Taxes Consolidation Act 1997

(5) (a) Notwithstanding any other provision of the Tax Acts, where an allowance or deduction has been given by virtue of this section in respect of any expenditure, no other allowance or deduction shall be given by virtue of any provision of the Tax Acts, including this section, in respect of that expenditure.

(b) Paragraph (b) of section 261 shall apply to a company for as long as it is deemed by virtue of subsection (2) to be carrying on a trade of working a qualifying mine as if “who is not a company within the charge to corporation tax in respect of the payment” were deleted from that paragraph.

680 Annual allowance for mineral depletion. [F(TPCM)A74 s8; CTA76 s140 and Sch2 PtI par37]

680.—(1) Where a person carrying on the trade of working a qualifying mine incurs after the 31st day of March, 1974, capital expenditure on the acquisition of a scheduled mineral asset entitling such person to work deposits of scheduled minerals and in connection with that trade commences to work those deposits, such person shall be entitled to mine development allowances under section 670 in respect of that capital expenditure to the extent that such person would have been entitled to such allowances if that capital expenditure had been capital expenditure incurred in the development of the mine, but section 673 shall not apply in respect of any such expenditure.

(2) Where a person who commences to carry on the trade of working a qualifying mine on or after the 6th day of April, 1974, incurred capital expenditure before that date on the acquisition of a scheduled mineral asset in connection with that mine, such person shall for the purposes of this section be deemed to have incurred that expenditure on the day on which such person commences to carry on that trade, and subsection (1) shall apply accordingly.

681 Allowance for mine rehabilitation expenditure. [F(TPCM)A74 s8A(1) to (9); FA96 s34; FA97 s146(1) and Sch9 PtI par7(2)]

681.— (1) (a) In this section—

“integrated pollution control licence” means a licence granted under section 83 of the Environmental Protection Agency Act, 1992;

“mine rehabilitation fund”, in relation to a qualifying mine, means a fund—

(i) which consists of amounts paid by a person carrying on the trade of working a qualifying mine to another person (in this section referred to as “the fund holder”) not connected with the first-mentioned person,

(ii) which is obliged to be maintained under the terms—

(I) of a State mining facility, or

(II) of any other agreement in writing to which the Minister is a party and to which the State mining facility is subject,

(iii) the sole purpose of which is to have available at the time a qualifying mine ceases to be worked such amount as is specified in a certificate given by the Minister under subsection (2) as being the amount which in the Minister's opinion could reasonably be expected to be necessary to meet rehabilitation expenditure in relation to the qualifying mine, and

(iv) no part of which may be paid to the person, or a person connected with that person, who is working or has worked the qualifying mine except where—

(I) the fund holder has been authorised in writing by the Minister, and by either or both the relevant local authority and the Environmental Protection Agency, to make a payment to the person or the connected person, as the case may be, for the purposes of incurring rehabilitation expenditure in relation to the qualifying mine, or

(II) an amount may be paid to the person or the connected person, as the case may be, after a certificate of completion of rehabilitation in relation to the qualifying mine has been submitted to and approved by—

(A) the Minister, and

(B) either or both the relevant local authority and the Environmental Protection Agency;

“the Minister” means the Minister for the Marine and Natural Resources;

“qualifying mine” means a mine being worked for the purpose of obtaining scheduled minerals, dolomite and dolomitic limestone, calcite and gypsum, or any of those minerals;

“rehabilitation expenditure” means expenditure incurred in connection with the rehabilitation of the site of a mine or part of a mine, being expenditure incurred by a person who has ceased to work the mine in order to comply with any condition—

(i) of a State mining facility,

(ii) subject to which planning permission for development consisting of the mining and working of minerals was granted, or

(iii) subject to which an integrated pollution control licence for an activity specified in the First Schedule to the Environmental Protection Agency Act, 1992, was granted;

“rehabilitation” includes landscaping and the carrying out of any activities which take place after the mine ceases to be worked and which are required by a condition subject to which planning permission for development consisting of the mining and working of minerals, or an integrated pollution control licence, was granted;

“relevant local authority”, in relation to a qualifying mine, means the council of a county or the corporation of a county or other borough or, where appropriate, the urban district council, in whose functional area the mine is situated;

“relevant payments” means payments specified in accordance with paragraph (b)(iii) of subsection (2) in a certificate given under that subsection and which are paid at or about the time specified in the certificate;

“State mining facility”, in relation to a mine, means a State mining lease, a State mining licence or a State mining permission granted by the Minister in relation to the mine.

(b) For the purposes of this section—

(i) any reference to the site of a mine includes a reference to land used in connection with the working of the mine, and

(ii) the net cost to any person of the rehabilitation of the site of a mine shall be the excess, if any, of rehabilitation expenditure over any receipts attributable to the rehabilitation (whether for spoil or other assets removed from the site or for tipping rights or otherwise).

(c) For the purposes of this section, subsections (2) and (3) of section 306 shall apply in determining the chargeable period (being a year of assessment) for which an allowance is to be made under this section.

(2) (a) Where in relation to a fund the Minister is of the opinion that—

(i) the matters set out in paragraphs (i), (ii) and (iv) of the definition of “mine rehabilitation fund” are satisfied, and

(ii) the sole purpose of the fund is to have available at the time a qualifying mine ceases to be worked such amount as could reasonably be expected to be necessary to meet rehabilitation expenditure in relation to the qualifying mine,

the Minister may give a certificate to that effect.

(b) A certificate given under paragraph (a) shall, in addition to the information specified in that paragraph, specify—

(i) the number of years, being the Minister's opinion of the life (in this section referred to as “the estimated life”) of the mine remaining at the time the certificate is given,

(ii) the amount which in the Minister's opinion could reasonably be expected to be necessary to meet rehabilitation expenditure in relation to the qualifying mine, and

(iii) the amounts (in this section referred to as “the scheduled payments”) required to be paid to the fund holder, and the times at which such amounts are to be paid, so as to achieve the purpose specified in paragraph (a)(ii).

(c) The Minister may, by notice in writing given to a person to whom a certificate has been given under this section, amend the certificate.

(3) (a) An allowance equal to so much of any rehabilitation expenditure in relation to a qualifying mine as does not exceed the net cost of the rehabilitation of the site of the mine shall be made to a person under this section for the chargeable period related to the expenditure.

(b) Expenditure incurred by a person after the person ceases to carry on the trade of working a qualifying mine shall be treated as having been incurred on the last day on which the person carried on the trade.

(4) (a) Subject to paragraphs (b) and (c), where the Minister has issued a certificate under subsection (2) in respect of a mine rehabilitation fund related to a qualifying mine, an allowance shall be made to the person who—

(i) is working the qualifying mine, and

(ii) is obliged to make relevant payments to the fund holder in relation to the fund,

for any chargeable period which falls wholly or partly in the period (in this subsection referred to as “the funding period”) commencing on the date on which the Minister gives the certificate and ending at the end of the estimated life of the mine, and the amount of the allowance shall be an amount determined by the formula—

E	N __ 12		1 __ L

where—

E is the aggregate of the scheduled payments,

N is the number of months in the chargeable period, or the part of the chargeable period falling in the funding period, and

L is the number of years in the estimated life of the mine.

(b) The aggregate of the amounts of allowances under this subsection for a chargeable period and all preceding chargeable periods shall not exceed the aggregate of the amounts of relevant payments made in the chargeable period or its basis period and in all preceding chargeable periods or their basis periods.

(c) Where effect cannot be given to an allowance or part of an allowance under this subsection for a chargeable period by virtue of paragraph (b), the allowance or the part of the allowance, as the case may be, shall be added to the amount of an allowance under this subsection for the following chargeable period and, subject to paragraph (b), shall be deemed to be part of the allowance for that period or, if there is no such allowance for that period, shall be deemed to be the allowance for that period, and so on for succeeding periods.

