Corporation Tax Act , 1976

(4) This section shall be construed together with section 98.

100 Distributions to be taken into account and meaning of “distributable income”, “investment income”, “estate income”, etc.

100.—(1) For the purposes of section 101 the distributions of a company for an accounting period shall be taken to be the aggregate of—

(a) any dividends which are declared for or in respect of the accounting period and are paid or payable during the accounting period or within eighteen months after the end of the accounting period, and

(b) all distributions, other than dividends, made in the accounting period.

(2) Where—

(a) a period of account for or in respect of which a company declares a dividend is not an accounting period,

(b) the dividend is paid or payable during the period of account or within eighteen months after the end of the period of account, and

(c) part of the period of account falls within an accounting period,

then, the proportion of the amount of the dividend to be treated for the purposes of subsection (1) as being for or in respect of the accounting period shall be the same as the proportion which the said part of the period of account bears to the whole of that period.

(3) For the purposes of subsection (4) the income of a company for an accounting period shall be the income for the accounting period, computed in accordance with the provisions of this Act, exclusive of franked investment income, before deducting—

(a) any loss incurred in any trade or profession carried on by the company which is carried forward from an earlier, or carried back from a later, accounting period,

(b) any excess of deficiencies over surpluses which if such excess were an excess of surpluses over deficiencies would be chargeable to corporation tax on the company under Case V of Schedule D and which is carried forward from an earlier, or carried back from a later, accounting period, and

(c) any loss which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D and which is carried forward from an earlier accounting period or any expenses of management or any charges on income which are so carried forward,

and after deducting—

(d) any loss incurred in the accounting period in any trade or profession carried on by the company,

(e) any loss incurred in the accounting period which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D,

(f) any excess of deficiencies over surpluses which if such excess were an excess of surpluses would be chargeable to corporation tax on the company for the accounting period under Case V of Schedule D,

(g) any amount which is an allowable deduction—

(i) against the total profits for the accounting period in respect of charges by virtue of section 10 (1), or

(ii) in computing the total profits for the accounting period in respect of expenses of management by virtue of section 15 (1), and

(h) the amount of the corporation tax which would be payable by the company for the accounting period if the tax were computed on the basis of the income arrived at in accordance with the preceding provisions of this subsection.

(4) In this section—

“distributable income” of a company for an accounting period means the income as computed in accordance with subsection (3) increased by—

(a) the amount of the company's franked investment income for the accounting period reduced by the tax credit comprised in that income, and

(b) any reduction in the income arising in the accounting period made under section 176 (transitional relief for existing companies on cessation of trade, etc.) in respect of any source of income:

Provided that, where the aggregate of the amounts specified in paragraphs (d) to (g) of subsection (3) exceeds the income as computed in accordance with that subsection apart from the said paragraphs, the amount of the excess shall, in computing the amount of the distributable income, be deducted from the aggregate of the amounts specified in paragraphs (a) and (b);

“investment income” of a company means income other than estate income which, if the company were an individual, would not be earned income within the meaning of section 2 of the Income Tax Act, 1967, but does not include any interest or dividends on investments which would, having regard to the nature of the company's trade, fall to be taken into account as trading receipts in computing trading income but for the fact that they have been subjected to tax otherwise than as trading receipts, or but for the fact that, by virtue of section 2 (Irish resident company distributions not chargeable to corporation tax), they are not to be taken into account in computing income for corporation tax;

“estate income” means income (other than yearly or other interest) which is chargeable to tax under Case III, IV or V of Schedule D, and which arises from the ownership of land (including any interest in or right over land) or from the letting furnished of any building or part of a building;

“trading income” means income arising from a trade (including farming) or profession in respect of which a company is chargeable to corporation tax under Case I or II of Schedule D;

“trading company” means any company which exists wholly or mainly for the purpose of carrying on a trade and any other company whose income does not consist wholly or mainly of investment or estate income.

(5) For the purposes of section 101—

“distributable investment income” of a company for an accounting period means, in a case where the proviso to subsection (4) applies, the amount arrived at in accordance with the said proviso, and, in any other case, the sum of the following two amounts—

(a) the amount arrived at by applying to the amount of the distributable income exclusive of franked investment income (as reduced by the tax credit comprised in that income) the fraction

where—

A is the amount of the investment income taken into account in computing the tax mentioned in subsection (3) (h), and

B is the total amount of income so taken into account,

and

(b) the amount of the franked investment income (as reduced by the tax credit comprised in that income):

Provided that in the case of a trading company the distributable investment income shall be the amount arrived at in accordance with the foregoing provisions of this paragraph reduced by 5 per cent.;

“distributable estate income” of a company for an accounting period means the amount arrived at by applying to the amount of the distributable income exclusive of franked investment income (as reduced by the tax credit comprised in that income) the fraction

where—

C is the amount of the estate income taken into account in computing the tax mentioned in subsection (3) (h), and

D is the total amount of income so taken into account:

Provided that in the case of a trading company the distributable estate income shall be the amount arrived at in accordance with the foregoing provisions of this paragraph reduced by 7.5 per cent.

(6) The amount for part of an accounting period of any description of income referred to in this section shall be a proportionate part of the amount for the whole period.

(7) Where a company is subject to any restriction imposed by law as regards the making of distributions, then regard shall be had to this restriction in determining the amount of income on which a surcharge shall be imposed under section 101.

101 Surcharge on close company's undistributed investment and estate income.

101.—(1) Where for an accounting period of a close company, the aggregate of the distributable investment income and the distributable estate income exceeds the distributions of the company for the accounting period, there shall be charged on the company for the accounting period an additional duty of corporation tax (referred to hereafter in this section as a surcharge) amounting to 20 per cent. of the excess:

Provided that—

(a) a surcharge shall not be made on the company where the excess is equal to or less than the smaller of the following amounts—

(i) £500, or, if the accounting period is less than twelve months, £500 proportionately reduced, and

(ii) where the company has one or more associated companies, £500 divided by one plus the number of those associated companies, or, if the accounting period is less than twelve months, £500 proportionately reduced divided by one plus the number of those associated companies;

(b) where the excess is greater than the smaller amount on which by virtue of paragraph (a) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to four-fifths of the amount by which the excess is greater than that smaller amount.

(2) Where the aggregate of—

(a) the accumulated undistributed income of the company at the end of the accounting period, and

(b) any amount which, on or after the 27th day of November, 1975, was transferred to capital reserves or was used to issue shares, stock or securities as paid up otherwise than for new consideration (as defined in Part IX) or was otherwise used so as to reduce the amount referred to in paragraph (a),

is less than the excess referred to in subsection (1), that subsection shall apply as if the amount of that aggregate were substituted for the said excess.

(3) The provisions of section 28 (4) (5) (reduction of corporation tax liability of small companies) shall apply for the purposes of subsection (1) as they apply for the purposes of section 28 (3).

(4) If any amount on which a surcharge is made on a company under this section is distributed, the tax credit in respect of the distribution shall, except where otherwise provided, be that provided for by section 88 (tax credit for certain recipients of distributions).

(5) A surcharge made under this section on a company for an accounting period shall be paid in one instalment within two months from the making of the assessment.

(6) The provisions of section 6 (5) (general scheme of corporation tax) and of Part XIV (Administration) shall apply in relation to a surcharge made under this section as they apply to corporation tax charged otherwise than under this section.

102 Meaning of “associated company” and “control”.

102.—(1) For the purposes of this Part a company is to be treated as another's “associated company” at a given time if, at that time or at any time within one year previously, one of the two has control of the other, or both are under the control of the same person or persons.

