Finance Act , 1987

PART I Income Tax and Corporation Tax

Chapter I Income Tax

1 Amendment of section 6 (special allowance in respect of P.R.S.I. for 1982-83) of Finance Act, 1982.

1.—Section 6 of the Finance Act, 1982, shall have effect for the purpose of ascertaining the amount of income on which an individual referred to therein is to be charged to income tax for the year 1987-88, as if in subsection (2)—

(a) “1987-88” were substituted for “1982-83”, and

(b) “£286” were substituted for “£312”, in each place where it occurs.

2 Application of section 10 (exemption of certain income from leasing of farm land) of Finance Act, 1985.

2.—(1) In this section, “qualifying lease”, “qualifying lessor” and “the specified amount” have the meanings respectively assigned to them by section 10 (1) of the Finance Act, 1985.

(2) As respects a qualifying lease or qualifying leases made in the period beginning on the 20th day of January, 1987, and ending on the 31st day of December, 1987, the said section 10 (1) shall have effect as if references therein to £2,000 were references to £2,800:

Provided that, where the income of a qualifying lessor consists of, or includes, rent or rents from a qualifying lease or qualifying leases made within the said period and from a qualifying lease or qualifying leases made at any other time, the specified amount shall not exceed £2,800.

3 Application of section 16 (credit for farm tax) of Finance Act, 1986.

3.—Section 16 of the Finance Act, 1986, shall apply and have effect for the year of assessment 1986-87 as if references therein to farm tax paid or borne in that year of assessment were references to such tax paid or borne on or before the 30th day of June, 1987.

4 Residence of persons working abroad.

4.—(1) Where an individual, who is domiciled in the State, is engaged full-time in one or more of the following, that is to say, a trade, profession, office or employment, and the condition mentioned in subsection (2) is satisfied, the question whether he is resident in the State for tax purposes shall be decided without regard to any place of abode maintained in the State for his use.

(2) The said condition is that no part of the trade or profession is carried on in the State and all the duties of the office or employment are performed outside the State.

(3) In determining whether the duties of an office or employment are performed outside the State, any duties performed in the State, the performance of which is merely incidental to the performance of the duties of the office or employment outside the State, shall be treated for the purposes of this section as having been performed outside the State.

5 Amendment of section 14 (taxation treatment of certain dividends) of Finance Act, 1986.

5.—Section 14 of the Finance Act, 1986, is hereby amended, as respects the year 1987-88 and any subsequent year of assessment—

(a) by the insertion in subsection (1) after “A dividend” of “in respect of eligible shares”,

(b) by the insertion after subsection (1) of the following subsection:

“(1A) (a) In this section ‘eligible shares’, in relation to a company, means shares forming part of the ordinary share capital of the company which—

(i) are fully paid up,

(ii) carry no present or future preferential right to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed, and

(iii) are not subject to any different treatment from the treatment which applies to all shares of the same class, in particular, different treatment in respect of—

(I) the dividend payable,

(II) repayment,

(III) restrictions attaching to the shares,

or

(IV) any offer of substituted or additional shares, securities or rights of any description in respect of the shares.

(b) Except where the shares are in a company whose ordinary share capital consists of shares of one class only, shares shall not be eligible shares for the purposes of this section unless, at the time of payment of the dividend in respect of the shares to which the claim under this section relates, the majority of the issued shares of the same class as those shares are held by persons other than—

(i) persons who acquired their shares in pursuance of any benefit or right conferred on them or an opportunity afforded to them as a director or employee of the company concerned or any other company and not in pursuance of an offer to the public, and

(ii) trustees holding shares on behalf of persons who acquired their beneficial interest in the shares in pursuance of such a benefit, right or opportunity as is mentioned in subparagraph (i).

(c) In this subsection, ‘ordinary share capital’ has the meaning assigned to it by section 155 (5) of the Corporation Tax Act, 1976.

(d) Shares in a company shall not be treated for the purposes of this section as being of one class only or of the same class unless they would be so treated if dealt in on a stock exchange in the State.”,

(c) by the substitution of the following proviso for the proviso to subsection (2):

“Provided that the amount by which the income of an individual which is represented by qualifying dividends is reduced in accordance with this section for any year of assessment shall not exceed—

(i) in the case of qualifying dividends paid by a company—

(I) which exists wholly for the purpose of carrying on wholly or mainly in the State a trade which consists wholly or mainly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980, and

(II) which has established a profit sharing scheme which has been approved of, and continues to be so approved of, by the Revenue Commissioners in accordance with Part I of the Third Schedule to the Finance Act, 1982,

£9,000, and

(ii) in the case of qualifying dividends paid by any other company, £7,000:

Provided further that the total amount by which the income of an individual which is represented by qualifying dividends is to be reduced under this section for any year of assessment shall not exceed £9,000.”,

and

(d) by the insertion after subsection (2) of the following subsection:

“(2A) For the purposes of subsection (2), a trade, which consists partly of the manufacture of goods within the meaning of Chapter VI of Part I of the Finance Act, 1980, and partly of other trading operations, shall be regarded as consisting wholly or mainly of the manufacture of goods within the said meaning if, but only if, the total amount receivable by the company carrying on the trade from the sale of such goods is not less than 75 per cent. of the total amount receivable by the company from all sales made in the course of the trade.”,

and the said subsection (1), as so amended, is set out in the Table to this section.