(5) Where the Minister by notice in writing amends a certificate under subsection (2)(c) in a chargeable period or its basis period—

(a) if the aggregate of the amounts of allowances made under subsection (4) for the chargeable period and all preceding chargeable periods exceeds the aggregate of the amounts of allowances which would have been made under that subsection for those chargeable periods if the certificate had been amended in accordance with the notice at the time the certificate was given, an amount equal to the amount of the excess shall be treated as a trading receipt of the chargeable period in which, or in the basis period for which, the certificate was amended, and

(b) if the aggregate of the amounts of allowances which would have been made under subsection (4) for the chargeable period and all preceding chargeable periods if the certificate had been amended in accordance with the notice at the time the certificate was given exceeds the aggregate of the amounts of allowances made under that subsection for those chargeable periods, the allowance under subsection (4) for the chargeable period shall, subject to subsection (4)(b), be increased by an amount equal to the excess.

(6) (a) Subject to paragraph (b), an amount received by a person who is working or has worked a qualifying mine, or by a person connected with such a person, from the fund holder of a mine rehabilitation fund in relation to the qualifying mine, or otherwise in connection with the mine rehabilitation fund, shall be treated as trading income of the person in accordance with this section.

(b) The amount to be treated as trading income for a chargeable period shall not exceed the excess of the aggregate of the amounts of allowances made under subsections (4) and (5) in that chargeable period and in any preceding chargeable periods over the aggregate amounts treated under this subsection or subsection (5) as trading income for all preceding chargeable periods.

(c) An amount to be treated under this subsection as trading income of a person shall be treated as income of—

(i) where the amount is received at any time when the person is working the qualifying mine, the chargeable period in which, or in the basis period for which, the amount is received, and

(ii) in any other case, the chargeable period in which the mine ceases to be worked.

(d) Notwithstanding paragraph (c), where an amount is to be treated as income of a chargeable period in accordance with subparagraph (ii) of that paragraph, the amount shall be assessed for the chargeable period in which, or in the basis period for which, the amount is received, and details of the receipt of the amount shall be included in the return required to be made by the person under section 951 for that chargeable period.

(7) Where a person (in this subsection referred to as “the first-mentioned person”) ceases to work a qualifying mine and any obligations of the first-mentioned person to rehabilitate the site of the mine are transferred to any other person, that other person shall be treated for the purposes of this section as if that other person had worked the qualifying mine and as if everything done to or by the first-mentioned person had been done to or by that other person.

(8) As respects any person who incurs rehabilitation expenditure in respect of which an allowance is made under subsection (3)—

(a) rehabilitation expenditure shall not otherwise be deductible in computing income of the person for any purpose of income tax or corporation tax,

(b) an allowance shall not be made in respect of the expenditure under any provision of the Tax Acts other than this section, and

(c) to the extent that any receipts are taken into account under subsection (1)(b)(ii) to determine the net cost of the rehabilitation of the site of a mine, those receipts shall not constitute income of the person for any purpose of income tax or corporation tax.

(9) An allowance under this section made to a person who is carrying on a trade of working a mine shall be made in taxing that trade, and section 304(4) shall apply in relation to an allowance under subsection (4) as it applies in relation to allowances to be made under Part 9.

682 Marginal mine allowance. [F(TPCM)A74 s10; CTA76 s140(1), s164, Sch2 PtI par38 and Sch3 PtII]

682.—(1) In this section, “marginal mine” means a qualifying mine in respect of which the Minister for the Marine and Natural Resources gives a certificate stating that that Minister is satisfied that the profits derived or to be derived from the working of that mine are such that, if tax is to be charged on those profits in accordance with the Income Tax Acts, other than this section, the mine is unlikely to be worked or to continue to be worked.

(2) The Minister for Finance, after consultation with the Minister for the Marine and Natural Resources, may direct in respect of a marginal mine that for any particular year of assessment the tax chargeable on the profits of that qualifying mine shall be reduced to such amount (including nil) as may be specified by the Minister for Finance.

(3) Where a person is carrying on the trade of working a qualifying mine in respect of which the Minister for Finance gives a direction under subsection (2) in respect of a year of assessment, an allowance (which shall be known as a “marginal mine allowance”) shall be made as a deduction in charging the profits of that trade to income tax for that year of assessment of such amount or amounts as will ensure that the tax charged in respect of the profits of that trade shall equal the amount specified by that Minister.

(4) This section shall apply for corporation tax as it applies for income tax, and the references to the Income Tax Acts, to a year of assessment and to charging the profits of that trade to income tax shall apply as if they were respectively references to the Corporation Tax Acts, to an accounting period and to computing the profits of that trade for the purposes of corporation tax.

683 Charge to tax on sums received from sale of scheduled mineral assets. [F(TPCM)A74 s11; CTA76 s140(1) and Sch2 PtI par39; FA81 s9(e)]

683.—(1) In this section—

“chargeable period” means an accounting period of a company or a year of assessment;

any reference to the sale of a right to a scheduled mineral asset includes a reference to the grant of a licence to work scheduled minerals.

(2) Where a person resident in the State sells any scheduled mineral asset and the net proceeds of the sale consist wholly or partly of a capital sum, the person shall, subject to this section, be charged to tax under Case IV of Schedule D for the chargeable period in which the sum is received by the person on an amount equal to that sum; but where the person is an individual who, not later than 24 months after the end of the year of assessment in which the sum is paid, elects by notice in writing to the inspector to be charged to tax for that year of assessment and for each of the 5 succeeding years of assessment on an amount equal to one-sixth of that sum, the person shall be so charged.

(3) (a) In this subsection, “tax” shall mean income tax, unless the seller of the scheduled mineral asset, being a company, would be within the charge to corporation tax in respect of any proceeds of the sale not consisting of a capital sum.

(b) Subject to paragraph (c), where a person not resident in the State sells any scheduled mineral asset and the net proceeds of the sale consist wholly or partly of a capital sum, then—

(i) the person shall be charged to tax in respect of that sum under Case IV of Schedule D for the chargeable period in which the sum is received by the person, and

(ii) section 238 shall apply to that sum as if it were an annual payment payable otherwise than out of profits or gains brought into charge to tax.

(c) Where the person referred to in paragraph (b) is an individual who, not later than 24 months after the end of the year of assessment in which the sum is paid elects by notice in writing to the Revenue Commissioners that the sum shall be treated for the purpose of tax for that year and for each of the 5 succeeding years as if one-sixth of that sum were included in his or her income chargeable to tax for each of those years respectively, it shall be so treated, and all such repayments and assessments of tax for each of those years shall be made as are necessary to give effect to the election; but—

(i) the election shall not affect the amount of tax to be deducted and accounted for under section 238,

(ii) where any sum is deducted under section 238, any adjustments necessary to give effect to the election shall be made by means of repayment of tax, and

(iii) those adjustments shall be made year by year and as if one-sixth of the sum deducted had been deducted in respect of tax for each year, and no repayment of, or of any part of, that portion of the tax deducted which is to be treated as deducted in respect of tax for any year shall be made unless and until it is ascertained that the tax ultimately to be paid for that year is less than the amount of tax paid for that year.

(4) Where the scheduled mineral asset sold by a person was acquired by the person by purchase and the price paid consisted wholly or partly of a capital sum, subsections (2) and (3) shall apply as if any capital sum received by the person when the person sells the asset were reduced by the amount of that sum; but nothing in this subsection shall affect the amount of tax to be deducted and accounted for under section 238 by virtue of subsection (3), and where any sum is deducted under section 238 any adjustment necessary to give effect to this subsection shall be made by means of repayment of tax.