(2) For the purposes of this Part a person shall be taken to have control of a company if he exercises, or is able to exercise or is entitled to acquire, control, whether direct or indirect, over the company's affairs, and in particular, but without prejudice to the generality of the preceding words, if he possesses or is entitled to acquire—

(a) the greater part of the share capital or issued share capital of the company or of the voting power in the company;

or

(b) such part of the issued share capital of the company as would, if the whole of the income of the company were in fact distributed among the participators (without regard to any rights which he or any other person has as a loan creditor), entitle him to receive the greater part of the amount so distributed; or

(c) such rights as would, in the event of the winding up of the company or in any other circumstances, entitle him to receive the greater part of the assets of the company which would then be available for distribution among the participators.

(3) Where two or more persons together satisfy any of the conditions of subsection (2), they shall be taken to have control of the company.

(4) For the purposes of subsection (2) a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date, or will at a future date be entitled to acquire.

(5) For the purposes of subsections (2) and (3), there shall be attributed to any person any rights or powers of a nominee for him, that is to say, any rights or powers which another person possesses on his behalf or may be required to exercise on his direction or behalf.

(6) For the purposes of subsections (2) and (3), there may also be attributed to any person all the rights and powers of any company of which he has, or he and associates of his have, control or any two or more such companies, or of any associate of his or of any two or more associates of his, including those attributed to a company or associate under subsection (5), but not those attributed to an associate under this subsection; and such attributions shall be made under this subsection as will result in the company being treated as under the control of five or fewer participators if it can be so treated.

103 Meaning of “participator”, “associate”, “director” and “loan creditor”.

103.—(1) For the purposes of this Part, a “participator” is, in relation to any company, a person having a share or interest in the capital or income of the company, and, without prejudice to the generality of the preceding words, includes—

(a) any person who possesses, or is entitled to acquire, share capital or voting rights in the company,

(b) any loan creditor of the company,

(c) any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company (construing “distributions” without regard to section 96 or 97) or any amounts payable by the company (in cash or in kind) to loan creditors by way of premium on redemption, and

(d) any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for his benefit.

In this subsection references to being entitled to do anything apply where a person is entitled to do it at a future date or will at a future date be entitled to do it.

(2) The provisions of subsection (1) are without prejudice to any particular provision of this Part requiring a participator in one company to be treated as being also a participator in another company.

(3) For the purposes of this Part “associate” means, in relation to a participator—

(a) any relative or partner of the participator,

(b) the trustee or trustees of any settlement in relation to which the participator is, or any relative of his (living or dead) is or was, a settlor (“settlement” and “settlor” having here the same meaning as in section 96 (3) (h) of the Income Tax Act, 1967), and

(c) where the participator is interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person, any other person interested therein,

and has a corresponding meaning in relation to a person other than a participator:

Provided that paragraph (c) shall not apply so as to make an individual an associate as being entitled or eligible to benefit under a trust—

(i) if the trust relates exclusively to a fund or scheme approved under section 222 (exemption of superannuation funds) or 229 (approval of retirement benefits schemes) of the Income Tax Act, 1967, or to an exempt approved scheme as defined in Chapter II of Part I of the Finance Act, 1972 (Occupational Pension Schemes), or

(ii) if the trust is exclusively for the benefit of the employees, or the employees and directors, of the company or their dependants (and not wholly or mainly for the benefit of directors or their relatives) and the individual in question is not (and could not as a result of the operation of the trust become) either on his own or with his relatives the beneficial owner of more than 5 per cent. of the ordinary share capital of the company,

and in applying paragraph (ii) of this proviso, any charitable trusts which may arise on the failure or determination of other trusts shall be disregarded.

(4) In subsection (3) “relative” means husband, wife, ancestor, lineal descendant, brother or sister.

(5) For the purposes of this Part “director” includes any person occupying the position of director by whatever name called, any person in accordance with whose directions or instructions the directors are accustomed to act, and any person who—

(a) is a manager of the company or otherwise concerned in the management of the company's trade or business, and

(b) is, either on his own or with one or more associates, the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control 20 per cent. or more of the ordinary share capital of the company.

(6) In subsection (5) (b), the expression “either on his own or with one or more associates” requires a person to be treated as owning or, as the case may be, controlling what any associate owns or controls, even if he does not own or control share capital on his own, and in paragraph (ii) of the proviso to subsection (3) the expression “either on his own or with his relatives” has a corresponding meaning.

(7) For the purposes of this Part “loan creditor”, in relation to a company, means a creditor in respect of any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company, or

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium thereon),

or in respect of any redeemable loan capital issued by the company:

Provided that a person carrying on a business of banking shall not be deemed to be a loan creditor in respect of any loan capital or debt issued or incurred by the company for money lent by him to the company in the ordinary course of that business.

(8) A person who is not the creditor in respect of any debt or loan capital to which subsection (7) applies but nevertheless has a beneficial interest therein shall, to the extent of that interest, be treated for the purposes of this Part as a loan creditor in respect of that debt or loan capital.

104 Information.

104.—(1) The inspector may, by notice in writing, require any company which is, or appears to him to be, a close company to furnish him within such time (not being less than thirty days) as may be specified in the notice with such particulars as he thinks necessary for the purposes of this Part.

(2) If for the purposes of this Part any person in whose name any shares are registered is so required by notice in writing by the inspector, he shall state whether or not he is the beneficial owner of the shares and, if not the beneficial owner of the shares or any of them, shall furnish the name and address of the person or persons on whose behalf the shares are registered in his name.

(3) Subsection (2) shall apply in relation to loan capital as it applies in relation to shares.

(4) The inspector may, for the purposes of this Part, by notice in writing require—

(a) any company which appears to him to be a close company to furnish him with particulars of any bearer securities issued by the company and the names and addresses of the persons to whom the securities were issued and the respective amounts issued to each person; and

(b) any person to whom securities were issued as aforesaid, or to or through whom such securities were subsequently sold or transferred, to furnish him with such further information as he may require with a view to enabling him to ascertain the names and addresses of the persons beneficially interested in the securities.

In this subsection “securities” includes shares, stocks, bonds, debentures and debenture stock and also any promissory note or other instrument evidencing indebtedness issued to a loan creditor of the company.

PART XI Group Relief

105 Group payments.

105.—(1) Where on or after the 6th day of April, 1976, a company receives from another company (both being companies resident in the State) any such payments as are referred to in this subsection, and either—

(a) the company making the payment is—

(i) a 51 per cent. subsidiary of the other or of a company so resident of which the other is a 51 per cent. subsidiary; or

(ii) a trading or holding company owned by a consortium the members of which include the company receiving the payments; or

(b) the company receiving the payments is a 51 per cent. subsidiary of the company,

then, subject to the following provisions of this section, the company receiving the payments and the company paying them may jointly elect that this subsection shall apply to any such payments received from the latter by the former, and so long as the election is in force those payments may be made without deduction of income tax and neither section 434 of the Income Tax Act, 1967 (payments not payable out of taxed profits), nor section 31 of the Finance Act, 1974 (interest payments by companies), shall apply thereto.

The payments for which an election may be made under this subsection are any payments which are for corporation tax charges on income of the company making them or would be for that tax charges on income of the company making them if they were not deductible in computing profits or any description of profits or if section 10 (6) (restriction of allowance of charges on income) did not apply to them.

(2) Subsection (1) shall not apply to payments received by a company on any investments, if a profit on the sale of those investments would be treated as a trading receipt of that company.

(3) Where a company purports by virtue of an election under subsection (1) to make any payment without deduction of income tax and income tax ought to have been deducted, the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) of the company making and the company receiving the payment are, so far as possible, the same as they would have been if the income tax had been duly deducted.

(4) Where tax assessed under subsection (3) on the company which made the payment is not paid by that company before the expiry of three months from the date on which that tax is payable, that tax shall, without prejudice to the right to recover it from that company, be recoverable from the company which received the payment.

