Corporation Tax Act , 1976

(ii) in relation to that part of the said excess which is charged to tax at a rate or rates higher than the reduced rate be a sum equal to income tax at the standard rate for the year of assessment in which the distribution is made on that part of the said excess,

(iii) in relation to so much of his income which is represented by the said distribution (or the aggregate of the said distributions as the case may be) as is charged to tax at the reduced rate be tax at the reduced rate on the amount so charged together with tax on the same amount at a rate per cent. equal to

where—

D is the difference between the standard rate per cent. and the reduced rate per cent. for the year of assessment and for this purpose “the reduced rate per cent.” for a year of assessment means 26 where the reduced rate for that year is 26 per cent. and similarly with reference to the reduced rate per cent. for a year of assessment for which the reduced rate is other than 26 per cent.,

E is the rate of imputation per cent. for the year of assessment, and for this purpose “the rate of imputation per cent.” for a year of assessment means an amount determined by the formula

100
B ___
A

where A and B have the same meanings as in subsection (2), and

F is the standard rate per cent. for the year of assessment, and

(iv) in relation to so much of his income which is represented by the said distribution (or the aggregate of the said distributions as the case may be) as is not included in his taxable income be a proportionate part of the tax credit which under section 64 is applicable to the said distribution (or, as the case may be, a proportionate part of the aggregate amount of the tax credits which under section 64 are applicable to the said distributions).

67 Distributions to non-resident individuals.

67.—Where for any year of assessment the income of an individual who for that year is not resident in the State includes an amount in respect of a distribution to which section 64 applies, the distribution shall be treated as representing income equal to an amount determined by the formula

100
A ___
B

where—

A is the amount of the tax credit to which the individual would have been entitled in respect of the distribution if he were resident in the State for the year of assessment, and

B is the standard rate per cent. for that year of assessment.

68 Appeals.

68.—An appeal to the Appeal Commissioners shall lie on any question arising under this Part in like manner as an appeal would lie against an assessment to corporation tax and the provisions of this Act relating to appeals shall apply and have effect accordingly.

PART V Profits from Trading within Shannon Airport

69 Definitions.

69.—In this Part—

“the airport” has the same meaning as in the Customs-free Airport Act, 1947;

“company” means any company carrying on a trade;

“the Minister” means the Minister for Finance.

70 Exempted trading operations.

70.—(1) In this section “qualified company” means a company the whole or part of the trade of which is carried on within the airport.

(2) Subject to subsections (5) and (6), the Minister may give a certificate certifying that such trading operations of a qualified company as are specified in the certificate are, with effect as from their commencement, exempted trading operations for the purposes of this Part, and any certificate so given shall, unless it is revoked under subsection (4), remain in force until the 5th day of April, 1990:

Provided that where the Minister has given a certificate under section 3 (2) of the Finance (Miscellaneous Provisions) Act, 1958, or under the said section 3 (2) and section 374 (2) of the Income Tax Act, 1967 (exempted trading operations), such certificate shall, until it is revoked, have effect as if it were a certificate given under this section.

(3) A certificate under subsection (2) may be given either without conditions or subject to such conditions as the Minister considers proper and specifies therein.

(4) Where, in the case of a company in relation to which a certificate under subsection (2) has been given—

(a) the trade of the company ceases or becomes carried on wholly outside the airport, or

(b) the Minister is satisfied that the company has failed to comply with any condition subject to which the certificate was given,

the Minister may, by notice in writing served by registered post on the company, revoke the certificate.

(5) The Minister shall not certify, under subsection (2), that a trading operation is an exempted trading operation unless it falls within one or more of the following classes of trading operations—

(a) the sale of goods exported, or to be exported, out of the State by the qualified company (whether acting as principal or agent), being goods which have been produced, manufactured or processed within the airport by the qualified company,

(b) the sale of goods exported, or to be exported, out of the State by the qualified company, being goods which have been imported into the State and which have been packaged or handled within the airport by the qualified company,

(c) the repair or maintenance, within the airport, of aircraft,

(d) the rendering, within the airport or outside the State, of services entailing the use of aircraft or air transport,

(e) other trading operations in regard to which the Minister is of opinion, after consultation with the Minister for Transport and Power, that they contribute to the use or development of the airport,

(f) trading operations which are ancillary to any of those described in the foregoing paragraphs of this subsection.

(6) The Minister shall not certify, under subsection (2), that any of the following trading operations is an exempted trading operation—

(a) the sale of goods brought, or to be brought, from the airport into any other part of the State otherwise than in the course of being exported out of the State,

(b) the rendering, to persons resident in the State outside the airport, of services,

(c) the production or manufacture of goods outside the airport,

(d) the operation of an air transport service other than an air transport service which—

(i) is operated between the airport and a place outside the State, and

(ii) is not so operated under an international bilateral agreement to which the Government is a party,

(e) the rendering within the State of—

(i) services to embarking or disembarking aircraft passengers, including hotel, catering, money changing or transport (other than air transport) services, or

(ii) services in connection with the landing, departure, loading or unloading of aircraft,

(f) the sale of goods by retail,

(g) the sale of consumable goods for the fuelling of aircraft or for shipment as aircraft stores.

71 Disregard of income or losses in the case of exempted trading operations.

71.—(1) Except as otherwise provided, income arising from, or losses sustained in, exempted trading operations shall not be taken into account for any purpose of this Act in relation to the company by which such operations are carried on.

(2) Where the trade carried on by a company consists partly of exempted trading operations and partly of other trading operations, the amount of the income arising from, or of the loss sustained in, such other trading operations shall, for any purpose of this Act, be computed as it would have been computed for that purpose if the company were carrying on two distinct trades consisting respectively of the exempted trading operations and of the other trading operations.

72 Transactions between associated persons.

72.—(1) Where, in the course of exempted trading operations, the company carrying on the operations (hereafter in this subsection referred to as the buyer) buys goods from another person (hereafter in this subsection referred to as the seller) and—

(a) the seller has control over the buyer or, the seller being a body corporate or partnership, the buyer has control over the seller or some other person has control over both the seller and the buyer, and

(b) the goods are sold at a price less than the price which they might have been expected to fetch if the parties to the transaction had been independent parties dealing at arm's length, then, a computation of the income or losses of the seller, for any purpose of the Tax Acts, shall be made as if the goods had been sold for the price which they would have fetched if the transaction had been a transaction between independent persons dealing as aforesaid.

(2) In this section “control” has the meaning assigned to it by section 158.

73 Delivery of statements, etc.

73.—Where the Minister has given a certificate under section 70 (2) or under the sections mentioned in the proviso thereto—

(a) the provisions of the Tax Acts relating to the delivery of statements or returns of profits shall continue to have effect in relation to the company concerned as if the certificate had not been given, and

(b) the Revenue Commissioners may by notice in writing require the company concerned to furnish them, within such time as they may direct, with such accounts and other particulars as the Revenue Commissioners think necessary for the purposes of this Part.

74 Exception from Part IV.

74.—Notwithstanding anything in Part IV (Profits from Export of Certain Goods) no amount receivable from the sale of goods exported out of the State in the course of exempted trading operations shall be taken into account for any purpose of that Part.

75 Reduction of capital allowances.

75.—Where the trade carried on by a company consists partly of exempted trading operations and partly of other trading operations, the amount of any capital allowances to which, but for this section, the company would have been entitled shall be reduced by such amount, if any, as the Appeal Commissioners consider just having regard to section 71.

76 Distributions.

76.—(1) Where a distribution for an accounting period is made by a body corporate in part out of income from exempted trading operations and in part out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of income from exempted trading operations and out of other profits.

(2) (a) So much of any distribution as has been made out of income from exempted trading operations—

(i) shall not, subject to section 54 of the Finance Act, 1974 (charge to tax in respect of certain dividends received by directors and employees), be regarded as income for any purpose of the Income Tax Acts; and

(ii) shall, where the recipient of such distribution is a body corporate, be deemed for the purposes of this Part to be income from exempted trading operations.

