanding anything in section 34 or 36, none of the provisions of this Chapter shall apply in relation to the occupation of lands (including woodlands).

Chapter III Patents: Annual Allowances and Balancing Allowances and Charges

284 Interpretation.

284.—(1) In this Chapter—

“income from patents” means—

(a) any royalty or other sum paid in respect of the user of a patent, and

(b) any amount on which tax is payable for any year of assessment by virtue of any of the provisions of this Chapter;

“the commencement of the patent” means, in relation to a patent, the date as from which the patent rights become effective;

“patent rights” means the right to do or authorise the doing of anything which would, but for that right, be an infringement of a patent;

“Irish patent” means a patent granted under the laws of the State;

“the operative date” means the 6th day of April, 1960.

(2) In this Chapter, any reference to the sale of part of patent rights includes a reference to the grant of a licence in respect of the patent in question, and any reference to the purchase of patent rights includes a reference to the acquisition of a licence in respect of a patent:

Provided that if a licence granted by a person entitled to any patent rights is a licence to exercise those rights to the exclusion of the grantor and all other persons for the whole of the remainder of the term for which the rights subsist, the grantor shall be treated for the purposes of this Chapter as thereby selling the whole of the rights.

(3) Where, under section 130 of the Industrial and Commercial Property (Protection) Act, 1927, or any corresponding provisions of the law of any country outside the State, an invention which is the subject of a patent is made, used, or exercised or vended by or for the service of the State or the government of the country concerned, the provisions of this Chapter shall have effect as if the making, user, exercise or vending of the invention had taken place in pursuance of a licence, and any sums paid in respect thereof shall be treated accordingly.

(4) Any reference in this Chapter to the number of years comprised in a period shall be construed as a reference to the number of consecutive periods of twelve months, beginning with the day with which the period begins, which are comprised in the period, any odd period being treated as a complete twelve months:

Provided that nothing in this subsection shall be construed as affecting any reference in this Chapter to the number of complete years comprised in any period or which have elapsed since any date.

285 Annual allowances for capital expenditure on purchase of patent rights.

285.—(1) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights, there shall, subject to and in accordance with the following provisions of this Chapter, be made to him for each of the relevant years of assessment, as hereinafter defined, an allowance (in this Chapter referred to as an annual allowance) equal to the appropriate fraction, as hereinafter defined, of the amount of that expenditure:

Provided that no annual allowance shall be made to a person in respect of any expenditure unless—

(a) the allowance falls to be made to him in charging the profits or gains of his trade, or

(b) any income receivable by him in respect of the rights would be liable to income tax.

(2) The relevant years of assessment are, in the case of any person, the seventeen years of assessment beginning with the year of assessment in his basis period for which the expenditure was incurred:

Provided that—

(a) Where the rights are purchased for a specified period, the preceding provisions of this subsection shall have effect with the substitution for the reference to seventeen years of a reference to seventeen years or the number of years comprised within that period, whichever is the less,