(5) In determining for the purposes of this section whether one company is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—

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

(6) For the purposes of this section—

(a) “trading or holding company” means a trading company or a company whose business consists wholly or mainly in the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries,

(b) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades,

(c) a company is owned by a consortium if three-fourths or more of the ordinary share capital of the company is beneficially owned between them by five or fewer companies resident in the State of which none beneficially owns less than one-twentieth of that capital, and those companies are called the members of the consortium.

(7) References in this section to payments received by a company apply to any received by another person on behalf of or in trust for the company but not to any received by the company on behalf of or in trust for another person.

106 Election: group payments.

106.—(1) An election under section 105 (in this section referred to as an “election”) shall be made by notice in writing to the inspector, and the notice shall set out the facts necessary to show that the companies are entitled to make the election.

(2) An election shall not have effect in relation to payments made less than three months after the giving of the notice and before the inspector is satisfied that the election is validly made, and has so notified the companies concerned; but shall be of no effect if within those three months the inspector notifies the companies concerned that the validity of the election is not established to his satisfaction:

Provided that the companies shall have the like right of appeal against any decision that the validity of the election is not established as the company making the payments would have if it were an assessment made on that company, and Part XXVI of the Income Tax Act, 1967, shall apply accordingly.

(3) An election shall cease to be in force if at any time the companies cease to be entitled to make the election, and on that happening each company shall forthwith notify the inspector.

(4) Either of the companies making an election may at any time give the inspector notice in writing revoking the election; and any such notice shall have effect from the time it is given.

107 Group relief.

107.—(1) Relief for trading losses and other amounts eligible for relief from corporation tax may in accordance with the following provisions of this Part be surrendered by a company (called the “surrendering company”) which is a member of a group of companies and, on the making of a claim by another company (called the “claimant company”) which is a member of the same group, may be allowed to the claimant company by way of a relief from corporation tax called “group relief”.

(2) Group relief shall also be available in accordance with the said provisions—

(a) where the surrendering company is a trading company which is owned by a consortium and which is not a 75 per cent. subsidiary of any company, and the claimant company is a member of the consortium, or

(b) where the surrendering company is a trading company—

(i) which is a 90 per cent. subsidiary of a holding company which is owned by a consortium, and

(ii) which is not a 75 per cent. subsidiary of a company other than the holding company,

and the claimant company is a member of the consortium, or

(c) where the surrendering company is a holding company which is owned by a consortium and which is not a 75 per cent. subsidiary of any company, and the claimant company is a member of the consortium:

Provided that no claim may be made by a member of a consortium if a profit on a sale of the share capital of the surrendering or holding company which that member owns would be treated as a trading receipt of that member nor if the member's share in the consortium in the relevant accounting period of the surrendering company or holding company is nil.

(3) Subject to the following sections of this Part, two or more claimant companies may make claims relating to the same surrendering company, and to the same accounting period of that surrendering company.

(4) A payment for group relief—

(a) shall not be taken into account in computing profits or losses of either company for corporation tax purposes, and

(b) shall not for any of the purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income,

and in this subsection “payment for group relief” means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered by way of group relief, being a payment not exceeding that amount.

(5) For the purposes of this section and the following sections of this Part—

(a) two companies shall be deemed to be members of a group of companies if one is the 75 per cent. subsidiary of the other or both are 75 per cent. subsidiaries of a third company,

(b) “holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries, and which are trading companies,

(c) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades.

(6) In applying for the said purposes the definition of “75 per cent. subsidiary” in section 156 (subsidiaries) any share capital of a registered industrial and provident society shall be treated as ordinary share capital.

(7) References in this and the following sections of this Part to a company apply only to companies resident in the State; and in determining for the purposes of this and the following sections of this Part whether one company is a 75 per cent. subsidiary of another, the other company 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.

(8) For the said purposes a company is owned by a consortium if all of the ordinary share capital of that company is directly and beneficially owned between them by five or fewer companies and those companies are called the members of the consortium.

108 Group relief: qualifications for entitlement.

108.—(1) Notwithstanding that at any time a company (in this subsection referred to as “the subsidiary company”) is a 75 per cent. subsidiary or a 90 per cent. subsidiary, within the meaning of section 156, of another company (in this section referred to as “the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of group relief unless, additionally, at that time—

(a) the parent company is beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any profits available for distribution to equity holders of the subsidiary company; and

(b) the parent company would be beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any assets of the subsidiary company available for distribution to its equity holders on a winding up.

(2) Subject to subsection (3), for the purposes of group relief a member's share in a consortium, in relation to an accounting period of the surrendering company, shall be whichever is the lowest in that period of the following percentages, namely—

(a) the percentage of the ordinary share capital of the surrendering company which is beneficially owned by that member;

(b) the percentage to which that member is beneficially entitled of any profits available for distribution to equity holders of the surrendering company; and

(c) the percentage to which that member would be beneficially entitled of any assets of the surrendering company available for distribution to its equity holders on a winding up;

and if any of those percentages have fluctuated in that accounting period, the average percentage over the period shall be taken for the purposes of this subsection.

(3) In any case where the surrendering company is a subsidiary of a holding company which is owned by a consortium, for references in subsection (2) to the surrendering company there shall be substituted references to the holding company.

109 Group relief: profits or assets available for distribution.

109.—(1) For the purposes of this Part, an equity holder of a company is any person who—

(a) holds ordinary shares in the company, or

(b) is a loan creditor of the company in respect of a loan which is not a normal commercial loan,

and any reference in that section to profits or assets available for distribution to a company's equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.

(2) For the purposes of subsection (1) (a) “ordinary shares” means all shares other than fixed-rate preference shares.

(3) In this Part “fixed-rate preference shares” means shares which—

(a) are issued for consideration which is or includes new consideration; and

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and

(c) do not carry any right to dividends other than dividends which—

(i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and

(ii) represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares; and

(d) on repayment do not carry any rights to an amount exceeding that new consideration except in so far as those rights are reasonably comparable with those general for fixed dividend shares quoted on a stock exchange in the State.

(4) Section 103 (7) (definition of “loan creditor” for purposes of provisions relating to close companies) shall apply for the purposes of subsection (1) (b) as it applies for the purposes of Part X, except that the proviso shall be omitted.

(5) In subsection (1) (b) “normal commercial loan” means a loan of or including new consideration and—

(a) which does not carry any right either to conversion into shares or securities of any other description or to the acquisition of additional shares or securities; and

(b) which does not entitle the loan creditor to any amount by way of interest which depends to any extent on the results of the company's business or any part of it or on the value of any of the company's assets or which exceeds a reasonable commercial return on the new consideration lent; and

(c) in respect of which the loan creditor is entitled, on repayment, to an amount which either does not exceed the new consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of new consideration) under the terms of issue of securities quoted on a stock exchange in the State.

(6) Notwithstanding anything in subsections (1) to (5) but subject to subsection (7), where—

(a) any person has, directly or indirectly, provided new consideration for any shares or securities in the company, and

(b) that person, or any person connected with him, uses for the purposes of his trade assets which belong to the company and in respect of which there is made to the company any of the allowances specified in Part XIII or XIV, Chapter I of Part XV, Chapter II of Part XVI of the Income Tax Act, 1967, section 22 of the Finance Act, 1971, or section 2, 3, 6 or 8 of the Finance (Taxation of Profits of Certain Mines) Act, 1974,

then, for the purposes of this Part, that person, and no other, shall be treated as being an equity holder in respect of those shares or securities and as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.

