Capital Gains Tax Act 1975

“quoted securities” means securities which at any time during the year of assessment or in the period of six years immediately prior to the year of assessment have had quoted market values on a stock exchange in the State or elsewhere.

PART VII Anti-Avoidance

33 Connected persons.

33.—(1) This section shall apply where a person acquires an asset and the person making the disposal is connected with him.

(2) Without prejudice to the generality of section 9, the person acquiring the asset and the person making the disposal shall be treated as parties to a transaction otherwise than by way of a bargain made at arm's length.

(3) If on the disposal a loss accrues to the person making the disposal, it shall not be deductible except from a chargeable gain accruing to him on some other disposal of an asset to the person acquiring the asset mentioned in subsection (1), being a disposal made at a time when they are connected persons:

Provided that this subsection shall not apply to a disposal by way of gift in settlement if the gift and the income from it is wholly or primarily applicable for educational, cultural or recreational purposes, and the persons benefiting from the application for those purposes are confined to members of an association of persons for whose benefit the gift was made, not being persons all or most of whom are connected persons.

(4) Where the asset mentioned in subsection (1) is an option to enter into a sale or other transaction given by the person making the disposal, a loss accruing to the person acquiring the asset shall not be an allowable loss unless it accrues on a disposal of the option at arm's length to a person who is not connected with him.

(5) In a case where the asset mentioned in subsection (1) is subject to any right or restriction enforceable by the person making the disposal, or by a person connected with him, then (the amount of the consideration for the acquisition being, in accordance with subsection (2), deemed to be equal to the market value of the asset) that market value shall be—

(a) what its market value would be if not subject to the right or restriction, as reduced by—

(b) the market value of the right or restriction or the amount by which its extinction would enhance the value of the asset to its owner, whichever is the less:

Provided that if the right or restriction—

(i) is of such a nature that its enforcement would or might effectively destroy or substantially impair the value of the asset without bringing any countervailing advantage either to the person making the disposal or a person connected with him,

(ii) is an option or other right to acquire the asset, or

(iii) in the case of incorporeal property, is a right to extinguish the asset in the hands of the person giving the consideration by forfeiture or merger or otherwise,

that market value of the asset shall be determined, and the amount of the gain accruing on the disposal shall be computed, as if the right or restriction did not exist.

(6) Subsection (5) shall not apply to a right of forfeiture or other right exercisable on breach of a covenant contained in a lease of land or other property, and shall not apply to any right or restriction under a mortgage or other charge.

(7) Any question whether a person is connected with another shall be determined in accordance with the following provisions (any provision that one person is connected with another being taken to mean that they are connected with one another)—

(a) a person is connected with an individual if that person is the individual's husband or wife, or is a relative, or the husband or wife of a relative, of the individual or of the individual's husband or wife;

(b) a person, in his capacity as trustee of a settlement, is connected with any individual who in relation to the settlement is a settlor, with any person who is connected with such an individual and with a body corporate which is deemed to be connected with that settlement, and a body corporate shall be deemed to be connected with a settlement in any year if at any time in the year it is a controlled company (or only not a controlled company because it is not resident in the State) and the shareholders then include the trustees of or a beneficiary under the settlement;

(c) except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements, a person is connected with any person with whom he is in partnership, and with the husband or wife or a relative of any individual with whom he is in partnership;

(d) a company is connected with another company—

(i) if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or

(ii) if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by one or more persons with whom he is connected;

(e) a company is connected with another person, if that person has control of it or if that person and persons connected with him together have control of it;

(f) any two or more persons acting together to secure or exercise control of or to acquire a holding in a company shall be treated in relation to that company as connected with one another and with any person acting on the direction of any of them to secure or exercise control of or to acquire a holding in the company.

(8) In subsection (7) “relative” means brother, sister, uncle, aunt, niece, nephew, ancestor, lineal descendant, or a person adopted under the Adoption Acts, 1952 to 1974, or under the law of any place outside the State.

34 Assets disposed of in a series of transactions.

34.—If a person is given, or acquires from one or more persons with whom he is connected, by way of two or more transactions, assets of which the aggregate market value, when considered separately in relation to the separate other transactions, is less than the aggregate market value of those assets when considered together, then for the purposes of this Act the market value of the assets where relevant, shall be taken to be the larger market value and that value shall be apportioned rateably to the respective disposals.

35 Controlled company transferring assets at undervalue.

35.—(1) If on or after the 6th day of April, 1974, a company which is a controlled company transfers an asset to any person otherwise than by way of a bargain made at arm's length and for a consideration of an amount or value less than the market value of the asset, an amount equal to the difference shall be apportioned among the issued shares of the company, and the holders of those shares shall be treated in accordance with the following provisions of this section.

(2) For the purposes of the computation of a chargeable gain accruing on the disposal of any of those shares by the person owning them on the date of transfer, an amount equal to the amount so apportioned to that share shall be excluded from the expenditure allowable as a deduction under paragraph 3 (1) (a) of Schedule 1 from the consideration for the disposal.

(3) If the person owning any of the said shares at the date of transfer is itself a controlled company, an amount equal to the amount apportioned to the shares so owned under subsection (1) to that controlled company shall be apportioned among the issued shares of that controlled company, and the holders of those shares shall be treated in accordance with subsection (2), and so on through any number of controlled companies.

(4) (a) A controlled company means a company resident in the State—

(i) in which the number of persons holding shares is not more than 50;

(ii) which has not issued any of its shares as a result of a public invitation to subscribe for shares; and

(iii) which is under the control of not more than 5 persons.

(b) A company shall be deemed to be under the control of any persons where the majority of the voting power or shares is in the hands of those persons or nominees of those persons.

(c) For the purposes of this subsection, a person and any persons with whom he is connected shall be treated as one person.

(5) This section shall apply to a company falling within section 36 as it applies to a controlled company.

36 Non-resident company.

36.—(1) This section applies as respects chargeable gains accruing to a company—

(a) which is not resident in the State, and

(b) which would be a controlled company if it were resident in the State.

(2) Subject to this section, every person who, at the time when the chargeable gain accrues to the company—

(a) is resident or ordinarily resident in the State,

(b) if an individual is domiciled in the State, and

(c) holds shares in the company,

shall be treated for the purposes of this Act as if a part of the chargeable gain had accrued to him.

(3) That part of the chargeable gain shall be equal to the proportion of the assets of the company to which that person would be entitled on a liquidation of the company at the time when the chargeable gain accrues to the company.

(4) This section shall not apply in relation to—

(a) any amount in respect of the chargeable gain which is distributed, whether by way of dividend or distribution of capital or on the dissolution of the company, to persons holding shares in the company, or creditors of the company, within two years from the time when the chargeable gain accrued to the company,

(b) a chargeable gain accruing on the disposal of assets, being tangible property, whether movable or immovable, or a lease of such property, where the property was used, and used only, for the purposes of a trade carried on by the company wholly outside the State,

(c) a chargeable gain accruing on the disposal of currency or of a debt within section 46 (6) (foreign bank accounts), where the currency or debt is or represents money in use for the purposes of a trade carried on by the company wholly outside the State, or

(d) a chargeable gain in respect of which the company is chargeable to tax by virtue of subsection (2) or (7) of section 4 (charge to tax on non-residents).

(5) Subsection (4) (a) shall not prevent the making of an assessment in pursuance of this section, but if, by virtue of subsection (4) (a), this section is excluded, all such adjustments, whether by way of repayment or discharge of tax or otherwise, shall be made as will give effect to the provisions of subsection (4) (a).

(6) The amount of capital gains tax paid by a person in pursuance of subsection (2) (so far as not reimbursed by the company) shall be allowable as a deduction in the computation, under this Act, of a gain accruing on the disposal by him of the shares by reference to which the tax was paid.

(7) To the extent that it would reduce or extinguish chargeable gains accruing by virtue of this section to a person in a year of assessment, this section shall apply in relation to a loss accruing to the company on the disposal of an asset in that year of assessment as it would apply if a gain instead of a loss had accrued to the company on the disposal, but shall only so apply in relation to that person; and subject to the foregoing provisions of this subsection, this section shall not apply in relation to a loss accruing to the company.

(8) If the person owning any of the shares in the company at the time when the chargeable gain accrues to the company is itself a company which is not resident in the State but which would be a controlled company if it were resident in the State, an amount equal to the amount apportioned under subsection (3) out of the chargeable gain to the shares so owned shall be apportioned among the issued shares of the second-mentioned company, and the holders of those shares shall be treated in accordance with subsection (2), and so on through any number of companies.

(9) If any tax payable by any person by virtue of subsection (2) is paid by the company to which the chargeable gain accrues, or in a case under subsection (8) is paid by any such other company, the amount so paid shall not for the purposes of income tax, or for the purposes of this Act, be regarded as a payment to the person by whom the tax was originally payable.