(5) Where by virtue of an order made by the Minister for the Marine and Natural Resources under section 14 of the Minerals Development Act, 1940, scheduled minerals or rights to work such minerals are acquired and that Minister pays compensation to any person in respect of such acquisition, that person shall be deemed for the purposes of this section to have sold a scheduled mineral asset for a capital sum equal to the amount of compensation paid to that person, and subsections (2) to (4) shall apply to the compensation as they apply to a capital sum received in respect of a sale of a scheduled mineral asset.

CHAPTER 2 Petroleum taxation

684 Interpretation (Chapter 2). [FA92 s75; FA95 s42(a)]

684.—(1) In this Chapter—

“abandonment activities”, in relation to a relevant field or any part of it, means those activities of a person, whether carried on by the person or on behalf of the person, which comply with the requirements of a petroleum lease held by the person, or, if the person is a company, held by the company or a company associated with it, in respect of—

(a) the closing down, decommissioning or abandonment of the relevant field or the part of it, as the case may be, or

(b) the dismantlement or removal of the whole or a part of any structure, plant or machinery which is not situated on dry land and which has been brought into use for the purposes of transporting as far as dry land petroleum won from the relevant field or from the part of it, as the case may be;

“abandonment expenditure”, in relation to a relevant field or any part of it, means expenditure incurred on abandonment activities in relation to the field or the part of it, as the case may be;

“chargeable period” means an accounting period of a company or a year of assessment;

“designated area” means an area designated by order under section 2 of the Continental Shelf Act, 1968;

“development expenditure” means capital expenditure incurred in connection with a relevant field on the provision for use in carrying on petroleum extraction activities of—

(a) machinery or plant,

(b) any works, buildings or structures, or

(c) any other assets,

which are of such a nature that when the relevant field ceases to be worked they are likely to be so diminished in value that their value will be nil or almost nil, but does not include—

(i) expenditure on any vehicle suitable for the conveyance by road of persons or goods or the haulage by road of other vehicles,

(ii) expenditure on any building or structure for use as a dwelling house, shop or office or for any purpose ancillary to the purposes of a dwelling house, shop or office,

(iii) (I) expenditure incurred on petroleum exploration activities, and

(II) payments made to the Minister for the Marine and Natural Resources on the application for, or in consideration of the granting of, a licence (other than a petroleum lease) or other payments made to that Minister in respect of the holding of the licence,

(iv) expenditure on the acquisition of the site of a relevant field, or of the site of any works, buildings or structures or of rights in or over any such site,

(v) expenditure on the acquisition of, or of rights in or over, deposits of petroleum,

(vi) expenditure on—

(I) machinery or plant, or

(II) works, buildings or structures,

provided for the processing or storing of petroleum won in the course of carrying on petroleum extraction activities, other than the initial treatment and storage of such petroleum,

or

(vii) any interest payment,

and “assets representing development expenditure” shall be construed accordingly and shall include any results obtained from any search or enquiry on which the expenditure was incurred;

“dry land” means land not permanently covered by water;

“exploration expenditure” means—

(a) capital expenditure incurred on petroleum exploration activities, and

(b) payments made to the Minister for the Marine and Natural Resources on the application for, or in consideration of the granting of, a licence (other than a petroleum lease) or other payments made to that Minister in respect of the holding of the licence,

but does not include any interest payment, and “assets representing exploration expenditure” shall be construed accordingly and shall include any results obtained from any search, exploration or enquiry on which the expenditure was incurred;

“initial treatment and storage”, in relation to petroleum won from a relevant field, means the doing of any of the following—

(a) subjecting petroleum so won to any process of which the sole purpose is to enable the petroleum to be safely stored, safely loaded into a tanker or safely accepted for refining,

(b) separating petroleum so won and consisting of gas from other petroleum so won,

(c) separating petroleum won and consisting of gas of a kind that is transported and sold in normal commercial practice from other petroleum so won and consisting of gas,

(d) liquefying petroleum so won and consisting of gas of such a kind as is mentioned in paragraph (c) for the purpose of transporting such petroleum,

(e) subjecting petroleum so won to any process so as to secure that petroleum disposed of without having been refined has the quality that is normal for petroleum so disposed of from the relevant field, or

(f) storing petroleum so won before its disposal or its appropriation to refining or to any use, except use in—

(i) winning petroleum from a relevant field, including searching in that field for and winning access to such petroleum, or

(ii) transporting as far as dry land petroleum that is won from a place not on dry land,

but does not include any activity carried on as part of or in association with the refining of petroleum;

“licence” means—

(a) an exploration licence,

(b) a lease undertaking,

(c) a licensing option,

(d) a petroleum prospecting licence,

(e) a petroleum lease, or

(f) a reserved area licence,

granted in respect of an area in the State or a designated area under the Petroleum and Other Minerals Development Act, 1960, and which was granted subject to—

(i) the licensing terms set out in the Notice entitled “Ireland Exclusive Offshore Licensing Terms” presented to each House of the Oireachtas on the 29th day of April, 1975,

(ii) licensing terms presented to each House of the Oireachtas on a day or days which fall after the 29th day of April, 1975, or

(iii) licensing terms to which paragraph (i) or (ii) relates, as amended or varied from time to time;

“licensed area” means an area in respect of which a licence is in force;

“mining trade” means a trade consisting only of working a mine which is a qualifying mine or, in the case of a trade consisting partly of such an activity and partly of one or more other activities, the part of the trade consisting only of working such a mine which is treated by virtue of section 685 as a separate trade;

“petroleum” means petroleum (within the meaning of section 2(1) of the Petroleum and Other Minerals Development Act, 1960) won or capable of being won under the authority of a licence;

“petroleum activities” means any one or more of the following activities—

(a) petroleum exploration activities,

(b) petroleum extraction activities, and

(c) the acquisition, enjoyment or exploitation of petroleum rights;

“petroleum exploration activities” means activities of a person carried on by the person or on behalf of the person in searching for deposits of petroleum in a licensed area, in testing or appraising such deposits or in winning access to such deposits for the purposes of such searching, testing or appraising, where such activities are carried on under a licence (other than a petroleum lease) authorising the activities and held by the person or, if the person is a company, held by the company or a company associated with it;

“petroleum extraction activities” means activities of a person carried on by the person or on behalf of the person under a petroleum lease authorising the activities and held by the person or, if the person is a company, held by the company or a company associated with it in—

(a) winning petroleum from a relevant field, including searching in that field for and winning access to such petroleum,

(b) transporting as far as dry land petroleum so won from a place not on dry land, or

(c) effecting the initial treatment and storage of petroleum so won from the relevant field;

“petroleum profits”, in relation to a company which is chargeable to corporation tax on its profits, means the income of the company from petroleum activities and any amount to be included in its total profits in respect of chargeable gains accruing to the company from disposals of petroleum-related assets;

“petroleum-related asset” means any of the following assets or any part of such an asset—

(a) any petroleum rights,

(b) any asset representing exploration expenditure or development expenditure,

(c) shares deriving their value or the greater part of their value, whether directly or indirectly, from petroleum activities, other than shares dealt in on a stock exchange;

“petroleum rights” means rights to petroleum to be extracted or to interests in, or to the benefit of, petroleum, and includes an interest in a licence;

“petroleum trade” means a trade consisting only of trading activities which are petroleum activities or, in the case of a trade consisting partly of such activities and partly of other activities, the part of the trade consisting only of trading activities which are petroleum activities which is treated by virtue of section 685 as a separate trade;

“qualifying mine” has the same meaning as in section 672;

“relevant field” means an area in respect of which a licence, being a petroleum lease, is in force.

