CORPORATION TAX ACT, 1976

“262.—(1) In this Part, as it applies for income tax purposes, ‘basis period’ has the meaning assigned to it by the following provisions of this section.

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

Provided that—

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

- (*b*) where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment, then, unless the second-mentioned year of assessment is the year of the permanent discontinuance of the trade or profession or of the cessation of the single source of profits or gains mentioned in section 81 (2), the interval shall be deemed to be part of the second basis period; and

- (*c*) where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade or profession is permanently discontinued or the said single source ceases and the basis period for the year in which the permanent discontinuance or the cessation occurs, the interval shall be deemed to form part of the first basis period.

• (3)

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

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

• (4) Nothing in subsection (2) or (3) applies in relation to an allowance under Chapter II falling to be made to a person by discharge or repayment of tax and, in relation to that allowance, his basis period for any year of assessment shall be the year of assessment itself.”.

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

• (a) any person is, at the end of a chargeable period or its basis period, entitled to an interest in a building or structure to which this section applies,

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

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

an allowance (in this Chapter referred to as a writing-down allowance) equal to one-fiftieth of that expenditure shall be made to him for that chargeable period:

Provided that—

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

- (ii) in relation to capital expenditure incurred on or after the 16th day of January, 1975, and before the 1st day of April, 1977, this Part shall have effect as if ‘one-twenty-fifth’ were substituted for ‘one-fiftieth’ in the foregoing provisions of this subsection.

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

• (3) Where, at any time on or after the 15th day of April, 1959, the interest in a building or structure which is the relevant interest in relation to any expenditure is sold while the building or structure is an industrial building or structure, then (subject to any further adjustment under this subsection on a later sale) the writing-down allowance for any chargeable period, if that chargeable period or its basis period ends after the time of the sale, shall be the residue (as defined in the provisions of this Chapter relating to the writing off of expenditure) of that expenditure immediately after the sale, reduced in the proportion (if it is less than one) which the length of the chargeable period bears to the part unexpired at the date of the sale of the period of fifty years beginning with the time when the building or structure was first used:

Provided that—

- (i) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 1st day of January, 1960, and which falls to be regarded as an industrial building or structure within the meaning of section 255 (1) by reason of its use for a purpose specified in paragraph (*c*) or (*d*) of that subsection, this Part shall have effect as if ‘ten years’ were substituted for ‘fifty years’ in the foregoing provisions of this subsection, and

- (ii) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 16th day of January, 1975, and before the 1st day of April, 1977, and which falls to be regarded as an industrial building or structure within the meaning of section 255 (1) by reason of its use for a purpose specified in paragraph (*a*) or (*b*) of that subsection, this Part shall have effect as if ‘twenty-five years’ were substituted for ‘fifty years’ in the foregoing provisions of this subsection.

• (4) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of a writing-down allowance made to a person for any chargeable period in respect of any expenditure exceed what, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of that expenditure at the end of that chargeable period or its basis period.”.

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

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

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

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

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

Provided that—

- (i) no balancing allowance or balancing charge shall be made by reason of any event occurring more than fifty years after the building or structure was first used,

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

- (iii) in relation to a building or structure the capital expenditure on the construction of which has been incurred on or after the 16th day of January, 1975, and before the 1st day of April, 1977, and which falls to be regarded as an industrial building or structure within the meaning of section 255 (1) by reason of its use for a purpose specified in paragraph (*a*) or (*b*) of that subsection, this Part shall have effect as if ‘twenty-five years’ were substituted for ‘fifty years’ in the foregoing provisions of this subsection.

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

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

• (4) Where a balancing allowance or a balancing charge falls to be made to, or on a person, and any part of the relevant period (as defined for purposes of this subsection) is not comprised in a chargeable period for which a writing-down allowance has been made to him or its basis period, the amount of the balancing allowance, or, as the case may be, the amount on which the balancing charge is to be made, shall be reduced in the proportion which the part or parts that are so comprised bear to the whole of the relevant period.

