TAXES CONSOLIDATION ACT, 1997

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

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

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

• (a) all the claims so made are admissible only by virtue of subsection (2) or (3) of section 423, and

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

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

• (5) The following provisions shall apply as respects a claim (in this subsection referred to as a “consortium claim”) for group relief made by a company as a member of a consortium:

• (a) a consortium claim, and a claim other than a consortium claim, shall not both have effect as respects the loss or other amount of the same accounting period of the same surrendering company unless each of the 2 claims is as respects a loss or other amount apportioned under section 423(2)(a) to a component of that accounting period, and the 2 components do not overlap;

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

• (c) paragraph (a) shall apply according to the order in which claims are made.

• (6) Without prejudice to section 320(6), any reference in Part 9, Chapter 1 of Part 24, Chapter 1 of Part 29 and section 765 to an allowance made shall include a reference to an allowance which would be made but for the granting of group relief or but for that and but for an insufficiency of profits or other income against which to make it.

429 Claims and adjustments. [CTA76 s125]

429.—(1) A claim for group relief—

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

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

• (c) shall be made within 2 years from the end of the surrendering company's accounting period to which the claim relates.

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

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

• (4) Subsection (3) is without prejudice to the making of an assessment under section 919 (5)(b)(iii) and to the making of all such other adjustments by means of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has foregone relief in respect of a corresponding amount.

PART 13 Close Companies

CHAPTER 1 Interpretation and general

430 Meaning of “close company”. [CTA76 s94]

430.—(1) For the purposes of the Corporation Tax Acts, “close company” means a company under the control of 5 or fewer participators, or of participators who are directors, but does not include—

• (a) a company not resident in the State,

• (b) a registered industrial and provident society, being a society within the meaning of section 698,

• (c) a building society within the meaning of section 702,

• (d) a company controlled by or on behalf of the State and not otherwise a close company, or

• (e) a company within subsection (4) or section 431.

• (2) For the purposes of this section—

• (a) a company shall be treated as controlled by or on behalf of the State only if it is under the control of the State, or of persons acting on behalf of the State, independently of any other person, and

• (b) where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company by virtue of being under the control of persons acting independently of the State.

• (3) A company resident in the State (but not within paragraph (b) or (c) of subsection (1)) shall also be a close company if, on a full distribution of its distributable income, more than 50 per cent of that income would be paid directly or indirectly to 5 or fewer participators, or to participators who are directors.

• (4) A company shall not be treated as a close company—

• (a) if—

• (i) it is controlled by a company which is not a close company, or by 2 or more companies none of which is a close company, and

• (ii) it cannot be treated as a close company except by taking as one of the 5 or fewer participators requisite for its being so treated a company which is not a close company,

or

• (b) if it cannot be treated as a close company except by virtue of paragraph (c) of section 432(2) and would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.

• (5) References in subsection (4) to a close company shall be treated as including a company which if resident in the State would be a close company.

• (6) Where shares in any company (in this subsection referred to as “the first company”) are at any time after the 5th day of April, 1976, held on trust for an exempt approved scheme (within the meaning of Chapter 1 of Part 30), then, unless the scheme is established wholly or mainly for the benefit of persons who are, or are dependants of, employees or directors or past employees or directors of—

• (a) the first company,

• (b) an associated company of the first company,

• (c) a company under the control of any director, or associate of a director, of the first company or of 2 or more persons each of whom is such a director or associate, or

• (d) a close company,

the persons holding the shares shall for the purposes of subsection (4) be deemed to be the beneficial owners of the shares and in that capacity to be a company which is not a close company.

431 Certain companies with quoted shares not to be close companies. [CTA76 s95]

431.—(1) In this section, “share” includes “stock”.

• (2) For the purposes of this section—

• (a) a person shall be a principal member of a company—

• (i) if such person possesses a percentage of the voting power in the company of more than 5 per cent and, where there are more than 5 such persons, if such person is one of the 5 persons who possess the greatest percentages, or

• (ii) if (because 2 or more persons possess equal percentages of the voting power in the company) there are no such 5 persons, such person is one of the 6 or more persons (so as to include those 2 or more who possess equal percentages) who possess the greatest percentages,

• (b) a principal member's holding shall consist of the shares which carry the voting power possessed by the principal member, and

• (c) in determining the voting power which a person possesses, there shall be attributed to such person any voting power which for the purposes of section 432 would be attributed to such person under subsection (5) or (6) of that section.

• (3) Subject to this section, a company shall not be treated as being at any time a close company if—

• (a) shares in the company carrying not less than 35 per cent of the voting power in the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) have been allotted unconditionally to, or acquired unconditionally by, and are at that time beneficially held by, the public, and

• (b) any such shares have within the preceding 12 months been the subject of dealings on a recognised stock exchange, and the shares have within those 12 months been quoted in the official list of a recognised stock exchange.

• (4) Subsection (3) shall not apply to a company at any time when the total percentage of the voting power in the company possessed by all of the company's principal members exceeds 85 per cent.