(2) For the purposes of this Chapter, 2 companies shall be associated with one another if—

(a) one company is a 51 per cent subsidiary of the other company,

(b) each company is a 51 per cent subsidiary of a third company, or

(c) one company is owned by a consortium of which the other company is a member,

and for the purposes of paragraph (c) a company shall be owned by a consortium if all the ordinary share capital of that company is directly and beneficially owned between them by 5 or fewer companies, which companies are in this Chapter referred to as “the members of the consortium”.

685 Separation of trading activities. [FA 92 s76]

685.—(1) Where a person carries on any petroleum activities as part of a trade and those activities apart from any other activity would constitute a trade, those activities shall be treated for the purposes of the Tax Acts and the Capital Gains Tax Acts as a separate trade distinct from all other activities carried on by the person as part of the trade, and any necessary apportionment shall be made of receipts and expenses.

(2) Where a person works a qualifying mine as part of a trade, that activity shall be treated for the purposes of this Chapter as a separate trade distinct from all other activity carried on by the person as part of the trade, and any necessary apportionment shall be made of receipts and expenses.

686 Reduction of corporation tax. [FA92 s77; FA95 s42(b)]

686.—(1) In this section—

“petroleum profits on which corporation tax falls finally to be borne”, in relation to a company, means the amount of the petroleum profits of the company after making all deductions and giving or allowing all reliefs that for the purposes of corporation tax are made from, or given or allowed against, or are treated as reducing—

(a) those profits, or

(b) income or chargeable gains, if any, included in those profits;

“relevant petroleum lease” means a petroleum lease in respect of a relevant field, being a field discovered by petroleum exploration activities carried on under a licence (other than a petroleum lease) which authorises the carrying on of those activities for a period which, apart from any extension of the period or revision or renewal of the licence—

(a) is not longer than 10 years, where the petroleum lease is granted by the Minister for the Marine and Natural Resources before the 1st day of June, 2003,

(b) is longer than 10 years but not longer than 15 years, where the petroleum lease is granted by the Minister for the Marine and Natural Resources before the 1st day of June, 2007, or

(c) is longer than 15 years, where the petroleum lease is granted by the Minister for the Marine and Natural Resources before the 1st day of June, 2013,

but a petroleum lease in respect of a relevant field shall be a relevant petroleum lease where—

(i) the field was discovered under a lease which is not a licence,

(ii) the lease under which the field was discovered expired before the petroleum lease is granted, and

(iii) the petroleum lease is granted by the Minister for the Marine and Natural Resources before the 1st day of June, 2003.

(2) (a) Subject to paragraph (b), corporation tax payable by a company for an accounting period shall be reduced by the amount, if any, determined by the formula—

I	R 25 ______ 100

where—

I is the amount for the accounting period of the income to which this section applies, and

R is the rate per cent of corporation tax specified in section 21(1) for the financial year or years in which the accounting period falls.

(b) Notwithstanding paragraph (a), where part of the accounting period falls in one financial year (in this paragraph referred to as “the first-mentioned financial year”) and the other part falls in the financial year succeeding the first-mentioned financial year and different rates of corporation tax are in force under section 21(1) for each of those years, then, R in paragraph (a) shall be the rate per cent determined by the formula—

(A C) _ E		(B D) _ E

where—

A is the rate per cent in force for the first-mentioned financial year,

B is the rate per cent in force for the financial year succeeding the first-mentioned financial year,

C is the length of that part of the accounting period falling in the first-mentioned financial year,

D is the length of that part of the accounting period falling in the financial year succeeding the first-mentioned financial year, and

E is the length of the accounting period.

(3) The income to which this section applies shall be the income of a company for an accounting period determined by the formula—

(F G)	S ___ T

where—

F is the amount for the accounting period of the company's petroleum profits on which corporation tax falls finally to be borne,

G is the amount to be included in the company's profits brought into charge to corporation tax for the accounting period in respect of chargeable gains accruing to the company from disposals of petroleum-related assets,

S is the aggregate of the income of the company for the accounting period which is—

(a) trading income attributable to sales of petroleum won by the company, or

(b) income, other than trading income, from the enjoyment or exploitation of petroleum rights,

under a relevant petroleum lease granted to the company or a company associated with the company, and

T is the aggregate of the income of the company for the accounting period from its petroleum trade or other petroleum activities.

(4) For the purposes of subsection (3), the income of a company for an accounting period which is trading income attributable to sales of petroleum won by the company under a relevant petroleum lease shall be the income, if any, determined by the formula—

O	P ___ Q

where—

O is the income of the company for the accounting period from its petroleum trade,

P is the aggregate of money or money's worth receivable by the company from sales in the accounting period of petroleum won by it under the relevant petroleum lease, and

Q is the aggregate of money or money's worth receivable by the company from sales of petroleum in the accounting period in the course of carrying on its petroleum trade.

687 Treatment of losses. [FA92 s78]

687.—(1) Notwithstanding sections 381 and 396(2)—

(a) as respects a loss incurred by a person in a petroleum trade, relief shall not be given—

(i) under section 381 against any income other than income arising from petroleum activities, or

(ii) under section 396(2) against any profits other than petroleum profits,

and

(b) as respects any loss, other than a loss incurred in a petroleum or a mining trade, incurred by a person, relief shall not be given—

(i) under section 381 against income arising from petroleum activities, or

(ii) under section 396(2) against petroleum profits.

(2) Notwithstanding sections 383 and 399(1), the amount of any income of a person which is within the charge to tax under Case IV of Schedule D, and which is income arising from petroleum activities, shall not be reduced by the amount of any loss which may be relieved under section 383 or 399(1), other than a loss incurred in petroleum activities, and the amount of any loss so incurred shall not be treated under either of those sections as reducing the amount of any income other than income arising from petroleum activities.

(3) Notwithstanding sections 305(1)(b) and 308(4), a capital allowance which is to be given by discharge or repayment of tax, or in charging income under Case V of Schedule D, shall not to any extent be given effect—

(a) under section 305 against income arising from petroleum activities, or

(b) under section 308(4) against petroleum profits.

688 Treatment of group relief. [FA92 s79]

688.—(1) In this section, “claimant company” and “surrendering company” have the meanings respectively assigned to them by section 411.

(2) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief shall not be allowed against any petroleum profits of the claimant company except to the extent that the claim relates to—

(a) a loss incurred by the surrendering company in a petroleum or mining trade, or

(b) charges on income paid, other than to a connected person, by the surrendering company which consist of payments made wholly and exclusively for the purposes of such a trade,

and group relief in respect of any such loss incurred by the surrendering company, or in respect of any charge on income paid by the surrendering company which is a payment made wholly and exclusively for the purposes of the petroleum or mining trade, shall not be allowed against any profits of the claimant company other than its petroleum profits.

689 Restriction of relief for losses on certain disposals. [FA92 s80(1) and (2)]

689.—(1) Notwithstanding any provision of the Capital Gains Tax Acts or of the Corporation Tax Acts relating to the deduction of allowable losses for the purposes of capital gains tax or of corporation tax on chargeable gains—

(a) an allowable loss accruing on a disposal of an asset other than a petroleum-related asset shall not be deducted from the amount of a chargeable gain accruing on a disposal of a petroleum-related asset, and

(b) an allowable loss accruing on a disposal of a petroleum-related asset shall not be deducted from the amount of a chargeable gain accruing on a disposal of an asset other than a petroleum-related asset.

(2) Subsection (11) of section 597 shall apply as respects the application of that section to a disposal of assets which have been used by the person disposing of them for the purposes of a petroleum trade as if each reference in that subsection to a “trade” or “trades” were respectively a reference to a “petroleum trade” or “petroleum trades” within the meaning of this Chapter.