(b) The recipient of any distribution, including part of a distribution treated under subsection (1) as a distribution, made out of income from exempted trading operations shall not be entitled to a tax credit in respect of that distribution.

(3) (a) Where a body corporate makes a distribution, including part of a distribution treated under subsection (1) as a distribution, in respect of any right or obligation to which section 178 (dividends at gross rate or of gross amount) relates and the distribution is made out of income from exempted trading operations, the body corporate shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (2) (b) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of income from exempted trading operations.

(4) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (1) as a distribution, made by a body corporate out of income from exempted trading operations, section 5 (dividend warrants) and section 83 (5) (Schedule F) shall apply to the body corporate so that the statements provided for by those sections shall show, as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of income from exempted trading operations.

(5) In relation to any supplementary distribution under subsection (3), section 5 shall apply to the body corporate so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(6) Where a body corporate makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (as defined in section 64 (4)) of that period to the extent of that income and in relation to the excess of the distribution over that income out of the most recently accumulated income.

(7) Section 64 (5) (6) (distributions: tax credit and export sales relief) shall apply for the purposes of this section as they apply for purposes of that section.

(8) In this section “other profits” includes a dividend or other distribution of a body corporate which is resident in the State but does not include a distribution to which subsection (2) (a) (ii) applies.

77 Provision for charges on income.

77.—Where charges on income, which are payable out of the income of a trade consisting partly of exempted trading operations and partly of other trading operations, are paid in an accounting period by a company there shall be treated as paid out of profits brought into charge to corporation tax only the portion of the charges so payable which bears to the total amount thereof the same proportion as the amount of the income of the trade actually charged to tax bears to the amount of such income which would have been charged to tax if this Part had not been enacted.

PART VI Associated Companies: Relief under Parts IV and V

78 Relief in relation to transactions between associated companies.

78.—(1) In this section—

“the airport” has the same meaning as in the Customs-free Airport Act, 1947;

“company” has the same meaning as in section 69 (definitions);

“control” has the meaning assigned to it by section 158;

“exempted trading operation” means a trading operation in respect of which there is in force a certificate given, before the 6th day of April, 1967, under section 3 (2) of the Finance (Miscellaneous Provisions) Act, 1958, or, on or after that date, under the said section 3 (2) and section 374 (2) of the Income Tax Act, 1967, or under section 70 (2) (exempted trading operations) of this Act;

“goods”, where it occurs in subsection (3), has the same meaning as in Part IV (Profits from Export of Certain Goods);

“other trading operation” means a trading operation which is carried on wholly within the airport other than an exempted trading operation;

“qualified company” has the same meaning as in section 70 (1).

(2) Where a qualified company (in this subsection referred to as the seller) which carries on a trade consisting partly of exempted trading operations and partly of other trading operations sells goods in the course of the other trading operations to a company (in this subsection referred to as the buyer) which carries on a trade in the State wholly outside the airport, and—

(a) the other trading operations would have been exempted trading operations if the goods had been exported out of the State by the seller, and

(b) the seller has control over the buyer or the buyer has control over the seller or some other person has control over both the buyer and the seller, and

(c) the goods are appropriated as trading stock of the buyer, and

(d) the goods are subjected by the buyer to a process of manufacture in the State, and

(e) the inspector is satisfied that the goods have been, or will be, exported out of the State by the buyer either as components of other goods or otherwise, and

(f) the other trading operations consist wholly of the sale of goods to the buyer and any goods sold by the buyer in the course of his trade (other than goods exported out of the State) are sold to the seller,

the income arising from, or losses sustained in, the other trading operations shall be deemed, notwithstanding section 70 (6) (a) or any certificate under section 70 (2) or any certificate having effect, by virtue of the proviso to section 70 (2), as if it were a certificate under the said section 70 (2), to arise from, or to be sustained in, exempted trading operations and Part V (Profits from trading within Shannon Airport) shall apply accordingly.

(3) Where a company (in this subsection referred to as the seller) which is not a qualified company sells goods to a person (in this subsection referred to as the buyer) who is either a qualified company which carries on a trade consisting partly of exempted trading operations and partly of other trading operations or a company which carries on a trade in the State wholly outside the airport, and—

(a) the seller would have been entitled to claim relief under Part IV in respect of the profits attributable to the sale of the goods if they had been exported out of the State, and

(b) the seller has control over the buyer or the buyer has control over the seller or some other person has control over both the buyer and the seller, and

(c) the goods are appropriated as trading stock of the buyer, and

(d) the goods are subjected by the buyer to a process of manufacture in the State, and

(e) the inspector is satisfied that the goods have been, or will be, exported out of the State by the buyer either as components of other goods or otherwise, and

(f) any goods sold by the seller in the course of his trade (other than goods exported out of the State) are sold to the buyer and any goods sold by the buyer in the course of his trade (other than goods exported out of the State) are sold to the seller,

Part IV shall apply as if the goods has been exported out of the State by the seller and any amount receivable by the seller from the sale of the goods to the buyer shall be deemed to be an amount receivable from the sale of goods so exported.

PART VII Special Exemptions

79 Reduced rate of corporation tax for certain income.

79.—(1) Where in any accounting period the profits of a company include any income to which this section applies—

(a) the corporation tax charged on that income for the accounting period shall, notwithstanding the provisions of section 1 (introduction for companies of corporation tax in place of income tax and corporation profits tax), be calculated as if the rate of corporation tax for the financial year 1974 and each subsequent financial year were 35 per cent., and

(b) the income shall be disregarded for all purposes of section 28 (reduction of corporation tax liability of small companies).

(2) For the purposes of this section the income of a company for an accounting period is its income for that period as defined in section 28 for the purposes of that section.

(3) The income to which this section applies is—

(a) in the case of a public utility company which, by or by virtue of any Act, is precluded in respect of the whole of the trade or business carried on by it either from charging any higher price or from distributing any higher rate of dividend than that authorised by or by virtue of such Act, any income of such company;

(b) in the case of a public utility company which, by or by virtue of any Act, is precluded in respect of part only of the trade or business carried on by it either from charging any higher price or from distributing any higher rate of dividend than that authorised by or by virtue of such Act, so much of the income of such company as is derived from the part of its trade or business to which such preclusion applies;

(c) in the case of a company which owns a controlling interest in and directs or is entitled to direct the management of any public utility company, the income derived by the first-mentioned company from such public utility company;

(d) the income of The Agricultural Credit Corporation Limited;

(e) the income of a company which carries on a railway undertaking;

(f) the income of an association which is registered under section 24 of the Companies Act, 1963, as a company with limited liability without the addition of the word “limited” to its name, so long as it continues to be so registered;

(g) the income of a company which is established solely for the advancement of religion or education and which under its memorandum or articles of association is prohibited from distributing any part of its profits to its members;

(h) the income of a company formed before the 4th day of August, 1920, whose assets consist wholly of stock or other securities issued by any public authority and formerly held by the persons by whom the company was formed;

(i) the income of a company which is precluded by its constitution from distributing any part of its profits amongst its members; and

(j) so much of the income of an investment trust company as is derived from dividends and other distributions received from any body corporate which is liable to the tax in Northern Ireland and Great Britain known as corporation tax to the extent that such dividends and distributions have been paid out of profits which have borne that tax.

(4) In this section “public utility company” means a company which carries on in the State any tramway, dock or canal undertaking.

