Taxes Consolidation Act 1997

(a) subsection (2) shall not apply after the death, and

(b) section 573(2) shall apply as if any assets held by a trustee or assignee in bankruptcy or under a deed of arrangement at the death of the bankrupt or debtor were assets of which the deceased was competent to dispose and which then devolved on the trustee or assignee as if the trustee or assignee were a personal representative.

(4) Assets vesting in a trustee in bankruptcy after the death of the bankrupt or debtor shall for the purposes of the Capital Gains Tax Acts be regarded as held by a personal representative of the deceased, and subsection (2) shall not apply.

570 Company in liquidation. [CGTA75 s41]

570.—Where assets of a company are vested in a liquidator under section 230 of the Companies Act, 1963, or otherwise, the Capital Gains Tax Acts shall apply as if the assets were vested in, and the acts of the liquidator in relation to the assets were acts of, the company (acquisitions from or disposals to the liquidator by the company being disregarded accordingly).

571 Chargeable gains accruing on disposals by liquidators and certain other persons. [FA83 s56]

571.—(1) In this section—

“accountable person” means—

(a) a liquidator of a company, or

(b) any person entitled to an asset by means of security or to the benefit of a charge or encumbrance on an asset or, as the case may be, any person appointed to enforce or give effect to the security, charge or encumbrance;

“the company” has the meaning assigned to it by subsection (6);

“the debtor” has the meaning assigned to it by subsection (5);

“referable capital gains tax” has the meaning assigned to it by subsection (2);

“referable corporation tax” has the meaning assigned to it by subsection (3);

“relevant disposal” has the same meaning as in section 648.

(2) In this section—

(a) in a case where no chargeable gains other than the chargeable gains mentioned in subsection (5)(a) (in this subsection referred to as “the referable gains”) accrued to the debtor in the year of assessment, “referable capital gains tax” means the amount of capital gains tax which apart from subsection (5) would be assessable on the debtor in respect of the referable gains;

(b) in a case where, in addition to the referable gains, other chargeable gains accrued to the debtor in the year of assessment and, in charging all of those gains to capital gains tax without regard to subsection (5), the same rate of tax would apply, and either—

(i) none of the disposals on which the chargeable gains accrued is a relevant disposal, or

(ii) each of the disposals is a relevant disposal,

“referable capital gains tax” means an amount of tax determined by the formula—

A ___ B	C

where—

A is the amount of capital gains tax which apart from subsection (5) would be assessable on the debtor in respect of the referable gains if no other chargeable gains accrued to the debtor in the year of assessment and if no deductions or reliefs were to be allowed against the referable gains,

B is the amount of capital gains tax which apart from subsection (5) would be assessable on the debtor in respect of all chargeable gains, including the referable gains, which accrued to the debtor in the year of assessment, if no deductions or reliefs were to be allowed against those chargeable gains, and

C is the amount of capital gains tax which apart from subsection (5) would be assessable on the debtor in respect of the total amount of chargeable gains, including the referable gains, which accrued to the debtor in the year of assessment;

(c) in any other case, “referable capital gains tax” means the amount of capital gains tax which apart from subsection (5) and taking into account—

(i) all other chargeable gains accruing to the debtor in the year of assessment, and

(ii) where appropriate, sections 546(6), 601(3) and 653,

would be the amount of capital gains tax appropriate to the referable gains.

(3) In this section—

(a) in a case where no chargeable gains other than—

(i) the chargeable gains mentioned in subsection (6)(a) (in this subsection referred to as “the referable gains”), or

(ii) any chargeable gains accruing on a relevant disposal,

accrued to the company in the accounting period, “referable corporation tax” means the amount of capital gains tax which apart from subsection (6) would be assessable on the company in respect of the referable gains on the assumptions that—

(I) notwithstanding any provision to the contrary in the Corporation Tax Acts, capital gains tax was to be charged in respect of the refereable gains in accordance with the Capital Gains Tax Acts, and

(II) accounting periods were years of assessment,

or, if it is less, the amount of corporation tax which apart from subsection (6) would be assessable on the company for the accounting period;

(b) in a case where, in addition to the referable gains, other chargeable gains (not being chargeable gains accruing on a relevant disposal) accrued to the company in the accounting period and, on the assumptions made in paragraph (a), in charging all of those gains to capital gains tax without regard to subsection (6), the same rate of tax would apply, “referable corporation tax” means an amount of tax determined by the formula—

D ___ E	F

where—

D is the amount of capital gains tax which, apart from subsection (6) and on the assumptions made in paragraph (a), would be assessable on the company in respect of the referable gains if no other chargeable gains accrued to the company in the accounting period and if no deductions or reliefs were to be allowed against the referable gains,

E is the amount of capital gains tax which, apart from subsection (6) and on the assumptions made in paragraph (a), would be assessable on the company in respect of all chargeable gains including the referable gains (but not including chargeable gains accruing on a relevant disposal) which accrued to the company in the accounting period, if no deductions or reliefs were to be allowed against those chargeable gains, and

F is the amount (in this subsection referred to as “the notional amount”) of capital gains tax which apart from subsection (6) would in accordance with section 78(2) be calculated in relation to the company for the accounting period in respect of all chargeable gains including the referable gains or, if it is less, the amount of corporation tax which apart from subsection (6) would be assessable on the company for the accounting period;

(c) (i) in any other case, “referable corporation tax” means, subject to subparagraph (ii), the amount of capital gains tax which, apart from subsection (6) and on the assumptions made in paragraph (a), and taking into account—

(I) all other chargeable gains (not being chargeable gains accruing on a relevant disposal) accruing to the company in the accounting period, and

(II) where appropriate, sections 546(6) and 653,

would be the amount of capital gains tax appropriate to the referable gains;

(ii) in any case in which subparagraph (i) applies, if the notional amount is greater than the amount of corporation tax which apart from subsection (6) would be assessable on the company for the accounting period, “referable corporation tax” shall mean an amount determined by the formula—

G ___ H	K

where—

G is the amount which under subparagraph (i) would be the referable corporation tax,

H is the notional amount, and

K is the amount of corporation tax which apart from subsection (6) would be assessable on the company for the accounting period.

(4) (a) In any case where, in calculating an amount of referable capital gains tax or referable corporation tax under subsection (2)(c) or (3)(c), deductions or reliefs were to be allowed against chargeable gains accruing in a year of assessment or in an accounting period and apart from this subsection those deductions or reliefs (or part of them) would be set against 2 or more chargeable gains chargeable at the same rate of capital gains tax, then, those deductions or reliefs (or, as the case may be, that part of them) shall, in so far as is necessary to calculate the amount of referable capital gains tax or referable corporation tax, be apportioned between the chargeable gains chargeable at the same rate in proportion to the amounts of those chargeable gains.

(b) In the case of chargeable gains accruing to a company (not being chargeable gains accruing on a relevant disposal), any reference in paragraph (a) to a rate of tax shall be construed as a reference to the rate of capital gains tax which would be applicable to those gains on the assumptions made in subsection (3)(a).

(5) Where section 537(2) or 570 applies in respect of the disposal of an asset in a year of assessment by an accountable person, then, notwithstanding any provision of the Capital Gains Tax Acts—

(a) any referable capital gains tax in respect of any chargeable gains which accrue on the disposal shall be assessable on and recoverable from the accountable person,

(b) the referable capital gains tax shall be treated as a necessary disbursement out of the proceeds of the disposal and shall be paid by the accountable person out of those proceeds, and

(c) referable capital gains tax paid by the accountable person shall discharge a corresponding amount of the liability to capital gains tax, for the year of assessment in which the disposal is made, of the person (in this section referred to as “the debtor”) who apart from this subsection is the chargeable person in relation to the disposal.

(6) Where section 78(8) or 537(2) applies in respect of the disposal (not being a relevant disposal) of an asset in an accounting period of a company by an accountable person, then, notwithstanding any provision of the Corporation Tax Acts—

(a) any referable corporation tax in respect of any chargeable gains which accrue on the disposal shall be assessable on and recoverable from the accountable person,

(b) the referable corporation tax shall be treated as a necessary disbursement out of the proceeds of the disposal and shall be paid by the accountable person out of those proceeds, and

(c) referable corporation tax paid by the accountable person shall discharge a corresponding amount of the liability to corporation tax, for the accounting period in which the disposal is made, of the company (in this section referred to as “the company”) which apart from this subsection is the chargeable person in relation to the disposal.