690 Interest and charges on income. [FA92 s81(1) to (5) and (7)]

690.—(1) In computing the amount of—

(a) a person's profits or gains for the purposes of income tax, or

(b) a person's income for the purposes of corporation tax,

arising from a petroleum trade, no deduction shall be made in respect of—

(i) any interest payable by the person to a connected person to the extent that the amount of the interest exceeds for whatever reason the amount which, having regard to all the terms on which the money in respect of which it is payable was borrowed and the standing of the borrower, might have been expected to be payable if the lender and the borrower had been independent parties dealing at arm's length,

(ii) interest payable by the person on any money borrowed to meet expenditure incurred on petroleum exploration activities, or

(iii) interest payable by the person on any money borrowed to meet expenditure incurred in acquiring petroleum rights from a connected person.

(2) Section 130(2)(d)(iv) shall not apply to so much of any interest as—

(a) would but for section 130(2)(d)(iv) be deductible in computing the amount of a company's income from a petroleum trade,

(b) would not be precluded by subsection (1) from being so deducted, and

(c) is interest payable to a company which is a resident of the United States of America or of a territory with the government of which arrangements having the force of law by virtue of section 826 have been made,

and for the purposes of paragraph (c) “resident of the United States of America” has the meaning assigned to it by the Convention set out in Schedule 25, and a company shall be regarded as being a resident of a territory, other than the United States of America, if it is so regarded under arrangements made with the government of that territory and having the force of law by virtue of section 826

(3) Notwithstanding section 243—

(a) no deduction shall be allowed from that part of a company's profits which consists of petroleum profits in respect of—

(i) a charge on income paid by the company to a connected person, or

(ii) any other charge on income paid by the company unless it is a payment made wholly and exclusively for the purposes of a petroleum or mining trade carried on by the company,

and

(b) no deduction shall be allowed from that part of a company's profits which consists of profits other than petroleum profits in respect of any charge on income paid by the company which is a payment made wholly and exclusively for the purposes of a petroleum trade carried on by the company.

(4) In applying section 237 to any annual payment made by a person whose profits or gains for the purposes of income tax arise wholly or partly from petroleum activities—

(a) the profits or gains arising from those activities shall not be treated as profits or gains which have been brought into charge to income tax—

(i) where the annual payment is made to a connected person, or

(ii) unless (but subject to subparagraph (i)) the payment is made wholly and exclusively for the purposes of a petroleum or mining trade carried on by the person making the payment,

and

(b) profits or gains, other than profits or gains arising from petroleum activities, shall not be treated as profits or gains which have been brought into charge to income tax where the annual payment is made wholly and exclusively for the purposes of a petroleum trade carried on by the person making the payment.

(5) Relief shall not be allowed—

(a) under section 396(7) in respect of a payment to which subsection (3)(a)(i) applies, or

(b) under section 390 in respect of a payment to which subsection (4)(a)(i) applies,

where the payment is made wholly and exclusively for the purposes of a petroleum trade.

(6) In any case where for an accounting period of a company charges on income paid by the company are allowable under section 243—

(a) such amount of those charges as, by virtue of subsection (3)—

(i) is not allowable against a part of the company's profits, but

(ii) is allowable against the remaining part (in this subsection referred to as “other profits”) of its profits,

exceeds the other profits, and

(b) the amount of that excess is greater than the amount, if any, by which the total of the charges on income which, subject to subsection (3), are allowable to the company under section 243 exceeds the total of the company's profits,

then, for the purpose of enabling the company to surrender the excess referred to in paragraph (a) by means of group relief, section 420(6)) shall apply as if—

(I) the reference in that section to the amount paid by the surrendering company by means of charges on income were a reference to so much of that amount as by virtue of subsection (3) is allowable only against the company's other profits, and

(II) the reference in that section to the surrendering company's profits were a reference to its other profits only.

691 Restriction of set-off of advance corporation tax. [FA92 s82]

691.—(1) Section 160 shall apply subject to subsection (2).

(2) Where advance corporation tax is paid by a company (in this subsection referred to as “the distributing company”) in respect of a distribution made by it to an associated company resident in the State—

(a) that advance corporation tax shall not be set against the distributing company's liability to corporation tax on any income included in its petroleum profits, and

(b) if the benefit of any amount of that advance corporation tax is surrendered under section 166 by the distributing company to another company, the corresponding amount of advance corporation tax which under that section that other company is treated for the purposes of section 160 as having paid shall not be set against that other company's liability to corporation tax on any income included in its petroleum profits.

(3) This section shall not apply as respects any distribution made before the 24th day of April, 1992.

692 Development expenditure: allowances and charges. [FA92 s83; FA96 s132(1) and Sch5 PtI par18]

692.—(1) Subject to subsection (4), the provisions of the Tax Acts relating to allowances and charges in respect of capital expenditure shall apply in relation to a petroleum trade as if each reference in those provisions to machinery or plant included a reference to assets, not being machinery or plant, representing development expenditure.

(2) In relation to assets representing development expenditure, section 284(2) shall, subject to subsection (3), apply as if the reference in paragraph (a)(i) of that section to 15 per cent were a reference to 100 per cent.

(3) Assets representing development expenditure shall not be treated for the purposes of section 284(1) as being in use for the purposes of a petroleum trade at the end of any chargeable period or its basis period which ends before the commencement of production of petroleum in commercial quantities from the relevant field in connection with which the assets were provided.

(4) The following provisions shall not apply as respects development expenditure—

(a) Chapters 1 and 3 of Part 9,

(b) section 283,

(c) section 670,

(d) Chapter 1 of Part 29,

(e) sections 763 to 765, and

(f) section 768.

(5) (a) For the purposes of this section, assets representing development expenditure shall be deemed to include assets (in this subsection referred to as “leased assets”) provided for leasing to a person carrying on a petroleum trade where such leased assets would, if they had been provided by that person, be assets representing development expenditure, and where this paragraph applies—

(i) section 284 shall apply as if the trade for the purposes of which the leased assets are (or would under section 298(1) be regarded as being) in use were a petroleum trade carried on by the lessor, and

(ii) section 403 shall apply as if each reference in that section to machinery or plant included a reference to assets, not being machinery or plant, representing development expenditure.

(b) For the purposes of subsection (4), capital expenditure on the provision of leased assets shall be deemed to be development expenditure.

693 Exploration expenditure: allowances and charges. [FA92 s84; FA97 s146(1) and Sch9 PtI par16(2)]

693.—(1) Subject to subsections (5) and (16), where a person carrying on a petroleum trade has incurred any exploration expenditure (not being expenditure which has been or is to be met directly or indirectly by any other person) there shall be made to the person for the chargeable period related to the expenditure an allowance equal to the amount of the expenditure.

(2) (a) Subject to paragraph (b), where a person carrying on a petroleum trade has incurred any exploration expenditure in respect of which an allowance has been made to the person under subsection (1) and disposes of assets representing any amount of that expenditure, a charge (in this section referred to as a “balancing charge”) equal to the net amount or value of the consideration in money or money's worth received by the person on the disposal shall be made on the person for the chargeable period related to the disposal or, if the disposal occurs after the date on which the trade is permanently discontinued, for the chargeable period related to the discontinuance.

(b) The amount on which a balancing charge is made shall not exceed the amount of the allowance made to the person under subsection (1) in respect of the amount of exploration expenditure represented by the assets disposed of.

(3) Where any assets representing exploration expenditure are destroyed, those assets shall for the purposes of subsection (2) be treated as if they had been disposed of immediately before their destruction, and any sale, insurance, salvage or compensation moneys received in respect of the assets by the person carrying on the petroleum trade shall be treated as if those moneys were consideration received on that disposal.