In this subsection ‘the relevant period’ means the period beginning when the building or structure was first used for any purpose and ending—

- (*a*) if the event giving rise to the balancing allowance or balancing charge occurs on the last day of a chargeable period or its basis period, with that day; or

- (*b*) if not, with the latest date before that event which is the last day of a chargeable period or its basis period:

  Provided that where, before the said event but on or after the 15th day of April, 1959, the building or structure has been sold while an industrial building or structure, the relevant period shall begin with the day following that sale or, if there has been more than one such sale, the last such sale.

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

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

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

• (3) If, by reason of the building or structure being at any time an industrial building or structure, a writing-down allowance is made for any chargeable period in respect of the expenditure, the amount of that allowance shall be written off as at the said time:

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

• (4)

  • (a) If, for any period or periods between the time when the building or structure was first used for any purpose and the time at which the residue of the expenditure falls to be ascertained, the building or structure has not been in use as an industrial building or structure, then, there shall in ascertaining that residue be treated as having been previously written off in respect of the said period or periods amounts equal to writing-down allowances made for chargeable periods of a total length equal thereto at such rate or rates as would have been appropriate having regard to any sale on which section 264 (3) of this Act operated.

  • (b) If the building or structure was in use as an industrial building or structure at the end of the basis period for any year of assessment falling before the year 1960-61, an amount equal to one-fiftieth of the expenditure shall be treated as written off as at the end of the previous year of assessment.

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

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

“267.—(1) Except in the cases mentioned in the following provisions of this section, any allowance or charge made to or on a person under the preceding provisions of this Chapter shall be made to or on him in taxing his trade or in charging his income under Case V of Schedule D as the case may require.

• (2) A writing-down allowance shall be made to a person for a chargeable period by way of discharge or repayment of tax if his interest is subject to any lease at the end of that chargeable period or its basis period:

Provided that this subsection shall not apply as respects income chargeable under Case V of Schedule D.

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

Provided that this subsection shall not apply as respects income chargeable under Case V of Schedule D.

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

• (5) Any allowance which, under the preceding provisions of this section, is to be made otherwise than in taxing a trade shall be available primarily against the following income:

  • (a) where the income (whether arising by way of rent or receipts in respect of premises or easements or otherwise) from the industrial building or structure in respect of the capital expenditure on which the allowance is given is chargeable under Case V of Schedule D, against income chargeable under the said Case,

  • (b) where the income (whether arising by way of rent or receipts in respect of premises or easements or otherwise) from the industrial building or structure in respect of the capital expenditure on which the allowance is given is chargeable under Case IV of Schedule D, against income chargeable under the said Case, or

  • (c) income chargeable under Case IV or Case V of Schedule D respectively which is the subject of a balancing charge.”.

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

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

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

  • (b) upon the last occasion upon which the building or structure was in use as an industrial building or structure, the relevant interest therein was subject to a lease which has since come to an end, any writing-down allowance or balancing allowance falling to be made to any person in respect of the building or structure during any period for which the temporary disuse continues after the discontinuance of the trade or the coming to an end of the lease shall be made by way of discharge or repayment of tax, and any balancing charge falling to be made on any person in respect of the building or structure during that period shall be made under Case IV of Schedule D:

  Provided that if for a chargeable period the person has income chargeable to tax under Case V of Schedule D and at the end of that chargeable period or its basis period the building or structure is one to which this subsection applies, any writing-down allowance or balancing allowance or balancing charge falling to be made to or on the person in respect of the building or structure shall be made in charging his income under Case V of Schedule D.

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

“271.—In this Chapter—

‘initial allowance’ means an allowance made under Chapter I of Part XV;

‘scientific research allowance’ means—

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

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

‘wear and tear allowance’ means an allowance made under section 241.”.

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

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

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

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

an allowance or charge (in this Chapter referred to as a balancing allowance or a balancing charge) shall, in the circumstances mentioned in this section, be made to, or, as the case may be, on, that person for the chargeable period related to that event.