• (5) For the purposes of subsection (3), shares in a company shall be deemed to be beneficially held by the public only if the shares—

• (a) are within subsection (6), and

• (b) are not within the exceptions in subsection (7),

and the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public shall be construed accordingly.

• (6) Shares are within this subsection (as being beneficially held by the public) if the shares—

• (a) are beneficially held by a company resident in the State which is not a close company, or by a company not so resident which would not be a close company if it were so resident,

• (b) are held on trust for an exempt approved scheme (within the meaning of Chapter 1 of Part 30), or

• (c) are not comprised in a principal member's holding.

• (7)
• (a) Shares shall be deemed not to be held by the public if the shares are held—

• (i) by any director, or associate of a director, of the company,

• (ii) by any company under the control of any such director or associate, or of 2 or more persons each of whom is such a director or associate,

• (iii) by an associated company of the company, or

• (iv) as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within subparagraph (ii) or (iii).

• (b) References in this subsection to shares held by any person include references to any shares the rights or powers attached to which could for the purposes of section 432 be attributed to that person under subsection (5) of that section.

432 Meaning of “associated company” and “control”. [CTA76 s102; FA96 s132(1) and Sch5 Pt1 par10(4)]

432.—(1) For the purposes of this Part, a company shall be treated as another company's associated company at a particular time if, at that time or at any time within one year previously, one of the 2 companies has control of the other company, or both companies are under the control of the same person or persons.

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

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

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

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

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

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

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

• (6) For the purposes of subsections (2) and (3), there may also be attributed to any person all the rights and powers of—

• (a) any company of which such person has, or such person and associates of such person have, control,

• (b) any 2 or more companies of which such person has, or such person and associates of such person have, control,

• (c) any associate of such person, or

• (d) any 2 or more associates of such person,

including the rights and powers attributed to a company or associate under subsection (5), but excluding those attributed to an associate under this subsection, and such attributions shall be made under this subsection as will result in the company being treated as under the control of 5 or fewer participators if it can be so treated.

433 Meaning of “participator”, “associate”, “director” and “loan creditor”. [CTA76 s103; FA97 s146(1) and Sch9 PtI par10(5)]

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

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

• (b) any loan creditor of the company,

• (c) any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company (construing “distributions” without regard to section 436 or 437) or any amounts payable by the company (in cash or in kind) to loan creditors by means of premium on redemption, and

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

• (2)
• (a) References in subsection (1) to being entitled to do anything apply where a person is entitled to do it at a future date or will at a future date be entitled to do it.

• (b) Subsection (1) is without prejudice to any particular provision of this Part requiring a participator in one company to be treated as being also a participator in another company.

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

• (b) For the purposes of this Part but subject to paragraph (c), “associate”, in relation to a participator, means—

• (i) any relative or partner of the participator,

• (ii) the trustee or trustees of any settlement in relation to which the participator is, or any relative (living or dead) of the participator is or was, a settlor (“settlement” and “settlor” having the same meanings respectively as in section 10), and

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

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

• (c) Paragraph (b)(iii) shall not apply so as to make an individual an associate as being entitled or eligible to benefit under a trust—

• (i) if the trust relates exclusively to an exempt approved scheme (within the meaning of Chapter 1 of Part 30), or

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

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

• (4) For the purposes of this Part, “director” includes any person—

• (a) occupying the position of director by whatever name called,

• (b) in accordance with whose directions or instructions the directors are accustomed to act,

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

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

• (5) In subsection (4)(d), “either on his or her own or with one or more associates” requires a person to be treated as owning or, as the case may be, controlling what any associate owns or controls, even if he or she does not own or control share capital on his or her own and, in subsection (3)(c)(ii), “either on his or her own or with his or her relatives” has a corresponding meaning.

• (6)
• (a) For the purposes of this Part but subject to paragraph (b), “loan creditor”, in relation to a company, means a creditor in respect of—

• (i) any debt incurred by the company for—

• (I) any money borrowed or capital assets acquired by the company,

• (II) any right to receive income created in favour of the company, or

• (III) consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on the debt),

or

• (ii) any redeemable loan capital issued by the company.

• (b) A person carrying on a business of banking shall not be deemed to be a loan creditor in respect of any loan capital issued or debt incurred by the company for money loaned by such person to the company in the ordinary course of that business.

• (7) A person who is not the creditor in respect of any debt or loan capital to which subsection (6) applies but nevertheless has a beneficial interest in that debt or loan capital shall to the extent of that interest be treated for the purposes of this Part as a loan creditor in respect of that debt or loan capital.