37 Non-resident trust.

37.—(1) This section applies as respects chargeable gains accruing to the trustees of a settlement if the trustees are not resident and not ordinarily resident in the State, and if the settlor, or one of the settlors, is domiciled and either resident or ordinarily resident in the State, or was domiciled and either resident or ordinarily resident in the State when he made the settlement.

(2) Any beneficiary under the settlement who is domiciled and either resident or ordinarily resident in the State in any year of assessment shall be treated for the purposes of this Act as if an apportioned part of the amount, if any, on which the trustees would have been chargeable to capital gains tax under section 5 (1), if domiciled and either resident or ordinarily resident in the State in that year of assessment, had been chargeable gains accruing to the beneficiary in that year of assessment; and for the purposes of this section any such amount shall be apportioned in such manner as is just and reasonable between persons having interests in the settled property, whether the interest be a life interest or an interest in reversion, and so that the chargeable gain is apportioned, as near as may be, according to the respective values of those interests, disregarding in the case of a defeasible interest the possibility of defeasance.

(3) For the purposes of this section—

(a) if in any of the five years ending with that in which the chargeable gain accrues a person has received a payment or payments out of the income of the settled property made in exercise of a discretion, he shall be regarded, in relation to that chargeable gain, as having an interest in the settled property of a value equal to that of an annuity of a yearly amount equal to one-fifth of the total of the payments so received by him in the said five years, and

(b) if a person receives at any time after the chargeable gain accrues a capital payment made out of the settled property in exercise of a discretion, being a payment which represents the chargeable gain in whole or in part, then, except so far as any part of the gain has been attributed under this section to some other person who is domiciled and resident or ordinarily resident in the State, that person shall, if domiciled and resident or ordinarily resident in the State, be treated as if the chargeable gain, or as the case may be the part of the chargeable gain represented by the capital payment, had accrued to him at the time when he received the capital payment.

(4) In the case of a settlement made before the 28th day of February, 1974—

(a) subsection (2) shall not apply to a beneficiary whose interest is solely in the income of the settled property, and who cannot by means of the exercise of any power of appointment or power of revocation or otherwise, obtain for himself, whether with or without the consent of any other person, any part of the capital represented by the settled property, and

(b) payment of capital gains tax chargeable on a gain apportioned to a beneficiary in respect of an interest in reversion in any part of the capital represented by the settled property may be postponed until that person becomes absolutely entitled to that part of the settled property, or disposes of the whole or any part of his interest, unless he can, by any means described in paragraph (a), obtain for himself any of it at any earlier time,

and, for the purposes of this subsection, property added to a settlement after the settlement is made shall be regarded as property under a separate settlement made at the time when the property is so added.

(5) In any case in which the amount of any capital gains tax payable by a beneficiary under a settlement in accordance with the provisions of this section is paid by the trustees of the settlement, such amount shall not for the purposes of income tax or capital gains tax be regarded as a payment to such beneficiary.

(6) This section shall not apply in relation to a loss accruing to the trustees of the settlement.

PART VIII Miscellaneous and Supplemental

38 Double taxation relief.

38.—(1) For the purposes of giving relief from double taxation in relation to capital gains tax charged under the law of any country outside the State, in section 361 of, and Schedule 10 to, the Income Tax Act, 1967, as they apply for the purposes of income tax, for references to income there shall be substituted references to capital gains, and for references to income tax there shall be substituted references to capital gains tax meaning, as the context may require, tax charged under the law of the State or tax charged under the law of a country outside the State.

(2) So far as by virtue of this section capital gains tax charged under the law of a country outside the State may be brought into account under the said provisions of the Income Tax Act, 1967, as applied by this section, that tax, whether relief is given by virtue of this section in respect of it or not, shall not be taken into account for the purposes of those provisions as they apply apart from this section.

(3) Section 361 (7) of the Income Tax Act, 1967 (disclosure of information for purposes of double taxation), shall apply in relation to capital gains tax as it applies in relation to income tax.

39 Disposals to State, charities and other bodies.

39.—(1) Where a disposal of an asset is made otherwise than under a bargain at arm's length—

(a) to the State,

(b) to a charity, or

(c) to any of the bodies falling within section 28 (3) of the Finance Act, 1931 (national institutions and other public bodies),

section 9 (consideration deemed to be equal to market value) shall not apply, but if the disposal is for no consideration or for a consideration not exceeding the sums allowable as a deduction under paragraph 3 of Schedule 1, then—

(i) the disposal and acquisition shall be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal, and

(ii) where, after the disposal, the asset is disposed of by the person who acquired it under the disposal, its acquisition by the person making the earlier disposal shall be treated for the purposes of this Act as the acquisition of the person making the later disposal.

(2) Where under subsection (3) or (5) of section 15, any assets or parts of any assets forming part of settled property are deemed to be disposed of and re-acquired by the trustee, and—

(a) where the assets deemed to be disposed of under section 15 (3) are re-acquired on behalf of the State, a charity or a body falling within the said section 28 (3); or

(b) the assets which or parts of which are deemed to be disposed of and re-acquired under section 15 (5) are held for the purposes of the State, a charity or a body falling within the said section 28 (3);

then, if no consideration is received by any person for or in connection with any transaction by virtue of which the State, the charity or other body becomes so entitled or the assets are so held, the disposal and acquisition of the assets to which the State, the charity or other body becomes so entitled or of the assets which are held as mentioned in paragraph (b) shall be treated for the purposes of this Act as made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.

40 Assets of insolvent persons.

40.—(1) In relation to assets held by a person as trustee or assignee in bankruptcy or under a deed of arrangement, this Act shall apply as if the assets were vested in, and the acts of the trustee or assignee in relation to the assets were the acts of, the bankrupt or debtor (acquisitions from or disposals to him by the bankrupt or debtor being disregarded accordingly), and tax in respect of any chargeable gains which accrue to any such trustee or assignee shall be assessable on and recoverable from him.

(2) Assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased and—

(a) subsection (1) shall not apply after the death, and

(b) section 14 (1) (under which assets passing on a death are deemed to be acquired by the persons on whom they devolve) shall apply as if any assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor were assets of which the deceased was competent to dispose and which then devolved on the trustee or assignee as if he were a personal representative.

(3) Assets vesting in a trustee in bankruptcy after the death of the bankrupt or debtor shall for the purposes of this Act be regarded as held by a personal representative of the deceased, and subsection (1) shall not apply.

(4) In this section “deed of arrangement” means a deed of arrangement to which the Deeds of Arrangement Act, 1887, applies.

41 Liquidation of companies.

41.—Where assets of a company are vested in a liquidator under section 230 of the Companies Act, 1963, or otherwise, this Act shall apply as if the assets were vested in, and the acts of the liquidator in relation to the assets were the acts of, the company (acquisitions from or disposals to him by the company being disregarded accordingly).

42 Funds in court.

42.—(1) In this section—

“funds in court” means any monies (and investments representing such monies), annuities, stocks, shares or other securities standing or to be placed to the account of the Accountant in the books of the Bank of Ireland or any company, and includes boxes and other effects;

“the Accountant” means the Accountant attached to the court or a deputy appointed by the Minister for Justice;

“court”, except where the reference is to the Circuit Court, means the High Court.

(2) For the purposes of section 8 (3), funds in court shall be regarded as held by the Accountant as nominee for the persons entitled to or interested in the funds, or as the case may be for their trustees.

(3) Where funds in court standing to an account in the books of the Accountant are invested or, after investment, are realised, the method by which the Accountant effects the investment or the realisation of investments shall not affect the question whether there is for the purposes of this Act an acquisition, or as the case may be a disposal, of an asset representing funds in court standing to that account, and, in particular, there shall for those purposes be an acquisition or disposal of assets notwithstanding that the investment of funds in court standing to an account in the books of the Accountant, or the realisation of funds which have been so invested, is effected by setting off, in the Accountant's accounts, investment in one account against realisation of investments in another.

(4) This section shall apply with any necessary modifications to funds in the Circuit Court as it applies to funds in court.

43 Unremittable gains.

43.—(1) In this section—

“particular gains” means chargeable gains accruing from the disposal of assets situated outside the State, the amount of which is, or is included in, the amount (in this section referred to as the said amount) on which, in accordance with this Act, the tax is computed.

(2) Subject to subsections (3), (4) and (5), the provisions of this section shall have effect where capital gains tax has been charged by an assessment for the year in which the particular gains accrued and the tax has not been paid.