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

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

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

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

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

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

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

• (5)

  • (a) Subject to the provisions of paragraph (c), where the aggregate amount of initial allowances and wear and tear allowances made to any person in respect of any machinery or plant exceeds the actual amount of the expenditure incurred by him on the provision of the said machinery or plant, the amount of such excess (in this paragraph referred to as the excess amount) shall, on the occurrence of an event falling within any of the paragraphs (a), (b) and (c) of subsection (1), be deemed to be a payment of an equal amount received by the person on account of sale, insurance, salvage or compensation moneys and shall be added to any other such moneys received in respect of the said machinery or plant and a balancing charge shall be made, and the amount on which it is made shall be an amount equal to—

    • (i) where there are no sale, insurance, salvage or compensation moneys, the said excess amount, or

    • (ii) where there are sale, insurance, salvage or compensation moneys, the aggregate of such moneys and the said excess amount.

  • (b) Subject to the provisions of paragraph (c), where, as respects any machinery or plant, an event falling within any of the paragraphs (a), (b) and (c) of subsection (1) is followed by another event falling within any of those paragraphs, any balancing allowance or balancing charge made to or on a person by virtue of the happening of the later event shall take account of any balancing allowance or balancing charge previously made to or on that person in respect of the expenditure incurred by him on the provision of that machinery or plant.

  • (c) Where, as respects any machinery or plant, an event falling within any of the paragraphs (a), (b) and (c) of subsection (1) is followed by another event falling within any of those paragraphs and occurring before the 3rd day of July, 1973, the later event shall not be treated as an event giving rise to a balancing allowance or balancing charge in respect of that machinery or plant.”.

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

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

• (b) any wear and tear allowances made or deemed under this Chapter to have been made to him in respect of the machinery or plant on the provision of which the expenditure was incurred, being allowances made for any chargeable period such that the chargeable period or its basis period ended before the time in question,

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

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

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

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

• (2)

  • (a) In taxing the several trade of any partner in a partnership the same allowances and charges shall be made in respect of machinery or plant used for the purposes of that trade and belonging to one or more of the partners but not being partnership property as would fall to be made if the machinery or plant had at all material times belonged to all the partners and been partnership property and everything done by or to any of the partners in relation thereto had been done by or to all the partners.

  • (b) In this subsection ‘several trade’ has the meaning assigned to it by section 71.

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

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

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

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

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

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

  • (c) during which the trade was carried on by him in such circumstances that, otherwise than by virtue of Part V of the Corporation Tax Act, 1976, or Chapter I of Part XXV the full amount of the profits or gains thereof was not liable to be charged to tax,

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

  • (e) for which the tax payable in respect of the profits of the trade was reduced by virtue of Part IV of the Corporation Tax Act, 1976, or Chapter III or IV of Part XXV.

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

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

  • (b) that the trade had at no time consisted wholly or partly of exempted trading operations within the meaning of Part V of the Corporation Tax Act, 1976, or Chapter I of Part XXV.

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

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

  In the case of a company as defined in section 1 (5) of the Corporation Tax Act, 1976, paragraph (a) shall not alter the periods which are to be taken as chargeable periods, but if during any time after the 5th day of April, 1976, and after the company acquired the machinery or plant, the company has not been within the charge to corporation tax, any year of assessment or part of a year of assessment falling within that time shall be taken as a chargeable period as if it had been an accounting period of the company.

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

“280.—(1) Where—

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

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

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

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

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

  then, in determining whether and, if so what, balancing allowance or balancing charge falls to be made to or on that person, there shall be deemed to have been made to him for the chargeable period related to the event a wear and tear allowance in respect of the machinery or plant of an amount equal to the total amount of the said sums.

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

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

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

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

“284.—(1) In this Chapter—

‘income from patents’ means—

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

• (b) any amount on which tax is payable for any chargeable period by virtue of any of the provisions of this Chapter;

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

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

‘Irish patent’ means a patent granted under the laws of the State;

‘the operative date’ means the 6th day of April, 1960.