(7) Notwithstanding any provision of the Capital Gains Tax Acts or of the Corporation Tax Acts, the amount of referable capital gains tax or referable corporation tax, as the case may be, which under this section is assessable on an accountable person in relation to a disposal, shall be recoverable by an assessment on the accountable person to income tax under Case IV of Schedule D for the year of assessment in which the disposal occurred on an amount the income tax on which at the standard rate for that year of assessment is equal to the amount of the referable capital gains tax or referable corporation tax, as the case may be.

(8) Where tax is paid by an accountable person under this section and it is established that the amount of tax paid is excessive, appropriate relief by means of repayment or otherwise shall be given to the accountable person.

(9) Subject to subsections (5)(c) and (6)(c), nothing in this section shall affect the amount of chargeable gains on which—

(a) the debtor is chargeable to capital gains tax, or

(b) the company is chargeable to corporation tax.

572 Funds in court. [CGTA75 s42]

572.—(1) In this section—

“the Accountant” means the Accountant attached to the court or a deputy appointed by the Minister for Justice, Equality and Law Reform;

“court” means the High Court except where the reference is to the Circuit Court;

“funds in court” means any moneys (and investments representing such moneys), annuities, stocks, shares or other securities standing or to be placed to the account of the Accountant in the books of the Bank of Ireland or any company, and includes boxes and other effects.

(2) For the purposes of section 567(2), funds in court shall be regarded as held by the Accountant as nominee for the persons entitled to or interested in the funds or, as the case may be, for their trustees.

(3) Where funds in court standing to an account in the books of the Accountant are invested or after investment are realised, the method by which the Accountant effects the investment or the realisation of investments shall not affect the question as to whether there is for the purposes of the Capital Gains Tax Acts an acquisition or, as the case may be, a disposal of an asset representing funds in court standing to that account, and in particular there shall for those purposes be an acquisition or disposal of assets notwithstanding that the investment of funds in court standing to an account in the books of the Accountant, or the realisation of funds which have been so invested, is effected by setting off in the Accountant's accounts investment in one account against realisation of investments in another.

(4) This section shall apply with any necessary modifications to funds in the Circuit Court as it applies to funds in court.

573 Death. [CGTA75 s14; CGT(A)A78 s6(1)]

573.—(1) In this section, references to assets of which a deceased person was competent to dispose are references to assets of the deceased which the deceased could if of full age and capacity have disposed of by will, assuming that all the assets were situated in the State and that the deceased was domiciled in the State, and include references to the deceased's severable share in any assets to which immediately before his or her death he or she was beneficially entitled as a joint tenant.

(2) For the purposes of the Capital Gains Tax Acts, the assets of which a deceased person was competent to dispose—

(a) shall be deemed to be acquired on his or her death by the personal representatives or other person on whom they devolve for a consideration equal to their market value at the date of the death; but

(b) shall not be deemed to be disposed of by him or her on his or her death (whether or not they were the subject of a testamentary disposition).

(3) Allowable losses sustained by an individual in the year of assessment in which he or she dies may, in so far as they cannot be deducted from chargeable gains accruing in that year, be deducted from chargeable gains accruing to the deceased in the 3 years of assessment preceding the year of assessment in which the death occurs, taking chargeable gains accruing in a later year before those accruing in an earlier year, and there shall be made all such amendments of assessments or repayments of tax as may be necessary to give effect to this subsection.

(4) In relation to property forming part of the estate of a deceased person, the personal representatives shall for the purposes of the Capital Gains Tax Acts be treated as being a single and continuing body of persons (distinct from the persons who may from time to time be the personal representatives), and that body shall be treated as having the deceased's residence, ordinary residence and domicile at the date of death.

(5) Where any asset is acquired by a person as legatee no chargeable gain shall accrue to the personal representatives, but the legatee shall be treated as if the personal representatives' acquisition of the asset had been the legatee's acquisition of the asset.

(6) Where not more than 2 years, or such longer period as the Revenue Commissioners may by notice in writing allow, after a death any of the dispositions of the property of which the deceased was competent to dispose, whether effected by will or under the law relating to intestacies or otherwise, are varied by a deed of family arrangement or similar instrument, this section shall apply as if the variations made by the deed or other instrument were effected by the deceased, and no disposition made by the deed or other instrument shall constitute a disposal for the purposes of the Capital Gains Tax Acts.

574 Trustees of settlement. [CGTA75 s15(1), (9) and (11)]

574.—(1) (a) In relation to settled property, the trustees of a settlement shall for the purposes of the Capital Gains Tax Acts be treated as being a single and continuing body of persons (distinct from the persons who may from time to time be the trustees) and, subject to paragraph (b), that body shall be treated as being resident and ordinarily resident in the State unless the general administration of the trusts is ordinarily carried on outside the State and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the State.

(b) A person carrying on a business which consists of or includes the management of trusts, and acting as trustees of a trust in the course of that business, shall be treated in relation to that trust as not resident in the State if the whole of the settled property consists of or derives from property provided by a person not at the time (or, in the case of a trust arising under a testamentary disposition or on an intestacy or partial intestacy, at his or her death) domiciled, resident or ordinarily resident in the State and, if in such a case the trustees or a majority of them are or are treated in relation to that trust as not resident in the State, the general administration of the trust shall be treated as ordinarily carried on outside the State.

(2) Where any amount of capital gains tax assessed on the trustees or any one trustee of a settlement in respect of a chargeable gain accruing to the trustee is not paid within 6 months from the date when it becomes payable by the trustees or trustee and, before or after the expiration of that period of 6 months, the asset in respect of which the chargeable gain accrued, or any part of the proceeds of sale of that asset, is transferred by the trustees to a person who as against the trustees is absolutely entitled to it, then, that person may, at any time within 2 years from the time when that amount of tax became payable, be assessed and charged (in the name of the trustees) to an amount of capital gains tax not exceeding the amount of capital gains tax chargeable on an amount equal to the amount of the chargeable gain and, where part only of the asset or of the proceeds was transferred, not exceeding a proportionate part of that amount.

(3) For the purposes of this section, where part of the property comprised in a settlement is vested in one trustee or set of trustees and part in another trustee or set of trustees (and in particular where settled land within the meaning of the Settled Land Act, 1882, is vested in the tenant for life and investments representing capital money are vested in the trustees of the settlement), they shall be treated as together constituting and, in so far as they act separately, as acting on behalf of a single body of trustees.

575 Gifts in settlement. [CGTA75 s15(2)]

575.—A gift in settlement, whether revocable or irrevocable, shall be a disposal of the entire property thereby becoming settled property notwithstanding that the donor has some interest as a beneficiary under the settlement and notwithstanding that the donor is a trustee or the sole trustee of the settlement.

576 Person becoming absolutely entitled to settled property. [CGTA75 s15(3) and (8)]

576.—(1) On the occasion when a person becomes absolutely entitled to any settled property as against the trustee, all the assets forming part of the settled property to which the person becomes so entitled shall be deemed for the purposes of the Capital Gains Tax Acts to have been disposed of by the trustee, and immediately reacquired by the trustee in the trustee's capacity as a trustee within section 567(2), for a consideration equal to their market value.

(2) On the occasion when a person becomes absolutely entitled to any settled property as against the trustee, any allowable loss which has accrued to the trustee in respect of property which is, or is represented by, the property to which that person becomes so entitled (including any allowable loss carried forward to the year of assessment in which that occasion falls), being a loss which cannot be deducted from chargeable gains accruing to the trustee in that year, but before that occasion, shall be treated for the purposes of the Capital Gains Tax Acts as if it were an allowable loss accruing at that time to the person becoming so entitled, instead of to the trustee.

577 Termination of life interest on death of person entitled. [CGTA75 s15(4), (5), (5A), (6) and (12); CGT(A)A78 s7(1); FA97 s73(1)]

577.—(1) (a) In this section, “life interest”, in relation to a settlement—

(i) includes a right under the settlement to the income of, or the use or occupation of, settled property for the life of a person (or for the lives of persons) other than the person entitled to the right,

(ii) does not include any right which is contingent on the exercise of the discretion of the trustee or the discretion of some other person, and

(iii) does not include an annuity, notwithstanding that the annuity is payable out of or charged on settled property or the income of settled property except where some or all of the settled property is appropriated by the trustees as a fund out of which the annuity is payable and there is no right of recourse to settled property not so appropriated, or to the income of settled property not so appropriated.