(3) In any case in which, on or after the date on which the capital gains tax has become payable, such proof is given to the Revenue Commissioners as renders them satisfied that particular gains cannot, by reason of legislation in the country in which they have accrued or of executive action of the government of that country, be remitted to the State, the Revenue Commissioners may, for the purposes of collection, treat the assessment as if the said amount did not include the particular gains, but such treatment shall terminate on the Revenue Commissioners ceasing to be satisfied as aforesaid.

(4) The Revenue Commissioners may, for the purposes of this section, call for such information as they consider necessary.

(5) Any person who is dissatisfied with a decision of the Revenue Commissioners under subsection (3) may, by giving notice in writing to the Revenue Commissioners within twenty-one days after the notification of the decision to him, apply to have the matter referred to the Appeal Commissioners, as if it were an appeal against an assessment, and the provisions of the Income Tax Act, 1967, 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 shall apply accordingly with any necessary modifications.

44 Consideration due after time of disposal.

44.—(1) If the consideration, or part of the consideration, taken into account in the computation of a chargeable gain is payable by instalments over a period beginning not earlier than the time when the disposal is made, being a period exceeding eighteen months then, if the person making the disposal satisfies the Revenue Commissioners that he would otherwise suffer undue hardship, the tax on a chargeable gain accruing on a disposal may, at his option, be paid by such instalments as the Revenue Commissioners may allow over a period not exceeding five years and ending not later than the time at which the last of the first-mentioned instalments is payable.

(2) In the computation of a chargeable gain, consideration for the disposal shall be brought into account without any discount for postponement of the right to receive any part of it and without regard to a risk of any part of the consideration being irrecoverable or to the right to receive any part of the consideration being contingent:

Provided that if any part of the consideration so brought into account is shown to the satisfaction of the inspector to be irrecoverable, such adjustment, whether by way of discharge or repayment of tax or otherwise, shall be made as the case may require.

45 Transfers of value derived from assets.

45.—(1) Without prejudice to the generality of the provisions of this Act as to the transactions which are disposals of assets, any transaction which under this section is to be treated as a disposal of an asset shall be so treated (with a corresponding acquisition of an interest in the asset) notwithstanding that there is no consideration and so far as, on the assumption that the parties to the transaction were at arm's length, the party making the disposal could have obtained consideration, or additional consideration, for the disposal, the transaction shall be treated as not being at arm's length and the consideration so obtainable, added to the consideration actually passing, shall be treated as the market value of what is acquired.

(2) (a) If a person having control of a company exercises his control so that value passes out of shares in the company owned by him or a person with whom he is connected, or out of rights over the company exercisable by him or by a person with whom he is connected, and passes into other shares in or rights over the company, that exercise of his control shall be a disposal of the shares or rights out of which the value passes by the person by whom they were owned or exercisable.

(b) References in paragraph (a) to a person include references to two or more persons connected with one another.

(3) If, after a transaction which results in the owner of land or of any other description of property becoming the lessee of the property there is any adjustment of the rights and liabilities under the lease (whether or not involving the grant of a new lease) which is as a whole favourable to the lessor, that shall be a disposal by the lessee of an interest in the property.

(4) If an asset is subject to any description of right or restriction, the extinction or abrogation, in whole or in part, of the right or restriction by the person entitled to enforce it shall be a disposal by him of the right or restriction.

46 Debts.

46.—(1) Where a person incurs a debt to another (that is, the original creditor), whether in Irish currency or in some other currency, no chargeable gain shall accrue to that creditor or his personal representative or legatee on a disposal of the debt:

Provided that this subsection shall not apply in the case of the debt on a security as defined in paragraph 3 of Schedule 2 (conversion of securities).

(2) Subject to the provisions of the said paragraph 3 and of paragraph 4 of Schedule 2 (company amalgamations), and subject to the foregoing subsection, the satisfaction of a debt or part of it (including a debt on a security as defined in the said paragraph 3) shall be treated as a disposal of the debt or of that part by the creditor made at the time when the debt or that part is satisfied.

(3) Where property is acquired by a creditor in satisfaction of his debt or part of it, then subject to the provisions of the said paragraph 3 and 4 the property shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor's acquisition of it; but if under subsection (1) (and in a case not falling within either of the said paragraphs 3 or 4 no chargeable gain is to accrue on a disposal of the debt by the creditor (that is, the original creditor), and a chargeable gain accrues to him on a disposal by him of the property, the amount of the chargeable gain shall (where necessary) be reduced so as not to exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part of it.

(4) A loss accruing on the disposal of a debt acquired by the person making the disposal from the original creditor or his personal representative or legatee at a time when the creditor or his personal representative or legatee is a person connected with the person making the disposal, and so acquired either directly or by one or more purchases through persons all of whom are connected with the person making the disposal, shall not be an allowable loss.

(5) Where the original creditor is a trustee and the debt, when created, is settled property, subsections (1) and (4) shall apply as if for the references to the original creditor's personal representative or legatee there were substituted references to any person becoming absolutely entitled, as against the trustee, to the debt on its ceasing to be settled property, and to that person's personal representative or legatee.

(6) This section shall not apply to a debt owed by a bank which is not in Irish currency or in sterling and which is represented by a sum standing to the credit of a person in an account in the bank unless it represents currency acquired by the holder for the personal expenditure outside the State of himself or his family or dependants (including expenditure on the maintenance of any residence outside the State).

47 Options.

47.—(1) Without prejudice to the provisions of section 8, the grant of an option, including—

(a) the grant of an option in the case where the grantor binds himself to sell an asset he does not own, and because the option is abandoned, never has occasion to own, and

(b) the grant of an option in a case where the grantor binds himself to buy an asset, which, because the option is abandoned, he does not acquire,

is the disposal of an asset (namely, of the option), but subject to the following provisions of this section as to treating the grant of an option as part of a larger transaction.

(2) If an option is exercised, the grant of the option and the transaction entered into by the grantor in fulfilment of his obligations under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the consideration for the option is part of the consideration for the sale, and

(b) if the option binds the grantor to buy, the consideration for the option shall be deducted from the cost of acquisition incurred by the grantor in buying in pursuance of his obligations under the option.

(3) The exercise or abandonment of an option by the person for the time being entitled to exercise it shall not constitute the disposal of an asset by that person, but if an option is exercised, then the acquisition of the option (whether directly from the grantor or not) and the transaction entered into by the person exercising the option in exercise of his rights under the option shall be treated as a single transaction and accordingly—

(a) if the option binds the grantor to sell, the cost of acquiring the option shall be part of the cost of acquiring the asset which is sold, and

(b) if the option binds the grantor to buy, the cost of the option shall be treated as a cost incidental to the disposal of the asset which is bought by the grantor of the option.

(4) In relation to the disposal by way of transfer of an option binding the grantor to sell or buy shares or securities which have a quoted market value on a stock exchange in the State or elsewhere, the option shall be regarded as a wasting asset the life of which ends when the right to exercise the option ends, or when the option becomes valueless, whichever is the earlier, but without prejudice to the application of the provisions in Schedule 1 relating to wasting assets to other descriptions of options.

(5) Where an option which is an option to acquire assets exercisable by a person intending to use them, if acquired, for the purposes of a trade carried on by him or which he commences to carry on within two years of his acquisition of the option, is disposed of or abandoned, then—

(a) if the option is abandoned, the abandonment shall, notwithstanding subsection (3), constitute the disposal of an asset (namely, the option), and

(b) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) shall not apply.

(6) (a) Where an option to subscribe for shares in a company, being an option of a kind which, at the time of disposal or abandonment, is quoted, and, in the same manner as shares, dealt in on a stock exchange in the State or elsewhere, is disposed of or abandoned, then—

(i) if the option is abandoned, the abandonment shall, notwithstanding subsection (3) constitute the disposal of an asset (namely, of the option), and

(ii) paragraph 9 of Schedule 1 (restriction of allowable expenditure for wasting asset) and subsection (4) shall not apply.

(b) Where an option mentioned in paragraph (a) is dealt in within three months after the taking effect, with respect to the company granting the option, of any reorganisation, reduction, conversion or amalgamation to which paragraphs 2, 3, 4 or 5 of Schedule 2 applies (or within such longer period as the Revenue Commissioners may by notice in writing allow), the option shall, for the purposes of the said paragraphs 2, 3, 4 or 5, be regarded as the shares which could be acquired by exercising the option and section 49 (3) shall apply for determining its market value.

(7) In the case of an option relating to shares or securities, this section shall apply subject to the provisions of paragraph 13 of Schedule 1 and accordingly the option may be regarded in relation to the grantor or in relation to the person entitled to exercise the option, as relating to part of a holding of shares or securities as defined in the said paragraph 13.

(8) This section shall apply in relation to an option binding the grantor both to sell and to buy as if it were two separate options with half the consideration attributed to each.