(5) For the purposes of subsection (3) (i), a company shall be regarded as being precluded by its constitution from distributing any part of its profits amongst its members if, but only if—

(a) it is a company within the meaning of the Companies Act, 1963, and its memorandum or articles of association contain provisions—

(i) prohibiting the distribution of any part of its profits amongst its members by way of dividend, bonus or otherwise, and

(ii) securing that if, after the satisfaction of all the debts and liabilities of the company on its winding up or dissolution, any property of the company is undisposed of, it shall not be given to or distributed amongst its members but shall be—

(I) given to the Minister for Finance for the benefit of the Central Fund, or

(II) given to a body of persons (within the meaning of the Income Tax Acts) selected by the members of the company at or before the time of the winding up or dissolution aforesaid the objects of which are similar to the objects of the company, and the constitution or other governing rules of which contains or contain provisions prohibiting (to an extent at least as great as the extent of the prohibitions referred to in relation to the company in this and the other subparagraphs of this paragraph) the distribution of any part of its income or property amongst its members or proprietors, or

(III) given to a body of persons (within the meaning of the Income Tax Acts) or trust established for charitable purposes only, and

(iii) securing that the aforementioned provisions may not be altered or deleted without the previous consent or approval of the Minister for Finance, or the previous consent or approval of any other Minister of State given after consultation with the Minister for Finance; or

(b) it is a company, established by or under a statute (within the meaning of section 3 of the Interpretation Act, 1937) and named therein, or incorporated by or under a charter, and—

(i) is prohibited by or under the statute or charter, as the case may be, from distributing any part of its profits amongst its members by way of dividend, bonus or otherwise or, if not so prohibited, is not authorised by or under the statute or charter to distribute any part of its profits amongst its members, or

(ii) is required to apply its income and property as directed by or under the statute or charter or by a Minister of State.

(6) Where provisions of the kind specified in subsection (5) (a) are contained in the memorandum or articles of association of a company and those provisions are altered or deleted without the previous consent or approval of the Minister for Finance, or the previous consent or approval of any other Minister of State given after consultation with the Minister for Finance, as the case may be, then—

(a) where the company makes a distribution out of income to which this section applies or out of profits which were, by virtue of section 43 (3) of the Finance Act, 1922, not charged to corporation profits tax or out of that income and those profits, the company shall be assessed to income tax at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for the year in which the distribution is made is equal to the amount of the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State;

(b) where the company distributes, on or after the 27th day of November, 1975, its assets amongst its members or proprietors on the winding up or dissolution of the company the company shall be assessed to income tax for the year of assessment in which the winding up or dissolution occurs at the standard rate under Case IV of Schedule D on an amount determined by the formula

100
D ______
100A

where—

A is the standard rate per cent. for the year of assessment in which the winding up or dissolution occurs, and

D is the amount by which the total value of the assets distributed to the members or proprietors on the winding up or dissolution exceeds the amount of the paid up share capital of the company.

(7) (a) In this section—

“investment trust company” means a company which complies with the following conditions—

(i) it is incorporated and resident in the State,

(ii) it has issued for public subscription not less than 80 per cent. in nominal value of its shares carrying voting rights, whether immediate or to arise in certain future circumstances,

(iii) its business consists mainly in the making of investments,

(iv) the distribution as dividend of surpluses arising from the realisation of investments is prohibited by the company's memorandum or articles of association;

“Irish securities” means securities of the Government, securities guaranteed by the Minister for Finance and any stocks, shares, debentures, bonds or obligations of any municipal corporation in the State, or any company or other body corporate incorporated in the State;

“securities” includes stocks, shares, bonds and obligations of any Government, municipal corporation, company or other body corporate.

(b) The provisions of subsection (1) shall not apply to the income of an investment trust company for any accounting period unless the following conditions are satisfied—

(i) throughout the accounting period—

(I) the value of the Irish securities held by the investment trust company was not less than 15 per cent. of the value of the securities held by the investment trust company,

(II) the securities (whether of one class or more than one class) held by the investment trust company in any one body corporate, other than an investment trust company, did not represent more than 15 per cent. by value of the first-mentioned investment trust company's securities,

(III) the number of shareholders was not less than fifty and no one shareholder was the beneficial owner of more than 49 per cent. of the shares of the investment trust company,

(IV) the value of the securities quoted on a recognised stock exchange which were held by the investment trust company was not less than 85 per cent. of the value of the securities held by the investment trust company,

and

(ii) the investment trust company did not retain more than 15 per cent. of its profits—

(I) in any accounting period, and

(II) in any period (not being a period for which the company was within the charge to corporation tax) for which accounts of the company were made up and which ended on or after the 29th day of July, 1968.

(c) The Minister for Finance may, after consultation with the Revenue Commissioners, direct that the provisions of subsection (1) shall apply in relation to an investment trust company for any accounting period notwithstanding that one or more of the conditions stated in paragraph (b) (i) of this subsection was or were not complied with and notification of any such direction shall be published in Iris Oifigiúil as soon as may be after it is given.

(8) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

80 Exemption of income from carrying out of voluntary health insurance schemes.

80.—Income of the Voluntary Health Insurance Board arising from the business of carrying out under section 4 of the Voluntary Health Insurance Act, 1957, schemes of voluntary health insurance shall be exempt from corporation tax.

PART VIII Distributions out of Certain Profits from Mining

81 Distributions: profits of certain mines.

81.—(1) In this section—

“exempted income” means income in respect of which a company has obtained relief under the Finance (Profits of Certain Mines) (Temporary Relief from Taxation) Act, 1956, or under Chapter II of Part XXV of the Income Tax Act, 1967 (Profits of Certain Mines), and

“other income” means income of a company which is not exempted income.

(2) Where a distribution for an accounting period is made by a company wholly out of exempted income, the distribution shall not be regarded as income for any purpose of the Income Tax Acts and, notwithstanding the provisions of section 88 (tax credit for certain recipients of distributions), the recipient of the distribution shall not be entitled to a tax credit in respect of it.

(3) Where a distribution for an accounting period is made by a company in part out of exempted income and in part out of other income, the distribution shall be treated as if it consisted of two distributions respectively made out of exempted income and other income and subsection (2) shall apply to such part of the distribution as is made out of exempted income as it applies to a distribution made wholly out of exempted income.

(4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of exempted income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be exempted income of the company.

(5) (a) Where a company makes a distribution, including part of a distribution treated under subsection (3) as a distribution, in respect of any right or obligation to which section 178 (dividends at gross rate or of gross amount) relates and the distribution is made out of exempted income, the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (2) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if the supplementary distribution were a distribution made out of exempted income and section 5 (dividend warrants) shall apply so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(6) Sections 64 (5) (6) (distributions in relation to export sales relief) and 76 (6) (distributions out of profits from trading within Shannon Airport) shall apply for the purposes of this section as they apply for the purposes of those sections.

(7) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made out of exempted income, sections 5 and 83 (5) (Schedule F) shall apply so that the statements provided for by those sections shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempted income.

82 Distributions out of profits from coal, gypsum and anhydrite mining operations.

82.—(1) For the purposes of this section, “relieved income” means the income of a company—

(a) on which income tax was paid at a reduced rate by virtue of section 395 (1) of the Income Tax Act, 1967 (relief—existing coal-mining operations), section 7 (relief—new coal-mining operations) or section 8 (relief—existing coal-mining operations) of the Finance (Miscellaneous Provisions) Act, 1956, or section 32 of the Finance Act, 1960 (extension of relief for new mining operations to gypsum and anhydrite mining), or

(b) on which income tax was borne by deduction at a reduced rate under section 396 (1) of the Income Tax Act, 1967 (dividends), or section 9 of the Finance (Miscellaneous Provisions) Act, 1956 (dividends, etc.), or

(c) which is franked investment income the tax credit comprised in which has been reduced under this section.

(2) The tax credit in respect of a distribution made wholly out of relieved income shall, notwithstanding section 88, be the amount arrived at by applying to the amount of the distribution the fraction

A
______
100 A

where—

A is 50 per cent. of the standard rate per cent. for the year of assessment in which the distribution is made.