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

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

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

“285.—(1) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights, there shall, subject to and in accordance with the following provisions of this Chapter, be made to him writing-down allowances in respect of that expenditure during the writing-down period as hereinafter defined:

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

• (a) the allowance falls to be made to him in taxing his trade, or

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

• (2) The writing-down period shall be the seventeen years beginning with the chargeable period related to the expenditure:

Provided that—

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

- (*b*) where the rights purchased begin one complete year or more after the commencement of the patent and paragraph (*a*) of this proviso does not apply, the said provisions shall have effect with the substitution for the reference to seventeen years of a reference to seventeen years less the number of complete years, which, when the rights begin, have elapsed since the commencement of the patent, or, if seventeen complete years have elapsed as aforesaid, of a reference to one year, and

- (*c*) any expenditure incurred on or after the operative date for the purposes of a trade by a person about to carry it on shall be treated for the purposes of this subsection as if it had been incurred by that person on the first day on which he does carry it on, unless, before the said first day, he has sold all the rights on the purchase of which the expenditure was incurred.”.

“286.—(1) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights and, before the end of the writing-down period under section 285, any of the following events occurs:

• (a) the rights come to an end without being subsequently revived;

• (b) he sells all those rights or so much thereof as he still owns;

• (c) he sells part of those rights and the net proceeds of the sale (so far as they consist of capital sums) are not less than the amount of the capital expenditure remaining unallowed;

no writing-down allowance shall be made to that person for the chargeable period related to the event or for any subsequent chargeable period.

• (2) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights and, before the end of the writing-down period under section 285, either of the following events occurs :

  • (a) the rights come to an end without being subsequently revived;

  • (b) he sells all those rights, or so much thereof as he still owns, and the net proceeds of the sale (so far as they consist of capital sums) are less than the amount of the capital expenditure remaining unallowed;

  there shall, subject to and in accordance with the following provisions of this Chapter, be made to him for the chargeable period related to the event, an allowance (in this Chapter referred to as a balancing allowance) equal, if the event is the rights coming to an end, to the amount of the capital expenditure remaining unallowed, and, if the event is a sale, to the amount of the capital expenditure remaining unallowed less the net proceeds of the sale.

• (3) Where a person who, on or after the operative date, has incurred capital expenditure on the purchase of patent rights sells all or any part of those rights and the net proceeds of the sale (so far as they consist of capital sums) exceed the amount of the capital expenditure remaining unallowed, if any, there shall, subject to and in accordance with the following provisions of this Chapter be made on him for the chargeable period related to the sale, a charge (in this Chapter referred to as a balancing charge) on an amount equal to the excess or, where the amount of the capital expenditure remaining unallowed is nil, to the said net proceeds.

• (4) Where a person who, on or after the operative date, has incurred capital expenditure on the purchase of patent rights sells a part of those rights and subsection (3) does not apply, the amount of any writing-down allowance made in respect of that expenditure for the chargeable period related to the sale or any subsequent chargeable period shall be the amount arrived at by—

  • (a) subtracting the net proceeds of the sale (so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale, and

  • (b) dividing the result by the number of complete years of the writing-down period which remained at the beginning of the chargeable period related to the sale,

  and so on for any subsequent sales.

• (5) References in the preceding provisions of this section to the amount of any capital expenditure remaining unallowed shall, in relation to any event, be construed as references to the amount of that expenditure less any writing-down allowances made in respect thereof for chargeable periods before the chargeable period related to that event, and less also the net proceeds of any previous sale by the person who incurred the expenditure of any part of the rights acquired by the expenditure, so far as those proceeds consist of capital sums.

• (6) Notwithstanding anything in the preceding provisions of this section, no balancing allowance shall be made in respect of any expenditure unless a writing-down allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure, less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.”.