(9) In this section references to an option include references to an option binding the grantor to grant a lease for a premium, or enter into any other transaction which is not a sale, and references to buying and selling in pursuance of an option shall be construed accordingly.

(10) This section shall apply in relation to a forfeited deposit of purchase money or other consideration money for a prospective purchase or other transaction which is abandoned as it applies in relation to the consideration for an option which binds the grantor to sell and which is not exercised.

48 Location of assets.

48.—The situation of any such assets as are specified in this section shall, except as otherwise provided by section 4, be determined in accordance with the following provisions:

(a) the situation of rights or interests (otherwise than by way of security) in or over immovable property is that of the immovable property,

(b) subject to the following provisions of this section, the situation of rights or interests (otherwise than by way of security) in or over tangible movable property is that of the tangible movable property,

(c) subject to the following provisions of this section, a debt, secured or unsecured, is situated in the State if and only if the creditor is resident in the State,

(d) shares or securities issued by any municipal or governmental authority, or by any body created by such an authority, are situated in the country of that authority,

(e) subject to paragraph (d), registered shares or securities are situated where they are registered and, if registered in more than one register, where the principal register is situated,

(f) a ship or aircraft is situated in the State if and only if the owner is resident in the State, and an interest or right in or over a ship or aircraft is situated in the State if and only if the person entitled to the interest or right is resident in the State,

(g) the situation of goodwill as a trade, business or professional asset is at the place where the trade, business or profession is carried on,

(h) patents, trade marks and designs are situated where they are registered, and if registered in more than one register, where each register is situated and copyright, franchises, rights and licences to use any copyright material, patent, trade mark or design are situated in the State if they, or any rights derived from them, are exercisable in the State, and

(i) a judgment debt is situated where the judgment is recorded.

49 Valuation.

49.—(1) Subject to the following subsections, in this Act “market value”, in relation to any assets, means the price which those assets might reasonably be expected to fetch on a sale in the open market.

(2) In estimating the market value of any assets no reduction shall be made in the estimate on account of the estimate being made on the assumption that the whole of the assets is to be placed on the market at one and the same time.

(3) The market value of shares or securities quoted on a stock exchange in the State or in the United Kingdom shall, except where in consequence of special circumstances the prices quoted are by themselves not a proper measure of market value, be as follows—

(a) in relation to shares or securities listed in the Stock Exchange Official List—Irish—

(i) the price shown in that list at which bargains in the shares or securities were last recorded (the previous price), or

(ii) where bargains, other than bargains done at special prices, were recorded in that list for the relevant date, the price at which the bargains were so recorded, or if more than one such price was so recorded, a price halfway between the highest and the lowest of such prices,

taking the amount under subparagraph (i) if less than under subparagraph (ii) or if no such business was recorded on the relevant date, and taking the amount under subparagraph (ii) if less than under subparagraph (i), and

(b) in relation to shares or securities listed in the Stock Exchange Daily Official List—

(i) the lower of the two prices shown in the quotations for the shares or securities on the relevant date plus one-quarter of the difference between those two figures, or

(ii) where bargains, other than bargains done at special prices were recorded in that list for the relevant date, the price at which the bargains were so recorded, or if more than one such price was so recorded, a price halfway between the highest and the lowest of such prices,

taking the amount under subparagraph (i) if less than under subparagraph (ii) or if no such bargains were recorded for the relevant date, and taking the amount under subparagraph (ii) if less than under subparagraph (i):

Provided that—

(a) where the shares or securities are listed in both of the said Official Lists for the relevant date, the lower of the two amounts as ascertained under paragraph (a) and paragraph (b) shall be taken;

(b) this subsection shall not apply to shares or securities for which some other stock exchange affords a more active market; and

(c) if the stock exchange concerned, or one of the stock exchanges concerned, is closed on the relevant date, the market value shall be ascertained by reference to the latest previous date or earliest subsequent date on which it is open, whichever affords the lower market value.

(4) Where shares and securities are not quoted on a stock exchange at the time at which their market value falls to be determined by virtue of subsection (1), it shall be assumed, for the purposes of such determination, that, in the open market which is postulated for the purposes of the said subsection (1), there is available to any prospective purchaser of the asset in question all the information which a prudent prospective purchaser of the asset might reasonably require if he were proposing to purchase it from a willing vendor by private treaty and at arm's length.

(5) In this Act “market value”, in relation to any rights of unit holders in any unit trust (including any unit trust legally established outside the State) the buying and selling prices of which are published regularly by the managers of the trust, shall mean an amount equal to the buying price (that is the lower price) so published on the relevant date, or if none were published on that date, on the latest date before.

(6) If and so far as any appeal against an assessment to capital gains tax or against a decision on a claim under this Act involves the question of the value of any shares or securities in a company resident in the State, other than shares or securities quoted on a stock exchange, that question shall be determined in like manner as an appeal against an assessment made on the company.

(7) In relation to an asset of a kind the sale of which is subject to restrictions imposed under the Exchange Control Act, 1954, such that part of what is paid by the purchaser is not retainable by the seller, the market value, as arrived at under this section, shall be subject to such adjustment as is appropriate having regard to the difference between the amount payable by a purchaser and the amount receivable by a seller.

50 Extension of certain Acts.

50.—(1) Section 1 of the Provisional Collection of Taxes Act, 1927, is hereby amended by the insertion of “and capital gains tax” before “but no other tax or duty”.

(2) Section 39 of the Inland Revenue Regulation Act, 1890, is hereby amended by the insertion of “capital gains tax” before “stamp duties”.

51 Supplemental.

51.—(1) Schedule 1 (computation), Schedule 2 (companies and shareholders), Schedule 3 (leases), and Schedule 4 (administration) shall have effect for the purposes of this Act.

(2) So far as the provisions of this Act as modified by Part II of Schedule 1 require the computation of a gain by reference to events before the 6th day of April, 1974, all those provisions, including Part I of Schedule 1 and Schedules 2 and 3 and the provisions fixing the amount of the consideration deemed to be given on a disposal or an acquisition, shall apply except so far as expressly excluded.

SCHEDULE 1 Computation Rules

PART I

General

Preliminary

1.—(1) No deduction shall be allowable in a computation under this Act more than once from any sum or from more than one sum.

(2) References in this Schedule to sums taken into account as receipts or as expenditure in computing profits, gains or losses for the purposes of the Income Tax Acts shall include references to sums which would be so taken into account but for the fact that any profits or gains of a trade, profession or employment are not chargeable to income tax or that losses are not allowable for those purposes.

(3) In this Part references to income or profits charged or chargeable to tax include references to income or profits taxed or as the case may be taxable by deduction at source.

(4) For the purposes of any computation under this Schedule any necessary apportionments shall be made of any consideration or of any expenditure and the method of apportionment adopted shall, subject to the express provisions of this Schedule, be such method as appears to the inspector or on appeal the Appeal Commissioners to be just and reasonable.

(5) In this Schedule “renewals allowance” has the meaning assigned to it by paragraph 5 (3).

(6) Paragraph 6 and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, are to be operated before the operation of, and without regard to—

(a) section 13 (5) (married persons),

(b) section 28 (replacement of business and other assets),

(c) any other provision making an adjustment to secure that neither a gain nor a loss accrues on a disposal.

Exclusion from consideration for disposals of sums chargeable to income tax

2.—(1) There shall be excluded from the consideration for a disposal of assets taken into account in the computation under this Schedule of the gain accruing on that disposal any money or money's worth charged to income tax as income of, or taken into account as a receipt in computing income, profits, gains or losses for the purposes of the Income Tax Acts of, the person making the disposal:

Provided that the exclusion from consideration under this subparagraph shall not be taken as applying to a computation in accordance with the provisions of Case I of Schedule D for the purpose of restricting relief in respect of expenses of management under section 214 of the Income Tax Act, 1967.

(2) Subparagraph (1) shall not be taken as excluding from the consideration so taken into account any money or money's worth which is taken into account in the making of a balancing charge under Part XVI of the Income Tax Act, 1967.

(3) This paragraph shall not preclude the taking into account in a computation under this Schedule, as consideration for the disposal of an asset, of the capitalised value of a rent (as in a case where rent is exchanged for some other asset), or of a right of any other description to income or to payments in the nature of income over a period, or to a series of payments in the nature of income.

(4) In this paragraph “rent” includes any rent charge, fee farm rent and any payment in the nature of a rent.

Expenditure: general provisions

3.—(1) Subject to the provisions of this Act, the sums allowable as a deduction from the consideration in the computation under this Schedule of the gain accruing to a person on the disposal of an asset shall be restricted to—

(a) the amount or value of the consideration, in money or money's worth, given by him or on his behalf wholly and exclusively for the acquisition of the asset, together with the incidental costs to him of the acquisition or, if the asset was not acquired by him, any expenditure wholly and exclusively incurred by him in providing the asset,

(b) the amount of any expenditure wholly and exclusively incurred on the asset by him or on his behalf for the purpose of enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal, and any expenditure wholly and exclusively incurred by him in establishing, preserving or defending his title to, or to a right over, the asset,

(c) the incidental costs to him of making the disposal.