(4) Where a person disposes of any assets representing exploration expenditure incurred by the person in connection with an area which at the time of the disposal is, or which subsequently becomes, a relevant field (or part of such a field), the person who acquires the assets shall, if that person carries on a petroleum trade which consists of or includes the working of the relevant field (or, as the case may be, the part of the relevant field), be deemed for the purposes of this section to have incurred—

(a) on the day on which that person acquires the assets, or

(b) if later, on the day on which that person commences to work the area connected with the assets as a relevant field (or, as the case may be, as part of the relevant field),

an amount of exploration expenditure equal to the lesser of—

(i) the amount of the exploration expenditure represented by the assets, and

(ii) the amount or value of the consideration given by that person on the acquisition of the assets.

(5) (a) Any exploration expenditure incurred by a person before the person commences to carry on a petroleum trade shall be treated for the purposes of subsection (1) as if that expenditure had been incurred by that person on the first day on which that person carries on the petroleum trade.

(b) Notwithstanding paragraph (a), no account shall be taken for the purposes of this subsection of expenditure incurred in connection with an area which is not a relevant field, or part of such a field, being worked in the course of carrying on the petroleum trade, if the expenditure was incurred more than 25 years before that first day.

(6) Where a person incurs exploration expenditure before commencing to carry on a petroleum trade and subsection (5) applies as respects that expenditure and, before the person commences to carry on that trade, the person disposes of assets representing any amount of that expenditure, the allowance to be made to the person under this section in respect of that expenditure shall be reduced by the net amount or value of any consideration in money or money's worth received by the person on that disposal.

(7) For the purposes of this section other than for the purposes of subsections (4) and (5)(a), the day on which any expenditure is incurred shall be taken to be the day on which the sum in question becomes payable.

(8) Any allowance or balancing charge made to or on a person under this section shall be made to or on the person in taxing the person's petroleum trade but, subject to subsection (4), such allowance shall not be made in respect of the same expenditure in taxing more than one such trade.

(9) Section 304(4) shall apply in relation to an allowance under this section as it applies in relation to an allowance to be made under Part 9.

(10) Section 307(2)(a) shall apply for the purposes of this section, and subsections (2) to (7) of section 321 shall apply for the interpretation of this section.

(11) Subsections (2) and (3) of section 306 shall apply in determining the chargeable period (being a year of assessment) for which an allowance or a balancing charge is to be made under this section.

(12) References to capital expenditure in Part 9 and in section 670, Chapter 1 of Part 29 and sections 763 to 765 shall be deemed not to include references to expenditure which is exploration expenditure, and exploration expenditure shall be deemed not to be expenditure on know-how for the purposes of section 768.

(13) Notwithstanding subsection (12), the following provisions—

(a) section 312,

(b) subsections (1) and (2) of section 316,

(c) section 317(2),

(d) section 318, and

(e) subsections (4) and (5) of section 320,

shall, with any necessary modifications, apply for the purposes of this section as they apply for the purposes of Part 9 and Chapter 1 of Part 29.

(14) Part 19 shall apply as if—

(a) the reference in section 551 (3) to a balancing charge included a reference to a balancing charge under this section, and

(b) references in section 555 to a capital allowance (or capital allowances) and to a balancing charge included references respectively to an allowance (or allowances) and a balancing charge under this section.

(15) Section 319 shall apply as if subsections (1) and (2) of that section included references to this section.

(16) For the purposes of this section, a person shall be deemed not to be carrying on a petroleum trade unless and until the person is carrying on in the course of that trade trading activities which are petroleum extraction activities.

(17) Any reference in this section to assets representing any exploration expenditure shall be construed as including a reference to a part of or share in any such assets, and any reference in this section to a disposal or acquisition of any such assets shall be construed as including a reference to a disposal or acquisition of a part of or share in any such assets.

694 Exploration expenditure incurred by certain companies. [FA92 s85]

694.—(1) For the purposes of section 693, where exploration expenditure (not being expenditure which has been or is to be met directly or indirectly by any other person) is incurred by a company (in this section referred to as an “exploration company”) and—

(a) another company is a wholly-owned subsidiary of the exploration company, or

(b) the exploration company is at the time the exploration expenditure is incurred a wholly-owned subsidiary of another company (in this section referred to as “the parent company”),

then, the expenditure or so much of it as the exploration company specifies—

(i) in the case referred to in paragraph (a), may at the election of the exploration company be deemed to have been incurred by such other company (being a wholly-owned subsidiary of the exploration company) as the exploration company specifies, and

(ii) in the case referred to in paragraph (b), may at the election of the exploration company be deemed to have been incurred by the parent company or by such other company (being a wholly-owned subsidiary of the parent company) as the exploration company specifies.

(2) Where under subsection (1) exploration expenditure incurred by an exploration company is deemed to have been incurred by another company (in this subsection referred to as “the other company”)—

(a) the expenditure shall be deemed to have been incurred by the other company at the time at which the expenditure was actually incurred by the exploration company,

(b) in a case where the expenditure was incurred at a time before the incorporation of the other company, that company shall be deemed to have been in existence at the time the expenditure was incurred, and

(c) in the application of section 693 to a petroleum trade carried on by the other company, the expenditure shall be deemed—

(i) to have been incurred by the other company for the purposes of that trade, and

(ii) not to have been met directly or indirectly by the exploration company.

(3) The same expenditure shall not be taken into account in relation to more than one trade by virtue of this section.

(4) A deduction or allowance shall not be made in respect of the same expenditure both by virtue of this section and under some other provision of the Tax Acts.

(5) A company shall for the purposes of subsection (1) be deemed to be a wholly-owned subsidiary of another company if and so long as all of its ordinary share capital is owned by that other company, whether directly or through another company or other companies, or partly directly and partly through another company or other companies, and paragraph 6 of Schedule 9 shall apply for the purposes of supplementing this subsection as if the reference in that paragraph to that Schedule were a reference to this subsection.

695 Abandonment expenditure: allowances and loss relief. [FA92 s86]

695.—(1) In this section, “abandonment losses” means so much of a loss in a petroleum trade incurred by a person in a chargeable period as does not exceed the total amount of allowances which—

(a) are to be made to the person for that chargeable period under this section, and

(b) have been taken into account in determining the amount of that loss in the petroleum trade.

(2) Subject to subsections (5) to (9), where in a chargeable period a person, who is or has been carrying on in relation to a relevant field or a part of it petroleum extraction activities other than effecting the initial treatment and storage of petroleum that is won from the relevant field, incurs abandonment expenditure (not being expenditure which has been or is to be met directly or indirectly by any other person) in relation to the field or the part of it, as the case may be, there shall be made to the person for the chargeable period an allowance equal to the amount of the expenditure.

(3) (a) Subject to paragraph (b), as respects so much of a loss in a petroleum trade incurred by a person in a chargeable period as is an abandonment loss, the person shall be entitled on making a claim in that behalf to such repayment of income tax as is necessary to secure that the aggregate amount of income tax for the chargeable period and the 3 chargeable periods immediately preceding it will not exceed the amount which would have been borne by the person if the person's income arising from petroleum activities for each of those chargeable periods had been reduced by the lesser of—

(i) the abandonment loss, and

(ii) so much of the abandonment loss as could not on that claim be treated as reducing such income of a later chargeable period.

(b) Relief under paragraph (a) in respect of a loss shall be deemed for the purposes of the Tax Acts to be relief given under section 381(1) such that—

(i) no further relief shall be given under section 381(1) in respect of so much of an abandonment loss as is an amount in respect of which relief has been given under paragraph (a), and

(ii) subsections (3) to (7) of section 381 and section 392 shall apply to relief under paragraph (a) as they apply to relief under section 381.

(c) As respects so much of a loss in a petroleum trade incurred by a person in a chargeable period as is an abandonment loss, subsections (2) and (3) of section 396 shall apply as if the time specified in subsection (3) of that section were a period of 3 years ending immediately before the chargeable period in which the loss is incurred.