434 Distributions to be taken into account and meaning of “distributable income”, “investment income”, “estate income”, etc. [CTA76 s100; FA89 s27(1)]

434.—(1) In this section—

“distributable income” of a company for an accounting period means—

• (a) the income as computed in accordance with subsection (4), increased by the amount of the company's franked investment income for the accounting period reduced by the tax credit comprised in that income, but

• (b) where the aggregate of the amounts specified in paragraphs (d) to (g) of subsection (4) exceeds the income as computed in accordance with that subsection apart from those paragraphs, the amount of the excess shall, in computing the amount of the distributable income, be deducted from the amount of the company's franked investment income for the accounting period as so reduced;

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

“investment income” of a company means income other than estate income which, if the company were an individual, would not be earned income within the meaning of section 3, but does not include any interest or dividends on investments which, having regard to the nature of the company's trade, would be taken into account as trading receipts in computing trading income but for the fact that they have been subjected to tax otherwise than as trading receipts, or but for the fact that by virtue of section 129 they are not to be taken into account in computing income for corporation tax;

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

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

• (2) For the purposes of section 440, the distributions of a company for an accounting period shall be taken to be the aggregate of—

• (a) any dividends which are declared for or in respect of the accounting period and are paid or payable during the accounting period or within 18 months after the end of the accounting period, and

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

• (3) Where—

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

• (b) the dividend is paid or payable during the period of account or within 18 months after the end of the period of account, and

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

then, the proportion of the amount of the dividend to be treated for the purposes of subsection (2) as being for or in respect of the accounting period shall be the same as the proportion which that part of the period of account bears to the whole of that period.

• (4) For the purposes of subsection (1), the income of a company for an accounting period shall be the income for the accounting period, computed in accordance with the Corporation Tax Acts, exclusive of franked investment income, before deducting—

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

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

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

and after deducting—

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

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

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

• (g) any amount which is an allowable deduction—

• (i) in computing the total profits for the accounting period in respect of expenses of management by virtue of section 83(2), or

• (ii) against the total profits for the accounting period in respect of charges by virtue of section 243(2), and

• (h) the amount of the corporation tax which apart from section 448(2) would be payable by the company for the accounting period if the tax were computed on the basis of the income determined in accordance with the preceding provisions of this subsection.

• (5) For the purposes of section 440—

“distributable investment income” of a company for an accounting period means—

• (a) in a case where paragraph (b) of the definition of “distributable income” applies, the amount determined in accordance with that paragraph, and

• (b) in any other case, the sum of the following amounts—

• (i) the amount determined by applying to the amount of the distributable income exclusive of franked investment income (as reduced by the tax credit comprised in that income) the fraction—

A __ B

where—

A is the amount of the investment income taken into account in computing the tax mentioned in subsection (4)(h), and

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

and

• (ii) the amount of the franked investment income (as reduced by the tax credit comprised in that income),

but, in the case of a trading company, the distributable investment income shall be the amount determined in accordance with the preceding provisions of this definition reduced by 5 per cent;

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

C __ D

where—

C is the amount of the estate income taken into account in computing the tax mentioned in subsection (4)(h), and

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

but, in the case of a trading company, the distributable estate income shall be the amount determined in accordance with the preceding provisions of this definition reduced by 7.5 per cent.

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

• (7) Where a company is subject to any restriction imposed by law as regards the making of distributions, regard shall be had to this restriction in determining the amount of income on which a surcharge shall be imposed under section 440.

435 Information. [CTA76 s104]

435.—(1) The inspector may by notice in writing require any company which is, or appears to the inspector to be, a close company to furnish him or her within such time (not being less than 30 days) as may be specified in the notice with such particulars as he or she thinks necessary for the purposes of this Part.

• (2) Where for the purposes of this Part any person in whose name any shares are registered is so required by notice in writing by the inspector, such person—

• (a) shall state whether or not such person is the beneficial owner of the shares, and

• (b) if not the beneficial owner of the shares or any of them, shall furnish the name and address of the person or persons on whose behalf the shares are registered in such person's name.

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

• (4)
• (a) In this subsection, “securities” includes shares, stocks, bonds, debentures and debenture stock and any promissory note or other instrument evidencing indebtedness issued to a loan creditor of the company.

• (b) For the purposes of this Part, the inspector may by notice in writing require—

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

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

CHAPTER 2 Additional matters to be treated as distributions, charges to tax in respect of certain loans and surcharges on certain undistributed income

436 Certain expenses for participators and associates. [CTA76 s96]

436.—(1) Subject to the exceptions mentioned in section 130, “distribution”, in relation to a close company, includes, unless otherwise stated, any such amount as is required to be treated as a distribution by subsection (3).

• (2) For the purposes of this section, any reference to a participator includes an associate of a participator, and any participator in a company which controls another company shall be treated as being also a participator in that other company.

• (3)
• (a) Subject to paragraph (b), where a close company incurs expense in or in connection with the provision for any participator of living or other accommodation, entertainment, domestic or other services, or other benefits or facilities of whatever nature, the company shall be treated as making a distribution to such participator of an amount equal to so much of that expense as is not made good to the company by such participator.

• (b) Paragraph (a) shall not apply to expense incurred in or in connection with the provision of benefits or facilities for a person to whom section 118 applies as a director or employee of the company, or the provision for the spouse, children or dependants of any such person of any pension, annuity, lump sum, gratuity or other like benefit to be given on his or her death or retirement.