TABLE

(1) A dividend in respect of eligible shares which is paid on or after the 6th day of April, 1986, by a company resident in the State and which is a relevant distribution for the purposes of section 45 of the Finance Act, 1980, shall be a qualifying dividend for the purposes of this section.

6 Amendment of provisions relating to relief in respect of interest.

6.—(1) In relation to any interest paid in respect of any period beginning on or after the 6th day of April, 1987, relief shall not be given under sections 76 (1) (c) and 496 of, and paragraph 1 (2) of Part III of Schedule 6 to, the Income Tax Act, 1967, in respect of the excess of the amount, or of the aggregate amount, of the interest over 90 per cent. of the amount, or of the aggregate amount, of the interest in respect of which, apart from this section, relief would otherwise have been given under those provisions.

(2) The provisions of this section shall not apply to interest on money borrowed to pay death duties.

7 Alternative amount on account of appropriate tax.

7.—(1) For the purposes of this section—

(a) interest shall be treated, if not otherwise so treated, as accruing from day to day,

(b) references to “general crediting date”, as respects a relevant deposit taker, shall be construed as references to a date on which the relevant deposit taker credits to all, or to the majority, of relevant deposits held by it on that date interest accrued due on those deposits (whether or not the interest is added to the balances on the relevant deposits on that date for the purpose of calculating interest due at some future date), and

(c) references to the “principal section” shall be construed as references to section 33 of the Finance Act, 1986.

(2) Where, for any year of assessment (being the year 1986-87 or any subsequent year of assessment), the amount of appropriate taxwhich is due and payable by a relevant deposit taker for that year under the principal section is less than the amount of appropriate tax which would have been so due and payable by the relevant deposit taker for the year if the total amount of the interest which had accrued, in the period of twelve months ending on—

(a) the general crediting date as respects that relevant deposit taker falling in that year of assessment, or

(b) if there is more than one general crediting date as respects that relevant deposit taker falling in that year of assessment, the last such date, or

(c) if there is no general crediting date as respects that relevant deposit taker falling in that year of assessment, the 5th day of April in that year,

on all relevant deposits held by the relevant deposit taker in that period (and no more) had been paid by it in that period, the provisions of this section shall apply to that relevant deposit taker for the year of assessment immediately succeeding that year of assessment and for each subsequent year of assessment.

(3) Notwithstanding anything contained in the principal section, where the provisions of this section apply to a relevant deposit taker for any year of assessment, subsection (4) of the principal section shall not apply to the relevant deposit taker for that year of assessment but subsection (4) of this section shall apply to that relevant deposit taker for that year and, as respects that relevant deposit taker for that year, any reference in the Tax Acts, apart from this section, to subsection (4) of the principal section, shall be construed as a reference to subsection (4) of this section.

(4) Notwithstanding subsection (3) of the principal section, a relevant deposit taker shall, for each year of assessment, pay to the Collector within 15 days from the 5th day of October in that year of assessment an amount on account of appropriate tax which shall be not less than the amount determined by the formula set out in the Table to this subsection; and any amount on account of appropriate tax so paid by the relevant deposit taker for a year of assessment shall be treated as far as may be as a payment on account of any appropriate tax due and payable by it for that year of assessment under the said subsection (3):

Provided that, where the amount on account of appropriate tax paid by a relevant deposit taker for a year of assessment under this subsection exceeds the amount of appropriate tax due and payable by it for that year of assessment under the said subsection (3), the excess shall be carried forward and shall be set off against any amount due and payable under this subsection or the said subsection (3) by the relevant deposit taker for any subsequent year of assessment (any such set-off being effected as far as may be against an amount so due and payable at an earlier date rather than at a later date).

TABLE

A (B C)

where

A is the amount of appropriate tax which would be due and payable by the relevant deposit taker for the year of assessment (hereafter in this Table referred to as the “relevant year”) in accordance with subsection (3) of the principal section if the total amount of the relevant interest whichhad accrued in the period of twelve months ending on the 5th day of October in the relevant year on all relevant deposits held by the relevant deposit taker in that period (and no more) had been paid by it in the relevant year,

B is the amount of appropriate tax which was due and payable by the relevant deposit taker for the year of assessment immediately preceding the relevant year in accordance with the said subsection (3), and

C is an amount equal to the lesser of the amount at B and the amount treated, in accordance with the provisions of this subsection or in accordance with the provisions of subsection (4) of the principal section, as paid by the relevant deposit taker on account of the appropriate tax due and payable by it for the year of assessment immediately preceding the relevant year.