(4) So much of the abandonment losses, if any, incurred by a person on or before the day on which the person permanently discontinues to carry on a petroleum trade (in this subsection referred to as “the first-mentioned trade”) as would not apart from this subsection be allowed against or treated as reducing the person's or any other person's income or profits, shall be treated as incurred by the person in the first chargeable period of the first petroleum trade (in this section referred to as “the new trade”) to be carried on by the person after the permanent discontinuance of the first-mentioned trade as a trading expense of the new trade.

(5) Where a petroleum trade carried on by a person has been permanently discontinued, any abandonment expenditure incurred by the person after the discontinuance shall be treated for the purposes of subsection (2) as if that expenditure had been incurred by the person on the last day on which the person carries on the petroleum trade.

(6) For the purposes of this section other than subsections (4) and (5), the day on which any expenditure is incurred shall be taken to be the day on which the sum in question becomes payable.

(7) Any allowance made to a person under this section shall be made in taxing the person's petroleum trade, but such allowance shall not be made in respect of the same expenditure in taxing more than one trade.

(8) References to capital expenditure in Part 9 and in section 670, Chapter 1 of Part 29 and sections 763 to 765 shall be deemed not to include references to expenditure which is abandonment expenditure; but subsections (1) and (2) of section 316 and sections 317 (2) and 320(5) shall, with any necessary modifications, apply for the purposes of this section as they apply for the purposes of Part 9 and Chapter 1 of Part 29.

(9) Subsections (9) to (11) and (15) of section 693 shall apply for the purposes of this section as they apply for the purposes of that section.

696 Valuation of petroleum in certain circumstances. [FA92 s87]

696.—(1) Where a person disposes, otherwise than by means of a sale at arm's length, of petroleum acquired by the person by virtue of petroleum activities carried on by the person, then, for the purposes of the Tax Acts the disposal of the petroleum and its acquisition by the person to whom the disposal was made shall be treated as having been for a consideration equal to the market value of the petroleum at the time the disposal was made.

(2) (a) In this subsection, “relevant appropriation”, in relation to any petroleum won or otherwise acquired in the course of the carrying on by a person of petroleum activities, means the appropriation of that petroleum to refining or to any use except use for petroleum extraction activities carried on by the person, and “relevantly appropriated” shall be construed accordingly.

(b) Where a person who carries on in the course of a trade petroleum activities and other activities makes a relevant appropriation of any petroleum won or otherwise acquired by the person in the course of the petroleum activities without disposing of the petroleum, then, for the purposes of the Tax Acts the person shall be treated as having at the time of the appropriation—

(i) sold the petroleum in the course of the petroleum trade carried on by the person, and

(ii) bought the petroleum in the course of a separate trade consisting of the activities other than the petroleum activities,

and as having so sold and bought the petroleum at a price equal to its market value at the time the petroleum was relevantly appropriated.

(3) For the purposes of this section, the market value at any time of any petroleum shall be the price which that petroleum might reasonably be expected to fetch on a sale of that petroleum at that time if the parties to the transaction were independent parties dealing at arm's length.

697 Treatment of certain disposals. [FA92 s88]

697.—(1) In this section, “relevant period”, as respects a disposal, means the period beginning 12 months before and ending 3 years after the disposal, or such longer period as the Minister for the Marine and Natural Resources may, on the application of the person making the disposal, certify to be in that Minister's opinion reasonable having regard to the proper exploration, delineation or development of any licensed area.

(2) This section shall apply where on or after the 14th day of January, 1985, a person, with the consent of the Minister for the Marine and Natural Resources, makes a disposal of an interest in a licensed area (including the part disposal of such an interest or the exchange of an interest owned by the person in one licensed area for an interest in another licensed area) and the disposal is shown to the satisfaction of that Minister to have been made for the sole purpose of ensuring the proper exploration, delineation or development of any licensed area.

(3) Where this section applies as respects a disposal by a person (neither being nor including an exchange referred to in subsection (2)) and the consideration received by the person is in the relevant period wholly and exclusively applied (whether by the person, or on that person's behalf by the person acquiring the asset disposed of) for the purposes of either or both of the following—

(a) petroleum exploration activities, and

(b) searching for or winning access to petroleum in a relevant field,

then, for the purposes of the Capital Gains Tax Acts, if the person making the disposal makes a claim in that behalf, the disposal shall not be treated as involving any disposal of an asset but the consideration shall not, as respects any subsequent disposal of any asset acquired or brought into being or enhanced in value by the application of that consideration, be deductible from the consideration for that subsequent disposal in the computation of the chargeable gain accruing on that disposal.

(4) (a) Where this section applies as respects an exchange referred to in subsection (2), then, for the purposes of the Capital Gains Tax Acts, if the person making such an exchange makes a claim in that behalf, the exchange shall not be treated as involving any disposal or acquisition by that person of an asset, but the asset given by that person and the asset acquired by that person in the exchange shall be treated as the same asset acquired as the asset given by that person was acquired.

(b) Notwithstanding paragraph (a)—

(i) where the person receives for the exchange any consideration in addition to the interest in the other licensed area, this subsection shall not apply as respects the claim made by that person unless the additional consideration is applied in the relevant period in the manner referred to in subsection (3) but, where that additional consideration is so applied and the person makes a claim that this subsection should apply, it shall so apply as if the asset given by that person in exchange were such portion only of that asset as is equal in value to the interest in the other licensed area taken by that person in the exchange, and subsection (3) shall apply as if the remaining portion of the asset so given by that person were disposed of by that person for that additional consideration, and

(ii) where the person gives for the exchange any consideration in addition to the interest in a licensed area given by that person in the exchange, this subsection shall apply as respects the claim made by that person as if the interest in the other licensed area taken by that person in the exchange were such portion only of that interest as is equal in value to the interest in the licensed area given by that person in the exchange.

PART 25 Industrial and Provident Societies, Building Societies, and Trustee Savings Banks

CHAPTER 1 Industrial and provident societies

698 Interpretation (Chapter 1). [ITA67 s218; FA75 s33(2) and Sch1 PtII]

698.— In this Chapter, except where the context otherwise requires—

“loan interest”, in relation to a society, means any interest payable by the society in respect of any mortgage, loan, loan stock or deposit;

“share interest”, in relation to a society, means any interest, dividend, bonus or other sum payable to a shareholder of the society by reference to the amount of the shareholder's holding in the share capital of the society;

“society” means a society registered under the Industrial and Provident Societies Acts, 1893 to 1978;

references to the payment of share interest or loan interest include references to the crediting of such interest.

699 Deduction as expenses of certain sums, etc. [ITA67 s219(1) and (4)(b) and (c); FA74 s47; CTA76 s30(5)(a)]

699.—(1) In computing for the purposes of Case I of Schedule D the profits or gains of a society, there shall be deducted as expenses any sums which—

(a) represent a discount, rebate, dividend or bonus granted by the society to members of the society or other persons in respect of amounts paid or payable by or to them on account of their transactions with the society, being transactions taken into account in that computation and calculated by reference to those amounts or to the magnitude of those transactions and not by reference to the amount of any share or interest in the capital of the society;

(b) are share interest or loan interest paid by the society, being interest wholly and exclusively laid out or expended for the purposes of the trade.

(2) (a) Where for the year 1962-73 or any previous year of assessment an annual allowance, balancing allowance or balancing charge in respect of capital expenditure on the construction of a building or structure might have been made to or on a society under Part V of the Finance Act, 1959, but for the circumstance that the society was exempt from tax under Schedule D, any writing down allowance, balancing allowance or balancing charge to be made in respect of the expenditure under Part 9 for any chargeable period shall be computed as if every annual allowance, balancing allowance and balancing charge which might have been so made had been made; but nothing in this paragraph shall affect section 274(8).