“288.—(1) Where, on or after the operative date, a person resident in the State sells any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, he shall, subject to the provisions of this Chapter, be charged to tax under Case IV of Schedule D for the chargeable period in which the sum is received by him and successive chargeable periods, being charged in each period on the same fraction of the sum as the period is of six years (or such less fraction as has not already been charged):

Provided that—

• (a) if that person, by notice in writing served on the inspector not later than twelve months after the end of the chargeable period in which that sum was received, elects that the whole of that sum shall be charged to tax for the said chargeable period, it shall be charged to tax accordingly;

• (b) if that person, by notice as aforesaid, applies to have the said fraction determined as being other than the same fraction as the chargeable period is of six years, then, if it appears to the Revenue Commissioners that hardship is likely to arise having regard to all the circumstances of the case unless a direction is given under this paragraph, they may direct that the fraction shall be the same fraction of the sum as the chargeable period is of a number of years other than six and that the charge shall be spread accordingly.

• (2) Where, on or after the operative date, a person not resident in the State sells any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, and the patent is an Irish patent, then, subject to the provisions of this Chapter—

  • (a) he shall be chargeable to tax in respect of that sum under Case IV of Schedule D, and

  • (b) section 434 shall apply to that sum as if it were an annual payment payable otherwise than out of profits or gains brought into charge to tax:

  Provided that if, not later than twelve months after the end of the year of assessment in which the sum is paid, the person to whom it is paid, by notice in writing to the Revenue Commissioners, elects that the said sum shall be treated for the purpose of income tax for that year and for each of the five succeeding years as if one-sixth thereof, and no more, were included in his income chargeable to tax for all those years respectively, it shall be so treated, and all such repayments and assessments of tax for each of those years shall be made as are necessary to give effect to the election, so, however, that—

  - (i) the election shall not affect the amount of tax falling to be deducted and accounted for under section 434;
  
  - (ii) where any sum is deducted under section 434, any adjustments necessary to give effect to the election shall be made by way of repayment of tax, and
  
  - (iii) the said adjustments shall be made year by year and as if one-sixth of the sum deducted had been deducted in respect of tax for each year, and no repayment of, or of any part of, that portion of the tax deducted which is to be treated as deducted in respect of tax for any year shall be made unless and until it is ascertained that the tax ultimately falling to be paid for that year is less than the amount of tax paid for that year.
  

• (2A) In subsection (2) the word ‘tax’ shall mean income tax, unless the seller of the patent rights, being a company, would be within the charge to corporation tax in respect of any proceeds of the sale not consisting of a capital sum; and where the subsection applies to charge a company to corporation tax in respect of a sum paid to it, the proviso shall not apply, but the company may, by notice in writing given to the Revenue Commissioners not later than twelve months after the end of the accounting period in which the sum is paid, elect that the sum shall be treated as arising rateably in the accounting periods ending not later than six years from the beginning of that in which the sum is paid (being accounting periods during which the company remains within the charge to corporation tax as aforesaid), and there shall be made all such repayments of tax and assessments to tax as are necessary to give effect to any such election.

• (3) Where the patent rights sold by a person, or the rights out of which the patent rights sold by a person were granted, were acquired by him by purchase and the price paid consisted wholly or partly of a capital sum, the preceding provisions of this section shall apply as if any capital sum received by him when he sells the rights were reduced by the amount of that sum:

Provided that—

- (*a*) where between the said purchase and the said sale he has sold part of the patent rights acquired by him and the net proceeds of that sale consist wholly or partly of a capital sum, the amount of the reduction falling to be made under this subsection in respect of the subsequent sale shall be itself reduced by the amount of that sum,

- (*b*) nothing in this subsection shall affect the amount of tax falling to be deducted and accounted for under section 434 by virtue of subsection (2) of this section, and where any sum is deducted under section 434, any adjustment necessary to give effect to the provisions of this subsection shall be made by way of repayment of tax.

• (4) This section shall apply in relation to any sale of part of any patent rights as it applies in relation to sales of patent rights.”.

“290.—(1) Notwithstanding anything in section 61, in computing the profits or gains of any trade, there shall be allowed to be deducted as expenses any fees paid or expenses incurred in obtaining, for the purposes of the trade, the grant of a patent or an extension of the term of a patent.