• (4) Any reference in subsection (3) to expense incurred in or in connection with any matter shall include a reference to a proper proportion of any expense incurred partly in or in connection with that matter, and section 119 shall apply for the purposes of subsection (3) as it applies for the purposes of section 118, references to subsection (3) being substituted for references to section 118(1).

• (5) Subsection (3) shall not apply if the company and the participator are both resident in the State and—

• (a) one is a subsidiary of the other or both are subsidiaries of a third company also so resident, and

• (b) the benefit to the participator arises on or in connection with the transfer of assets or liabilities by the company to the participator, or to the company by the participator.

• (6) The question whether one company is a subsidiary of another company for the purpose of subsection (5) shall be determined as if it were a question whether it is a 51 per cent subsidiary of the other company, except that the other company shall be treated as not being the owner of—

• (a) any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade,

• (b) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

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

• (7)
• (a) Where each of 2 or more close companies makes a payment to a person (in this paragraph referred to as “the first-mentioned person”) who is not a participator in that company, but is a participator in another of those companies, and the companies are acting in concert or under arrangements made by any person, then, each of those companies and any participator in it shall be treated as if the payment made to the first-mentioned person had been made by that company.

• (b) This subsection shall apply with any necessary modifications in relation to the giving of any consideration and to the provision of any facilities as it applies in relation to the making of a payment.

437 Interest paid to directors and directors' associates. [CTA76 s97]

437.—(1) In this section, “interest” includes any other consideration paid or given by the close company for the use of money advanced, or credit given, by any person, and references to interest paid shall be construed accordingly.

• (2) For the purposes of this section, a person shall have a material interest in a company if the person, either on the person's own or with any one or more of the person's associates, or if any associate of the person with or without any such other associates, is the beneficial owner of, or is able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent of the ordinary share capital of the company.

• (3) Subject to the exceptions mentioned in section 130(1), this section shall apply where in any accounting period any interest is paid by a close company to, or to an associate of, a person—

• (a) who is a director of the close company, or of any company which controls or is controlled by the close company, and

• (b) who has a material interest—

• (i) in the close company, or

• (ii) where the close company is controlled by another company, in that other company.

• (4) Where the total amount so paid to any person in the accounting period exceeds the limit imposed in that person's case, the excess shall be deemed to be a distribution made by the close company to that person.

• (5) The limit shall be calculated in the first instance as an overall limit applying to the aggregate of all interest which is within subsection (3) and which was paid by the close company in the accounting period and, where there are 2 or more different recipients, that overall limit shall be apportioned between them according to the amounts of interest paid to them respectively.

• (6) The overall limit shall be a sum equal to interest at 13 per cent per annum or such other rate of interest as the Minister for Finance may from time to time prescribe on whichever is the lesser of—

• (a) the total of the loans, advances and credits on which the interest within subsection (3) was paid by the close company in the accounting period or, if the total was different at different times in the accounting period, the average total over the accounting period, and

• (b) the nominal amount of the issued share capital of the close company plus the amount of any share premium account (or other comparable account by whatever name called) of the company, taking both amounts as at the beginning of the accounting period.

• (7) This section shall apply subject to section 436(7).

438 Loans to participators, etc. [CTA76 s98(1) to (7) and (9); FA83 s35]

438.—(1) (a) Subject to this section, where a close company, otherwise than in the ordinary course of a business carried on by it which includes the lending of money, makes any loan or advances any money to an individual who is a participator in the company or an associate of a participator, the company shall be deemed for the purposes of this section to have paid in the year of assessment in which the loan or advance is made an annual payment of an amount which, after deduction of income tax at the standard rate for the year of assessment in which the loan or advance is made, is equal to the amount of the loan or advance.

• (b) Section 239 shall apply for the purposes of the charge, assessment and recovery of the tax referred to in paragraph (a).

• (c) The annual payment referred to in paragraph (a) shall not be a charge on the company's income within the meaning of section 243.

• (2) For the purposes of this section, the cases in which a close company is to be regarded as making a loan to any person shall include a case where—

• (a) that person incurs a debt to the close company, or

• (b) a debt due from that person to a third person is assigned to the close company,

and in such a case the close company shall be regarded as making a loan of an amount equal to the debt; but paragraph (a) shall not apply to a debt incurred for the supply by the close company of goods or services in the ordinary course of its trade or business unless the period of credit given exceeds 6 months or is longer than that normally given to the company's customers.

• (3) Subsection (1) shall not apply to a loan made to a director or employee of a close company, or of an associated company of the close company, if—

• (a) the amount of the loan, or that amount when taken together with any other outstanding loans which were made by the close company or any of its associated companies to the borrower, or to the spouse of the borrower, does not exceed £15,000,

• (b) the borrower works full-time for the close company or any of its associated companies, and

• (c) the borrower does not have a material interest in the close company or in any associated company of the close company but, if the borrower acquires such a material interest at a time when the whole or part of any such loan remains outstanding, the close company shall be regarded as making to the borrower at that time a loan of an amount equal to the sum outstanding.