(7) In any case where subsection (6) applies in relation to a bank in such circumstances that—

(a) the only new consideration provided by the bank as mentioned in subsection (6) (a) is provided in the normal course of its banking business by way of a normal commercial loan as defined in subsection (5); and

(b) the cost to the company concerned of the assets falling within subsection (6) (b) which are used as mentioned in that subsection by the bank or a person connected with the bank is less than the amount of that new consideration,

references in subsection (6), other than the reference in paragraph (a) thereof, to shares or securities in the company shall be construed as a reference to so much only of the loan referred to in paragraph (a) of this subsection as is equal to the cost referred to in paragraph (b) of this subsection.

(8) In this section “new consideration” has the same meaning as in Part IX and any question whether one person is connected with another shall be determined in accordance with section 157 (connected persons).

110 Group relief: “the profit distribution”.

110.—(1) Subject to the following provisions of this Part, for the purposes of section 108, the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company means the percentage to which the first company would be so entitled in the relevant accounting period on a distribution in money to those equity holders of—

(a) an amount of profits equal to the total profits of the other company which arise in that accounting period (whether or not any of those profits are in fact distributed), or

(b) if there are no profits of the other company in that accounting period, profits of £100,

and in the following provisions of this Part, that distribution is referred to as “the profit distribution”.

(2) For the purposes of the profit distribution, it shall be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution.

(3) Subject to subsection (2), where an equity holder is entitled as such to a payment of any description which, apart from this subsection, would not be treated as a distribution, it shall nevertheless be treated as an amount to which he is entitled on the profit distribution.

111 Group relief: “the notional winding up”.

111.—(1) Subject to the following provisions of this Part, for the purposes of section 108 the percentage to which one company would be beneficially entitled of any assets of another company available for distribution to its equity holders on a winding up means the percentage to which the first company would be so entitled if the other company were to be wound up and on that winding up the value of the assets available for distribution to its equity holders (that is to say, after deducting any liabilities to other persons) were equal to—

(a) the excess, if any, of the total amount of the assets of the company, as shown in the balance sheet relating to its affairs as at the end of the relevant accounting period, over the total amount of those of its liabilities as so shown which are not liabilities to equity holders as such, or

(b) if there is no such excess or if the company's balance sheet is prepared to a date other than the end of the relevant accounting period, £100.

(2) In the following provisions of this Part, a winding up on the basis specified in subsection (1) is referred to as “the notional winding up”.

(3) If, on the notional winding up, an equity holder would be entitled as such to an amount of assets of any description which, apart from this subsection, would not be treated as a distribution of assets, it shall nevertheless be treated, subject to subsection (4), as an amount to which the equity holder is entitled on the distribution of assets on the notional winding up.

(4) If an amount (in this subsection referred to as “the returned amount”) which corresponds to the whole or any part of the new consideration provided by an equity holder of a company for any shares or securities in respect of which he is an equity holder is applied by the company, directly or indirectly, in the making of a loan to, or in the acquisition of any shares or securities in, the equity holder or any person connected with him, then, for the purposes of this Part,—

(a) the total amount of the assets referred to in subsection (1) (a) shall be taken to be reduced by a sum equal to the returned amount; and

(b) the amount of assets to which the equity holder is beneficially entitled on the notional winding up shall be taken to be reduced by a sum equal to the returned amount.

(5) In subsection (4) “new consideration” has the same meaning as in Part IX and any question whether one person is connected with another shall be determined in accordance with section 157.

112 Group relief: limited rights to profits or assets.

112.—(1) This section applies if any of the equity holders—

(a) to whom the profit distribution is made, or

(b) who is entitled to participate in the notional winding up,

holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding up which are wholly or partly limited by reference to a specified amount or amounts (whether the limitation takes the form of the capital by reference to which a distribution is calculated or operates by reference to an amount of profits or assets or otherwise).

(2) Where this section applies, there shall be determined—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled, and

(b) the percentage of assets to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled,

if, to the extent that they are limited as mentioned in subsection (1), the rights of every equity holder falling within that subsection (including the first company concerned if it is such an equity holder) had been waived.

(3) If, on the profit distribution, the percentage of profits determined as mentioned in subsection (2) (a) is less than the percentage of profits determined under section 110 (1) without regard to that subsection, the lesser percentage shall be taken for the purposes of section 108 to be the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled as mentioned in that section.

(4) If, on the notional winding up, the percentage of assets determined as mentioned in subsection (2) (b) is less than the percentage of assets determined under section 111 (1) without regard to that subsection, the lesser percentage shall be taken for the purposes of section 108 to be the percentage to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled of any assets of the other company available for distribution to its equity holders on a winding up.

113 Group relief: diminishing share of profits or assets.

113.—(1) This section applies if, at any time in the relevant accounting period, any of the equity holders—

(a) to whom the profit distribution is made, or

(b) who is entitled to participate in the notional winding up,

holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding up which are of such a nature (as, for example, if any shares will cease to carry a right to a dividend at a future time) that if the profit distribution or the notional winding up were to take place in a different accounting period the percentage to which, in accordance with the preceding provisions of this Part, that equity holder would be entitled of profits on the profit distribution or of assets on the notional winding up would be different from the percentage determined in the relevant accounting period.

(2) Where this section applies, there shall be determined—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled, and

(b) the percentage of assets to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled,

if the rights of the equity holders in the relevant accounting period were the same as they would be in the different accounting period referred to in subsection (1).

(3) If in the relevant accounting period an equity holder holds, as such, any shares or securities in respect of which arrangements exist by virtue of which, in that or any subsequent accounting period, the equity holder's entitlement to profits on the profit distribution or to assets on the notional winding up could be different as compared with his entitlement if effect were not given to the arrangements, then for the purposes of this section—

(a) it shall be assumed that effect would be given to those arrangements in a later accounting period, and

(b) those shares or securities shall be treated as though any variation in the equity holder's entitlement to profits or assets resulting from giving effect to the arrangements were the result of the operation of such rights attaching to the shares or securities as are referred to in subsection (1).

(4) Section 112 (3) (4) shall apply for the purposes of this section as they apply for the purposes of that section and, accordingly, references therein to subsection (2) (a) (b) of that section shall be construed as references to subsection (2) (a) (b) of this section.

(5) In any case where section 112 applies as well as this section, section 112 shall be applied separately (in relation to the profit distribution and the notional winding up)—

(a) on the basis specified in subsection (2), and

(b) without regard to that subsection,

and section 112 (3) (4) shall apply accordingly in relation to the percentages so determined as if for the word “lesser” there were substituted the word “lowest”.

114 Group relief: beneficial percentage.

114.—For the purposes of sections 108 and 110 to 113—

(a) the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company, and

(b) the percentage to which one company would be beneficially entitled of any assets of another company on a winding up,

means the percentage to which the first company is, or would be, so entitled either directly or through another company or other companies or partly directly and partly through another company or other companies.

115 Group relief: “the relevant accounting period”, etc.

115.—(1) In this Part “the relevant accounting period” means—

(a) in a case falling within section 108 (1), the accounting period current at the time in question; and

(b) in a case falling within section 108 (2), the accounting period in relation to which the share in the consortium falls to be determined.

(2) For the purposes of sections 109 to 114 a loan to a company shall be treated as a security, whether or not it is a secured loan, and, if it is a secured loan, regardless of the nature of the security.

116 Kinds of group relief.

116.—(1) If in any accounting period the surrendering company has incurred a loss, computed as for the purposes of section 16 (2) (relief for trading losses other than terminal losses), in carrying on a trade, the amount of the loss may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period:

Provided that this subsection shall not apply to so much of a loss as is excluded from section 16 (2) by section 16 (4) or section 17 (restriction of relief for losses in farming or market gardening).