• (2) Where—

  • (a) on or after the operative date, a person, otherwise than for the purposes of a trade carried on by him, pays any fees or incurs any expenses in connection with the grant or maintenance of a patent or the obtaining of an extension of a term of a patent, and

  • (b) those fees or expenses would, if they had been paid or incurred for the purposes of a trade, have been allowable as a deduction in estimating the profits or gains thereof,

  there shall be made to him, for the chargeable period in which those expenses were paid or incurred, an allowance equal to the amount thereof.

• (3) Where a patent is granted in respect of any invention, an allowance equal to so much of the net amount of any expenses incurred on or after the operative date by an individual who, whether alone or in conjunction with any other person, actually devised the invention as is properly ascribable to the devising thereof (not being expenses in respect of which, or of assets representing which, an allowance falls to be made under any other provision of this Act) shall be made to that individual for the year of assessment in which the expenses were incurred.

• (4) The provisions of subsection (3) shall apply in relation to expenses incurred before the operative date as if those expenses were incurred on that day, subject to the modification that, if the patent in question was granted one complete year or more before that day, the amount to be allowed shall be reduced by applying thereto the fraction the numerator of which is seventeen less the number of complete years comprised in the period beginning with the commencement of the patent and ending immediately before the operative date and the denominator of which is seventeen.”.

“291.—(1) Where a royalty or other sum to which section 433 or 434 applies is paid in respect of the user of a patent, and that user extended over a period of six complete years or more, the person receiving the payment may require that the tax payable by him by reason of the receipt of that sum shall be reduced so as not to exceed the total amount of tax which would have been payable by him if that royalty or sum had been paid in six equal instalments at yearly intervals, the last of which was paid on the date on which the payment was in fact made.

• (2) Subsection (1) shall apply in relation to a royalty or other sum where the period of the user is two complete years or more but less than six complete years as it applies to the royalties and sums mentioned in that subsection, but with the substitution for the reference to six equal instalments of a reference to so many equal instalments as there are complete years comprised in that period.

• (3) In this section, any reference to the tax payable by a person includes, in cases where the income of a wife is deemed to be the income of the husband, references to the income tax payable by his wife or her husband, as the case may be.

• (4) Nothing in this section shall apply to any sum to which section 434 applies by virtue of section 288.”.

“292.—(1) An allowance or charge under any of the provisions of this Chapter shall be made to or on a person in taxing his trade if—

• (a) he is carrying on a trade the profits or gains of which are, or, if there were any, would be, chargeable to tax under Case I of Schedule D for the chargeable period for which the allowance or charge is made, and

• (b) at any time in the chargeable period or its basis period the patent rights in question, or other rights out of which they were granted, were or were to be used for the purposes of that trade:

Provided that nothing in this subsection shall affect any of the preceding provisions of this Chapter allowing a deduction as expenses in computing the profits or gains of a trade or requiring a charge to be made under Case IV of Schedule D.

• (2) Save as aforesaid, an allowance under this Chapter shall be made by way of discharge or repayment of tax and shall be available against income from patents, and a charge under this Chapter shall be made under Case IV of Schedule D.”.

“293.—(1) Where a person on whom, by reason of the receipt of a capital sum, a charge falls or would otherwise fall to be made under section 288 dies or, being a body corporate, commences to be wound up—

• (a) no sums shall be charged under that section on that person for any chargeable period subsequent to that in which the death takes place or the winding up commences, and

• (b) the amount falling to be charged for the chargeable period in which the death occurs or the winding up commences shall be increased by the total amounts which, but for the death or winding up, would have fallen to be charged for subsequent chargeable periods:

Provided that, in the case of a death, the personal representatives may, by notice in writing served on the inspector not later than twenty-one days after notice has been served on them of the charge falling to be made by virtue of this section, require that the tax payable out of the estate of the deceased by reason of the increase provided for by this section shall be reduced so as not to exceed the total amount of tax which would have been payable by him or out of his estate by reason of the operation of section 288 in relation to that sum, if, instead of the amount falling to be charged for the year in which the death occurs being increased by the whole amount of the sums charged for subsequent years, the several amounts falling to be charged for the years beginning with that in which the capital sum was received and ending with that in which the death occurred had each been increased by the said whole amount divided by the number of those years.