(b) Without prejudice to subsection (4)(b), where under paragraph (a) (iii) an annuity is to be treated as a life interest in relation to a settlement, the settled property or the part of the settled property appropriated by the trustees as a fund out of which the annuity is payable shall, while the annuity is payable and on the occasion of the death of the annuitant, be treated for the purposes of subsection (3) as being settled property under a separate settlement.

(2) Where by virtue of section 576(1) the assets forming part of any settled property are deemed to be disposed of and reacquired by the trustee on the occasion when a person becomes absolutely entitled to the assets as against the trustee, then, if that occasion is the termination of a life interest by the death of the person entitled to that interest—

(a) no chargeable gain shall accrue on the disposal, and

(b) the reacquisition under that section shall be deemed to be for a consideration equal to the market value of the assets at the date of the death.

(3) On the termination of a life interest in possession in all or any part of settled property, the whole or a corresponding part of each of the assets forming part of the settled property and not ceasing at that time to be settled property shall be deemed for the purposes of the Capital Gains Tax Acts at that time to be disposed of by the trustee, and immediately reacquired by the trustee, for a consideration equal to the whole or a corresponding part of the market value of the asset.

(4) For the purposes of subsection (3)—

(a) a life interest which is a right to part of the income of settled property shall be treated as a life interest in a corresponding part of the settled property, and

(b) if there is a life interest in a part of the settled property and, where that interest is a life interest in income, there is no right of recourse to, or to the income of, the remainder of the settled property, the part of the settled property in which the life interest subsists shall while it subsists be treated for the purposes of this subsection as being settled property under a separate settlement.

(5) (a) Subject to paragraph (b), where—

(i) as a consequence of a termination, on the death of the person entitled to it, of a life interest in settled property, subsection (3) applies, and

(ii) an asset which forms the whole or any part of that settled property—

(I) is comprised in an inheritance (within the meaning of the Capital Acquisitions Tax Act, 1976) taken on the death, and

(II) is exempt from tax in relation to the inheritance under section 55 of that Act, or that section as applied by section 39 of the Finance Act, 1978,

that asset shall for the purposes of subsection (3), be excluded from the assets deemed to be disposed of and immediately reacquired.

(b) Where, in a year of assessment, in respect of an asset an exemption from tax in relation to an inheritance referred to in paragraph (a) ceases to apply, then, the chargeable gain which but for paragraph (a) would have accrued to the trustee on the termination of the life interest in accordance with subsection (3) shall be deemed to accrue to the trustee in that year of assessment and shall accordingly be included in the return required to be made by the trustee concerned under section 951 for that year of assessment.

578 Death of annuitant. [CGTA75 s15(7)]

578.—Sections 576(1) and 577(3) shall apply where an annuity which is not a life interest within the meaning of section 577 is terminated by the death of the annuitant as they apply on the termination of a life interest (within the meaning of that section) by the death of the person entitled to that life interest.

579 Non-resident trusts. [CGTA75 s37]

579.—(1) This section shall apply as respects chargeable gains accruing to the trustees of a settlement where the trustees are not resident and not ordinarily resident in the State, and where the settlor or one of the settlors is domiciled and either resident or ordinarily resident in the State, or was domiciled and either resident or ordinarily resident in the State when such settlor made the settlement.

(2) (a) Any beneficiary under the settlement who is domiciled and either resident or ordinarily resident in the State in any year of assessment shall be treated for the purposes of the Capital Gains Tax Acts as if an apportioned part of the amount, if any, on which the trustees would have been chargeable to capital gains tax under section 31, if domiciled and either resident or ordinarily resident in the State in that year of assessment, had been chargeable gains accruing to the beneficiary in that year of assessment.

(b) For the purposes of this section, any amount referred to in paragraph (a) shall be apportioned in such manner as is just and reasonable between persons having interests in the settled property, whether the interest is a life interest or an interest in reversion, and so that the chargeable gain is apportioned as near as may be according to the respective values of those interests, disregarding in the case of a defeasible interest the possibility of defeasance.

(3) For the purposes of this section—

(a) where in any of the 5 years ending with that in which the chargeable gain accrues a person has received a payment or payments out of the income of the settled property made in exercise of a discretion, such person shall be regarded, in relation to that chargeable gain, as having an interest in the settled property of a value equal to that of an annuity of a yearly amount equal to 20 per cent of the total of the payments so received by such person in those 5 years, and

(b) where a person (in this paragraph referred to as “the recipient”) receives at any time after the chargeable gain accrues a capital payment made out of the settled property in exercise of a discretion, being a payment which represents the chargeable gain in whole or in part, then, except in so far as any part of the gain has been attributed under this section to some other person who is domiciled and resident or ordinarily resident in the State, the recipient shall, if domiciled and resident or ordinarily resident in the State, be treated as if the chargeable gain or, as the case may be, the part of the chargeable gain represented by the capital payment, had accrued to the recipient at the time when the recipient received the capital payment.

(4) In the case of a settlement made before the 28th day of February, 1974—

(a) subsection (2) shall not apply to a beneficiary whose interest is solely in the income of the settled property and who cannot, by means of the exercise of any power of appointment or power of revocation or otherwise, obtain for himself or herself, whether with or without the consent of any other person, any part of the capital represented by the settled property, and

(b) payment of capital gains tax chargeable on a gain apportioned to a beneficiary in respect of an interest in reversion in any part of the capital represented by the settled property may be postponed until that person becomes absolutely entitled to that part of the settled property, or disposes of the whole or any part of his or her interest, unless he or she can, by any means described in paragraph (a), obtain for himself or herself any of it at any earlier time,

and, for the purposes of this subsection, property added to a settlement after the settlement is made shall be regarded as property under a separate settlement made at the time when the property is so added.

(5) In any case in which the amount of any capital gains tax payable by a beneficiary under a settlement in accordance with this section is paid by the trustees of the settlement, such amount shall not for the purposes of income tax or capital gains tax be regarded as a payment to such beneficiary.

(6) This section shall not apply in relation to a loss accruing to the trustees of the settlement.

CHAPTER 4 Shares and securities

580 Shares, securities, etc: identification. [CGT(A)A78 s16 and Sch1 par4]

580.—(1) For the purposes of identifying shares acquired with shares subsequently disposed of, in so far as the shares are of the same class, shares acquired at an earlier time shall for the purposes of the Capital Gains Tax Acts be deemed to have been disposed of before shares acquired at a later time.

(2) Shares shall not be treated for the purposes of this section as being of the same class unless, if dealt with on a stock exchange, they would be so treated, but shall be treated in accordance with this section notwithstanding that they are identified in a different way by a disposal or by the transfer or delivery giving effect to the disposal.

(3) This section shall apply to securities as it applies to shares.

(4) This section apart from subsection (2) shall apply in relation to any assets as it applies in relation to shares where the assets are of a nature to be dealt in without identifying the particular assets disposed of or acquired.

(5) (a) This subsection shall apply in relation to the disposal of any assets to which paragraph 13 of Schedule 1 to the Capital Gains Tax Act, 1975, applied, where—

(i) any such assets were on the 6th day of April, 1978, comprised in a holding of the kind referred to in that paragraph,

(ii) the holding consisted of assets acquired on different dates, and

(iii) before the 6th day of April, 1978, there had been a disposal of assets which if that disposal had not taken place would have been comprised in the holding on that date.

(b) For the purposes of applying subsection (1) in relation to each disposal to which this subsection applies—

(i) shares acquired on different dates shall be treated as if they were distinguishable parts of a single asset (in this subsection referred to as “the holding”) acquired respectively on the separate dates on which they were acquired and for the consideration for which they were acquired, and

(ii) it shall be assumed that, on each occasion before the 6th day of April, 1978, on which a disposal was made of shares in the holding, each of the distinguishable parts of the holding as it existed immediately before the disposal was reduced, both as regards the number of shares comprised in that part and the expenditure attributable to that part under paragraphs (a) and (b) of section 552(1), in the same proportion as the number of shares so disposed of bears to the number of shares comprised in the holding immediately before that disposal, and

(iii) the number of shares comprised in each such part on the 6th day of April, 1978, and the expenditure attributable (apart from section 556) to that part under paragraphs (a) and (b) of section 552(1) shall, in relation to a disposal made on or after that date, be the number and expenditure respectively determined in accordance with this subsection.