(3) Where a distribution is made in part out of relieved income and in part out of other income, the distribution shall be treated as if it consisted of two distributions respectively made out of relieved income and out of other income and the tax credit in respect of each such distribution shall be calculated in accordance with subsection (2) and section 88 respectively.

(4) Any distribution, including part of a distribution treated under subsection (3) as a distribution, made out of relieved income shall, where the recipient is a company resident in the State, be deemed for the purposes of this section to be relieved income of that company.

(5) Subject to subsection (7), for the purposes of Schedule F and all other purposes of the Tax Acts a distribution made by a company out of relieved income shall be treated as representing income equal to the aggregate of the amount or value of that distribution and the amount of the tax credit in respect of it calculated in accordance with this section.

(6) Where for a year of assessment the taxable income of an individual which is chargeable at the reduced rate or the standard rate includes income represented by distributions made out of relieved income, his liability to income tax in respect of the income represented by such distributions shall be an amount equal to the tax on that income calculated at 50 per cent. of the reduced rate or of the standard rate, as the case may be, for the year of assessment in which the distributions were made.

(7) Where for a year of assessment the taxable income of an individual which is chargeable at the higher rates includes income represented by distributions made out of relieved income, his liability to income tax at the higher rates in respect of the income represented by such distributions shall be an amount equal to the tax, calculated at the higher rates for the year of assessment in which the distributions were made, on the income reduced by 50 per cent. and credit shall be given against that tax of an amount equal to tax at the standard rate for the said year on the amount of the income as so reduced.

(8) Where a company makes a distribution (including part of a distribution which is treated as a distribution under subsection (3)) in respect of any right or obligation to which section 178 relates and the tax credit in respect of that distribution is calculated in accordance with subsection (2), then the company shall make a supplementary distribution of an amount equal to the excess of the tax credit which would have applied to the distribution if this section had not been enacted over the amount of the tax credit which in accordance with subsection (2) applies to the distribution and the person to whom the distribution and the supplementary distribution are made shall be regarded as having received one distribution consisting of the aggregate of the distribution and the supplementary distribution.

(9) Notwithstanding section 88, the recipient of a supplementary distribution under subsection (8) shall not be entitled to a tax credit in respect of such supplementary distribution and section 5 (dividend warrants) shall apply so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(10) Sections 64 (5) (6) and 76 (6) shall apply for the purposes of this section as they apply for the purposes of those sections respectively.

(11) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (3) as a distribution, made by a company out of relieved income, sections 5 and 83 (5) shall apply so that the statements provided for by those sections shall show, in addition to the particulars required to be given apart from this section, that the distribution is made out of relieved income and shall also show the amount of the tax credit which would apply in respect of the distribution if it were not made out of relieved income.

PART IX Schedule F and Company Distributions

83 Schedule F.

83.—(1) Income tax for any year of assessment after the year 1975-76 shall be chargeable under a new Schedule, to be called Schedule F, in respect of dividends and other distributions in that year of a company resident in the State.

(2) The Schedule referred to as Schedule F is as follows—

SCHEDULE F

(3) No distribution which is chargeable under Schedule F shall be chargeable under any other provision of the Income Tax Acts.

(4) Where for any year of assessment the income of a person who for that year is not resident in the State includes an amount in respect of a distribution made by a company which is resident in the State—

(a) that person's liability under any assessment to income tax made in respect of the distribution shall be reduced by a sum equal to income tax at the standard rate for that year on the said amount, and

(b) the amount or value of the distribution shall be treated for the purposes of sections 433 (yearly interest, etc., payable wholly out of taxed profits) and 434 (interest, etc., not payable out of taxed profits) of the Income Tax Act, 1967, as not brought into charge to income tax.

(5) A company which makes a distribution (not being a distribution to which section 5 (1) refers) shall, if the recipient so requests in writing, furnish to him a statement in writing showing the amount or value of the distribution and (whether or not the recipient is a person entitled to a tax credit in respect of the distribution) the amount of the tax credit to which a recipient who is such a person is entitled in respect thereof.

The duty imposed by this subsection shall be enforceable at the suit or instance of the person requesting the statement.

84 Matters to be treated as distributions.

84.—(1) The following provisions of this Part, together with section 96 (payments, etc., to participators and associates) and section 97 (interest paid to directors and directors' associates), shall, subject to any express exceptions, have effect with respect to the meaning in this Act of “distribution” and for determining the persons to whom certain distributions are to be treated as made; but references in this Act to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.

(2) In relation to any company “distribution” means—

(a) any dividend paid by the company, including a capital dividend;

(b) any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except, subject to section 86, so much of the distribution, if any, as represents a repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;

(c) any amount met out of assets of the company (whether in cash or otherwise) in respect of the redemption of any security issued by the company in respect of shares in or securities of the company otherwise than wholly for new consideration, or in the redemption of such part of any such security so issued as is not properly referable to new consideration;

(d) any interest (excluding interest paid before the 6th day of April, 1976) or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured, and, without prejudice to section 87 (9), for this purpose no amount shall be regarded as representing the principal secured by a security in so far as it exceeds any new consideration which has been received by the company for the issue of the security), where the securities are—

(i) securities issued as mentioned in paragraph (c), but excluding securities issued before the 27th day of November, 1975; or

(ii) securities convertible directly or indirectly into shares in the company or securities carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted; or

(iii) securities under which—

(I) the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company's business or any part of it, or

(II) the consideration so given represents more than a reasonable commercial return for the use of that principal; provided that this shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal; or

(iv) securities issued by the company and held by a company not resident in the State, where—

(I) the company which issued the securities is a 75 per cent. subsidiary of the other company; or

(II) both are 75 per cent. subsidiaries of a third company which is not resident in the State; or

(III) except where 90 per cent. or more of the share capital of the company which issued the securities is directly owned by a company resident in the State both the company which issued the securities and the company not resident in the State are 75 per cent. subsidiaries of a third company which is resident in the State; or

(v) securities which are connected with shares in the company, where “connected with” means that in consequence of the nature of the rights attaching to the securities or shares, and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or acquire, a proportionate holding of the shares;

(e) any such amount as is required to be treated as a distribution by subsection (3) or by section 85.

(3) Where on a transfer of assets or liabilities by a company to its members or to a company by its members, the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by him, the company shall be treated as making a distribution to him of an amount equal to the difference:

Provided that, where the company and the member receiving the benefit are both resident in the State and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident, the said amount shall not be treated as a distribution.

(4) The question whether one company is a subsidiary of another for the purpose of subsection (3) shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade; or

(b) of any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt; or

(c) of any share capital which it owns directly or indirectly in a company not resident in the State.

(5) (a) No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (3) if they are companies—

(i) both of which are resident in the State and neither of which is a 51 per cent. subsidiary of a company not so resident; and

(ii) which neither at the time of the transfer nor as a result of it are under common control.

(b) For the purposes of this subsection two companies are under common control if they are under the control of the same person or persons, and for this purpose “control” shall have the meaning assigned to it by section 158.

(c) Any amount which would be a distribution by virtue of subsection (3) apart from the proviso to that subsection (groups of companies resident in the State), shall not constitute a distribution by virtue of subsection (2)(b).

85 Bonus issues following repayment of share capital.

85.—(1) Where a company—

(a) repays any share capital, or has done so at any time on or after the 27th day of November, 1975; and

(b) at or after the time of that repayment issues as paid up otherwise than by the receipt of new consideration any share capital;

the amount so paid up shall be treated as a distribution made in respect of the shares on which it is paid up, except in so far as that amount exceeds the amount or aggregate amount of share capital so repaid less any amounts previously so paid up and treated by virtue of this subsection as distributions.

(2) Subsection (1) shall not apply where the repaid share capital consists of fully paid up preference shares—

(a) if those shares existed as issued and fully paid preference shares on the 27th day of November, 1975, and throughout the period from that date until the repayment those shares continued to be fully paid preference shares, or

(b) if those shares were issued after the 27th day of November, 1975, as fully paid preference shares wholly for new consideration not derived from ordinary shares and throughout the period from their issue until the repayment those shares continued to be fully paid preference shares.