• (2) Where, under the provisions of Chapter V of this Part as modified by Chapter III of Part IV, charges under section 288 fall to be made on two or more persons as being the persons for the time being carrying on a trade, and the relevant period, within the meaning of the said Chapter III, comes to an end, the provisions of subsection (1) shall have effect in relation to the ending of the relevant period as they have effect where a body corporate commences to be wound up:

Provided that—

- (*a*) the additional sums which, under subsection (1), fall to be charged for the year in which the relevant period ends shall be aggregated and apportioned among the members of the partnership immediately before the ending of the relevant period according to their respective interests in the partnership profits at that time and each partner (or, if he is dead, his personal representatives) charged for his proportion, and

- (*b*) each partner (or, if he is dead, his personal representatives) shall have the same right to require a reduction of the total tax payable by him or out of his estate by reason of the increase as would have been exercisable by the personal representatives under subsection (1) in the case of a death, and the proviso to that subsection shall have effect accordingly but as if references to the amount of tax which would have been payable by the deceased or out of his estate in the event therein mentioned were a reference to the amount of tax which would in that event have fallen to be paid or borne by the partner in question or out of his estate.

• (3) In this section, any references to tax paid or borne or payable or falling to be paid or borne by a person include, in cases where the income of a wife is deemed to be income of the husband, references to the income tax paid or borne, or payable or falling to be paid or borne, by his wife or her husband, as the case may be.”.

“294.—(1) Subject to the provisions of this section, where a person for the purposes of any qualifying trade carried on by him incurs capital expenditure on dredging, and either the trade consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway or the dredging is for the benefit of vessels coming to, leaving or using any dock or other premises occupied by him for the purposes of the trade, then—

• (a) an initial allowance equal to one-tenth of the expenditure shall be made for the first relevant chargeable period to the person incurring the expenditure, and

• (b) writing-down allowances shall be made in respect of that expenditure to the person for the time being carrying on the trade during a writing-down period of fifty years beginning with the first relevant chargeable period, but where a writing-down allowance falls to be made for a year of assessment to such a person, and he is within the charge to income tax in respect of the trade for part only of that year, that part shall be treated as a separate chargeable period for the purposes of computing allowances under this section:

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

• (2) If the trade is permanently discontinued in any chargeable period, then, for that chargeable period there shall be made to the person last carrying on the trade, in addition to any other allowance made to him, an allowance equal to the amount of the expenditure less the allowances made in respect of it under subsection (1) for that and previous chargeable periods.

• (3) For the purposes of this section, a trade shall not be treated by virtue of any of the provisions of this Act as discontinued on a change in the persons engaged in carrying it on.

• (4) Any allowance under this section shall be made in taxing the trade.

• (5) Where expenditure is incurred partly for the purposes of a qualifying trade and partly for other purposes, subsection (1) shall apply to so much only of that expenditure as on a just apportionment ought fairly to be treated as incurred for the purposes of that trade.

• (6) In this section ‘qualifying trade’ means any trade or undertaking which, or a part of which, complies with any of the following conditions—

  • (a) the condition that it consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway,

  • (b) any condition set out in the provisions of section 255 (1),

  but where part only of a trade or undertaking complies with those conditions, subsection (5) shall apply as if the part which does and the part which does not comply were separate trades.

• (7) Where a person incurs capital expenditure for the purposes of a trade or part of a trade not yet carried on by him but with a view to carrying it on, or incurs capital expenditure in connection with a dock or other premises not yet occupied by him for the purposes of a qualifying trade but with a view to so occupying the dock or premises, the foregoing provisions of this section shall apply as if he had been carrying on the trade or part of the trade or occupying the dock or premises for the purposes of the qualifying trade, as the case may be, at the time when the expenditure was incurred.

• (8) For the purposes of this section, the first relevant chargeable period, in relation to expenditure incurred by any person, is the chargeable period related to the following event or occasion, that is—

  • (a) the incurring of the expenditure, or

  • (b) in the case of expenditure for which allowances are to be made by virtue of subsection (7) of this section, the occasion when he first both carries on the trade or part of the trade for the purposes of which the expenditure was incurred, and occupies for the purposes of that trade or part of the trade the dock or other premises in connection with which it was incurred.