(c) Nothing in this subsection shall affect the computation of any chargeable gain or allowable loss in relation to any disposal of assets made before the 6th day of April, 1978.

(6) This section shall apply subject to section 581.

581 Disposals of shares or securities within 4 weeks of acquisition. [CGTA75 s51(1) and Sch1 par14(1) to (5)]

581.—(1) For the purposes of the Capital Gains Tax Acts, where the same person in the same capacity disposes of shares of the same class as shares which such person acquired within 4 weeks preceding the disposal, the shares disposed of shall be identified with the shares so acquired within those 4 weeks.

(2) For the purposes of the Capital Gains Tax Acts, where the quantity of shares of the same class disposed of exceeds the quantity of shares of the same class acquired within the period of 4 weeks preceding the disposal, the excess shall be identified with shares of the same class acquired otherwise than within the period of 4 weeks.

(3) Where a loss accrues to a person on the disposal of shares and such person reacquires shares of the same class within 4 weeks after the disposal, that loss shall not be allowable under section 538 or 546 otherwise than by deduction from a chargeable gain accruing to such person on the disposal of the shares reacquired; but, if the quantity of shares so reacquired is less than the quantity so disposed of, such proportion of the loss shall be allowable under section 538 or 546 as bears the same proportion to the loss on the disposal as the quantity not reacquired bears to the quantity disposed of.

(4) In the case of a man and his wife living with him—

(a) subsections (1) and (2) shall, with the necessary modifications, apply where shares are acquired by one of them and shares of the same class are disposed of within 4 weeks by the other, and

(b) subsection (3) shall, with the necessary modifications, apply also where a loss on the disposal accrues to one of them and the acquisition after the disposal is made by the other.

(5) This section shall apply to securities as it applies to shares.

582 Calls on shares. [CGT(A)A78 s16 and Sch1 par3]

582.—Where, as respects an issue of shares in or debentures of a company, a person gives any consideration on a date which is more than 12 months after the date on which the shares or debentures were allotted, the consideration shall, in the computation of a gain accruing to such person on a disposal of the shares or debentures, be deemed for the purposes of section 556 to be expenditure incurred on the date on which the consideration was given.

583 Capital distributions by companies. [CGTA75 s51(1) and Sch2 par1]

583.—(1) In this section, “capital distribution” means any distribution from a company (including a distribution in the course of dissolving or winding up the company) in money or money's worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax.

(2) Where a person receives or becomes entitled to receive in respect of shares in a company any capital distribution from the company (other than a new holding within the meaning of section 584), such person shall be treated for the purposes of the Capital Gains Tax Acts as if such person had in consideration of that capital distribution disposed of an interest in the shares.

584 Reorganisation or reduction of share capital. [CGTA75 s51(1) and Sch2 par2(1) to (7) and (9); CGT(A)A78 s16 and Sch1 par5]

584.—(1) In this section—

“new holding”, in relation to any original shares, means the shares in and debentures of the company which as a result of the reorganisation or reduction of capital represent the original shares (including such, if any, of the original shares as remain);

“original shares” means shares held before and concerned in the reorganisation or reduction of capital;

references to a reorganisation of a company's share capital include—

(a) any case where persons are, whether for payment or not, allotted shares in or debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in the company or of any class of shares in the company, and

(b) any case where there is more than one class of shares and the rights attached to shares of any class are altered;

references to a reduction of share capital do not include the paying off of redeemable share capital and, where shares in a company are redeemable by the company otherwise than by the issue of shares or debentures (with or without other consideration) and otherwise than in a liquidation, the shareholder shall be treated as disposing of the shares at the time of the redemption.

(2) This section shall apply for the purposes of the Capital Gains Tax Acts in relation to any reorganisation or reduction of a company's share capital.

(3) Subject to subsections (4) to (8), a reorganisation or reduction of a company's share capital shall not be treated as involving any disposal of the original shares or any acquisition of the new holding or any part of it; but the original shares (taken as a single asset) and the new holding (taken as a single asset) shall be treated as the same asset acquired as the original shares were acquired.

(4) (a) Where on a reorganisation or reduction of a company's share capital a person gives or becomes liable to give any consideration for such person's new holding or any part of it, that consideration shall, in the computation of a gain accruing to such person on a disposal of the new holding or any part of it, be deemed for the purposes of section 556 to be expenditure incurred on the date the consideration was given and, if the new holding or part of it is disposed of with a liability attaching to it in respect of that consideration, the consideration given for the disposal shall be adjusted accordingly.

(b) Notwithstanding paragraph (a), there shall not be treated as consideration given for the acquisition of the new holding—

(i) any surrender, cancellation or other alteration of the original shares or of the rights attached to the original shares, or

(ii) any consideration consisting of any application, in paying up the shares or debentures or any part of them, of any assets of the company, or of any dividend or other distribution declared out of those assets but not made;

but, if section 816 applies in relation to the issue of any of the shares, the sum in cash which the person would have received if the person had not exercised the option to receive additional share capital instead of a sum in cash shall be treated for the purposes of this subsection as consideration given for those shares.

(5) Where on a reorganisation or reduction of a company's share capital a person receives (or is deemed to receive), or becomes entitled to receive, any consideration other than the new holding for the disposal of an interest in the original shares, and in particular—

(a) where under section 583 such person is to be treated as if such person had in consideration of a capital distribution disposed of an interest in the original shares, or

(b) where such person receives (or is deemed to receive) a consideration from other shareholders in respect of a surrender of rights derived from the original shares,

such person shall be treated as if the new holding resulted from such person having for that consideration disposed of an interest in the original shares (but without prejudice to the original shares and the new holding being treated in accordance with subsection (3) as the same asset).

(6) Where, for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of any part of the new holding, it is necessary to apportion the cost of acquisition of any of the original shares between the part which is disposed of and the part which is retained, the apportionment shall be made by reference to market value at the date of the disposal (with such adjustment of the market value of any part of the new holding as may be required to offset any liability attaching to the new holding but forming part of the cost to be apportioned), and any corresponding apportionment for the purposes of subsection (5) shall be made in the like manner.

(7) Notwithstanding subsection (6)—

(a) where a new holding—

(i) consists of more than one class of shares in or debentures of the company and one or more of those classes is of shares or debentures which, at any time not later than the end of the period of 3 months beginning on the date on which the reorganisation or reduction of capital took effect, or of such longer period as the Revenue Commissioners may by notice in writing allow, had quoted market values on a recognised stock exchange in the State or elsewhere, or

(ii) consists of more than one class of rights of unit holders and one or more of those classes is of rights the prices of which were published regularly by the managers of the scheme at any time not later than the end of that period of 3 months (or longer if so allowed), and

(b) where, for the purpose of computing the gain or loss accruing to a person from the acquisition and disposal of the whole or any part of any class of shares or securities or rights of unit holders forming part of a new holding of the kind referred to in paragraph (a), it is necessary to apportion costs of acquisition between the part that is disposed of and the part that is retained,

then, the cost of acquisition of the new holding shall first be apportioned between the entire classes of shares or debentures or rights of which it consists by reference to market value on the first day (whether that day fell before the reorganisation or reduction of capital took effect or later) on which market values or prices were quoted or published for the shares, debentures or rights mentioned in paragraph (a) or (b) (with such adjustment of the market value of any class as may be required to offset any liability attaching thereto but forming part of the cost to be apportioned) and, for the purposes of this subsection, the day on which a reorganisation of share capital involving the allotment of shares or debentures or unit holders' rights takes effect shall be the day following the day on which the right to renounce any allotment expires.

(8) Where a person receives or becomes entitled to receive in respect of any shares in or debentures of a company a provisional allotment of shares in or debentures of the company and such person disposes of such person's rights, section 583 shall apply as if the amount of the consideration for the disposal were a capital distribution received by such person from the company in respect of the first-mentioned shares, and as if such person had, instead of disposing of the rights, disposed of an interest in those shares.