(2) If for any accounting period any capital allowances fall to be made to the surrendering company which are to be given by discharge or repayment of tax or in charging its income under Case V of Schedule D and are to be available primarily against a specified class of income, so much of the amount of those capital allowances (exclusive of any carried forward from an earlier period) as exceeds its income of the relevant class arising in that accounting period (before deduction of any losses of any other period or of any capital allowances) may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(3) If for any accounting period the surrendering company (being an investment company) may under section 15 (1) deduct any amount as expenses of management disbursed for that accounting period, so much of that amount (exclusive of any amount deductible only by virtue of section 15 (2)) as exceeds the company's profits of that accounting period may be set off for purposes of corporation tax against the total profits of the claimant company (whether an investment company or not) for its corresponding accounting period.

(4) The surrendering company's profits of the period shall be determined for the purposes of subsection (3) without any deduction under section 15 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.

(5) References in subsections (3) and (4) to section 15 do not include references to that section as applied by section 33 to companies carrying on life business.

(6) If in any accounting period the surrendering company has paid any amount by way of charges on income, so much of that amount as exceeds its profits of the period may be set off for purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(7) The surrendering company's profits of the period shall be determined for the purposes of subsection (6) without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management deductible only by virtue of section 15 (2).

(8) In applying any of the preceding subsections in the case of a claim made by a company as a member of a consortium only a fraction of the loss referred to in subsection (1), or of the excess referred to in subsection (2) or (3) or (6), as the case may be, may be set off under the subsection in question, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under section 118 (2).

(9) This section shall apply to any accounting period beginning on or after the 6th day of April, 1976.

117 Relation of group relief to other relief.

117.—(1) Group relief for an accounting period shall be allowed as a deduction against the claimant company's total profits for the period before reduction by any relief derived from a subsequent accounting period, but as reduced by any other relief from tax (including relief in respect of charges on income under section 10 (1)).

(2) The said other relief shall be determined on the assumption that the company makes all relevant claims under section 16 (2) or 14 (6).

(3) For the purposes of this section “relief derived from a subsequent accounting period” means—

(a) relief under section 16 (2) in respect of a loss incurred in an accounting period after the accounting period the profits of which are being computed, and

(b) relief under section 14 (6) in respect of capital allowances falling to be made for an accounting period after the accounting period the profits of which are being computed, and

(c) relief under section 176 (transitional relief on cessation of trade, etc.) where the company ceases to possess the source of income in question at a time after the end of the accounting period the profits of which are being computed, and

(d) relief under section 18 (terminal loss in trade) in respect of a loss incurred in an accounting period after the end of the accounting period the profits of which are being computed.

(4) The reductions to be made in total profits of an accounting period against which any relief derived from a subsequent accounting period is to be set off shall include any group relief for that first-mentioned accounting period, and this subsection shall have effect notwithstanding that under section 176 (3) relief under that section is to be given in priority to any other relief.

118 Corresponding accounting periods.

118.—(1) For the purposes of group relief any accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.

(2) If an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—

(a) the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction (if that fraction is less than unity), and

(b) the said profits against which the amount mentioned in paragraph (a) (as reduced where so required) may be set off shall be reduced by applying the fraction (if that fraction is less than unity),

where—

A is the length of the period common to the two accounting periods,

B is the length of the accounting period of the surrendering company, and

C is the length of the corresponding accounting period of the claimant company.

119 Companies joining or leaving group or consortium.

119.—(1) Subject to the following provisions of this section, group relief shall be given if, and only if, the surrendering company and the claimant company are members of the same group, or fulfil the conditions for relief for a consortium, throughout the whole of the surrendering company's accounting period to which the claim relates, and throughout the whole of the corresponding accounting period of the claimant company.

(2) Where on any occasion two companies become or cease to be members of the same group, then for the purposes specified in subsection (3) it shall be assumed as respects each company that on that occasion (unless a true accounting period of the company begins or ends then) an accounting period of the company ends, and a new one begins, the new accounting period to end with the end of the true accounting period (unless before then there is a further break under this subsection) and—

(a) that the losses or other amounts of the true accounting period are apportioned to the component accounting periods on a time basis according to their lengths, and

(b) that the amount of total profits for the true accounting period of the company against which group relief may be allowed in accordance with section 117 (1) is also so apportioned to the component accounting periods.

(3) Where the one company is the surrendering company and the other company is the claimant company—

(a) references to accounting periods, to profits, and to losses, allowances, expenses of management or charges on income of the surrendering company, in section 116 shall be construed in accordance with subsection (2),

(b) references to accounting periods in section 118 and subsection (1) of this section shall be so construed (so that if the two companies are members of the same group in the surrendering company's accounting period they must under section 118 also be members of the same group in any corresponding accounting period of the claimant company),

(c) references to profits, and amounts to be set off against the profits, in section 118 shall be so construed (so that an amount apportioned under subsection (2) to a component accounting period may fall to be reduced under section 118 (2)).

(4) Subsections (2) and (3) shall apply with the necessary modifications where a company begins or ceases to fulfil the conditions for relief for a consortium, either as a surrendering company or as a claimant company, as it applies where two companies become or cease to be members of the same group.

120 Group relief: effect of arrangements for transfer of company to another group, etc.

120.—(1) If, apart from this section, two companies (in this subsection referred to as “the first company” and “the second company”) would be treated as members of the same group of companies and—

(a) in an accounting period which begins on or after the 6th day of April, 1976, one of the two companies has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period,—

(i) the first company or any successor of it could cease to be a member of the same group of companies as the second company and could become a member of the same group of companies as a third company, or

(ii) any person has or could obtain, or any persons together have or could obtain, control of the first company but not of the second, or

(iii) a third company could begin to carry on the whole or any part of a trade which, at any time in that accounting period, is carried on by the first company and could do so either as a successor of the first company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the first company shall be treated as not being a member of the same group of companies as the second company.

(2) If a trading company is owned by a consortium or is a 90 per cent. subsidiary of a holding company which is owned by a consortium and—

(a) in any accounting period which begins on or after the 6th day of April, 1976, the trading company has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which—

(i) the trading company or any successor of it could, at some time during or after the expiry of that accounting period, become a 75 per cent. subsidiary of a third company, or

(ii) any person who owns, or any persons who together own, less than 50 per cent. of the ordinary share capital of the trading company has or together have, or could at some time during or after the expiry of that accounting period obtain, control of the trading company, or

(iii) any person, other than a holding company of which the trading company is a 90 per cent. subsidiary, either alone or together with connected persons, holds or could obtain, or controls or could control the exercise of not less than 75 per cent. of the votes which may be cast on a poll taken at a general meeting of the trading company in that accounting period or in any subsequent accounting period, or

(iv) a third company could begin to carry on, at some time during or after the expiry of that accounting period, the whole or any part of a trade which, at any time in that accounting period, is carried on by the trading company and could do so either as a successor of the trading company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the trading company shall be treated as though it did not (as the surrendering company) fall within section 107 (2) (a) (b) (c).

(3) In any case where a trading company is a 90 per cent. subsidiary of a holding company which is owned by a consortium, any reference in subsection (2) to the trading company, other than a reference in paragraph (b) (iv) thereof, shall be construed as including a reference to the holding company.

(4) In this section “third company” means a company which, apart from any provision made by or under any such arrangements as are specified in either subsection (1) (b) or (2), is not a member of the same group of companies as the first company, within the meaning of subsection (1), or, as the case may be, the trading company or holding company to which subsection (2) applies.

(5) In subsections (1) and (2)—

“connected persons” shall be construed in accordance with section 157, and “control” has the meaning assigned to it by section 158.