• (4)
• (a) Where, after a company has been assessed to tax under this section in respect of any loan or advance, the loan or advance or any part of it is repaid to the company, relief shall be given from that tax or a proportionate part of that tax by discharge or repayment.

• (b) Relief under this subsection shall be given on a claim which shall be made within 10 years from the end of the year of assessment in which the repayment is made.

• (5) Where under arrangements made by any person otherwise than in the ordinary course of a business carried on by that person—

• (a) a close company makes a loan or advance which apart from this subsection does not give rise to any charge on the company under subsection (1), and

• (b) some person other than the close company makes a payment or transfers property to, or releases or satisfies (in whole or in part) a liability of, an individual who is a participator in the company or an associate of a participator,

then, unless in respect of the matter referred to in paragraph (b) there is to be included in the total income of the participator or associate an amount not less than the loan or advance, this section shall apply as if the loan or advance had been made to the participator or associate.

• (6) In subsections (1) and (5)(b), the references to an individual shall apply also to a company receiving the loan or advance in a fiduciary or representative capacity and to a company not resident in the State.

• (7) For the purposes of this section, any participator in a company which controls another company shall be treated as being also a participator in that other company, and section 437(2) shall apply for the purpose of determining whether a person has for the purpose of subsection (3) a material interest in a company.

• (8) For the purposes of this section and in relation to any loan or advance made on or after the 23rd day of May, 1983, section 430(1) shall apply as if paragraph (b) of that section were deleted.

439 Effect of release, etc. of debt in respect of loan under section 438. [CTA76 s99(1), (2) and (4)]

439.—(1) Subject to this section, where a company is assessed or liable to be assessed under section 438 in respect of a loan or advance and releases or writes off the whole or part of the debt in respect of the loan or advance, then—

• (a) for the purpose of computing the total income of the person to whom the loan or advance was made, a sum equal to the amount so released or written off shall be treated as income received by such person after deduction of income tax by virtue of section 238 (at the standard rate for the year of assessment in which the whole or part of the debt was released or written off) from a corresponding gross amount,

• (b) no repayment of income tax shall be made in respect of that income,

• (c) notwithstanding paragraph (a), the income included by virtue of that paragraph in the total income of that person shall be treated for the purposes of sections 237 and 238 as not brought into charge to income tax, and

• (d) for the purposes of section 59(ii), any amount to be treated as income by virtue of paragraph (a) shall be treated as if income tax had been deducted from that amount at the standard rate for the year of assessment in which the whole or part of the debt was released or written off; but, where such amount (or the aggregate of such amounts if more than one) exceeds the amount of the individual's taxable income charged at the standard rate or the higher rate, the amount of the credit under section 59(ii) in respect of the excess shall not, notwithstanding anything in section 59, exceed the amount of the income tax, if any, charged on that excess.

• (2) If the loan or advance referred to in subsection (1) was made to a person who has since died, or to trustees of a trust which has come to an end, this section, instead of applying to the person to whom it was made, shall apply to the person from whom the debt is due at the time of release or writing off (and accordingly, if it is due from such person as personal representative within the meaning of Chapter 1 of Part 32, the amount treated as received by such person shall be, as regards the higher rate of tax, included for the purposes of that Chapter in the aggregate income of the estate), and subsection (1) shall apply accordingly with the necessary modifications.

• (3) This section shall be construed together with section 438.

440 Surcharge on undistributed investment and estate income. [CTA76 s101; FA90 s47; FA97 s146(1) and Sch9 PtI par10(4)]

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

• (b) Notwithstanding paragraph (a)—

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

• (I) £500 or, if the accounting period is less than 12 months, £500 proportionately reduced, and

• (II) where the company has one or more associated companies, £500 divided by one plus the number of those associated companies or, if the accounting period is less than 12 months, £500 proportionately reduced divided by one plus the number of those associated companies;

• (ii) where the excess is greater than the lesser amount on which by virtue of subparagraph (i) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to 80 per cent of the amount by which the excess is greater than that lesser amount.

• (2) Where the aggregate of—

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

• (b) any amount which, on or after the 27th day of November, 1975, was transferred to capital reserves or was used to issue shares, stock or securities as paid up otherwise than for new consideration (within the meaning of section 135) or was otherwise used so as to reduce the amount referred to in paragraph (a),

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

• (3) In applying subsection (1) to any accounting period of a company, an associated company which has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period) shall be disregarded.

• (4) In determining how many associated companies a company has in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and 2 or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.

• (5) Where any amount on which a surcharge is made on a company under this section is distributed, the tax credit in respect of the distribution shall, except where otherwise provided, be that provided for by section 136.

• (6) A surcharge made under this section on a company in respect of an accounting period (in this subsection referred to as “the first-mentioned accounting period”)—

• (a) shall be charged on the company for the earliest accounting period which ends on or after a day which is 12 months after the end of the first-mentioned accounting period, and

• (b) shall be treated as corporation tax chargeable for that accounting period;

but where there is no such accounting period so ending, the surcharge shall be charged for, and treated as corporation tax of, the accounting period in respect of which it is made.