(3) In this section—

“ordinary shares” means shares other than preference shares;

“preference shares” means shares—

(a) which do not carry any right to dividends other than dividends at a rate per cent. of the nominal value of the shares which is fixed, and

(b) which carry rights in respect of dividends and capital which are comparable with those general for fixed-dividend shares quoted on a stock exchange in the State;

“new consideration not derived from ordinary shares” means new consideration other than consideration consisting of the surrender, transfer or cancellation of ordinary shares of the company or any other company or consisting of the variation of rights in ordinary shares of the company or any other company, and other than consideration derived from a repayment of share capital paid in respect of ordinary shares of the company or of any other company.

(4) Except in relation to a close company within the meaning of section 94 (meaning of close company) this section shall not apply if the issue of share capital mentioned in paragraph (b) of subsection (1)—

(a) is of share capital other than redeemable share capital; and

(b) takes place more than ten years after the repayment of share capital mentioned in paragraph (a) of that subsection.

86 Matters to be treated or not treated as repayments of share capital.

86.—(1) Where—

(a) a company issues any share capital as paid up otherwise than by the receipt of new consideration, or has done so on or after the 27th day of November, 1975; and

(b) any amount so paid up does not fall to be treated as a distribution:

then for the purposes of sections 84 and 85 distributions afterwards made by the company in respect of shares representing that share capital shall not be treated as repayments of share capital, except to the extent to which those distributions, together with any relevant distributions previously so made, exceed the amounts so paid up (then or previously) on such shares after that date and not falling to be treated as distributions.

(2) In subsection (1) “relevant distribution” means so much of any distribution made in respect of shares representing the relevant share capital as apart from that subsection would be treated as a repayment of share capital, but by virtue of that subsection cannot be so treated.

(3) For the purposes of subsection (1) all shares of the same class shall be treated as representing the same share capital, and where shares are issued in respect of other shares, or are directly or indirectly converted into or exchanged for other shares, all such shares shall be treated as representing the same share capital.

(4) Where share capital is issued at a premium representing new consideration, the amount of the premium is to be treated as forming part of that share capital for the purpose of determining under this Part whether any distribution made in respect of shares representing the share capital is to be treated as a repayment of share capital:

Provided that this subsection shall not have effect in relation to any part of the premium after that part has been applied in paying up share capital.

(5) Subject to subsection (4), premiums paid on redemption of share capital are not to be treated as repayments of capital.

(6) Except in relation to a close company within the meaning of section 94, subsection (1) shall not prevent a distribution being treated as a repayment of share capital if it is made—

(a) more than ten years after the issue of share capital mentioned in paragraph (a) of that subsection; and

(b) in respect of share capital other than redeemable share capital.

87 Distributions: supplemental.

87.—(1) In this Part “new consideration” means consideration not provided directly or indirectly out of the assets of the company, and in particular does not include amounts retained by the company by way of capitalising a distribution:

Provided that where share capital has been issued at a premium representing new consideration, any part of that premium afterwards applied in paying up share capital shall be treated as new consideration also for that share capital, except in so far as the premium has been taken into account under section 86 (4) so as to enable a distribution to be treated as a repayment of share capital.

(2) (a) No consideration derived from the value of any share capital or security of a company, or from voting or other rights in a company, shall be regarded for the purposes of this Part as new consideration received by the company unless the consideration consists of—

(i) money or value received from the company as a distribution;

(ii) money received from the company as a payment which for those purposes constitutes a repayment of that share capital or of the principal secured by that security; or

(iii) the giving up of the right to that share capital or security on its cancellation, extinguishment or acquisition by the company.

(b) No amount shall be regarded as new consideration by virtue of paragraph (a) (ii) or (iii) in so far as it exceeds any new consideration received by the company for the issue of the share capital or security in question or, in the case of share capital which constituted a distribution on issue, the nominal value of that share capital.

(3) Where two or more companies enter into arrangements to make distributions to each other's members, all parties concerned may for the purposes of this Part be treated as if anything done by any of those companies had been done by any other, and this subsection applies however many companies participate in the arrangements.

(4) (a) In this Part the expressions “in respect of shares in the company” and “in respect of securities of the company” in relation to a company which is a member of a 90 per cent. group, mean respectively in respect of shares in that company or any other company in the group and in respect of securities of that company or any other company in the group.

(b) Without prejudice to section 84 (2) (b) as extended by the immediately preceding paragraph, in relation to a company which is a member of a 90 per cent. group, “distribution” includes anything distributed out of assets of the company (whether in cash or otherwise) in respect of shares in or securities of another company in the group.

(c) Nothing in this subsection shall require a company to be treated as making a distribution to any other company which is in the same group and is resident in the State.

(d) For the purposes of this subsection a principal company and all its 90 per cent. subsidiaries form a “90 per cent. group” and “principal company” means a company of which another company is a subsidiary.

(5) A distribution shall be treated under this Part as made, or consideration as provided, out of assets of a company if the cost falls on the company.

(6) In this Part “share” includes stock, and any other interest of a member in a company.

(7) References in this Part to issuing share capital as paid up apply also to the paying up of any issued share capital.

(8) For purposes of this Part “security” includes securities not creating or evidencing a charge on assets, and interest paid by a company on money advanced without the issue of a security for the advance, or other consideration given by a company for the use of money so advanced, shall be treated as if paid or given in respect of a security issued for the advance by the company.

(9) Where securities are issued at a price less than the amount repayable on them, and are not quoted on a recognised stock exchange, the principal secured shall not be taken for the purposes of this Part to exceed the issue price, unless the securities are issued on terms reasonably comparable with the terms of issue of securities so quoted.

(10) For the purposes of this Part a thing is to be regarded as done in respect of a share if it is done to a person as being the holder of the share, or as having at a particular time been the holder, or is done in pursuance of a right granted or offer made in respect of a share, and anything done in respect of shares by reference to share holdings at a particular time is to be regarded as done to the then holder of the shares or the personal representatives of any share holder then dead.

This subsection shall apply in relation to securities as it applies in relation to shares.

88 Tax credit for certain recipients of distributions.

88.—(1) Where a company resident in the State makes a distribution on or after the 6th day of April, 1976, and the person receiving the distribution is another such company or a person resident in the State, not being a company, the recipient of the distribution shall, subject to the provisions of this Act, be entitled to a tax credit under this section (in this Act referred to as a “tax credit”).

(2) The tax credit in respect of a distribution shall be available for the purposes specified in the Tax Acts and shall, subject to any express provision to the contrary, be an amount determined by the formula

A
D _____
100 A

where—

A is the standard rate per cent. for the year of assessment in which the distribution is made, and

D is the amount or value of the distribution.

(3) A company resident in the State which is entitled to a tax credit in respect of a distribution may claim to have the amount of the tax credit paid to it if—

(a) the company is wholly exempt from corporation tax or is only not exempt in respect of trading income; or

(b) the distribution is one in relation to which express exemption (otherwise than by section 2 (resident company distributions not chargeable to corporation tax)) is given, whether specifically or by virtue of a more general exemption from tax, under any provision of the Tax Acts.

(4) A person, not being a company resident in the State, who is entitled to a tax credit in respect of a distribution may claim to have the credit set against the income tax chargeable on his income for the year of assessment in which the distribution is made and, where the credit exceeds that income tax, to have the excess paid to him.

(5) (a) Where a distribution mentioned in subsection (1) is, or falls to be treated as, or under any provision of the Tax Acts is deemed to be, income of a person other than the recipient, that person shall be treated for the purposes of this section as receiving the distribution (and accordingly the question whether he is entitled to a tax credit in respect of it shall be determined by reference to where he, and not the actual recipient, is resident); and where any such distribution is income of a trust resident in the State the trustees shall be entitled to a tax credit in respect of it if no other person falls to be treated for the purposes of this section as receiving the distribution.