(6) For the purposes of subsections (1) and (2) a company is a successor of another if it carries on a trade which, in whole or in part, the other company has ceased to carry on and the circumstances are such that—

(a) section 20 (company reconstructions without change of ownership) applies in relation to the two companies as the predecessor and the successor within the meaning of that section, or

(b) the two companies are connected with each other within the terms of section 157.

121 Leasing contracts: effect on claims for losses of company reconstructions.

121.—(1) Subject to the provisions of this section, if—

(a) under a contract entered into after the 27th day of November, 1975, a company (in this section referred to as “the first company”) incurs capital expenditure on the provision of machinery or plant which the first company lets to another person by another contract (in this section referred to as a “leasing contract”), and

(b) apart from this subsection, the first company would be entitled to claim relief under section 16 (1) or (2) (relief for trading losses other than terminal losses) in respect of losses incurred on the leasing contract, and

(c) in the accounting period for which an allowance under section 251 of the Income Tax Act, 1967 (machinery and plant: initial allowance), section 11 of the Finance Act, 1967 (wear and tear allowances for certain machinery and plant in undeveloped areas), or section 22 (investment allowance for machinery and plant in designated areas) or 26 (increase of wear and tear allowances for certain machinery and plant) of the Finance Act, 1971, in respect of the expenditure referred to in paragraph (a) is made to the first company, arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period, a successor company will be able to carry on any part of the first company's trade which consists of or includes the performance of all or any of the obligations which, apart from the arrangements, would be the first company's obligations under the leasing contract,

then, in the accounting period specified in paragraph (c) and in any subsequent accounting period, the first company shall not be entitled to claim relief as mentioned in paragraph (b) except in computing its profits (if any) arising under the leasing contract.

(2) For the purposes of this section a company is a successor of the first company if the circumstances are such that—

(a) section 20 applies in relation to the first company and the other company as the predecessor and the successor within the meaning of that section, or

(b) the two companies are connected with each other within the terms of section 157.

(3) For the purposes of this section losses incurred on a leasing contract and profits arising under such a contract shall be computed as if the performance of the leasing contract were a trade begun to be carried on by the first company, separately from any other trade which it may carry on, at the commencement of the letting under the leasing contract.

(4) In determining whether the first company would be entitled to claim relief as mentioned in subsection (1) (b), any losses incurred on the leasing contract shall be treated as incurred in a trade carried on by that company separately from any other trade which it may carry on.

122 Partnerships involving companies: effect of arrangements for transferring relief.

122.—(1) The provisions of subsection (2) shall apply in relation to a company (in this section referred to as “the partner company”) which is a member of a partnership carrying on a trade if arrangements are in existence (whether as part of the terms of the partnership or otherwise) whereby—

(a) in respect of the whole or any part of the value of, or of any portion of, the partner company's share in the profits or loss of any accounting period of the partnership, another member of the partnership or any person connected with another member of the partnership receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money's worth; or

(b) in respect of the whole or any part of the cost of, or of any portion of, the partner company's share in the loss of any accounting period of the partnership, the partner company, or any person connected with that company, receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money's worth, other than a payment in respect of group relief to the partner company by a company which is a member of the same group as the partner company for the purposes of group relief.

(2) In any case where the provisions of this subsection apply in relation to the partner company—

(a) the company's share in the loss of the relevant accounting period of the partnership and its share in any charges on income, within the meaning of section 10, paid by the partnership in that accounting period shall not be available for set-off for the purposes of corporation tax except against its profits of the several trade; and

(b) except in accordance with paragraph (a), no trading losses shall be available for set-off for the purposes of corporation tax against the profits of the company's several trade for the relevant accounting period of the partnership; and

(c) except in accordance with paragraphs (a) and (b), no amount which, apart from this subsection, would be available for relief against profits shall be available for set-off for the purposes of corporation tax against so much of the company's total profits as consists of profits of its several trade for the relevant accounting period of the partnership.

(3) In subsection (2) “relevant accounting period of the partnership” means any accounting period of the partnership beginning on or after the 6th day of April, 1976, in which any such arrangements as are specified in subsection (1) are in existence or to which any such arrangements apply.

(4) If a company is a member of a partnership and tax in respect of any profits of the partnership is chargeable under Case IV or V of Schedule D, this section shall apply in relation to the company's share in the profits or loss of the partnership as if—

(a) the profits or loss to which the company's share is attributable were the profits of, or the loss incurred in, a several trade carried on by the company, and

(b) any allowance which falls to be made by discharge or repayment of tax or in charging income under Case V were an allowance made in taxing that trade.

(5) For the purposes of this section, the amount of a company's share in the profits or loss of any accounting period of a partnership shall be such amount as is determined in accordance with the provisions of section 32 (partnerships involving companies).

(6) In this section “group relief” has the same meaning as in section 107 and any question whether one person is connected with another shall be determined in accordance with section 157.

123 Information as to arrangements for transferring relief, etc.

123.—(1) If a company—

(a) makes a claim for group relief, or

(b) being a party to a leasing contract, as defined in section 121, claims relief as mentioned in subsection (1) (b) of that section, or

(c) being a member of a partnership, claims any relief which, if section 122 (2) applied in relation to it, it would not be entitled to claim,

and the inspector has reason to believe that any relevant arrangements may exist, or may have existed at any time material to the claim, then at any time after the claim is made he may serve notice in writing on the company requiring it to furnish him, within such time being not less than thirty days from the giving of the notice as he may direct, with—

(i) a declaration in writing stating whether or not any such arrangements exist or existed at any material time, or

(ii) such information as he may reasonably require for the purpose of satisfying himself whether or not any such arrangements exist or existed at any material time, or

(iii) both such a declaration and such information.

(2) In this section “relevant arrangements”, in relation to a claim falling within any of paragraphs (a) to (c) of subsection (1), means such arrangements as are referred to in the enactment which is specified in the corresponding paragraph below, that is to say—

(a) section 120 (1) or (2) or section 113 (3),

(b) section 121 (1) (c), or

(c) section 122 (1).

(3) In a case falling within paragraph (a) of subsection (1), a notice under that subsection may be served on the surrendering company, within the meaning of section 107, instead of or as well as on the company claiming relief.

(4) In a case falling within paragraph (c) of subsection (1), a notice under that subsection may be served on the partners instead of or as well as on the company, and accordingly may require them, instead of or as well as the company, to furnish the declaration, information or declaration and information concerned.

(5) In this section, section 113 (3) and sections 120 to 122 “arrangements” means arrangements of any kind, whether in writing or not.

124 Exclusion of double allowances, etc.

124.—(1) Relief shall not be given more than once in respect of the same amount, whether by giving group relief and by giving some other relief (in any accounting period) to the surrendering company or by giving group relief more than once.

(2) In accordance with subsection (1), two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.

(3) If claims for group relief are made by more than one claimant company which relate to the same accounting period of the same surrendering company, and—

(a) all the claims so made are admissible only by virtue of section 119 (2) (3), and

(b) there is a part of the surrendering company's accounting period during which none of those claimant companies is a member of the same group as the surrendering company,

those claimant companies shall not obtain in all more relief than could be obtained by a single claimant company which was not a member of the same group as the surrendering company during that part of the surrendering company's accounting period (but was a member during the remainder of that accounting period).

(4) If claims for group relief are made by a claimant company as respects more than one surrendering company for group relief to be set off against its total profits for any one accounting period, and—

(a) all the claims so made are admissible only by virtue of section 119 (2) (3), and

(b) there is a part of the claimant company's accounting period during which none of the surrendering companies by reference to which the claims are made is a member of the same group as the claimant company,

the claimant company shall not obtain in all more relief to be set off against its profits for the accounting period than it could obtain on a claim as respects a single surrendering company (with unlimited losses and other amounts eligible for relief) which was not a member of the same group as the claimant company during that part of the claimant company's accounting period (but was a member during the remainder of that accounting period).