• (7) The provisions of the Corporation Tax Acts relating to—

• (a) assessments to corporation tax,

• (b) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court), and

• (c) the collection and recovery of corporation tax,

shall apply in relation to a surcharge made under this section as they apply to corporation tax charged otherwise than under this section.

441 Surcharge on undistributed income of service companies. [CTA76 s162(1) to (6); FA90 s48; FA95 s55(1); FA96 s52(1); FA97 s146(1) and Sch9 PtI par10(9)]

441.—(1) In this section, “service company” means, subject to subsection (2)—

• (a) a close company whose business consists of or includes the carrying on of a profession or the provision of professional services,

• (b) a close company having or exercising an office or employment, or

• (c) a close company whose business consists of or includes the provision of services or facilities of whatever nature to or for—

• (i) a company within either of the categories referred to in paragraphs (a) and (b),

• (ii) an individual who carries on a profession,

• (iii) a partnership which carries on a profession,

• (iv) a person who has or exercises an office or employment, or

• (v) a person or partnership connected with any person or partnership referred to in subparagraphs (i) to (iv);

but the provision by a close company of services or facilities to or for a person or partnership not connected with the company shall be disregarded for the purposes of this paragraph.

• (2) Where the principal part of a company's income which is chargeable to corporation tax under Cases I and II of Schedule D and Schedule E is not derived from—

• (a) carrying on a profession,

• (b) providing professional services,

• (c) having or exercising an office or employment,

• (d) providing services or facilities (other than providing services or facilities to or for a person or partnership not connected with the company) to or for any person or partnership referred to in subparagraphs (i) to (v) of subsection (1)(c), or

• (e) any 2 or more of the activities specified in paragraphs (a) to (d),

the company shall be deemed not to be a service company.

• (3) For the purposes of this section—

• (a) a partnership shall be treated as connected with a company or individual (and a company or individual shall be treated as connected with a partnership) if any one of the partners in the partnership is connected with the company or individual, and

• (b) a partnership shall be treated as connected with another partnership if any one of the partners in the partnership is connected with any one of the partners in the other partnership.

• (4)
• (a) Where for an accounting period of a service company the aggregate of—

• (i) 50 per cent of the distributable income, and

• (ii) 50 per cent of the aggregate of the distributable investment income and the distributable estate income,

exceeds the distributions of the company for the accounting period, there shall be charged on the company an additional duty of corporation tax (in this section referred to as a “surcharge”) amounting to 15 per cent of the excess.

• (b) Notwithstanding paragraph (a)—

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

• (I) £500 or, if the accounting period is less than 12 months, £500 proportionately reduced, and

• (II) where the company has one or more associated companies, £500 divided by one plus the number of those associated companies or, if the accounting period is less than 12 months, £500 proportionately reduced divided by one plus the number of those associated companies;

• (ii) where the excess is greater than the lesser amount on which by virtue of subparagraph (i) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to 80 per cent of the amount by which the excess is greater than that lesser amount;

• (iii) the surcharge shall apply to so much of the excess calculated under this subsection in respect of an accounting period of a company as is not greater than the excess of the aggregate of the distributable investment income and the distributable estate income of the accounting period over the distributions of the company for the accounting period as if the reference in this subsection apart from this subparagraph to 15 per cent were a reference to 20 per cent.

• (5) Section 440(1) shall not apply in relation to a service company, but subsections (2) to (7) of section 440 shall apply in relation to a surcharge made under this section as they apply in relation to a surcharge made under section 440 with the substitution in subsections (2) and (3) of section 440 of a reference to subsection (4) of this section for the reference to subsection (1) of that section.

• (6)
• (a) Subsections (2), (3), (6) and (7) of section 434 shall apply for the purposes of this section as they apply for the purposes of section 434 or 440, as the case may be.

• (b) For the purposes of this section—

• (i) the income of a company for an accounting period shall be its income computed for that period in accordance with section 434(4);

• (ii) “distributable income”, “distributable investment income” and “distributable estate income” of a company for an accounting period have the same meanings respectively as in subsections (1) and (5) of section 434 with the substitution for the reference to a trading company in each place where it occurs in subsection (5) of that section of a reference to a service company.

PART 14 Taxation of Companies Engaged in Manufacturing Trades, Certain Trading Operations Carried on in Shannon Airport and Certain Trading Operations Carried on in the Custom House Docks Area

CHAPTER 1 Interpretation and general

442 Interpretation (Part 14). [FA80 s38 and s40; FA90 s40 and s41(6); FA91 s35]

442.—(1) In this Part—

“merchandise” means goods other than goods within the meaning of section 443;

“relevant accounting period” means an accounting period or part of an accounting period of a company ending on or before—

• (a) where subsection (11) or (12) of section 443 applies, the 31st day of December, 2000, or

• (b) in any other case, the 31st day of December, 2010;

“relief under this Part” means the reduction of corporation tax pro vided for in section 448(2).