(2) For the purposes of this paragraph and for the purposes of all other provisions of this Act, as respects the person making the disposal, the incidental costs to him of the acquisition of the asset or of its disposal shall consist of expenditure wholly and exclusively incurred by him for the purposes of the acquisition or, as the case may be, the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent, or legal adviser and costs of transfer or conveyance (including stamp duty) together—

(a) in the case of the acquisition of an asset, with costs of advertising to find a seller, and

(b) in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation under this Schedule, including in particular expenses reasonably incurred in ascertaining market value where required by this Act.

(3) (a) Where—

(i) a company incurs expenditure on the construction of any building, structure or works, being expenditure allowable as a deduction under subparagraph (1) in computing a gain accruing to the company on the disposal of the building, structure or works, or of any asset comprising it,

(ii) that expenditure was defrayed out of borrowed money, and

(iii) the company charged to capital all or any part of the interest on that borrowed money referable to a period ending on or before the disposal,

the sums so allowable under the said subparagraph (1) shall include the amount of that interest charged to capital except in so far as such interest has been taken into account for the purposes of relief under the Income Tax Acts, or could have been so taken into account but for an insufficiency of income or profits or gains.

(b) Subject to clause (a), no payment of interest shall be allowable as a deduction under this paragraph.

(4) Without prejudice to the provisions of paragraph 4, there shall be excluded from the sums allowable as a deduction under this paragraph any premium or other payments made under a policy of insurance of the risk of any kind of damage or injury to, or loss or depreciation of, the asset.

(5) In the case of a gain accruing to a person on the disposal of, or of a right or interest in or over, an asset to which he became absolutely entitled as legatee or as against the trustees of settled property—

(a) any expenditure within subparagraph (2) incurred by him in relation to the transfer of the asset to him by the personal representatives or trustees, and

(b) any such expenditure incurred in relation to the transfer of the asset by the personal representatives or trustees,

shall be allowable as a deduction under this paragraph.

(6) Subject to the provisions of this Act as regards double taxation relief, the tax chargeable under the law of any country outside the State on the disposal of an asset which is borne by the person making the disposal shall be allowable as a deduction in the computation under this Schedule.

(7) There shall be excluded from the computation under this Schedule any expenditure which has been or is to be met directly or indirectly by any government, by any board established by statute or by any public or local authority whether in the State or elsewhere.

Exclusion of expenditure by reference to income tax

4.—(1) There shall be excluded from the sums allowable under paragraph 3 as a deduction any expenditure allowable as a deduction in computing the profits or gains or losses of a trade or profession for the purposes of income tax or allowable as a deduction in computing any other income or profits or gains or losses for the purposes of the Income Tax Acts and any expenditure which, although not so allowable as a deduction in computing any losses, would be so allowable but for an insufficiency of income or profits or gains; and this subparagraph applies irrespective of whether effect is or would be given to the deduction in computing the amount of tax chargeable or by discharge or repayment of tax or in any other way.

(2) Without prejudice to the provisions of subparagraph (1), there shall be excluded from the sums allowable under paragraph 3 as a deduction any expenditure which, if the assets, or all the assets to which the computation relates, were, and had at all times been, held or used as part of the fixed capital of a trade the profits or gains of which were chargeable to income tax would be allowable as a deduction in computing the profits or gains or losses of the trade for the purposes of the Income Tax Acts.

Restriction of losses by reference to capital allowances and renewals allowances

5.—(1) Paragraph 4 shall not require the exclusion from the sums allowable as a deduction under paragraph 3 of any expenditure as being expenditure in respect of which a capital allowance or renewals allowance is made, but in the computation under this Schedule of the amount of a loss accruing to the person making the disposal, there shall be excluded from the sums allowable as a deduction any expenditure to the extent to which any capital allowance or renewals allowance has been or may be made in respect of it.

(2) If the person making the disposal acquired the asset—

(a) by a transfer by way of sale in relation to which an election under section 299 (4) of the Income Tax Act, 1967, was made, or

(b) by a transfer to which section 277 (5) or 278 of that Act applies,

(being provisions under which a transfer is treated for the purposes of capital allowances as being made at written down value), this paragraph shall apply as if any capital allowance made to the transferor in respect of the asset had (except so far as any loss to the transferor was restricted under those provisions) been made to the person making the disposal (that is, the transferee); and where the transferor acquired the asset by such a transfer, capital allowances which by virtue of this subparagraph can be taken into account in relation to the transferor shall also be taken into account in relation to the transferee (that is, the person making the disposal), and so on for any series of transfers before the disposal.

(3) In this paragraph “renewals allowance” means a deduction allowable in computing profits or gains or losses for the purposes of the Income Tax Acts by reference to the cost of acquiring an asset in replacement of another asset, and for the purposes of this Schedule a renewals allowance shall be regarded as a deduction allowable in respect of the expenditure incurred on the asset which is being replaced.

(4) The amount of capital allowances to be taken into account under this paragraph in relation to a disposal includes any allowances falling to be made by reference to the event which is the disposal, and there shall be deducted from the amount of the allowances the amount of any balancing charge to which effect has been or is to be given by reference to the event which is the disposal, or any earlier event, and of any balancing charge to which effect might have been so given but for the making of an election under section 273 of the Income Tax Act, 1967 (option in case of replacement of machinery or plant).

Part disposals

6.—(1) Where a person disposes of an interest or rights in or over an asset and, generally wherever on the disposal of an asset, any description of property derived from that asset remains undisposed of, the sums which under clauses (a) and (b) of paragraph 3 (1) are attributable to the asset shall, both for the purposes of the computation under this Schedule of the gain accruing on the disposal and for the purpose of applying this Schedule in relation to the property which remains undisposed of, be apportioned.

(2) Such portion of the expenditure shall be allowable as a deduction in computing under this Schedule the amount of the gain accruing on the disposal as bears the same proportion to the total of the said sums as the value of the consideration for the disposal bears to the aggregate of the said value and the market value of the property which remains and the balance of the expenditure shall be attributed to the property which remains undisposed of.

(3) Any apportionment to be made in pursuance of this paragraph shall be made before operating the provisions of paragraph 5, and if, after a part disposal, there is a subsequent disposal of an asset the capital allowances or renewals allowances to be taken into account in pursuance of that paragraph in relation to the subsequent disposal shall, subject to the next following subparagraph, be those referable to the sums which under clauses (a) and (b) of paragraph 3 (1) are attributable to the asset whether before or after the part disposal, but those allowances shall be reduced by the amount (if any) by which the loss on the earlier disposal was restricted under the provisions of that paragraph.

(4) This paragraph shall not be taken as requiring the apportionment of any expenditure which, on the facts, is wholly attributable to the asset or part of the asset which is disposed of, or wholly attributable to the asset or part of the asset which remains undisposed of.

Assets derived from other assets

7.—(1) If and so far as, in a case where assets have been merged or divided or have changed their nature or rights or interests in or over assets have been created or extinguished, the value of an asset is derived from any other asset in the same ownership, an appropriate proportion of the sums allowable as a deduction in respect of the other asset under clauses (a) and (b) of paragraph 3 (1) shall, both for the purpose of the computation of a gain accruing on the disposal of the first-mentioned asset and, if the other asset remains in existence, on a disposal of that other asset, be attributed to the first-mentioned asset.

(2) The appropriate proportion shall be computed by reference to the market value at the time of disposal, of the assets (including rights or interests in or over the assets) which have not been disposed of and the consideration received in respect of the assets (including rights or interests in or over the assets) disposed of.

Wasting assets

8.—(1) In this Schedule “wasting asset” means an asset with a predictable life not exceeding fifty years but so that—

(a) freehold land shall not be a wasting asset whatever its nature, and whatever the nature of the buildings or works on it,

(b) “life”, in relation to any tangible movable property, means useful life, having regard to the purpose for which the tangible assets were acquired or provided by the person making the disposal,

(c) plant and machinery shall in every case be regarded as having a predictable life of less than fifty years, and in estimating that life it shall be assumed that its life will end when it is finally put out of use as being unfit for further use, and that it is going to be used in the normal manner and to the normal extent and is going to be so used throughout its life as so estimated, and

(d) a life interest in settled property shall not be a wasting asset until the predictable expectation of life of the life tenant is fifty years or less, and the predictable life of life interests in settled property and of annuities shall be ascertained from actuarial tables approved by the Revenue Commissioners.