(5) The provisions of this subsection have effect as respects a claim for group relief made by a company as a member of a consortium, in this subsection referred to as a “consortium claim”—

(a) a consortium claim, and a claim other than a consortium claim, shall not both have effect as respects the loss or other amount of the same accounting period of the same surrendering company, unless each of the two claims is as respects a loss or other amount apportioned under section 119 (2) (a) to a component of that accounting period, and the two components do not overlap,

(b) in subsections (3) and (4) consortium claims shall be disregarded,

and paragraph (a) shall take effect according to the order in which claims are made.

(6) Without prejudice to the provisions of section 304 (6) of the Income Tax Act, 1967 (interpretation), any reference in Part XVI (Annual Allowances for Certain Capital Expenditure) of that Act to an allowance made includes a reference to an allowance which would be made but for the granting of group relief or but for that and but for an insufficiency of profits or other income against which to make it.

125 Claims and adjustments.

125.—(1) A claim for group relief—

(a) need not be for the full amount available,

(b) shall require the consent of the surrendering company notified to the inspector in such form as the Revenue Commissioners may require, and

(c) must be made within two years from the end of the surrendering company's accounting period to which the claim relates.

(2) A claim for group relief by a company as a member of a consortium shall require the consent of each other member of the consortium, notified to the inspector in such form as the Revenue Commissioners may require, in addition to the consent of the surrendering company.

(3) If the inspector discovers that any group relief which has been given is or has become excessive he may make an assessment to corporation tax under Case IV of Schedule D in the amount which ought in his opinion to be charged.

(4) Subsection (3) is without prejudice to the making of an assessment under section 144 (5) (a) (iii) (additional assessments) and to the making of all such other adjustments by way of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has foregone relief in respect of a corresponding amount.

PART XII Companies' Capital Gains

126 Corporation tax attributable to chargeable gains: recovery from shareholder.

126.—(1) This section applies where a person who is connected with a company resident in the State, on or after the 6th day of April, 1976, receives or becomes entitled to receive in respect of shares in the company any capital distribution from the company, other than a capital distribution representing a reduction of capital, and—

(a) the capital so distributed derives from the disposal after the 5th day of April, 1976, of assets in respect of which a chargeable gain accrues to the company; or

(b) the distribution constitutes such a disposal of assets.

(2) If the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues included any amount in respect of chargeable gains, and any of the tax assessed on the company for that period is not paid within six months from the date when it becomes payable by the company, the said person may by an assessment made within two years from that date be assessed and charged (in the name of the company) to an amount of that corporation tax—

(a) not exceeding the amount or value of the capital distribution which that person has received or became entitled to receive; and

(b) not exceeding a proportion equal to that person's share of the capital distribution made by the company of corporation tax on the amount and at the rate charged in respect of that gain in the assessment in which the said tax was charged.

(3) A person paying any amount of tax under this section shall be entitled to recover a sum equal to that amount from the company.

(4) The provisions of this section are without prejudice to any liability of the person receiving or becoming entitled to receive the capital distribution in respect of a chargeable gain accruing to him by reference to the capital distribution as constituting a disposal of an interest in shares in the company.

(5) In this section “capital distribution” has the same meaning as in paragraph 1 (2) of Schedule 2 to the Capital Gains Tax Act, 1975, and “connected with” shall be construed in accordance with section 157 (connected persons).

127 Company reconstruction or amalgamation: transfer of assets.

127.—(1) Subject to the provisions of this section, where—

(a) any scheme of reconstruction or amalgamation involves the transfer of the whole or part of a company's business to another company, and

(b) at the time of the transfer both companies are resident in the State, and

(c) the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business),

then so far as relates to corporation tax on chargeable gains the two companies shall be treated as if any assets included in the transfer were acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal by way of transfer neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of Part II of Schedule 1 to the Capital Gains Tax Act, 1975 (assets held on the 6th day of April, 1974), the acquiring company shall be treated as if the respective acquisitions of the assets by the other company had been the acquiring company's acquisition of them.

(2) This section does not apply in relation to an asset which, until the transfer, formed part of trading stock of a trade carried on by the company making the disposal, or in relation to an asset which is acquired as trading stock for the purposes of a trade carried on by the company acquiring the asset.

(3) In this section—

“scheme of reconstruction or amalgamation” means a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies,

“trading stock” has the meaning given by section 62 (2) of the Income Tax Act, 1967.

128 Interest charged to capital.

128.—Where—

(a) a company incurs expenditure on the construction of any building, structure or works, being expenditure allowable as a deduction under paragraph 3 of Schedule 1 to the Capital Gains Tax Act, 1975 (expenditure: general provisions), in computing a gain accruing to the company on the disposal of the building, structure or work, or of any asset comprising it, and

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

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

the sums so allowable shall, notwithstanding subparagraph (3) (b) of the said paragraph 3, include the amount of that interest charged to capital.

129 Groups of companies: definitions.

129.—(1) For the purposes of this section and the following sections of this Part—

(a) references to a company, subject to section 138 (7), apply only to a company, as that expression is limited by subsection (2), which is resident in the State;

(b) a principal company, and all its 75 per cent. subsidiaries form a group, and where a principal company is a member of a group as being itself a 75 per cent. subsidiary that group shall comprise all its 75 per cent. subsidiaries;

(c) “principal company” means a company of which another company is a 75 per cent. subsidiary;

(d) in applying the definition of “75 per cent. subsidiary” in section 156 (subsidiaries) any share capital of a registered industrial and provident society shall be treated as ordinary share capital; and

(e) “group” and “subsidiary” shall be construed with any necessary modifications where applied to a company incorporated under the law of a country outside the State.

(2) For the purposes referred to in subsection (1) references to a company apply only to—

(a) a company within the meaning of the Companies Act, 1963, and

(b) a company which is constituted under any other Act or a charter or letters patent or (although resident in the State) is formed under the law of a country or territory outside the State, and

(c) a registered industrial and provident society within the meaning of section 218 of the Income Tax Act, 1967.

(3) For the purposes referred to in subsection (1) a group remains the same group so long as the same company remains the principal company of the group, and if at any time the principal company of a group becomes a 75 per cent. subsidiary of another company the group of which it was the principal company before that time shall be regarded as the same as the group of which that other company, or one of which it is a 75 per cent. subsidiary, is the principal company, and the question whether or not a company has ceased to be a member of a group shall be determined accordingly.

(4) For the purposes referred to in subsection (1) the passing of a resolution or the making of an order, or any other act, for the winding up of a company shall not be regarded as the occasion of that company, or of any 75 per cent. subsidiary of that company, ceasing to be a member of a group of companies.

(5) The following sections of this Part, except in so far as they relate to recovery of tax, shall also have effect in relation to bodies from time to time established by or under any enactment for the carrying on of any industry or part of an industry, or of any undertaking, under national ownership or control as if they were companies within the meaning of those sections, and as if any such bodies charged with related functions and subsidiaries of any of them formed a group, and as if also any two or more such bodies charged at different times with the same or related functions were members of a group:

Provided that this subsection shall have effect subject to any enactment by virtue of which property, rights, liabilities or activities of one such body fall to be treated for corporation tax as those of another.

(6) For the purposes of this Part—

(a) section 35 of the Capital Gains Tax Act, 1975 (close company transferring assets at undervalue), shall not apply where the transfer is a disposal to which section 130 (1) applies;

(b) paragraph 6 of Schedule 1 to the Capital Gains Tax Act, 1975 (part disposals), and all other provisions for apportioning on a part disposal expenditure which is deductible in computing a gain, shall be operated before the operation of, and without regard to,—

(i) section 130 (1),

(ii) any other enactment making an adjustment to secure that neither a gain nor a loss occurs on a disposal;

(c) a “non-resident group” of companies—

(i) in the case of a group, none of the members of which is resident in the State, means that group, and

(ii) in the case of a group, two or more members of which are not resident in the State, means the members which are not resident in the State,

and for the purposes of this paragraph “group” shall be construed in accordance with subsections (1) (without paragraph (a)), (3) and (4).