585 Conversion of securities. [CGTA75 s51(1) and Sch2 par3]

585.—(1) In this section—

“conversion of securities” includes—

(a) a conversion of securities of a company into shares in the company,

(b) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash, and

(c) any exchange of securities effected in pursuance of any enactment which provides for the compulsory acquisition of any shares or securities and the issue of securities or other securities instead;

“security” includes any loan stock or similar security, whether of any government or of any public or local authority or of any company and whether secured or unsecured but excluding securities within section 607.

(2) Section 584 shall apply with any necessary modifications in relation to the conversion of securities as it applies in relation to the reorganisation or reduction of a company's share capital.

586 Company amalgamations by exchange of shares. [CGTA75 s51(1) and Sch2 par4; FA82 s63(1)(a) and (2)]

586.—(1) Subject to section 587, where a company issues shares or debentures to a person in exchange for shares in or debentures of another company, section 584 shall apply with any necessary modifications as if the 2 companies were the same company and the exchange were a reorganisation of its share capital.

(2) This section shall apply only where—

(a) the company issuing the shares or debentures has, or in consequence of the exchange will have, control of the other company, or

(b) the first-mentioned company issues the shares or debentures in exchange for shares as the result of a general offer made to members of the other company or any class of them (with or without exceptions for persons connected with the first-mentioned company), the offer being made in the first instance on a condition such that if it were satisfied the first-mentioned company would have control of the other company.

(3) (a) In this subsection, “shares” includes stock, debentures and any interests to which section 587(3) applies and also includes any option in relation to such shares.

(b) This section shall not apply to the issue by a company of shares in the company by means of an exchange referred to in subsection (1) unless it is shown that the exchange is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is avoidance of liability to tax.

587 Company reconstructions and amalgamations. [CGTA75 s51(1) and Sch2 par5; FA82 s63(1)(b) and (2)]

587.—(1) In this section, “scheme of reconstruction or amalgamation” means a scheme for the reconstruction of any company or companies or the amalgamation of any 2 or more companies, and references to shares or debentures being retained include their being retained with altered rights or in an altered form, whether as the result of reduction, consolidation, division or otherwise.

(2) Where under any arrangement between a company and the persons holding shares in or debentures of the company or any class of such shares or debentures, being an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation, another company issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of the first-mentioned shares or debentures, but the first-mentioned shares or debentures are either retained by those persons or cancelled, then, those persons shall be treated as exchanging the first-mentioned shares or debentures for those held by them in consequence of the arrangement (any shares or debentures retained being for this purpose regarded as if they had been cancelled and replaced by a new issue), and accordingly section 586(1) shall apply to such exchange of shares or debentures.

(3) Subsection (2) shall apply in relation to a company which has no share capital as if references to shares in or debentures of a company included references to any interests in the company possessed by members of the company, and sections 584 and 586 shall apply accordingly.

(4) (a) In this subsection, “shares” has the same meaning as in section 586(3).

(b) This section shall not apply to the issue by a company of shares in the company under a scheme of reconstruction or amalgamation referred to in subsection (2) unless it is shown that the reconstruction or amalgamation is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is avoidance of liability to tax.

588 Demutualisation of assurance companies. [CGTA75 s51(1) and Sch2 par5A; FA97 s70]

588.—(1) In this section—

“assurance company” has the same meaning as in section 3 of the Insurance Act, 1936;

“free shares”, in relation to a member of the assurance company, means any shares issued by the successor company to that member in connection with the arrangement but for no new consideration;

“member”, in relation to the assurance company, means a person who is or has been a member of it, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;

“new consideration” means consideration other than—

(a) consideration provided directly or indirectly out of the assets of the assurance company or the successor company, or

(b) consideration derived from a member's shares or other rights in the assurance company or the successor company.

(2) This section shall apply as on and from the 21st day of April, 1997, in respect of an arrangement between a company and its members, being an arrangement to which subsection (2) of section 587 applies by virtue of subsection (3) of that section, and where the company is an assurance company which carries on a mutual life business.

(3) Where in connection with the arrangement there is conferred on a member of the assurance company concerned any rights—

(a) to acquire shares in another company (in this section referred to as the “successor company”) in priority to other persons,

(b) to acquire shares in the successor company for consideration of an amount or value lower than the market value of the shares, or

(c) to free shares in the successor company,

then, any such rights so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 540) granted to and acquired by such member for no consideration and having no value at the time of that grant and acquisition.

(4) Where in connection with the arrangement shares in the successor company are issued to a member of the assurance company concerned, and such shares are treated under section 587 as having been exchanged by the member for the interest in the company possessed by the member, those shares shall, notwithstanding section 584, be regarded for the purposes of section 552(1)—

(a) as having been issued to the member for a consideration given by the member of an amount or value equal to the amount or value of any new consideration given by the member for the shares or, if no new consideration is given, as having been issued for no consideration, and

(b) as having, at the time of their issue to the member, a value equal to the amount or value of the new consideration so given or, if no new consideration is given, as having no value;

but this subsection is without prejudice to the operation where applicable of subsection (3).

(5) Subsection (6) shall apply in any case where—

(a) in connection with the arrangement, shares in the successor company are issued by that company to trustees on terms which provide for the transfer of those shares to members of the assurance company concerned for no new consideration, and

(b) the circumstances are such that in the hands of the trustees the shares constitute settled property.

(6) (a) Where this subsection applies, then, for the purposes of capital gains tax—

(i) the shares shall be regarded as acquired by the trustees for no consideration,

(ii) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by the member for no consideration and as having no value at the time of its acquisition, and

(iii) where on the occasion of a member becoming absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on the member becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 567(2), for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees, and accordingly section 576(1) shall not apply in relation to that occasion.

(b) Reference in paragraph (a) to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include reference to the case where the member would become so entitled but for being a minor or otherwise under a legal disability.

589 Shares in close company transferring assets at undervalue. [CGTA75 s35(1) to (3) and (5); CTA76 s140(2) and Sch 2 PtII par3(1)]

589.—(1) Where a close company transfers an asset to any person otherwise than by means of a bargain made at arm's length and for a consideration of an amount or value less than the market value of the asset, an amount equal to the difference shall be apportioned among the issued shares of the company, and the holders of those shares shall be treated in accordance with subsections (2) and (3).

(2) For the purposes of the computation of a chargeable gain accruing on the disposal of any of those shares by the person owning them on the date of transfer, an amount equal to the amount so apportioned to that share shall be excluded from the expenditure allowable as a deduction under section 552(1)(a) from the consideration for the disposal.

(3) Where the person owning any of those shares at the date of transfer is itself a close company, an amount equal to the amount apportioned to the shares so owned under subsection (1) to that close company shall be apportioned among the issued shares of that close company, and the holders of those shares shall be treated in accordance with subsection (2), and so on through any number of close companies.

(4) This section shall apply to a company within section 590 as it applies to a close company.

590 Attribution to shareholders of chargeable gains accruing to non-resident company. [CGTA75 s36; CTA76 s129(6)(c) and (7), s140(2) and s159 and Sch2 PtII pars4 and 5]

590.—(1) This section shall apply as respects a chargeable gain accruing to a company—

(a) which is not resident in the State, and

(b) which would be a close company if it were resident in the State.

(2) Subject to this section, any person who at the time when the chargeable gain accrues to the company—

(a) is resident or ordinarily resident in the State,

(b) if an individual, is domiciled in the State, and

(c) holds shares in the company,

shall be treated for the purposes of the Capital Gains Tax Acts as if a part of the chargeable gain had accrued to that person.

(3) The part of the chargeable gain referred to in subsection (2) shall be equal to the proportion of the assets of the company to which that person would be entitled on a liquidation of the company at the time when the chargeable gain accrues to the company.

(4) This section shall not apply in relation to—

(a) any amount in respect of the chargeable gain which is distributed, whether by means of dividend or distribution of capital or on the dissolution of the company, to persons holding shares in the company or to creditors of the company within 2 years from the time when the chargeable gain accrued to the company,

(b) a chargeable gain accruing on the disposal of assets, being tangible property, whether movable or immovable, or a lease of such property, where the property was used only for the purposes of a trade carried on by the company wholly outside the State,

(c) a chargeable gain accruing on the disposal of currency or of a debt within section 541(6), where the currency or debt is or represents money in use for the purposes of a trade carried on by the company wholly outside the State, or

(d) a chargeable gain in respect of which the company is chargeable to capital gains tax by virtue of subsection (3) or (7) of section 29 or to corporation tax by virtue of section 25(2)(b).