(2) In this Schedule “the residual or scrap value”, in relation to a wasting asset, means the predictable value, if any, which the wasting asset will have at the end of its predictable life as estimated in accordance with this paragraph.

(3) The question what is the predictable life of an asset, and the question what is its predictable residual or scrap value at the end of that life, if any, shall, so far as those questions are not immediately answered by the nature of the asset, be taken, in relation to any disposal of the asset, as they were known or ascertainable at the time when the asset was acquired or provided by the person making the disposal.

Wasting assets: restriction of allowable expenditure

9.—(1) In the computation under this Schedule of the gain accruing on the disposal of a wasting asset, it shall be assumed—

(a) that any expenditure attributable to the asset under paragraph 3 (1) (a), after deducting the residual or scrap value, if any, of the asset, is written off at a uniform rate from its full amount at the time when the asset is acquired or provided, to nothing at the end of its life, and

(b) that any expenditure attributable to the asset under paragraph 3 (1) (b) is written off at a uniform rate from the full amount of that expenditure at the time when that expenditure is first reflected in the state or nature of the asset to nothing at the end of its life.

(2) If any expenditure attributable to the asset under paragraph 3 (1) (b) creates or increases a residual or scrap value of the asset, the residual or scrap value to be deducted under subparagraph (1) (a) shall be the residual or scrap value so created or as so increased.

(3) Any expenditure written off under this paragraph shall not be allowable as a deduction under paragraph 3.

Wasting assets qualifying for capital allowances

10.—(1) Paragraph 9 shall not apply in relation to a disposal of an asset—

(a) which, from the beginning of the period of ownership of the person making the disposal to the time when the disposal is made, is used and used solely for the purposes of a trade or profession and in respect of which that person has claimed or could have claimed any capital allowance in respect of any expenditure attributable to the asset under clause (a) or (b) of paragraph 3 (1), or

(b) on which the person making the disposal has incurred any expenditure which has otherwise qualified in full for any capital allowance.

(2) In the case of the disposal of an asset which, in the period of ownership of the person making the disposal, has been used partly for the purposes of a trade or profession and partly for other purposes, or has been used for the purposes of a trade or profession for part of that period, or which has otherwise qualified in part only for capital allowances—

(a) the consideration for the disposal, and any expenditure attributable to the asset by clause (a) or (b) of paragraph 3 (1), shall be apportioned by reference to the extent to which that expenditure qualified for capital allowances,

(b) the computation under this Schedule shall be made separately in relation to the apportioned parts of the expenditure and consideration,

(c) paragraph 9 shall not apply for the purposes of the computation in relation to the part of the consideration apportioned to use for the purposes of the trade or profession, or to the expenditure qualifying for capital allowances,

(d) if an apportionment of the consideration for the disposal has been made for the purposes of making any capital allowance to the person making the disposal or for the purpose of making any balancing charge on him, that apportionment shall be employed for the purposes of this paragraph, and

(e) subject to clause (d), the consideration for the disposal shall be apportioned for the purposes of this paragraph in the same proportions as the expenditure attributable to the asset is apportioned under clause (a).

Contingent liabilities

11.—No allowance shall be made under paragraph 3—

(a) in the case of a disposal by way of assigning a lease of land or other property, for any liability remaining with, or assumed by, the person making the disposal by way of assigning the lease which is contingent on a default in respect of liabilities thereby or subsequently assumed by the assignee under the terms and conditions of the lease,

(b) for any contingent liability of the person making the disposal in respect of any covenant for quiet enjoyment or other obligation assumed—

(i) as vendor of land, or of any estate or interest in land,

(ii) as a lessor, or

(iii) as grantor of an option binding him to sell land or an interest in land or to grant a lease of land,

(c) for any contingent liability in respect of a warranty or representation made on a disposal by way of sale or lease of any property other than land:

Provided that if it is shown to the satisfaction of the inspector that any such contingent liability has become enforceable and is being or has been enforced, such adjustment, whether by way of discharge or repayment of tax or otherwise, shall be made as may be necessary.

Woodlands

12.—(1) In the computation under this Schedule of the gain accruing on the disposal by an individual of woodland, there shall be excluded—

(a) consideration for the disposal of trees growing on the land, and

(b) notwithstanding the provisions of section 8 (2), capital sums received under a policy of insurance in respect of the destruction of or damage or injury to trees by fire or other hazard on such land.

(2) In the computation under this Schedule so much of the cost of woodland shall be disregarded as is attributable to trees growing on the land.

(3) References in this paragraph to trees include references to saleable underwood.

Dealing in marketable securities, commodities, etc.: pooling

13.—(1) Any number of shares of the same class held by one person in one capacity shall for the purposes of this Act be regarded as indistinguishable parts of a single asset (in this paragraph referred to as a holding) growing or diminishing on the occasions on which additional shares of the class in question are acquired, or some of the shares of the class in question are disposed of.

(2) Without prejudice to the generality of subparagraph (1), a disposal of shares in a holding, other than the disposal outright of the entire holding, is a disposal of part of an asset and the provisions of this Act relating to the computation of a gain accruing on a disposal of part of an asset shall apply accordingly.

(3) Shares shall not be treated for the purposes of this paragraph as being of the same class unless they are so treated by the practice of a stock exchange in the State or elsewhere or would be so treated if dealt with on such a stock exchange, but shares shall be treated in accordance with this paragraph notwithstanding that they are identified in some other way by the disposal or by the transfer or delivery giving effect to it.

(4) This paragraph shall apply separately in relation to any shares of a company held by a person to whom they were issued as an employee of the company or of any other person on terms which restrict his rights to dispose of them, so long as those terms are in force, and, while applying separately to any such shares, shall have effect as if the owner held them in a capacity other than that in which he holds any other shares of the same class.

(5) Nothing in this paragraph shall be taken as affecting the manner in which the market value of any asset is to be ascertained.

(6) This paragraph, without subparagraph (3), shall apply in relation to a disposal of any assets as it applies in relation to a disposal of shares, where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

(7) This paragraph shall not apply in relation to shares held by a person on the 6th day of April, 1974, while that person continues to hold them and, in particular, shall not apply in relation to a disposal of the shares by him.

(8) This paragraph applies in relation to securities as it applies in relation to shares.

(9) This paragraph shall apply subject to the provisions of paragraph 14.

Disposal within four weeks of acquisition

14.—(1) Where the same person in the same capacity disposes of shares of the same class as shares which he acquired within four weeks preceding the disposal, the shares disposed of shall be identified with the shares so acquired within that four weeks.

(2) Where the quantity of shares of the same class disposed of exceeds the quantity of shares of the same class acquired within the period of four weeks preceding the disposal, the excess shall be identified with shares of the same class acquired otherwise than within the period of four weeks.

(3) Where a loss accrues to a person on the disposal of shares and he re-acquires shares of the same class within four weeks after the disposal, that loss shall not be allowable under section 12 otherwise than by deduction from a chargeable gain accruing to him on the disposal of the shares re-acquired:

Provided that, if the quantity of shares so re-acquired is less than the quantity so disposed of, such proportion of the loss shall be allowable under section 12 as bears the same proportion to the loss on the disposal as the quantity not re-acquired bears to the quantity disposed of.

(4) In the case of a man and his wife living with him—

(a) subparagraphs (1) and (2) shall, with the necessary modifications, apply where shares are acquired by the one of them and shares of the same class are disposed of within four weeks by the other; and

(b) subparagraph (3) shall, with the necessary modifications, apply also where a loss on the disposal accrues to the one of them and the acquisition after the disposal is made by the other.

(5) This paragraph applies in relation to securities as it applies in relation to shares.

(6) Paragraphs 13, 16 and 20 shall apply subject to subparagraph (1).

Appropriations to and from stock in trade

15.—(1) Where an asset acquired by a person otherwise than as trading stock of a trade carried on by him is appropriated by him for the purposes of the trade as trading stock (whether on the commencement of the trade or otherwise) and, if he had then sold the asset for its market value, a chargeable gain or allowable loss would have accrued to him, he shall be treated as having thereby disposed of the asset by selling it for its then market value.

(2) If at any time an asset forming part of the trading stock of a person's trade is appropriated by him for any other purpose, or is retained by him on his ceasing to carry on the trade, he shall be treated as having acquired it at that time for a consideration equal to the amount brought into the accounts of the trade in respect of it for purposes of income tax on the appropriation or on his ceasing to carry on the trade, as the case may be.

(3) Subparagraph (1) shall not apply in relation to a person's appropriation of an asset for the purposes of a trade if he is chargeable to income tax in respect of the profits of the trade under Case I of Schedule D, and elects that instead the market value of the asset at the time of the appropriation shall, in computing the profits of the trade for purposes of income tax, be treated as reduced by the amount of the chargeable gain or increased by the amount of the allowable loss referred to in that subparagraph, and where the subparagraph does not apply by reason of such an election, the profits of the trade shall be computed accordingly:

Provided that if a person making an election under this subparagraph is at the time of the appropriation carrying on the trade in partnership with others, the election shall not have effect unless concurred in by the others.