• (2) For the purposes of this Part, where a part only of an accounting period of a company is a relevant accounting period, all amounts referable to the accounting period shall be apportioned, on the basis of the proportion which the length of the relevant accounting period bears to the length of the accounting period of the company, for the purpose of ascertaining any amount required to be taken into account in respect of the relevant accounting period.

443 Meaning of “goods”. [FA80 s39; FA81 s17(a); FA84 s45(b); FA87 s28(3), s29 and s31; S.I. No. 61 of 1988; FA90 s41(1); FA91 s32(1); FA92 s47; FA93 s44(1) and s47(3); FA94 s48(1); FA97 s146(1) and Sch9 PtI par11(1)]

443.—(1) (a) In this Part, “goods” means, subject to this section, goods manufactured in the State in the course of a trade by the company which, in relation to the relevant accounting period, is the company claiming relief under this Part in relation to the trade.

• (b) Where—

• (i) there are 2 companies one of which manufactures goods and the other of which sells the goods in the course of its trade, and

• (ii) one of the companies is a 90 per cent subsidiary of the other company or both companies are 90 per cent subsidiaries of a third company,

any goods manufactured in the State by one of the companies shall, when sold in the course of its trade by the other company, be deemed to have been manufactured in the State by that other company.

• (c) Sections 412 to 417 shall apply for the purposes of paragraph (b)(ii) as they apply for the purposes of Chapter 5 of Part 12.

• (2) The definition of “goods” shall include fish produced in the State on a fish farm in the course of a trade by the company which, in relation to the relevant accounting period, is the company claiming relief under this Part in relation to the trade, and references in this Part to manufactured shall be construed, in relation to fish, as including references to produced and cognate words shall be construed accordingly.

• (3) The definition of “goods” shall include plants cultivated in the State, by the process of plant biotechnology known as “micro-propagation” or “plant cloning”, in the course of a trade by the company which, in relation to the relevant accounting period, is the company claiming relief under this Part in relation to the trade, and references in this Part to manufactured shall be construed, in relation to such plants, as including references to cultivated and cognate words shall be construed accordingly.

• (4) The definition of “goods” shall include—

• (a) meat processed in the State in an establishment approved and inspected in accordance with the European Communities (Fresh Meat) Regulations, 1987 (S.I. No. 284 of 1987), and

• (b) subject to subsections (5) and (6)(a)(iii), fish which has been subjected to a process of manufacture in the State,

in the course of a trade by the company which, in the relevant accounting period, is the company claiming relief under this Part in relation to the trade, and references in this Part to manufactured and cognate words shall be construed accordingly.

• (5)
• (a) The definition of “goods” shall not include goods sold by retail by the company claiming relief under this Part.

• (b) For the purposes of paragraph (a), goods shall be deemed not to be sold by retail if they are sold—

• (i) to a person who carries on a trade of selling goods of the class to which the goods so sold to such person belong,

• (ii) to a person who uses goods of that class for the purposes of a trade carried on by such person, or

• (iii) to a person, other than an individual, who uses goods of that class for the purposes of an undertaking carried on by such person.

• (6) Without prejudice to the generality of subsection (1) and subject to subsections (2) to (4) and (8) to (15), goods shall not for the purposes of this section be regarded as manufactured if they are goods which result from a process—

• (a) which consists primarily of any one of the following—

• (i) dividing (including cutting), purifying, drying, mixing, sorting, packaging, branding, testing or applying any other similar process to a product, produce or material that is acquired in bulk so as to prepare that product, produce or material for sale or distribution, or any combination of such processes,

• (ii) applying methods of preservation, pasteurisation or maturation or other similar treatment to any foodstuffs, or any combination of such processes,

• (iii) cooking, baking or otherwise preparing food or drink for human consumption which is intended to be consumed, at or about the time it is prepared, whether or not in the building or structure in which it is prepared or whether or not in the building to which it is delivered after being prepared,

• (iv) improving or altering any articles or materials without imposing on them a change in their character, or

• (v) repairing, refurbishing, reconditioning, restoring or other similar processing of any articles or materials, or any combination of such processes,

or

• (b) which, subject to subsection (1)(b), is not carried out by the company claiming relief under this Part.

• (7)
• (a) In this subsection, “the intervention agency” means the Minister for Agriculture and Food, when exercising or performing any power or function conferred on that Minister by regulation 3 of the European Communities (Common Agricultural Policy) (Market Intervention) Regulations, 1973 (S.I. No. 24 of 1973), and any other person when exercising or performing any corresponding power or function in any Member State of the European Communities.

• (b) Notwithstanding any other provision of the Tax Acts, the definition of “goods” shall not include goods sold to the intervention agency.

