Finance Act , 1978

PART I Income Tax and Corporation Tax

Chapter I Income Tax

1 Amendment of section 142 (dependent relatives) of Income Tax Act, 1967.

1.—Section 142 of the Income Tax Act, 1967, is hereby amended, as respects the year 1978-79 and subsequent years of assessment, by the substitution for subsection (1A) of the following subsection:

“(1A) For the purposes of this section ‘the specified amount’ means £944.”.

2 Amendment of section 143 (premiums on post-1916 insurances and certain other payments) of Income Tax Act, 1967s.

2.—Section 143 of the Income Tax Act, 1967, is hereby amended by the substitution for subsection (3) of the following subsection:

“(3) (a) The deduction to be made from the total income of the claimant shall be—

(i) where the insurance or contract referred to in subsection (2) was made after the 21st day of May, 1953, and before the 2nd day of February, 1978, with any insurance company or friendly society, being a company or society which is registered in the State and managed and controlled therein, an amount equal to two-thirds of the premium paid by him;

(ii) in any other case an amount equal to one-half of the premium paid by him or, as the case may be, of the sum paid by him or deducted from his salary or stipend.

(b) Where an individual claims relief under this section in respect of—

(i) an insurance or contract referred to in subsection (2) to which paragraph (a) (ii) applies and which was made before the 2nd day of February, 1978, or

(ii) a sum (being a sum referred to in subsection (1) (b)) to whose payment, or deduction from his stipend or salary, the individual was, prior to the 2nd day of February, 1978, and is, liable,

and any of his taxable income is chargeable to tax at one or more of the higher rates, he shall be entitled to have the amount of the tax payable by him reduced so as not to exceed an amount equal to the aggregate of the two following amounts—

(I) the amount of the tax that would have been payable by him if the deduction from his total income in respect of the insurance or contract or of the said sum had been two-thirds of the premium paid by him or, as the case may be, of the said sum, and

(II) an amount representing tax at the standard rate on one-sixth of the premium paid by him in respect of such insurance or contract or, as the case may be, of the said sum.”.

3 Amendment of section 193 (personal reliefs on exercise of option for separate assessments) of Income Tax Act, 1967.

3.—Section 193 of the Income Tax Act, 1967, is hereby amended, as respects the year 1978-79 and subsequent years of assessment—

(a) by the substitution in subsection (2) of the following paragraphs for paragraphs (a), (aa) and (f):

“(a) so far as it flows from relief under sections 138 and 141 (other than subsection (2)), section 11 of the Finance Act, 1971, and section 8 of the Finance Act, 1974, in the proportions of one-half and one-half,

(b) so far as it flows from relief under sections 143, 145, 151 and 152, to the husband or to the wife according as he or she made the payment giving rise to the relief,

(bb) so far as it flows from relief under section 12 of the Finance Act, 1967, in the proportions in which they bore the expenditure giving rise to the relief,” and

(b) by the substitution of the following subsections for subsection (7):

“(7) Where an application under section 197 has effect with respect to a year of assessment, section 5 of the Finance Act, 1977, shall apply for that year, in relation to each of the spouses concerned, as if the part of taxable income specified in that section that is to be charged to tax at any of the rates specified therein (other than the rate expressed to be chargeable on the remainder of taxable income) were one-half of the part so specified.

(8) Where the part of taxable income of a spouse chargeable to tax in accordance with subsection (7) at a particular rate specified in section 5 of the Finance Act, 1977, is less than that of the other spouse and is less than the part (hereinafter referred to as ‘the appropriate part’) of taxable income in respect of which, by virtue of subsection (7), the first-mentioned spouse is chargeable to tax at that rate, the part of taxable income of the other spouse which, in accordance with subsection (7), is to be charged to tax at that rate shall be increased by the amount by which the taxable income of the first-mentioned spouse chargeable to tax at that rate is less than the appropriate part.”.

4 Amendment of section 236 (retirement annuities—nature and amount of relief for qualifying premiums) of Income Tax Act, 1967.

4.—(1) Section 236 of the Income Tax Act, 1967, is hereby amended—

(a) by the substitution for subsections (1A), (1B) and (1C) (inserted by the Finance Act, 1974) of the following subsections—

“(1A) Subject to the provisions of this section and of Schedule 5, the amount which may be deducted or set off in any year of assessment (whether in respect of one or more qualifying premiums and whether or not including premiums in respect of a contract approved under section 235A) shall not be more than 15 per cent. of the individual's net relevant earnings for that year and the amount to be deducted shall to the greatest extent possible include qualifying premiums in respect of contracts approved under section 235A.

(1B) Subject to the provisions of this section, the amount which may be deducted or set off in any year of assessment in respect of qualifying premiums paid under a contract approved under section 235A (whether in respect of one or more such premiums) shall not be more than 5 per cent. of the individual's net relevant earnings for that year.”, and

(b) by the substitution in paragraph (b) of subsection (2) of “(1B)” for “(1B) (b)”,

and the said paragraph (b), as so amended, is set out in the Table to this section.