(b) In this subsection “trust resident in the State” means a trust administered under the law of the State, not being a trust the general administration of which is ordinarily carried on outside the State and the trustees, or a majority of the trustees, of which are resident or ordinarily resident outside the State.

89 Disallowance of reliefs in respect of bonus issues.

89.—(1) This section has effect where any person (in this section referred to as “the recipient”) receives an amount treated as a distribution by virtue of—

(a) section 84 (2) (c) (d),

(b) section 85, or

(c) section 86 (1),

and in the following provisions of this section a distribution falling within paragraph (a), (b) or (c) is referred to as a “bonus issue” and “relevant tax credit”, in relation to a bonus issue, means the tax credit to which the recipient of the bonus issue becomes entitled under section 88 in respect of the bonus issue.

(2) Subject to subsection (5), if the recipient is entitled by reason of—

(a) any exemption from tax, or

(b) the setting-off of losses against profits or income, or

(c) the payment of interest,

to recover tax in respect of any distribution received by him, no account shall be taken, for the purposes of any such exemption or set-off or payment of interest, of any bonus issue or relevant tax credit received by him.

(3) Subject to subsection (5), a bonus issue and the relevant tax credit shall be treated as not being franked investment income within the meaning of section 24 (franked investment income and franked payment).

(4) Subject to subsection (5), the relevant tax credit relating to a bonus issue shall not be available to set against any income tax which the recipient is entitled to deduct under section 433, or with which he is chargeable by virtue of section 434, of the Income Tax Act, 1967.

(5) Nothing in subsections (2) to (4) shall affect the proportion (if any) of any bonus issue made in respect of any shares or securities which, if it were declared as a dividend, would represent a normal return to the recipient on the consideration provided by him for the relevant shares or securities, that is to say, those in respect of which the bonus issue was made and, if those securities are derived from shares or securities previously acquired by the recipient, the shares or securities which were previously acquired; nor shall anything in those subsections affect the like proportion of the relevant tax credit relating to that bonus issue.

(6) For the purposes of subsection (5)—

(a) if the consideration provided by the recipient for any of the relevant shares or securities was in excess of their market value at the time he acquired them, or if no consideration was provided by him for any of the relevant shares or securities, the recipient shall be taken to have provided for those shares or securities consideration equal to their market value at the time he acquired them; and

(b) in determining whether an amount received by way of dividend exceeds a normal return, regard shall be had to the length of time previous to the receipt of that amount that the recipient first acquired any of the relevant shares or securities and to any dividends and other distributions made in respect of them during that time.

90 Distributions made out of capital profits of companies.

90.—(1) Where on or after the 6th day of April, 1976, a company resident in the State makes a distribution partly out of capital profits of the company and partly out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of capital profits and out of other profits.

(2) Notwithstanding section 1 (2) (introduction for companies of corporation tax), where a company on or after the 6th day of April, 1976, makes a distribution (including part of a distribution treated under subsection (1) as a distribution) and the distribution is made, or is deemed under subsection (5) to have been made, out of capital profits of the company, the company shall, for the year of assessment in which the distribution is made, be assessed to income tax at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for that year is equal to the amount of the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(3) Where a distribution (including part of a distribution treated under subsection (1) as a distribution) to which subsection (2) applies is made partly out of capital profits which have been charged to capital gains tax or, after the reduction provided for by section 13 (computation of chargeable gains), to corporation tax and partly out of other capital profits, the distribution shall be treated as if it consisted of two distributions respectively made out of capital profits which have been so charged and out of other capital profits.

(4) Where on or after the 6th day of April, 1976, a company makes a distribution out of capital profits which have been charged to capital gains tax or, after the reduction provided for by section 13, to corporation tax, the tax charged under subsection (2) shall be reduced by an amount equal to the amount of capital gains tax which would be chargeable under section 3 of the Capital Gains Tax Act, 1975, for the year of assessment in which the distribution is made on an amount equal to the aggregate of the distribution and the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(5) Where a distribution (being a distribution by virtue of section 96 (payments to participators or associates) or section 97 (interest paid to directors and their associates)) is made by a company, the distribution shall be deemed to be made out of the profits of the company to the extent of those profits, and where the distribution exceeds the profits of the company the amount of the excess shall be deemed to have been made out of capital profits of the company which have not been charged to capital gains tax or to corporation tax.

(6) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

91 Distributions by newly resident companies out of profits arising before residence begins.

91.—(1) Where, on or after the date on which it begins to be resident in the State, but not earlier than the 6th day of April, 1976, a company makes a distribution partly out of profits which arose to it before the date on which it begins to be so resident and partly out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of profits which arose to the company before the date on which it begins to be resident in the State and out of other profits.

(2) Notwithstanding section 1 (2), a company which, on or after the date on which it begins to be resident in the State but not earlier than the 6th day of April, 1976, makes a distribution, including part of a distribution treated under subsection (1) as a distribution, out of profits which arose to it before the date on which it begins to be so resident shall, for the year of assessment in which the distribution is made, be assessed to income tax at the standard rate under Case IV of Schedule D on an amount the income tax on which at the standard rate for the said year of assessment is equal to the amount of the tax credit which would apply in respect of the distribution if the person receiving it were an individual resident in the State.

(3) Any person who by virtue of any exemption or relief from tax claims payment of the tax credit in respect of a distribution to which subsection (2) refers shall not be entitled to payment of the said credit if the company by which the distribution is made is a close company (as defined in section 94) which has not paid the total amount of the income tax which is assessed on it under subsection (2).

(4) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

92 Distributions made before 6th April, 1976.

92.—(1) Where on or after the 27th day of November, 1975, and before the 6th day of April, 1976, a distribution is made by a company which is resident in the State, such distribution, for the purposes of sections 83, 88 and 90, shall be deemed to have been made on the 6th day of April, 1976:

Provided that “distribution” in this section shall be deemed not to include a dividend from which income tax was deducted or a dividend from which income tax was not deducted by virtue of section 387 or 410 of the Income Tax Act, 1967.

(2) This section shall not apply to a distribution made on or after the 27th day of November, 1975, and before the 6th day of April, 1976, if—

(a) it was declared by the company in general meeting before the first-mentioned date; or

(b) it was declared in general meeting after the first-mentioned date but in accordance with a recommendation of the directors and the directors' decision to make that recommendation was, with the authority of the directors, publicly announced before that date; or

(c) it was made in accordance with a decision of the directors, and that decision was, with their authority, publicly announced before the first-mentioned date.

93 Distributions out of certain exempt profits.

93.—(1) In this section “exempt profits” means profits or gains which by virtue of—

(a) section 18 of the Finance Act, 1969 (profits from the occupation of certain lands), or

(b) that section as applied by section 11 (6) (continuation of exemptions)

were not charged to tax.

(2) Where a distribution for an accounting period is made by a company in part out of exempt profits and in part out of other profits, the distribution shall be treated as if it consisted of two distributions respectively made out of exempt profits and out of other profits.

(3) (a) So much of any distribution as has been made out of exempt profits—

(i) shall, where the recipient of such distribution is a company, be deemed for the purposes of this Act to be exempt profits of the company, and

(ii) shall not be regarded as income for any purpose of the Income Tax Acts.

(b) Notwithstanding the provisions of section 88, the recipient of any distribution, including part of a distribution treated under subsection (2) as a distribution, made out of exempt profits shall not be entitled to a tax credit in respect of that distribution.

(4) (a) Where a company makes a distribution, including part of a distribution treated under subsection (2) as a distribution, in respect of any right or obligation to which section 178 (dividends at gross rate or of gross amount) relates and the distribution is made out of exempt profits the company shall make a supplementary distribution of an amount equal to the amount of the tax credit which would have applied in respect of the distribution if subsection (3) (b) had not been enacted.