(5) Subsection (4)(a) shall not prevent the making of an assessment in pursuance of this section but, if by virtue of subsection (4)(a) this section is excluded, all such adjustments, whether by means of repayment or discharge of tax or otherwise, shall be made as will give effect to subsection (4)(a).

(6) The amount of capital gains tax paid by a person in pursuance of subsection (2) (in so far as not reimbursed by the company) shall be allowable as a deduction in the computation under the Capital Gains Tax Acts of a gain accruing on the disposal by the person of the shares by reference to which the tax was paid.

(7) To the extent that it would reduce or extinguish chargeable gains accruing by virtue of this section to a person in a year of assessment, this section shall apply in relation to a loss accruing to the company on the disposal of an asset in that year of assessment as it would apply if a gain instead of a loss had accrued to the company on the disposal, but shall only so apply in relation to that person, and, subject to this subsection, this section shall not apply in relation to a loss accruing to the company.

(8) Where the person owning any of the shares in the company at the time when the chargeable gain accrued to the company is itself a company which is not resident in the State but which would be a close company if it were resident in the State, an amount equal to the amount apportioned under subsection (3) out of the chargeable gain to the shares so owned shall be apportioned among the issued shares of the second-mentioned company, and the holders of those shares shall be treated in accordance with subsection (2), and so on through any number of companies.

(9) Where any tax payable by any person by virtue of subsection (2) is paid by the company to which the chargeable gain accrues, or in a case under subsection (8) is paid by any such other company, the amount so paid shall not, for the purposes of income tax or for the purposes of the Capital Gains Tax Acts, be regarded as a payment to the person by whom the tax was originally payable.

(10) Where any tax payable by any company by virtue of subsection (2) is paid by the company to which the chargeable gain accrues, or in a case under subsection (8) is paid by any such other company, the amount so paid shall not for the purposes of corporation tax be regarded as a payment to the company by which the tax was originally payable.

(11) (a) In this subsection—

“group” shall be construed in accordance with subsections (1) (excluding paragraph (a)), (3) and (4) of section 616;

“non-resident group” of companies—

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

(ii) in the case of a group 2 or more members of which are not resident in the State, means the members not resident in the State.

(b) For the purposes of this section—

(i) sections 617 to 620 shall apply in relation to non-resident companies which are members of a non-resident group of companies as they apply in relation to companies resident in the State which are members of a group of companies, and

(ii) sections 623 and 625 shall apply as if for any reference in those sections to a group of companies there were substituted a reference to a non-resident group of companies, and as if references to companies were references to companies not resident in the State.

591 Relief for individuals on certain reinvestment. [FA93 s27(1) to (5) (apart from proviso to (5)) and (6) to (13); FA94 s65(b); FA95 s74(1); FA96 s62(1); FA97 s75(1)]

591.—(1) In this section—

“director” has the same meaning as in section 116;

“eligible shares” and “ordinary shares” have the same meanings respectively as in section 488;

“full-time director”, “full-time employee”, “part-time director” and “part-time employee” have the same meanings respectively as in section 250;

“holding company” means a company whose business consists wholly or mainly in the holding of shares in, or securities of, one or more companies which are trading companies and which are its 51 per cent subsidiaries;

“material disposal” has the meaning assigned to it by subsection (5);

“ordinary share capital” has the same meaning as in section 2;

“the original holding” has the meaning assigned to it by subsection (2);

“qualifying company” has the meaning assigned to it by subsection (7);

“qualifying investment” has the meaning assigned to it by subsection (6);

“the reinvestor” has the meaning assigned to it by subsection (2);

“the specified period” has the meaning assigned to it by subsection (6)(b);

“trade” includes a profession, and “trading company”, “trading group”, “qualifying trade” (within the meaning of subsection (8)) and “qualifying trading operations” (within the meaning of that subsection) shall be construed accordingly;

“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

“trading group” means a holding company and one or more trading companies which are 51 per cent subsidiaries of the holding company;

“unquoted company” means a company none of whose shares, stocks or debentures are listed in the official list of a stock exchange or quoted on an unlisted securities market of a stock exchange;

“51 per cent subsidiary” has the meaning assigned to it by section 9.

(2) (a) Subject to this section, where the consideration which an individual (in this section referred to as “the reinvestor”) obtains for any material disposal by him or her of shares in or securities of any company (in this section referred to as “the original holding”) is applied by him or her within the period of 3 years from the date of that disposal in acquiring a qualifying investment, the reinvestor shall, on making a claim in that behalf, be treated for the purposes of the Capital Gains Tax Acts as if the chargeable gain accruing on the disposal of the original holding did not accrue until he or she disposes of the qualifying investment.

(b) Notwithstanding paragraph (a), where—

(i) the disposal of the qualifying investment is a material disposal for the purposes of this section, and

(ii) the consideration for that disposal is applied by the reinvestor within the period of 3 years from the date of that disposal in acquiring another qualifying investment,

the reinvestor shall be treated as if the chargeable gain accruing on the disposal of the original holding did not accrue until he or she disposes of the other qualifying investment and any further qualifying investment which is acquired in a similar manner.

(3) (a) Where an individual is not entitled to be treated in accordance with subsection (2) solely by reason of not having satisfied the requirements of either or both paragraphs (a) and (e) of subsection (6), and—

(i) all the other requirements of this section have been satisfied,

(ii) the capital gains tax on the disposal of the original holding has been paid in full, and

(iii) the individual has, throughout a period of 2 years beginning within the specified period, been a full-time employee or a full-time director of the qualifying company,

then, the individual—

(I) shall be entitled on making a claim in that behalf to such repayment of capital gains tax as would secure that the tax which is ultimately borne by the individual does not exceed the tax which would have been borne by the individual if he or she had been entitled to be treated in accordance with subsection (2), and

(II) shall be treated for the purposes of the Capital Gains Tax Acts as if the chargeable gain accruing on the disposal of the original holding did not accrue until the individual disposes of the qualifying investment, and subsection (2)(b) shall apply for the purposes of this subsection as it applies for the purposes of subsection (2).

(b) No repayment of tax under this subsection shall carry interest.

(4) Subsection (2) shall not apply if part only of the amount or value of the consideration for the material disposal of the original holding is applied, within the period of 3 years from the date of that disposal, in acquiring a qualifying investment but, if all of the amount of that consideration except for a part which is less than the amount of the gain accruing on the disposal is so applied, the reinvestor shall, on making a claim in that behalf, be treated for the purposes of the Capital Gains Tax Acts as if the amount of the gain accruing on the disposal were reduced to the amount of the consideration not applied in acquiring a qualifying investment, and the balance of the gain shall be treated as if it did not accrue until the reinvestor disposes of the qualifying investment.

(5) For the purposes of this section, the disposal of shares in or securities of a company shall be a material disposal if—

(a) throughout the period of 3 years ending with the date of the disposal, or

(b) in a case where the company commenced to trade at any time in the period mentioned in paragraph (a), throughout the period beginning at that time and ending with the date of the disposal,

the following conditions are satisfied—

(i) the company has been a trading company or a holding company, and

(ii) the reinvestor has been a full-time employee, part-time employee, full-time director or part-time director of the company or, if that company is a member of a trading group, of one or more companies which are members of the trading group.

(6) For the purposes of this section, an individual shall be regarded as acquiring a qualifying investment where he or she acquires any eligible shares in a qualifying company if—

(a) he or she holds not less than 5 per cent of the ordinary share capital of the company at any time in the period (in this subsection referred to as “the initial period”) beginning on the date of the acquisition of the eligible shares and ending on the date which is one year after the date of the disposal of the original holding,

(b) he or she holds not less than 15 per cent of the ordinary share capital of the company at any time in the period (in this section referred to as “the specified period”) beginning on the date of the acquisition of the eligible shares and ending on the date which is 3 years after the date of the disposal of the original holding,

(c) within the specified period, the company uses the money raised through the issue of the eligible shares for the purposes of enabling it, or enlarging its capacity, to undertake qualifying trading operations (within the meaning of subsection (8)),

(d) the company is not—

(i) the company in which the original holding has subsisted, or

(ii) a company that was a member of the same trading group as that company,

and

(e) he or she becomes at any time within the initial period, and is throughout the period beginning at that time and—

(i) ending at the end of the specified period, or

(ii) in a case where the company is wound up or dissolved without winding up and the conditions mentioned in subsection (7)(d) are satisfied, ending at the time of the commencement of the winding up or dissolution of the company,

a full-time employee or a full-time director of the company.