PART II

Assets Held on the 6th day of April, 1974

Quoted securities

16.—(1) This paragraph applies—

(a) to shares and securities which on the 6th day of April, 1974, had quoted market values on a stock exchange in the State or elsewhere, or which had such quoted market values at any time in the period of six years ending on the 6th day of April, 1974, and

(b) to rights of unit holders in any unit trust (including any unit trust legally established outside the State) the prices of which are published regularly by the managers of the unit trust.

(2) For the purposes of this Act it shall be assumed, wherever relevant, that any assets to which this paragraph applies were sold, and immediately re-acquired, at their market value on the 6th day of April, 1974, by the person who held them on that date.

(3) Subparagraph (2) shall not apply in relation to a disposal of assets—

(a) if on the assumption in that subparagraph a gain would accrue on that disposal to the person making the disposal and either a smaller gain or a loss would so accrue (computed in accordance with the provisions of Part I of this Schedule) if subparagraph (2) did not apply, or

(b) if on the assumption in subparagraph (2) a loss would so accrue and either a smaller loss or a gain would accrue if subparagraph (2) did not apply,

and accordingly the amount of the gain or loss accruing on the disposal shall be computed without regard to the provisions of this Part except that in a case where this subparagraph would otherwise substitute a loss for a gain or a gain for a loss it shall be assumed, in relation to the disposal, that the relevant assets were acquired by the owner for a consideration such that, neither a gain nor a loss accrued to him on making the disposal.

(4) This paragraph shall not apply in relation to a disposal of shares or securities of a company by a person to whom those shares were issued as an employee either of the company or of some other person on terms which restrict his rights to dispose of them.

(5) For the purpose of—

(a) identifying shares or securities held on the 6th day of April, 1974, with shares previously acquired, and

(b) identifying the shares or securities held on that date with shares or securities subsequently disposed of, and distinguishing them from shares or securities acquired subsequently,

so far as that identification is needed for the purposes of subparagraph (3), and so far as the shares or securities are of the same class, shares or securities acquired at an earlier time shall be deemed to be disposed of before shares or securities acquired at a later time.

Sales of land in the State reflecting development value

17.—(1) This paragraph shall apply in relation to a disposal of an asset which is land in the State—

(a) if, but for this paragraph, the expenditure allowable as a deduction in computing under this Schedule the gain accruing on the disposal would include any expenditure incurred before the 6th day of April, 1974, and

(b) if the consideration for the disposal exceeds what the market value of the asset would be if, immediately before the disposal, it had become unlawful to carry out any development (within the meaning of section 3 (1) of the Local Government (Planning and Development) Act, 1963) in, on or over the land other than development of the kinds specified in section 4 (1) of the said Act.

(2) For the purposes of this Act, it shall be assumed in relation to the disposal and, if it is a part disposal, in relation to any subsequent disposal of the asset which is land in the State that the asset was sold by the person making the disposal, and immediately re-acquired by him, at its market value on the 6th day of April, 1974.

(3) Subparagraph (2) shall apply also in relation to any prior part disposal of the asset and, if tax has been charged, or relief allowed, by reference to that part disposal in accordance with any other provision of this Act, all such adjustments shall be made, whether by way of assessment or discharge or repayment of tax as are required to give effect to the provisions of this subparagraph.

(4) Subparagraph (2) shall not apply in relation to a disposal of assets—

(a) if on the assumption in that subparagraph a gain would accrue on that disposal to the person making the disposal and either a smaller gain or a loss would so accrue (computed in accordance with the provisions of Part I of this Schedule) if subparagraph (2) did not apply, or

(b) if on the assumption in subparagraph (2) a loss would so accrue and either a smaller loss or a gain would accrue if subparagraph (2) did not apply,

and accordingly the amount of the gain or loss accruing on the disposal shall be computed without regard to the provisions of this Part except that in a case where this subparagraph would otherwise substitute a loss for a gain or a gain for a loss it shall be assumed, in relation to the disposal, that the relevant assets were acquired by the owner, for a consideration such that neither a gain nor a loss accrued to him on making the disposal.

Apportionment of gain or loss by reference to uniform rate of growth over period of ownership

18.—(1) This paragraph applies subject to the provisions of paragraphs 16 and 17.

(2) On the disposal of assets by a person whose period of ownership began before the 6th day of April, 1974, only so much of any gain accruing on the disposal as is under this paragraph to be apportioned to the period beginning with the 6th day of April, 1974, shall be a chargeable gain.

(3) Subject to the following provisions of this Schedule, the gain shall be assumed to have grown at a uniform rate from nothing at the beginning of the period of ownership to its full amount at the time of the disposal and the portion attributable to the period beginning on the 6th day of April, 1974, shall be determined accordingly.

(4) If any of the expenditure which is allowable as a deduction in the computation under this Schedule of the gain is within paragraph 3 (1) (b)—

(a) the gain shall be attributed to the expenditure, if any, allowable under paragraph 3 (1) (a) as one item of expenditure, and to the respective items of expenditure under paragraph 3 (1) (b) in proportion to the respective amounts of those items of expenditure, taking into account the period which has elapsed between the time when each item of expenditure was first reflected in the value of the asset and the time of disposal,

(b) subparagraph (3) shall apply to the part of the gain attributed to the expenditure under paragraph 3 (1) (a),

(c) each part of the gain attributed to the items of expenditure under paragraph 3 (1) (b) shall be assumed to have grown at a uniform rate from nothing at the time when the relevant item of expenditure was first reflected in the value of the asset to the full amount of that part of the gain at the time of the disposal and the portion of each part of the gain so treated as growing before the 6th day of April, 1974, shall not be chargeable and each portion treated as growing on and after that date shall be chargeable.

(5) In a case within subparagraph (4) where there is no expenditure under paragraph 3 (1) (a) or such expenditure is, compared with any item of expenditure under paragraph 3 (1) (b), disproportionately small having regard to the value of the asset immediately before the subsequent item of expenditure was incurred, the part of the gain which is not attributable to the enhancement of the value of the asset due to any item of expenditure under paragraph 3 (1) (b) shall be deemed to be attributed to expenditure incurred at the beginning of the period of ownership and allowable under paragraph 3 (1) (a), and the part or parts of the gain attributable to expenditure under paragraph 3 (1) (b), shall be reduced accordingly.

(6) In the case of an asset the cost of which cannot be established or which was acquired otherwise than under a bargain at arm's length, the beginning of the period over which a gain, or a part of a gain, is, under subparagraphs (3) and (4), assumed to have grown shall not be earlier that the 6th day of April, 1964, and this subparagraph shall have effect notwithstanding any provision of this Act.

(7) If in pursuance of paragraph 6 the market value of an asset at a date before the 6th day of April, 1974, is to be ascertained, subparagraphs (3) to (6) shall have effect as if that asset had been on that date sold by the owner, and immediately re-acquired by him, at that market value.

(8) If in pursuance of paragraph 6 the market value of an asset at a date on or after the 6th day of April, 1974, is to be ascertained, subparagraphs (3) to (5) shall have effect as if the asset had been on that date sold by the owner, and immediately re-acquired by him, at that market value, and accordingly, the computation of any gain on a subsequent disposal of that asset shall be computed—

(a) by apportioning in accordance with this paragraph the gain or loss over a period ending on the said date (the date of the part disposal), and

(b) by bringing into account the entire gain or loss over the period from the date of the part disposal to the date of subsequent disposal.

(9) For the purposes of this paragraph, the period of ownership of an asset shall, where under paragraph 7 account is to be taken of expenditure in respect of an asset from which the asset disposed of was derived, or where it would so apply if there were any relevant expenditure in respect of that other asset, include the period of ownership of that other asset.

(10) If under this paragraph part only of a gain is a chargeable gain, the proportion in section 25 (3) (private residence) shall be applied to that part, instead of to the whole of the gain.

Election for valuation on the 6th day of April, 1974

19.—(1) If the person making a disposal so elects, paragraph 18 shall not apply in relation to that disposal and it shall be assumed, both for the purposes of computing under this Schedule the gain accruing to that person on the disposal, and for all other purposes both in relation to that person and other persons, that the assets disposed of, and any assets of which account is to be taken in relation to the disposal under paragraph 7, being assets which were in the ownership of the said person on the 6th day of April, 1974, were on that date sold, and immediately re-acquired, by him at their market value on the 6th day of April, 1974.