(b) Subsection (2) shall apply to a supplementary distribution under this subsection as if that supplementary distribution were a distribution made wholly out of exempt profits.

(5) In relation to any distribution (not being a supplementary distribution under this section), including part of a distribution treated under subsection (2) as a distribution, made by a company out of exempt profits, sections 5 (dividend warrants) and 83 (5) shall apply to the company so that the statements provided for by these sections shall show as respects each such distribution, in addition to the particulars required to be given apart from this section, that the distribution is made out of exempt profits.

(6) In relation to any supplementary distribution under subsection (4), section 5 shall apply to the company so that the statement required by that section shall show, in addition to the particulars required to be given apart from this section, the separate amount of such supplementary distribution.

(7) Where a company makes a distribution for an accounting period, the distribution shall be regarded for the purposes of this section as having been made out of the distributable income (as defined in section 64 (4)) of that period to the extent of that income, and in relation to the excess of the distribution over that income, out of the most recently accumulated income.

(8) Subsections (5) and (6) of section 64 shall apply for the purposes of this section as they apply for the purposes of that section.

(9) In this section “other profits” includes a dividend or other distribution of a company which is resident in the State but does not include a distribution to which subsection (3) (a) (i) applies.

PART X Close Companies

94 Meaning of close company.

94.—(1) For the purposes of this Act, a “close company” is one which is under the control of five or fewer participators, or of participators who are directors, except that the expression does not apply—

(a) to a company not resident in the State, or

(b) to a registered industrial and provident society within the meaning of section 30 (industrial and provident societies), or to a building society within the meaning of section 31 (building societies), or

(c) to a company controlled by or on behalf of the State, and not otherwise a close company, or

(d) to a company falling within subsection (4) or section 95.

(2) For the purposes of this section—

(a) a company is to be treated as controlled by or on behalf of the State if, but only if, it is under the control of the State or of persons acting on behalf of the State, independently of any other person, and

(b) where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company as being under the control of persons acting independently of the State.

(3) A company resident in the State (but not falling within subsection (1) (b)) is also a close company if, on a full distribution of its distributable income, more than half of it would fall to be paid, directly or indirectly, to five or fewer participators, or to participators who are directors.

(4) A company is not to be treated as a close company—

(a) if—

(i) it is controlled by a company which is not a close company, or by two or more companies none of which is a close company, and

(ii) it cannot be treated as a close company except by taking as one of the five or fewer participators requisite for its being so treated a company which is not a close company;

(b) if it cannot be treated as a close company except by virtue of paragraph (c) of section 102 (2) and it would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.

(5) References in subsection (4) to a close company shall be treated as applying to any company which, if resident in the State, would be a close company.

(6) If shares in any company (in this subsection referred to as the “first company”) are at any time after the 5th day of April, 1976, held on trust for a fund or scheme approved under section 222 or 229 of the Income Tax Act, 1967, or for an exempt approved scheme as defined in Chapter II of Part I of the Finance Act, 1972, then, unless the fund or scheme is established wholly or mainly for the benefit of persons who are, or are dependants of, employees or directors or past employees or directors of—

(a) the first company; or

(b) an associated company of the first company; or

(c) a company which is under the control of any director or associate of a director of the first company or of two or more persons each of whom is such a director or associate; or

(d) a close company;

the persons holding the shares shall, for the purposes of subsection (4), be deemed to be the beneficial owners of the shares and, in that capacity, to be a company which is not a close company.

95 Certain companies with quoted shares not to be close companies.

95.—(1) Subject to the provisions of this section, a company is not to be treated as being at any time a close company if—

(a) shares in the company carrying not less than 35 per cent. of the voting power in the company (and not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) have been allotted unconditionally to, or acquired unconditionally by, and are at that time beneficially held by, the public, and

(b) any such shares have within the preceding twelve months been the subject of dealings on a recognised stock exchange, and the shares have within those twelve months been quoted in the official list of a recognised stock exchange.

(2) Subsection (1) shall not apply to a company at any time when the total percentage of the voting power in the company possessed by all of the company's principal members exceeds 85 per cent.

(3) For the purposes of subsection (1), shares in a company shall be deemed to be beneficially held by the public if, and only if, they—

(a) fall within subsection (4), and

(b) are not within the exceptions in subsection (5),

and a corresponding construction shall be given to the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public.

(4) Shares fall within this subsection (as being beneficially held by the public)—

(a) if beneficially held by a company resident in the State which is not a close company, or by a company not so resident which would not be a close company if it were so resident, or

(b) if held on trust for a fund or scheme approved under section 222 or 229 of the Income Tax Act, 1967, or for an exempt approved scheme as defined in Chapter II of Part I of the Finance Act, 1972, or

(c) if they are not comprised in a principal member's holding.

(5) Shares shall not be deemed to be held by the public if they are held—

(a) by any director or associate of a director of the company, or

(b) by any company which is under the control of any such director or associate, or of two or more persons each of whom is such a director or associate, or

(c) by any associated company of the company, or

(d) as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within paragraph (b) or (c).

References in this subsection to shares held by any person include references to any shares the rights or powers attached to which could, for the purposes of section 102, be attributed to that person under subsection (5) of that section.

(6) For the purposes of this section—

(a) a person is a principal member of a company if he possesses a percentage of the voting power in the company of more than 5 per cent. and, where there are more than five such persons, if he is one of the five persons who possess the greatest percentages or if, because two or more persons possess equal percentages of the voting power in the company, there are no such five persons, he is one of the six or more persons (so as to include those two or more who possess equal percentages) who possess the greatest percentages, and

(b) a principal member's holding consists of the shares which carry the voting power possessed by him.

(7) In arriving at the voting power which a person possesses, there shall be attributed to him any voting power which, for the purposes of section 102, would be attributed to him under subsection (5) or (6) of that section.

(8) In this section “share” includes “stock”.

96 Certain expenses for participators and associates.

96.—(1) Subject to such exceptions as are mentioned in section 84 (matters to be treated as distributions) “distribution”, in relation to a close company, includes unless otherwise stated any such amount as is required to be treated as a distribution by subsection (2).

(2) Where a close company incurs expense in or in connection with the provision for any participator of living or other accommodation, of entertainment, of domestic or other services, or of other benefits or facilities of whatever nature, the company shall be treated as making a distribution to him of an amount equal to so much of that expense as is not made good to the company by the participator:

Provided that this subsection shall not apply to expense incurred in or in connection with the provision of benefits or facilities for a person to whom section 117 of the Income Tax Act, 1967 (benefits in kind), applies as a director or employee of the company, or the provision for the spouse, children or dependants of any such person of any pension, annuity, lump sum, gratuity or other like benefit to be given on his death or retirement.

(3) Any reference in subsection (2) to expense incurred in or in connection with any matter includes a reference to a proper proportion of any expense incurred partly in or in connection with that matter; and section 118 of the Income Tax Act, 1967 (valuation of benefits in kind), shall apply for the purposes of that subsection as it applies for the purposes of section 117 of the Income Tax Act, 1967, references to that subsection being substituted for references to section 117 (1).

(4) Subsection (2) shall not apply if the company and the participator are both resident in the State and—

(a) one is a subsidiary of the other or both are subsidiaries of a third company also so resident, and

(b) the benefit to the participator arises on or in connection with the transfer of assets or liabilities by the company to him, or to the company by him.

(5) The question whether one company is a subsidiary of another for the purpose of subsection (4) shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade; or

(b) of any share capital which it owns indirectly, and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt; or

(c) of any share capital which it owns directly or indirectly in a company not resident in the State.

(6) Where each of two or more close companies makes a payment to a person who is not a participator in that company, but is a participator in another of those companies, and the companies are acting in concert or under arrangements made by any person, then each of those companies and any participator in it shall be treated as if the payment made to him had been made by that company.