(7) (a) For the purposes of this section and subject to paragraphs (b) to (d), a company shall be a qualifying company if it is incorporated in the State and if—

(i) it is throughout the specified period—

(I) an unquoted company resident in the State and not resident elsewhere, and

(II) a company which exists wholly for the purposes of carrying on wholly or mainly in the State of one or more qualifying trades,

and

(ii) it is not at any time in the specified period—

(I) under the control of another company (or of another company and any person connected with that other company), or

(II) without being under the control of another company, a 51 per cent subsidiary of that other company.

(b) A company shall be deemed not to have ceased to be a qualifying company solely by virtue of shares in the company commencing, at any time in the specified period, to be quoted on the market known as the Developing Companies Market of the Irish Stock Exchange.

(c) A company shall cease to be a qualifying company if at any time in the specified period a resolution is passed, or an order is made, for the winding up of the company (or in the case of a winding up otherwise than under the Companies Act, 1963, any other act is done for the like purpose) or the company is dissolved without winding up.

(d) Notwithstanding paragraph (c), a company shall be deemed not to have ceased to be a qualifying company solely by virtue of the application of that paragraph where—

(i) it is shown that the winding up or dissolution is for bona fide commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of income tax, corporation tax or capital gains tax, and

(ii) the company's net assets, if any, are distributed to its members within 3 years from the commencement of the dissolution or the winding up.

(8) (a) In this subsection, “qualifying trading operations”, in relation to a trade, means all the operations of the trade excluding those of dealing in shares, securities, land, currencies, futures or traded options.

(b) A trade shall be a qualifying trade for the purposes of subsection (7) if throughout the specified period the trade—

(i) is conducted on a commercial basis and with a view to the realisation of profits, and

(ii) consists wholly or mainly of qualifying trading operations,

and a trade which during the specified period consists partly of qualifying trading operations and partly of other trading operations shall be regarded for the purposes of this subsection as a trade which consists wholly or mainly of qualifying trading operations only if the total amount receivable in the specified period by the company carrying on the trade from sales made and services rendered in the course of qualifying trading operations is not less than 75 per cent of the total amount receivable by the company from all sales made and services rendered in the course of the trade in the specified period.

(9) A claim for relief under this section may be made after the making of a material disposal and the acquisition of eligible shares in a qualifying company if all the conditions for the relief are or will be satisfied, but the relief shall be withdrawn if, by reason of the subsequent happening of any event or failure of an event to happen which at the time the relief was claimed was expected to happen, the individual by whom the relief was claimed is not entitled to the relief so claimed.

(10) The withdrawal of relief under subsection (9) shall be made—

(a) for the year of assessment in which the happening or failure to happen, as the case may be, of the event giving rise to the withdrawal of the relief occurred, and

(b) in accordance with subsection (11),

and both—

(i) details of the happening or the failure to happen, as the case may be, of the event giving rise to the withdrawal of relief, and

(ii) the amount to be treated as a gain under subsection (11),

shall be included in the return required to be made by the individual concerned under section 951 for that year of assessment.

(11) (a) Notwithstanding any other provision of the Capital Gains Tax Acts, where relief is to be withdrawn under subsection (9) for any year of assessment, such amount (in this subsection referred to as “the relevant amount”) of the chargeable gain which accrued to the reinvestor on the disposal of the original holding as was treated under subsection (2) or (4) as not accruing at that time—

(i) reduced in accordance with paragraph (b), and

(ii) increased in accordance with paragraph (c),

shall be treated as a gain which accrued in that year of assessment.

(b) The amount by which the relevant amount is to be reduced under paragraph (a)(i) is an amount equal to the aggregate of—

(i) to the extent that such excess has not been deducted in years of assessment subsequent to the year of assessment in which the disposal of the original holding occurred, the excess of the amount of the losses which would have been deducted under section 31 in the year of assessment in which the disposal of the original holding occurred, if relief under this section had not been claimed, over the amount of such losses which were so deducted in that year, and

(ii) any amount of chargeable gains in the year of assessment in which the disposal of the original holding occurred in respect of which the reinvestor would not by virtue of section 601 have been charged to capital gains tax if relief under this section had not been claimed.

(c) The amount by which the relevant amount is to be increased under paragraph (a)(ii) is an amount determined by the formula—

G	R ____ 100	M

where—

G is the relevant amount reduced in accordance with paragraph (b),

R is the rate per cent specified in section 1080(1), and

M is the number of months in the period beginning on the date on which capital gains tax for the year of assessment in which the disposal of the original holding occurred was due and payable and ending on the date on which capital gains tax for the year of assessment for which the withdrawal of relief is to be made is due and payable.

(12) A chargeable gain or the balance of a chargeable gain which under subsection (2) or (4), as may be appropriate, is treated as accruing at a date later than the date of the disposal on which it accrued shall not be so treated for the purposes of section 556.

(13) Without prejudice to the provisions of the Capital Gains Tax Acts providing generally for apportionments, where consideration is given for the acquisition or disposal of any assets some or part of which are shares or other securities to the acquisition or disposal of which a claim under this section relates and some or part of which are not, the consideration shall be apportioned in such manner as is just and reasonable.

(14) This section shall not apply unless the acquisition of a qualifying investment was made for bona fide commercial reasons and not wholly or partly for the purposes of realising a gain from the disposal of the qualifying investment.

592 Reduced rate of capital gains tax on certain disposals of shares by individuals. [FA94 s66(1) to (8); FA96 s63(1); FA97 s76, s146(1) and Sch9 PtI par 18(3)]

592.—(1) In this section—

“disposal” does not include a relevant disposal within the meaning of section 648;

“ordinary share capital” has the same meaning as in section 2;

“ordinary shares” means shares forming part of a company's ordinary share capital;

“period of ownership”, in relation to an individual making a disposal of qualifying shares, means the individual's period of continuous ownership of the shares in the same capacity ending on the date of such disposal and, for the purposes of this definition, where the shares were acquired by the individual on the death of that individual's spouse so that the individual's period of ownership would apart from this definition be treated as having commenced on the date of that death, the individual's period of ownership shall be deemed to be extended to include the individual's spouse's period of ownership ending on that date;

“qualifying company” shall be construed in accordance with subsection (2);

“qualifying shares”, in relation to a company, means ordinary shares of the company which are fully paid up and which carry no present or future preferential rights to dividends or to the company's assets on its winding up and no present or future preferential right to be redeemed;

“qualifying trade” shall be construed in accordance with subsection (4);

“qualifying trading operations”, in relation to a trade, means all the operations of the trade excluding those of dealing in shares, securities, land, currencies, futures or traded options;

“the specified period”, in relation to the disposal of qualifying shares, means the period of 3 years immediately preceding the date of the disposal of those shares;

“trade” includes a profession, and “qualifying trade” and “qualifying trading operations” shall be construed accordingly;

“unquoted company” means a company none of whose shares, stocks or debentures are listed in the official list of a stock exchange or quoted on an unlisted securities market.

(2) For the purposes of this section, a company shall be a qualifying company in relation to the disposal of qualifying shares where—

(a) at the date of acquisition of those shares, it is an unquoted company which is resident in the State and not resident elsewhere and which has an issued share capital the market value of which is not more than £25,000,000, and

(b) throughout the specified period, it is a company which is resident in the State and not resident elsewhere and—

(i) which exists wholly or mainly for the purposes of the carrying on of one or more qualifying trades, or

(ii) the business of which consists—

(I) wholly or mainly of the holding of shares in one or more connected companies, or

(II) wholly or mainly of both the holding of such shares and the carrying on of one or more qualifying trades.

(3) (a) A company shall be regarded as having satisfied the condition referred to in subsection (2)(b)(i) only if throughout the specified period not less than 75 per cent of the market value of all the issued share capital of the company derives from the carrying on by the company of one or more qualifying trades.