• (c) For the purposes of paragraph (b), the sale of goods to a person other than the intervention agency shall be deemed to be a sale to the intervention agency if and to the extent that those goods are ultimately sold to the intervention agency; but the rendering to the intervention agency of services consisting of the subjecting of meat belonging to the agency to a process of manufacture carried out in an establishment specified in subsection (4)(a) shall not be regarded as a sale of goods to the agency.

• (8) For the purpose of relief under this Part, in relation to a company that carries on a trade which consists of or includes the repairing of ships—

• (a) repairs carried out in the State to a ship shall be regarded as the manufacture in the State of goods, and

• (b) any amount receivable in payment for such repairs so carried out shall be regarded as an amount receivable from the sale of goods.

• (9)
• (a) In this subsection, “engineering services” means design and planning services the work on the rendering of which is carried out in the State in connection with chemical, civil, electrical or mechanical engineering works executed outside the territories of the Member States of the European Communities.

• (b) For the purpose of relief under this Part, in relation to a company which carries on a trade which consists of or includes the rendering of engineering services—

• (i) the rendering in the State of such services shall be regarded as the manufacture in the State of goods, and

• (ii) any amount receivable in payment for such services so rendered shall be regarded as an amount receivable from the sale of goods.

• (10)
• (a) In this subsection, “computer services” means one or more of the following—

• (i) data processing services,

• (ii) software development services, and

• (iii) technical or consultancy services relating to either or both services specified in subparagraphs (i) and (ii),

the work on the rendering of which is carried out in the State in the course of a service undertaking in respect of which—

• (I) (A) an employment grant was made by the Industrial Development Authority under section 25 of the Industrial Development Act, 1986, or

• (B) an employment grant was made by the Industrial Development Agency (Ireland) or Forbairt, as may be appropriate, under section 12(2) of the Industrial Development Act, 1993,

• (II) a grant under section 3, or financial assistance under section 4, of the Shannon Free Airport Development Company Limited (Amendment) Act, 1970, was made available by the Shannon Free Airport Development Company Limited, or

• (III) financial assistance was made available by Údarás na Gaeltachta under section 10 of the Údarás na Gaeltachta Act, 1979.

• (b) For the purposes of relief under this Part, in relation to a company carrying on a trade which consists of or includes the rendering of computer services—

• (i) the rendering of the computer services shall be regarded as the manufacture in the State of goods, and

• (ii) any amount receivable in payment for the rendering of the computer services shall be regarded as an amount receivable from the sale of goods.

• (11)
• (a) In this subsection, “qualifying shipping activities” and “qualifying shipping trade” have the same meanings respectively as in section 407.

• (b) For the purposes of relief under this Part, in relation to a company carrying on a qualifying shipping trade—

• (i) qualifying shipping activities carried on in the course of the qualifying shipping trade shall be regarded as the manufacture in the State of goods, and

• (ii) any amount receivable from the carrying on of qualifying shipping activities shall be regarded as an amount receivable from the sale of goods.

• (12)
• (a) In this subsection—

“export goods” means goods which, in relation to the manufacturer of those goods, are goods for the purposes of this Part and which are exported by a Special Trading House which is not the manufacturer of the goods but which, in relation to the relevant accounting period, is the company claiming relief from tax by virtue of this subsection, where the selling by the Special Trading House of the goods so exported is selling by wholesale;

“selling by wholesale” means selling goods of any class to a person who carries on a business of selling goods of that class or who uses goods of that class for the purposes of a trade or undertaking carried on by such person;

“Special Trading House” means a company which exists solely for the purpose of carrying on a trade consisting solely of the selling of export goods manufactured by a firm which employs less than 200 persons.

• (b) For the purposes of this subsection, goods shall be deemed to be exported when they are transported out of the State in the course of the selling by wholesale of those goods and are not subsequently transported into the State in the course of the selling by wholesale of those goods.

• (c) For the purposes of relief under this Part, in relation to a Special Trading House—

• (i) export goods when exported in the course of its trade by a Special Trading House shall be deemed to have been manufactured by the Special Trading House, notwithstanding that the manufacturer has claimed, or is entitled to claim, relief under this Part in respect of the sale by it of those goods, and

• (ii) any amount receivable by the Special Trading House in payment for the sale of export goods shall be regarded as an amount receivable from the sale of goods.

• (d) This subsection shall apply subject to the Export Promotion (Amendment) Act, 1987.

• (13) For the purposes of relief under this Part, in relation to a company which carries on a trade, not being a relevant trading operation within the meaning of section 445(7)(a), which consists of or includes the repair or maintenance of aircraft, aircraft engines or components—

• (a) such repair or maintenance carried out in the State shall be regarded as the manufacture in the State of goods, and

• (b) any amount receivable in payment for such repair or maintenance so carried out shall be regarded as an amount receivable from the sale of goods.

• (14)
• (a) In this subsection, “film” means a film which is produced—

• (i) on a commercial basis with a view to the realisation of profit, and

• (ii) wholly or principally for exhibition to the public in cinemas or by means of television broadcasting or for training or documentary purposes,

and in respect of which not less than 75 per cent of the work on the production is carried out in the State.