This subsection shall apply, with any necessary adaptations, in relation to the giving of any consideration, and to the provision of any facilities, as it applies in relation to the making of a payment.

(7) For the purposes of this section any reference to a participator includes an associate of a participator, and any participator in a company which controls another company shall be treated as being also a participator in that other company.

97 Interest paid to directors and directors' associates.

97.—(1) Subject to such exceptions as are mentioned in section 84 (1), this section has effect where in any accounting period, but not before the 6th day of April, 1976, any interest is paid by a close company to, or to an associate of, a person—

(a) who is a director of the close company, or of any company which controls, or is controlled by, the close company, and

(b) who has a material interest—

(i) in the close company, or

(ii) where the close company is controlled by another company, in that other company.

(2) If the total amount so paid to any person in the accounting period exceeds the limit imposed in his case, the excess shall be a distribution made by the close company to that person.

(3) The limit shall be calculated in the first instance as an overall limit applying to the aggregate of all interest which is within subsection (1) and which was paid by the close company in the accounting period, and, where there are two or more different recipients, that overall limit shall be apportioned between them according to the amounts of interest paid to them respectively.

(4) The overall limit shall be a sum equal to interest at 13 per cent. per annum or such other rate of interest as the Minister for Finance may from time to time prescribe on whichever is the smaller of—

(a) the total of the loans, advances and credits on which the interest within subsection (1) was paid by the close company in the accounting period, or if that total was different at different times in the accounting period, the average total over the accounting period, and

(b) the nominal amount of the issued share capital of the close company plus the amount of any share premium account (or other comparable account by whatever name called) of the company, taking both amounts as at the beginning of the accounting period.

(5) In this section “interest” includes any other consideration paid or given by the close company for the use of money advanced, or credit given, by any person, and references to interest “paid” shall be construed accordingly.

(6) This section has effect subject to section 96 (6), and for the purposes of this section a person has a material interest in a company if he, either on his own or with any one or more of his associates, or if any associate of his with or without any such other associates, is the beneficial owner of, or is able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent. of the ordinary share capital of the company.

98 Loans to participators, etc.

98.—(1) Subject to the following provisions of this section, where after the 5th day of April, 1976, a close company, otherwise than in the ordinary course of a business carried on by it which includes the lending of money, makes any loan or advances any money to an individual who is a participator in the company or an associate of a participator, the company shall be deemed, for the purposes of this section, to have paid in the year of assessment in which the loan or advance is made, an annual payment of an amount which, after deduction of income tax at the standard rate for the year of assessment in which the loan or advance is made, is equal to the amount of the loan or advance, and section 151 (income tax on payments) shall apply for the purposes of the charge, assessment and recovery of such tax:

Provided that the annual payment referred to in this subsection shall not be a charge on the company's income within the meaning of section 10 (allowance of charges on income).

(2) For the purposes of this section the cases in which a close company is to be regarded as making a loan to any person include a case where—

(a) that person incurs a debt to the close company, or

(b) a debt due from that person to a third party is assigned to the close company,

and then the close company shall be regarded as making a loan of an amount equal to the debt:

Provided that paragraph (a) shall not apply to a debt incurred for the supply by the close company of goods or services in the ordinary course of its trade or business unless the credit given exceeds six months or is longer than that normally given to the company's customers.

(3) Subsection (1) shall not apply to a loan made to a director or employee of a close company, or of an associated company of the close company, if—

(a) the amount of the loan, or that amount when taken together with any other outstanding loans which were made by the close company or any of its associated companies to the borrower, or to the wife or husband of the borrower, does not exceed £15,000,

(b) the borrower works full-time for the close company, or any of its associated companies, and

(c) the borrower does not have a material interest in the close company or in any associated company of the close company but if the borrower acquires such a material interest at a time when the whole or part of any such loan remains outstanding the close company shall be regarded as making to him at that time a loan of an amount equal to the sum outstanding.

(4) Where, after a company has been assessed to tax under this section in respect of any loan or advance, the loan or advance or any part of it is repaid to the company, relief shall be given from that tax, or a proportionate part of it, by discharge or repayment.

Relief under this subsection shall be given on a claim, which must be made within ten years from the end of the year of assessment in which the repayment is made.

(5) Where, under arrangements made by any person otherwise than in the ordinary course of a business carried on by him—

(a) a close company makes a loan or advance which, apart from this subsection, does not give rise to any charge on the company under subsection (1), and

(b) some person other than the close company makes a payment or transfers property to or releases or satisfies (in whole or in part) a liability of, an individual who is a participator in the company or an associate of a participator,

then, unless in respect of the matter referred to in paragraph (b) there falls to be included in the total income of the participator or associate an amount not less than the loan or advance, this section shall apply as if the loan or advance had been made to him.

(6) In subsections (1) and (5) (b), the references to an individual shall apply also to a company receiving the loan or advance in a fiduciary or representative capacity, and to a company not resident in the State.

(7) For the purposes of this section any participator in a company which controls another company shall be treated as being also a participator in that other company; and section 97 (6) shall apply for the purpose of determining whether a person has, for the purpose of subsection (3), a material interest in a company.

(8) Where on or after the 27th day of November, 1975, but not later than the 5th day of April, 1976, a close company makes any loan or advances any money to an individual who is a participator in the company or an associate of a participator, the company shall be deemed for the purposes of this section to have made the loan or advanced the money on the 6th day of April, 1976:

Provided that this subsection shall not apply to any loan or advance or any part of it which is repaid to the company before the 6th day of April, 1976.

99 Effect of release, etc., of debt in respect of loan under section 98.

99.—(1) Subject to the following provisions of this section, where a company is assessed or liable to be assessed under section 98 in respect of a loan or advance and releases or writes off the whole or part of the debt in respect of it, then—

(a) for the purpose of computing the total income of the person to whom the loan or advance was made a sum equal to the amount so released or written off shall be treated as income received by him after deduction of income tax by virtue of section 434 of the Income Tax Act, 1967 (at the standard rate for the year of assessment in which the whole or part of the debt was released or written off) from a corresponding gross amount;

(b) no repayment of income tax shall be made in respect of that income;

(c) notwithstanding paragraph (a), the income included by virtue of that paragraph in the total income of that person shall be treated for the purposes of sections 433 (yearly interest, etc., payable wholly out of taxed profits) and 434 (interest, etc., not payable out of taxed profits) of the Income Tax Act, 1967, as not brought into charge to income tax;

(d) for the purposes of section 4 (e) of the Finance Act, 1974 (charge to tax of income from which tax has been deducted), but not for any other purpose, any amount which is to be treated as income by virtue of paragraph (a) shall be treated as if tax had been deducted therefrom at the standard rate for the year of assessment in which the whole or part of the debt was released or written off, provided that where such amount or the aggregate of such amounts, if more than one, exceeds the amount of the individual's taxable income charged at the standard rate or a higher rate the amount of the credit under the said section 4 (e) in respect of the excess shall not, notwithstanding anything in the said section 4, exceed the amount of the tax, if any, charged on that excess.

(2) If the loan or advance referred to in subsection (1) was made to a person who has since died, or to trustees of a trust which has come to an end, this section, instead of applying to the person to whom it was made, shall apply to the person from whom the debt is due at the time of release or writing off (and if it is due from him as personal representative within the meaning of Part XXIX of the Income Tax Act, 1967 (Income in relation to Administration of Estates), the amount treated as received by him shall accordingly be, as regards the higher rates of tax, included for the purposes of that Part in the aggregate income of the estate) and subsection (1) shall apply accordingly with the necessary modifications.

(3) Where under section 98 (8) a loan or advance is deemed to have been made on the 6th day of April, 1976, and before that date the company which made the loan or advance releases or writes off the whole or part of the debt in respect of it, then for the purposes of this section the amount released or written off shall be deemed to have been so released or written off on the 6th day of April, 1976.