(b) A company shall be regarded as having satisfied the condition referred to in clause (I) or (II), as the case may be, of subsection (2)(b)(ii) only if throughout the specified period not less than 75 per cent of the market value of all the issued share capital of the company derives from the carrying on of one or more qualifying trades by the connected companies or, as the case may be, by the company and the connected companies.

(c) In a case where a connected company (in this paragraph referred to as “the first-mentioned company”) is a company whose business consists of the holding of shares in one or more companies, references in paragraph (b) to the connected companies shall be construed as including references to the companies which are connected with the first-mentioned company.

(4) For the purposes of this section, a trade shall be a qualifying trade if throughout the specified period it consists of qualifying trading operations and, where during that period a trade consists partly of qualifying trading operations and partly of other trading operations, the part of the trade which consists of other trading operations shall be treated as a separate trade.

(5) For the purposes of this section, where a company (in this subsection referred to as “the first-mentioned company”) holds shares in another company, that other company shall be regarded as connected with the first-mentioned company if—

(a) at the date of the acquisition of those shares by the first-mentioned company it was an unquoted company,

(b) it is resident in the State and not resident elsewhere, and

(c) not less than 20 per cent of the total voting rights in the company are exercisable by the first-mentioned company.

(6) As respects chargeable gains accruing to an individual on the disposal of qualifying shares in a qualifying company in a case where the individual's period of ownership of those shares is not less than 3 years, section 28 (3) shall apply as if the reference in that section to 40 per cent were a reference to 26 per cent.

(7) (a) In this subsection and in subsection (8), “original shares” and “new holding” have the same meanings respectively as in section 584.

(b) If the time when an individual acquires qualifying shares would be determined under section 584, 585, 586 or 587, it shall be determined in the same way for the purposes of this section where the following conditions are satisfied—

(i) both the original shares and the new holding constitute qualifying shares, and

(ii) the individual is not treated under section 584(4) as giving or becoming liable to give any consideration, other than the original shares, for the acquisition of the new holding.

(8) (a) In a case where subsection (7)(b) applies and the new holding is held for a period of not less than 3 years, subsection (2) shall apply as if—

(i) in paragraph (a) of that subsection “at the date of acquisition of the original shares” were substituted for “at the date of acquisition of those shares”,

(ii) where the company in which the new holding subsists is not the company in which the original shares subsisted, in paragraph (a) of that subsection “the company in which the original shares subsisted is” were substituted for “it is”, and

(iii) in paragraph (b) of that subsection “the company in which the new holding subsists is” were substituted for “it is”.

(b) In a case where subsection (7)(b) applies and the new holding is held for a period of less than 3 years, subsection (2) shall apply—

(i) as if in paragraph (a) of that subsection “at the date of acquisition of the original shares” were substituted for “at the date of acquisition of those shares”, and

(ii) where the company in which the new holding subsists is not the company in which the original shares subsisted as if—

(I) in paragraph (a) of that subsection “the company in which the original shares subsisted is” were substituted for “it is”,

(II) in paragraph (b) of that subsection “throughout that part of the specified period commencing on the date of the acquisition of the new holding, the company in which the new holding subsists is” were substituted for “throughout the specified period, it is”, and

(III) the conditions referred to in paragraph (b) of that subsection applied also to the company in which the original shares subsisted but only in relation to the part of the specified period which does not include the part of that period mentioned in clause (II).

CHAPTER 5 Life assurance and deferred annuities

593 Life assurance and deferred annuities. [CGTA75 s20]

593.—(1) This section shall apply for the purposes of the Capital Gains Tax Acts as respects any policy of assurance or contract for a deferred annuity on the life of any person.

(2) No chargeable gain shall accrue on the disposal of or of an interest in the rights under any such policy of assurance or contract except where the person making the disposal is not the original beneficial owner and acquired the rights or interests for a consideration in money or money's worth.

(3) Subject to subsection (2), the occasion of the payment of the sum or sums assured by a policy of assurance or of the first instalment of a deferred annuity, and the occasion of the surrender of a policy of assurance or of the rights under a contract for a deferred annuity, shall be the occasion of a disposal of the rights under the policy of assurance or contract for a deferred annuity, and the amount of the consideration for the disposal of a contract for a deferred annuity shall be the market value at that time of the right to the first and further instalments of the annuity.

(4) In subsection (3), the reference to payment of the sum assured shall include a reference to the transfer of investments or other assets to the owner of the policy in accordance with the policy.

594 Foreign life assurance and deferred annuities: taxation and returns. [CGTA75 s20A; FA93 s24; FA95 s68; FA97 s74(1)]

594.—(1) (a) (i) For the purposes of this section, a policy of assurance or contract for a deferred annuity on the life of any person, being a policy issued or a contract made before the 20th day of May, 1993, shall be treated as a policy issued or contract made, as the case may be, after that date if there is a variation of the policy or contract on or after that date which directly or indirectly increases the benefits secured by, or extends the term of, the policy or contract, as the case may be.

(ii) For the purposes of subparagraph (i), where a policy of assurance issued or a contract made before the 20th day of May, 1993, provides an option to have another policy or contract substituted for it or to have any of its terms changed, any change in the terms of the policy or contract made in pursuance of the option shall be deemed to be a variation of the policy or contract, as the case may be.

(b) Subject to subsection (2), this section shall be construed together with subsections (3) and (4) of section 593 as if subsection (3) of that section were not subject to subsection (2) of that section.

(c) (i) In this paragraph and in subsection (3)—

“assurance company” has the same meaning as in section 3 of the Insurance Act, 1936;

“excluded policy” means a policy of assurance or contract for a deferred annuity on the life of any person where the policy is issued to or the contract is made with, as the case may be, a person who did not continuously reside outside the State throughout the period of 6 months commencing on the date of issue or the date of contract, as the case may be;

“life assurance fund” has the same meaning as in the Insurance Acts 1909 to 1969;

“relevant company” means a company which is—

(I) resident in the State, or

(II) chargeable under Case III of Schedule D by virtue of section 726 in respect of its income from the investment of its life assurance fund.

(ii) Subsection (2) shall apply to any policy of assurance or contract for a deferred annuity on the life of any person which is a policy issued or a contract made, as the case may be, on or after the 20th day of May, 1993—

(I) otherwise than by an assurance company which is a relevant company, or

(II) being a policy or contract which is an excluded policy issued or made, as the case may be, by a relevant company to which section 710(2) applies.

(2) (a) In this subsection, “relevant gain” means a chargeable gain arising on a disposal of or of an interest in the rights under any policy of assurance or contract for a deferred annuity to which this subsection applies, including a disposal by a person who is not the original beneficial owner of those rights and who acquired them or an interest in them for a consideration in money or money's worth.

(b) Section 593(2) shall not apply in respect of any disposal of or of any interest in the rights under any policy of assurance or contract for a deferred annuity to which this subsection applies.

(c) A relevant gain shall be computed as if section 556 had not been enacted.

(d) Notwithstanding section 31, the total amount of chargeable gains accruing to a person chargeable in a year of assessment after deducting any allowable losses shall not be less than the total amount of any relevant gains accruing to the person in that year, and accordingly any deduction for allowable losses made in computing the total amount of chargeable gains so accruing shall not exceed the total amount of chargeable gains so accruing which are not relevant gains.

(e) Notwithstanding section 601 or 1028(4), an individual shall be charged to capital gains tax on the amount of any relevant gains accruing to the individual.

(3) As respects a policy of assurance or a contract for a deferred annuity to which subsection (2) applies, section 895 shall apply with any necessary modifications—

(a) (i) to a relevant company, and

(ii) to every person carrying on in the State a trade or business in the ordinary course of the operations of which such person acts as an intermediary in or in connection with the issue of such a policy, or the making of such a contract,

in the same manner as it applies to every intermediary within the meaning of that section, and

(b) to a person resident or ordinarily resident in the State who is entitled to any amount payable under such a policy or contract, being an amount payable otherwise than in the event of the death of a person specified in the terms of the policy or the contract, as the case may be, in the same manner as it applies to a person resident in the State opening an account, in which a deposit which such person beneficially owns is held, at a location outside the State,

as if references in that section to—

(i) a deposit were references to any payment made by a person resident or ordinarily resident in the State in respect of such a policy or contract,

(ii) a foreign account were references to such a policy or contract,

(iii) the opening of a foreign account were references to the issue of such a policy or the making of such a contract, and