(5) This section shall be construed together with Chapter IV of Part I of the Finance Act, 1986, and any tax payable in accordance with this section shall be deemed to be payable in accordance with that Chapter.

Chapter II Income Tax: Relief for Investment in Corporate Trades

8 Amendment of section 12 (the relief) of Finance Act, 1984.

8.—Section 12 of the Finance Act, 1984, is hereby amended—

(a) by the addition to paragraph (c) of subsection (1) of the following proviso:

“Provided that, where the money raised was used, is being used, or is intended to be used, by the company for the purpose of purchasing a ship for use by it in the course of a qualifying shipping trade carried on by it, the aforementioned evidence shall include a certificate by the Minister for the Marine certifying that the purchase of the ship was, is or would be eligible to be grant-aided under a statutory scheme of assistance for the purchase of ships administered by the Department of the Marine.”,

and

(b) by the addition to subsection (3), with effect as on and from the 6th day of April, 1987, of the following proviso:

“Provided that where—

(a) in accordance with the provisions of section 27, relief is due in respect of an amount subscribed as nominee for a qualifying individual by the managers of a designated fund, and

(b) the eligible shares in respect of which the amount is subscribed are issued in the year of assessment next following the year of assessment in which that amount was subscribed to the designated fund,

the individual may elect, by notice in writing to the inspector, to have the relief due given as a deduction from his total income for the year of assessment in which the amount was subscribed to the designated fund instead of as a deduction from his total income for the year of assessment in which the shares are issued.”.

9 Amendment of section 13 (limits on relief) of Finance Act, 1984.

9.—Section 13 of the Finance Act, 1984, is hereby amended, with effect as on and from the 6th day of April, 1984, by the insertion after subsection (2) of the following subsections:

“(2A) If, in any year of assessment, a greater amount of relief would be given to an individual in respect of the amount or the total amount subscribed by him for eligible shares (in this subsection referred to as ‘the relevant subscription’) issued to him in that year or, where the proviso (inserted by the Finance Act, 1987) to section 12 (3) applies, in the next following year of assessment but for either or both of the following reasons, that is—

(a) an insufficiency of total income, or

(b) the operation of subsection (2),

the amount of the relief which would be given but for those reasons less the amount, or the aggregate amount, of any relief in respect of the relevant subscription which is given in that year of assessment, shall be carried forward to the next following year of assessment, and shall be treated for the purposes of the relief as an amount subscribed directly by the individual for eligible shares issued to him in that following year:

Provided that this subsection shall not apply or have effect for any year of assessment subsequent to the year 1990-91.

(2B) If, and so far as, an amount once carried forward under subsection (2A) (and treated as an amount subscribed directly by an individual for eligible shares issued to him in the said following year of assessment) is not deducted from his total income for that year of assessment, it shall be carried forward again to the next following year of assessment (and treated as an amount subscribed directly by him for eligible shares issued to him in that next following year), and so on for succeeding years of assessment:

Provided that this subsection shall not apply or have effect for any year of assessment subsequent to the year 1990-91.

(2C) Relief shall be given to an individual for any year of assessment in the following order—

(a) firstly, in respect of an amount carried forward from an earlier year of assessment in accordance with the provisions of subsection (2A) or (2B), and, in respect of such an amount so carried forward, for an earlier year of assessment in priority to a later year of assessment, and

(b) then, and only then, in respect of any other amount for which relief is to be given in that year of assessment.”.

10 Amendment of section 15 (qualifying companies) of Finance Act, 1984.

10.—Section 15 of the Finance Act, 1984, is hereby amended—

(a) by the insertion after subsection (3) of the following subsection:

“(3A) (a) A company, whose trade includes one or more tourist traffic undertakings within the meaning of section 16 (2A) (inserted by the Finance Act, 1987), shall not be a qualifyingcompany unless and until it has shown to the satisfaction of the Revenue Commissioners that it has submitted to, and has had approved of by, Bord Fáilte Éireann (hereafter in this Chapter referred to as ‘the Bord’) a three-year development and marketing plan in respect of that undertaking, or those undertakings, as the case may be, which plan is primarily designed and formulated to increase tourist traffic, and revenue, from outside the State.

(b) In considering whether to approve of such a plan, the Bord shall have regard only to such guidelines in relation to such approval as may, from time to time, be agreed, with the consent of the Minister for Finance, between it and the Minister for Tourism and Transport, and those guidelines may, without prejudice to the generality of the foregoing, set out—

(i) the extent to which the company's interests in land and buildings may form part of its total assets,

(ii) specific requirements which have to be met in order to comply with the objective mentioned in paragraph (a), and

(iii) the extent to which the money raised through the issue of eligible shares should be used in promoting outside the State the undertaking or undertakings, as the case may be.”, and

(b) by the insertion after subsection (12) of the following new subsection:

“(13) Notwithstanding any of the foregoing provisions of this section, a company shall not be a qualifying company if, during the relevant period—