(2) Part I of the First Schedule shall have effect for the purpose of supplementing this section.

TABLE

(b) the operation of subsection (1B) (as respects a qualifying premium paid under a contract approved under section 235A),

5 Cesser of section 23 (benefit in kind: minimum charge to tax in respect of use of vehicle) of Finance Act, 1976.

5.—Section 23 of the Finance Act, 1976, shall not apply or have effect in relation to the year 1978-79 or any subsequent year of assessment.

6 Personal reliefs.

6.—(1) Where a deduction falls to be made from the total income of an individual for the year 1978-79 or any subsequent year of assessment in respect of relief to which the individual is entitled under the provision mentioned in column (1) of the Table to this subsection and the amount of the deduction would, but for this section, be an amount specified in column (2) of the said Table, the amount of the deduction shall, in lieu of being the amount specified in the said column (2), be the amount specified in column (3) of the said Table opposite the mention of the amount in the said column (2).

TABLE

Statutory provision	Amount to be deducted from total income for 1977-78	Amount to be deducted from total income for 1978-79 and subsequent years
(1)	(2)	(3)
	£	£
Income Tax Act, 1967:
section 138
(married man)	1,100	1,730
(single person)	665	865
(widowed person)	735	935
Finance Act, 1974:
section 8 (age allowance)
(married man)	145	180
(single or widowed person)	45	80

(2) Section 6 of the Finance Act, 1974, and section 6 of the Finance Act, 1977, shall have effect subject to the provisions of this section.

(3) Part II of the First Schedule shall have effect for the purpose of supplementing subsection (1).

7 Payments in respect of thalidomide children.

7.—The following section shall be substituted for section 19 of the Finance Act, 1973:

“19.—(1) This section applies to any payment made by the Minister for Health or by the foundation known as Hilfswerk fr behinderte Kinder to or in respect of any individual handicapped by reason of infirmity which can be linked with the taking by the individual's mother during her pregnancy of preparations containing thalidomide.

(2) Income which—

(a) consists of a payment to which this section applies, or

(b) arises to a person to or in respect of whom payments to which this section applies are made, from the investment, in whole or in part, of such payments or of the income derived therefrom, being income consisting of dividends or other income which would, but for this section, be chargeable to tax under Schedule C or under Case III, IV (by virtue of section 4 of the Finance Act, 1974) or V of Schedule D or under Schedule F,

shall be exempt from tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts but the provisions of those Acts in relation to the making of returns of total income shall apply as if this section had not been enacted.

(3) This section shall have effect in relation to any income of the kind specified in subsection (2) whether that income has arisen before or arises after the passing of this Act.”.

8 Relief to individuals on loans applied in acquiring interest in companies.

8.—(1) Notwithstanding that an individual does not satisfy one or both of the conditions set out in paragraphs (a) and (b) of subsection (2) of section 34 of the Finance Act, 1974, he shall be entitled to relief under the said section for any interest paid in respect of any period beginning on or after the 2nd day of February, 1978, on any loan to him applied for a purpose specified in subsection (1) of the said section 34 if—

(a) the company part of whose ordinary share capital is acquired or, as the case may be, to which the money is lent is—

(i) both a company referred to in subparagraph (i) of paragraph (a) of the said subsection (1) and a company in relation to which the individual was a full-time employee, part-time employee, full-time director or part-time director during the period taken as a whole from the application of the proceeds of the loan until the interest was paid, or

(ii) both a company referred to in subparagraph (ii) of the said paragraph (a) and a private company in relation to which, or in relation to any company which would be regarded as connected with it for the purposes of the said section 34, the individual was during the said period a full-time director or a full-time employee,

and

(b) the company or any person connected with the company has not, during the period specified in paragraph (a) (i), made any loans or advanced any money to the individual or a person connected with the individual other than a loan made or money advanced in the ordinary course of a business, which included the lending of money, carried on by the company or, as the case may be, by the person connected with the company.

(2) In relation to any payment or payments of interest on any loan or loans applied—

(a) in acquiring any part of the ordinary share capital of a company other than a private company, or

(b) in lending money to such a company, or

(c) in paying off any other loan or loans applied for a purpose specified in paragraphs (a) and (b),

no relief shall be given for any year of assessment by virtue of this section other than to a full-time employee or full-time director of the company and no such relief shall be given to such employee or director on the excess of that payment, or the aggregate amount of those payments, for that year of assessment over £2,000.

(3) Where relief is given by virtue of this section to an individual and any loan made or money advanced to him or to a person connected with him is, in accordance with the provisions of paragraph (c) of subsection (5) and by virtue of subparagraph (ii), (iii), (iv) or (v) of subsection (5) (c), subsequently regarded as not having been made or advanced in the ordinary course of a business, any relief so given, which would not have been given if, at the time the relief was given, the loan or money advanced had been so regarded, shall be withdrawn and there shall be made all such assessments or additional assessments as are necessary to give effect to the provisions of this subsection.