• (9) Where a person contributes a capital sum to expenditure on dredging incurred by another person, he shall, for the purposes of this section, be treated as incurring capital expenditure on that dredging equal to the amount of the contribution and the capital expenditure incurred by the other person on that dredging shall, for those purposes, be deemed to be reduced by the amount of the contribution.

• (10) In this section ‘dredging’ does not include things done otherwise than in the interests of navigation, but (subject to that) includes the removal of anything forming part of or projecting from the bed of the sea or of any inland water, by whatever means it is removed and whether or not at the time of removal it is wholly or partly above water; and this section shall apply to the widening of an inland waterway in the interests of navigation as it applies to dredging.

• (11) No allowance shall be made by virtue of this section in respect of any expenditure if for the same or any other chargeable period an allowance is or can be made in respect of it under Chapter II of Part XV or Chapter I of this Part.

• (12) Notwithstanding any other provision of this section, no allowance under this section shall be made for any year of assessment beginning before the 6th day of April, 1960, but, in determining the allowances to be made under this section in any particular case, there shall be deemed to have been made in that case all such allowances (other than initial allowances) as could have been made if this section had always had effect.”.

“295.—(1) Any claim by a person for an allowance falling to be made to him under any of the provisions of this Part in charging profits or gains of any description shall be included in the annual statement required to be delivered under this Act of those profits or gains and the allowance shall be made as a deduction in charging those profits or gains, and section 241 (3) shall apply in relation to the allowance as it applies in relation to allowances in respect of wear and tear of machinery and plant.

• (2) Any charge falling to be made under any of the provisions of this Part on a person for any chargeable period in taxing his trade or in charging his income under Case V of Schedule D shall be made by means of an assessment in addition to any other assessment falling to be made thereon for that period.

• (3) The preceding provisions of this section shall apply in relation to professions, employments and offices as they apply in relation to trades.”.

“297.—(1) In this Part, as it applies for income tax purposes, ‘basis period’ has the meaning assigned to it by the following provisions of this section.

• (2) In the case of a person to or on whom an allowance or charge falls to be made under Case I of Schedule D in charging the profits or gains of his trade or under Case V of Schedule D in charging income arising from rents or receipts in respect of premises or easements, his basis period for any year of assessment is the period on the profits or gains of which income tax for that year falls to be finally computed under Case I of Schedule D in respect of the trade in question or, as the case may be, under Case V of Schedule D in respect of the income arising from rents or receipts in respect of premises or easements or, where, by virtue of any provision of this Act, the profits or gains or income of any other period are to be taken to be the profits or gains or income of the said period, that other period:

Provided that, in the case of any trade—

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

- (*b*) where there is an interval between the end of the basis period for one year of assessment and the basis period for the next year of assessment then, unless the second-mentioned year of assessment is the year of the permanent discontinuance of the trade or of the cessation of the single source of profits or gains mentioned in section 81 (2), the interval shall be deemed to be part of the second basis period, and

- (*c*) where there is an interval between the end of the basis period for the year of assessment preceding that in which the trade is permanently discontinued or the said single source ceases and the basis period for the year in which the permanent discontinuance or the cessation occurs, the interval shall be deemed to form part of the first basis period.

• (3) Any reference in the proviso to subsection (2) to the overlapping of two periods shall be construed as including a reference to the coincidence of two periods or to the inclusion of one period in another, and references to the period common to both of two periods shall be construed accordingly.

• (4) Where an allowance or charge falls to be made under Chapter II of this Part to or on a person carrying on or holding a profession, employment or office, the provisions of the preceding subsections of this section shall apply as if the references to a trade included references to a profession, employment or office and as if the references to Case I of Schedule D included references to Case II of Schedule D and Schedule E.

• (5) In the case of any other person to or on whom an allowance or charge falls to be made under this Part, his basis period for any year of assessment is the year of assessment itself.”.