(7) For the purposes of section 36 of the Capital Gains Tax Act, 1975 (non-resident company)—

(a) sections 130 to 133 shall apply in relation to non-resident companies which are members of a non-resident group of companies, as they apply in relation to companies resident in the State which are members of a group of companies,

(b) sections 135 and 137 shall apply as if for any reference therein to a group of companies there were substituted a reference to a non-resident group of companies, and as if references to companies were references to companies not resident in the State.

130 Transfers within a group.

130.—(1) Notwithstanding any provision in the Capital Gains Tax Act, 1975, fixing the amount of the consideration deemed to be received on a disposal or given on an acquisition, where a member of a group of companies disposes of an asset to another member of the group, both members shall, except as provided by subsections (2) and (3), be treated, so far as relates to corporation tax on chargeable gains, as if the asset acquired by the member to whom the disposal is made were acquired for a consideration of such amount as would secure that on the other's disposal neither a gain nor a loss would accrue to that other; but where it is assumed for any purpose that a member of a group of companies has sold or acquired an asset, it shall be assumed also that it was not a sale to or acquisition from another member of the group.

(2) Subsection (1) shall not apply where the disposal is—

(a) a disposal of a debt from a member of a group of companies effected by satisfying the debt or part of it; or

(b) a disposal of redeemable shares in a company on the occasion of their redemption;

and the reference in that subsection to a member of a group of companies disposing of an asset shall not apply to anything which under Schedule 2 to the Capital Gains Tax Act, 1975, is to be treated as a disposal of an interest in shares in a company in consideration for a capital distribution (as defined in paragraph 1 of the said Schedule) from that company, whether or not involving a reduction of capital.

(3) For the purposes of subsection (1), so far as the consideration for the disposal consists of money or money's worth by way of compensation for any kind of damage or injury to assets, or for the destruction or dissipation of assets or for anything which depreciates or might depreciate an asset, the disposal shall be treated as being to the person who, whether as an insurer or otherwise, ultimately bears the burden of furnishing that consideration.

131 Transfers within a group: trading stock.

131.—(1) Where a member of a group of companies acquires an asset as trading stock from another member of the group, and the asset did not form part of the trading stock of any trade carried on by the other member, the member acquiring it shall be treated for purposes of paragraph 15 of Schedule 1 to the Capital Gains Tax Act, 1975 (appropriations to and from stock in trade), as having acquired the asset otherwise than as trading stock and immediately appropriated it for the purposes of the trade as trading stock.

(2) Where a member of a group of companies disposes of an asset to another member of the group and the asset formed part of the trading stock of a trade carried on by the member disposing of it but is acquired by the other member otherwise than as trading stock of a trade carried on by it, the member disposing of the asset shall be treated for purposes of the said paragraph 15 as having immediately before the disposal appropriated the asset for some purpose other than the purpose of use as trading stock.

132 Disposal or acquisition outside a group.

132.—(1) Where a company which is or has been a member of a group of companies disposes of an asset which it acquired from another member of the group at a time when both were members of the group, paragraph 5 of Schedule 1 to the Capital Gains Tax Act, 1975 (restriction of losses by reference to capital allowances), shall apply in relation to any capital allowances made to the other member (so far as not taken into account in relation to a disposal of the asset by that other member), and so on as respects previous transfers of the asset between members of the group (but this shall not be taken as affecting the consideration for which an asset is deemed under section 130 (1) to be acquired).

(2) Part II of Schedule 1 to the Capital Gains Tax Act, 1975, shall apply in relation to a disposal of an asset by a company which is or has been a member of a group of companies, and which acquired the asset from another member of the group at a time when both were members of the group, as if all members of the group for the time being were the same person, and as if the acquisition or provision of the asset by the group, so taken as a single person, had been the acquisition or provision of it by the member disposing of it.

133 Replacement of business assets by members of a group.

133.—For the purposes of section 28 of the Capital Gains Tax Act, 1975 (replacement of business assets), all the trades carried on by members of a group of companies shall be treated as a single trade (unless it is a case of one member of the group acquiring, or acquiring the interest in, the new assets from another or disposing of, or of the interest in, the old assets to another).

134 Tax on company recoverable from other members of a group.

134.—(1) If at any time a chargeable gain accrues to a company which at that time is a member of a group of companies and any of the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues is not paid within six months from the date when it becomes payable by the company, then, if the tax so assessed included any amount in respect of chargeable gains—

(a) a company which was at the time when the gain accrued the principal company of the group; and

(b) any other company which in any part of the period of two years ending with that time was a member of the said group of companies and owned the asset disposed of or any part of it, or where that asset is an interest or right in or over another asset, owned either asset or any part of either asset; may at any time within two years from the time when the tax became payable be assessed and charged (in the name of the company to whom the chargeable gain accrued) to an amount of that corporation tax not exceeding corporation tax on the amount and at the rate charged in respect of that gain in the assessment on the company to which the chargeable gain accrued.

(2) A company paying any amount of tax under subsection (1) shall be entitled to recover a sum of that amount—

(a) from the company to which the chargeable gain accrued, or

(b) if that company is not the company which was the principal company of the group at the time when the chargeable gain accrued, from that principal company,

and a company paying any amount under paragraph (b) shall be entitled to recover a sum of that amount from the company to which the chargeable gain accrued, and so far as it is not so recovered, to recover from any company which is for the time being a member of the group and which has while a member of the group owned the asset disposed of or any part of it (or where that asset is an interest or right in or over another asset, owned either asset or any part of it) such proportion of the amount unrecovered as is just having regard to the value of the asset at the time when the asset, or an interest or right in or over it, was disposed of by that company.

135 Company ceasing to be member of a group.

135.—(1) If a company (in this section called “the chargeable company”) ceases to be a member of a group of companies, this section shall have effect as respects any asset which the chargeable company acquired from another company which was at the time of acquisition a member of that group of companies, but only if the time of acquisition fell—

(a) on or after the 6th day of April, 1974, and

(b) within the period of ten years ending with the time when the company ceases to be a member of the group;

and references in this section to a company ceasing to be a member of a group of companies do not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved.

(2) Where two or more associated companies cease to be members of the group at the same time, subsection (1) shall not have effect as respects an acquisition by one from another of those associated companies.

(3) If, when the chargeable company ceases to be a member of the group, the chargeable company, or an associated company also leaving the group, owns, otherwise than as trading stock—

(a) the asset, or

(b) property on the acquisition of which a chargeable gain in relation to the asset has been deferred on a replacement of business assets,

the chargeable company shall be treated for all the purposes of the Capital Gains Tax Act, 1975, as if immediately after its acquisition of the asset it had sold, and immediately reacquired, the asset at market value at that time.

(4) For the purposes of this section—

(a) two or more companies are associated companies if, by themselves, they would form a group of companies,

(b) a chargeable gain is deferred on a replacement of business assets if, by one or more claims under section 28 of the Capital Gains Tax Act, 1975, a chargeable gain on the disposal of those assets is treated as not accruing until the new assets, within the meaning of that section, cease to be used for the purposes of a trade carried on by the company making the claim,

(c) an asset acquired by the chargeable company shall be treated as the same as an asset owned at a later time by that company or an associated company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion.

(5) If any of the corporation tax assessed on a company in consequence of this section is not paid within six months from the date when it becomes payable then—