(4) In this section—

“90 per cent. subsidiary” has the meaning assigned to it by section 156 of the Corporation Tax Act, 1976;

“full-time employee” and “full-time director” mean, in relation to a company, an employee or director, as the case may be, who is required to devote substantially the whole of his time to the service of the company;

“holding company” has the meaning assigned to it by section 107 of the Corporation Tax Act, 1976;

“part-time employee” and “part-time director” mean, in relation to a company, an employee or director, as the case may be, who is not required to devote substantially the whole of his time to the service of the company;

“private company” has the meaning assigned to it by section 33 of the Companies Act, 1963.

(5) For the purposes of this section—

(a) any question whether a person is connected with another shall be determined in accordance with the provisions of section 16 of the Finance (Miscellaneous Provisions) Act, 1968, and paragraph (b);

(b) a person is connected with any other person to whom he has, otherwise than in the ordinary course of a business carried on by him which includes the lending of money, made any loans or advanced any money, and with any person to whom that other person has so made any loan or advanced any money and so on;

(c) a loan shall not be regarded as having been made, or money shall not be regarded as having been advanced, in the ordinary course of a business if—

(i) the loan is made or the money is advanced on terms which are not reasonably comparable with the terms which would have been applied in respect of that loan or the advance of that money on the basis that the negotiations for the loan or the advance of the money had been at arm's length,

(ii) at the time the loan was made or the money was advanced the terms were such that subparagraph (i) did not apply, the said terms are subsequently altered and the terms as so altered are such that if they had applied at the time the loan was made or the money was advanced, subparagraph (i) would have applied,

(iii) any interest payable on the loan or on the money advanced is waived,

(iv) any interest payable on the loan or on the money advanced is not paid within 12 months from the date on which it became payable, or

(v) the loan or the money advanced or any part of the said loan or money advanced is not repaid within 12 months of the date on which it becomes repayable;

(d) the cases in which a person is to be regarded as making a loan to any other person include a case where—

(i) that other person incurs a debt to that person, or

(ii) a debt due from that other person to a third party is assigned to that person:

Provided that subparagraph (i) shall not apply to a debt incurred for the supply by that person of goods or services in the ordinary course of his trade or business unless the credit given exceeds six months or is longer than that normally given by that person;

(e) a company, other than a private company, shall be deemed to be a company referred to in section 34 (1) (a) (i) of the Finance Act, 1974, if it is a holding company and it is resident in the State, and

(f) an individual shall be deemed to be a full-time employee or full-time director of such a company as is referred to in paragraph (e) if he is a full-time employee or full-time director of any company which is a 90 per cent. subsidiary of that company.

9 Relief from tax for certain individuals resident in the State and employed in the United Kingdom affected by the Convention for the reciprocal avoidance of double taxation in the State and in the United Kingdom of income and capital gains.

9.—(1) In this section and in Part III of the First Schedule—

“capital allowance” has the same meaning as in section 33 of the Finance Act, 1975;

“the Convention” has the same meaning as in section 39 (5) of the Finance Act, 1977;

“deduction in respect of contributions” and “deduction in respect of expenses” have the same meanings as in section 16 of the Finance Act, 1976;

“emoluments” means, in relation to any year, salaries, wages and other similar remuneration derived by an individual in respect of an employment exercised in the United Kingdom which are chargeable to tax under Case III of Schedule D for that year and to which, if they are so derived or had been so derived by the individual in the year 1977-78, Article 15 (1) or 15 (3) of the Convention applies or would have applied;

“the former Agreements” has the same meaning as in section 39 (5) of the Finance Act, 1977;

“net emoluments” means the emoluments referred to as net emoluments in Part III of the First Schedule;

“tax” means income tax;

“tax appropriate to the emoluments” means, in relation to any individual, for any year of assessment, the amount of tax determined in accordance with the formula set out in Part III of the First Schedule.

(2) Where an individual is chargeable to tax in respect of emoluments for the year 1977-78, he shall be entitled to relief for the year 1976-77 in an amount (hereinafter referred to as a “remission”) equal to—

(a) in the case of an individual who was resident in the State and not resident in the United Kingdom for the year 1976-77, one-half of the tax appropriate to the emoluments for the year 1976-77, and

(b) in the case of an individual who was resident both in the State and in the United Kingdom for the year 1976-77, one-half of the tax appropriate to the emoluments for the year 1976-77, reduced by an amount representing tax on one quarter of the net emoluments at his appropriate rate of Irish tax or at his appropriate rate of United Kingdom tax, whichever is the lower, computed in accordance with the former Agreements:

Provided that the remission shall not exceed the tax appropriate to the emoluments for the year 1977-78.

(3) Where the remission is in respect of emoluments of an individual and emoluments of his wife which are deemed to be his income under the provisions of section 192 of the Income Tax Act, 1967, the remission in respect of the emoluments of each shall be an amount which bears the same proportion to the remission as the net emoluments of each bears to A in the formula referred to in subsection (1):