(2) Subparagraph (1) shall not apply in relation to a disposal of assets to the extent that on the assumption in that subparagraph a loss would accrue on that disposal to the person making the disposal and either a smaller loss or a gain would accrue if the said subparagraph (1) did not apply, but in a case where this subparagraph would otherwise substitute a gain for a loss it shall be assumed, in relation to the disposal, that the relevant assets were acquired by the owner, for a consideration such that, on the disposal, neither a gain nor a loss accrued to the person making the disposal:

Provided that nothing in this subparagraph shall be taken as bringing paragraph 18 into operation where an election under subparagraph (1) has been made.

(3) An election under this paragraph is irrevocable.

(4) An election may not be made under this paragraph as respects, or in relation to, an asset the market value of which at a date on or after the 6th day of April, 1974, and before the date of the disposal to which the election relates, is to be ascertained in pursuance of paragraph 6.

(5) An election under this paragraph shall be made by notice in writing to the inspector given within two years from the end of the year of assessment in which the disposal is made or such further time as the Revenue Commissioners may by notice in writing allow.

(6) This paragraph shall not apply to a disposal of an asset on which the person making the disposal has incurred any expenditure which has qualified for any capital allowance or renewals allowance.

Shares, commodities, etc.

20.—(1) This paragraph has effect as respects shares held by any person on the 6th day of April, 1974, other than shares which are to be treated under this Act as if disposed of and immediately re-acquired by him on that date.

(2) This paragraph applies to securities as it applies to shares.

(3) For the purpose of—

(a) identifying the shares so held on the 6th day of April, 1974, with shares previously acquired, and

(b) identifying the shares so held on that date with shares subsequently disposed of, and distinguishing them from shares acquired subsequently,

so far as the shares are of the same class, shares acquired at an earlier time shall be deemed to have been disposed of before shares acquired at a later time.

(4) Shares shall not be treated for the purposes of this paragraph as being of the same class unless if dealt with on a stock exchange in the State or elsewhere they would be so treated, but shall be treated in accordance with this paragraph notwithstanding that they are identified in a different way by a disposal or by the transfer or delivery giving effect to it.

(5) This paragraph, without subparagraph (4), shall apply in relation to any assets, other than shares, which are of a nature to be dealt with without identifying the particular assets disposed of or acquired.

Reorganisation of share capital, conversion of securities, etc.

21.—(1) For the purposes of this Act, it shall be assumed that any shares or securities held by a person on the 6th day of April, 1974 (identified in accordance with paragraph 20), which, in accordance with paragraphs 2 to 5 of Schedule 2, are to be regarded as being or forming part of a new holding, were sold and immediately re-acquired by him on the 6th day of April, 1974, at their market value on that date.

(2) If the event which results in a new holding in accordance with the said paragraphs 2 to 5 occurs at a time after the 5th day of April, 1974, subparagraphs (3) to (5) of paragraph 18 shall have effect as if the new holding had at that time been sold by the owner, and immediately re-acquired by him, at its market value at that time, and accordingly, the amount of any gain on a disposal of the new holding or any part of it shall be computed—

(a) by apportioning in accordance with paragraph 18 the gain or loss over a period ending at the said time, and

(b) by bringing into account the entire gain or loss over the period from that time to the date of the disposal.

(3) This paragraph shall not apply in relation to a reorganisation of a company's share capital if the new holding differs only from the original shares in being a different number, whether greater or less, of shares of the same class as the original shares.

Assets transferred to controlled companies

22.—(1) This paragraph has effect where—

(a) at any time, including a time before the 6th day of April, 1974, any of the persons having control of a controlled company, or any person who (in the terms of section 33) is connected with a person having control of a controlled company, has transferred assets to the company, and

(b) paragraph 18 applies in relation to a disposal by one of the persons having control of the company of shares or securities in the company, or in relation to a disposal by a person having, up to the time of disposal, a holding of shares or securities in the company, being in either case a disposal after the transfer of the assets.

(2) So far as the gain accruing to the said person on the disposal of the shares is attributable to a profit on the assets so transferred, the period over which the gain is to be treated under paragraph 18 as growing at a uniform rate shall begin with the time when the assets were transferred to the company, and accordingly a part of a gain attributable to a profit on assets transferred on or after the 6th day of April, 1974, shall all be a chargeable gain.

(3) This paragraph shall not apply where a loss, and not a gain, accrues on the disposal.

SCHEDULE 2 Companies and Shareholders

Capital distributions by companies

1.—(1) Where a person receives or becomes entitled to receive in respect of shares in a company any capital distribution from the company (other than a new holding as defined in paragraph 2), he shall be treated as if he had in consideration of that capital distribution disposed of an interest in the shares.

(2) In this paragraph “capital distribution” means any distribution from a company, including a distribution in the course of dissolving or winding up the company, in money or money's worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax.

Reorganisation or reduction of share capital

2.—(1) This paragraph shall apply in relation to any reorganisation or reduction of a company's share capital, and in this paragraph—

(a) references to a reorganisation of a company's share capital include—

(i) any case where persons are, whether for payment or not, allotted shares in or debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in the company or of any class of shares in the company; and

(ii) any case where there are more than one class of shares and the rights attached to shares of any class are altered; and

(b) “original shares” means shares held before and concerned in the reorganisation or reduction of capital, and “new holding” means, in relation to any original shares, the shares in and debentures of the company which as a result of the reorganisation or reduction of capital represent the original shares (including such, if any, of the original shares as remain).

(2) Subject to the following subparagraphs, a reorganisation or reduction of a company's share capital shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it but the original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset acquired as the original shares were acquired.

(3) Where, on a reorganisation or reduction of a company's share capital, a person gives or becomes liable to give any consideration for his new holding or any part of it, that consideration shall, in relation to any disposal of the new holding or any part of it, be treated as having been given for the original shares, and if the new holding or part of it is disposed of with a liability attaching to it in respect of that consideration, the consideration given for the disposal shall be adjusted accordingly:

Provided that there shall not be treated as consideration given for the new holding or any part of it—

(a) any surrender, cancellation or other alteration of the original shares or of the rights attached thereto, or

(b) any consideration consisting of any application in paying up the new holding or any part of it, of assets of the company, or of any dividend or other distribution declared out of those assets but not made,

but, where in relation to an issue of share capital, section 56 of the Finance Act, 1974, applies, there shall be allowed as consideration given for the new holding which includes that share capital the sum in cash which he would have received if he had not exercised the option to receive additional share capital instead of a sum in cash.

(4) Where, on a reorganisation or reduction of a company's share capital, a person receives (or is deemed to receive), or becomes entitled to receive, any consideration, other than the new holding, for the disposal of an interest in the original shares, and in particular—

(a) where under paragraph 1 he is to be treated as if he had in consideration of a capital distribution disposed of an interest in the original shares, or

(b) where he receives (or is deemed to receive) consideration from other shareholders in respect of a surrender of rights derived from the original shares,

he shall be treated as if the new holding resulted from his having for that consideration disposed of an interest in the original shares (but without prejudice to the original shares and the new holding being treated in accordance with subparagraph (2) as the same asset).

(5) Where, for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of any part of the new holding, it is necessary to apportion the cost of acquisition of any of the original shares between the part which is disposed of and the part which is retained, the apportionment shall be made by reference to market value at the date of the disposal (with such adjustment of the market value of any part of the new holding as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned); and any corresponding apportionment for the purposes of subparagraph (4) shall be made in like manner.

(6) Notwithstanding subparagraph (5)—

(a) where a new holding—

(i) consists of more than one class of shares in or debentures of the company and one or more of those classes is of shares or debentures which, at any time not later than the end of the period of three months beginning with the date on which the reorganisation or reduction of capital took effect, or of such longer period as the Revenue Commissioners may by notice in writing allow, had quoted market values on a recognised stock exchange in the State or elsewhere, or

(ii) consists of more than one class of rights of unit holders and one or more of those classes is of rights the prices of which were published regularly by the managers of the scheme at any time not later than the end of that period of three months (or longer if so allowed), and

(b) where for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of the whole or any part of any class of shares or securities or rights of unit holders forming part of a new holding of the kind referred to in clause (a) it is necessary to apportion costs of acquisition between the part that is disposed of and the part that is retained,

then the cost of acquisition of the new holding shall first be apportioned between the entire classes of shares or debentures or rights of which it consists by reference to market value on the first day (whether that day fell before the reorganisation or reduction of capital took effect or later) on which market values or prices were quoted or published for the shares, debentures or rights as mentioned in clause (a) or (b) (with such adjustment of the market value of any class as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned) and for the purposes of this subparagraph the day on which a reorganisation of share capital involving the allotment of shares or debentures or unit holders' rights takes effect is the day following the day on which the right to renounce any allotment expires.