(b) Where for the year 1962-73 or any previous year of assessment an annual allowance in respect of capital expenditure on the purchase of patent rights might have been made to or on a society under Part V of the Finance Act, 1959, but for the circumstance that the society was exempt from tax under Schedule D, the amount of the expenditure remaining unallowed (within the meaning of section 756) shall, in relation to any balancing allowance or balancing charge under Chapter 1 of Part 29 to be made to or on the society in respect of the expenditure for any chargeable period, be computed as if every annual allowance which might have been so made had been made.

700 Special computational provisions. [CTA76 s30(2) to (4); FA78 s19]

700.—(1) Notwithstanding anything in the Tax Acts, any share or loan interest paid by a society—

(a) shall be paid without deduction of income tax and shall be charged under Case III of Schedule D, and

(b) shall not be treated as a distribution;

but paragraph (a) shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not in the State.

(2) In computing the corporation tax payable for any accounting period of a society, section 243 shall apply subject to the deletion of “yearly” in subsection (4)(a) of that section.

(3) On or before the 1st day of May in each year, every society shall deliver to the inspector a return in such form as the Revenue Commissioners may prescribe specifying—

(a) the name and place of residence of every person to whom share interest or loan interest amounting to the sum of £70 or more has been paid by the society in the year of assessment which ended before that date, and

(b) the amount of such share interest or loan interest paid in that year to each of those persons,

and, if such a return is not fully made as respects any year of assessment, the society shall not be entitled to any deduction under section 97(2)(e), 243 or 699(1) in respect of any payments of share interest or loan interest which it was required to include in the return, and all such assessments and additional assessments shall be made as may be necessary to give effect to this subsection.

701 Transfer of shares held by certain societies to members of society. [FA93 s 35(1)(a) and (2) to (6); FA97 s146(1) and Sch9 PtI par17(2)]

701.—(1) In this section—

“company” has the meaning assigned to it by section 5(1);

“consideration” means consideration in money or money's worth;

“control”, in relation to a company, shall be construed in accordance with section 432;

“society” means a society registered under the Industrial and Provident Societies Acts, 1893 to 1978, which is an agricultural society or a fishery society within the meaning of section 443(16).

(2) (a) In this subsection and in subsection (4), “the appropriate number”, in relation to a member's original shares, means such portion (or as near as may be to such portion) of the total number of the referable shares owned by the member at the time of the transfer as bears to that number the same proportion as the total number of shares in the company which are subject to the transfer bears to the total number of shares in the company owned by the society immediately before the transfer, and the number of the referable shares owned by a member shall be an amount determined by the formula—

A B ______ C		D ___ B

where—

A is the market value of the shares in the company owned by the society immediately before the transfer,

B is the total number of the shares in the society in issue immediately before the transfer,

C is the market value of the total assets (including the shares in the company) of the society immediately before the transfer, and

D is the number of shares in the society owned by the member immediately before the transfer.

(b) Where on or after the 6th day of April, 1993, a society, being a society which at any time on or after that date controls or has had control of a company, transfers to the members of the society shares owned by it in the company (in this section referred to as “the transfer”) and—

(i) the transfer, in so far as it relates to any member, is in respect of and in proportion to, or as nearly as may be in proportion to, that member's holding of shares (in this section referred to as “the original shares”) in the society immediately before the transfer,

(ii) no consideration (apart from the consideration given by the members represented by the cancellation of the original shares referred to in subparagraph (iii)) for, or in connection with, the transfer is given to or received from any member (or any person connected with that member) by the society (or any person connected with the society), and

(iii) on the transfer or as soon as possible after the transfer, the original shares (or the appropriate number of those shares) of each member are cancelled without any consideration (apart from the consideration given to the members represented by the transfer to the members of the shares in the company) for or in connection with such cancellation being given to or received from any member (or any person connected with that member) by the society (or any person connected with the society) and, where the original shares (or the appropriate number of those shares) have been issued to a member at different times, any cancellation of such shares shall involve those issued earlier rather than those issued later,

then, subject to subsection (5), subsections (3) and (4) shall apply.

(3) For the purposes of the Corporation Tax Acts, the transfer shall be treated as—

(a) not being a distribution within the meaning of Part 6, and

(b) being for a consideration of such amount as would secure that, for the purposes of charging the gain on the disposal by the society of the shares owned by it in the company, neither a gain nor a loss would accrue to the society.

(4) For the purposes of the Capital Gains Tax Acts—

(a) the cancellation of the original shares (or the appropriate number of those shares) shall not be treated as involving any disposal of those shares, and

(b) each member shall be treated as if the shares transferred to that member in the course of the transfer were acquired by that member at the same time and for the same consideration at which the original shares (or the appropriate number of those shares) were acquired by that member and, for the purposes of giving effect to this paragraph, where the original shares (or the appropriate number of those shares) have been issued to a member at different times, there shall be made all such apportionments as are in the circumstances just and reasonable.

(5) This section shall not apply unless it is shown that the transfer 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 corporation tax or capital gains tax.

(6) In a case where this section applies, the society concerned shall include in the return required to be made by it under section 884 a statement of the total number of shares cancelled in accordance with subsection (2)(b)(iii).

CHAPTER 2 Building societies

702 Union or amalgamation of, transfer of engagement between, societies. [CTA76 s31(5) and (8)]

702.—(1) In this section, “building society” means a building society within the meaning of the Building Societies Acts, 1874 to 1989.

(2) Where in the course of or as part of a union or amalgamation of 2 or more building societies or a transfer of engagements from one building society to another building society there is a disposal of an asset by one society to another society, both societies shall be treated for the purposes of corporation tax in respect of chargeable gains as if the asset were acquired from the society making the disposal for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the society making the disposal.

703 Change of status of society. [FA90 s57]

703.—(1) In this section and in Schedule 16—

“building society” means a building society incorporated or deemed by section 124(2) of the Building Societies Act, 1989, to be incorporated under that Act, and references to “society” shall be construed accordingly;

“successor company” means a successor company within the meaning of Part XI of the Building Societies Act, 1989.

(2) Schedule 16 shall apply where a society converts into a successor company in accordance with Part XI of the Building Societies Act, 1989.

CHAPTER 3 Trustee savings banks

704 Amalgamation of trustee savings banks. [FA90 s59]

704.—(1) In this Chapter and in Schedule 17, “trustee savings bank” has the same meaning as in the Trustee Savings Banks Act, 1989.

(2) Where any assets or liabilities of a trustee savings bank are transferred or deemed to be transferred to another trustee savings bank in accordance with Part IV of the Trustee Savings Banks Act, 1989, those banks shall be treated for the purposes of the Tax Acts and the Capital Gains Tax Acts as if they were the same person.

705 Reorganisation of trustee savings banks into companies. [FA90 s60]

705.—Schedule 17 shall apply to the reorganisation in accordance with section 57 of the Trustee Savings Banks Act, 1989, of—

(a) one or more trustee savings banks into a company, or

(b) a company referred to in subparagraph (i) of subsection (3)(c) of that section into a company referred to in subparagraph (ii) of that subsection.

PART 26 Life Assurance Companies

CHAPTER 1 General provisions

706 Interpretation and general (Part 26). [CTA76 s36A(7) and s50(2) to (4); FA79 s28(5); FA86 s59(d); FA93 s11(f) and (k); FA96 s132(1) and Sch5 PtI par10(2) and (3)]

706.—(1) In this Part, unless the context otherwise requires—

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

“annuity business” means the business of granting annuities on human life;

“annuity fund” means, where an annuity fund is not kept separately from the life assurance fund of an assurance company, such part of the life assurance fund as represents the liability of the company under its annuity contracts, as stated in its periodical returns;

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

“excluded annuity business”, in relation to an assurance company, means annuity business which—

(a) is not pension business, or the liability of the company in respect of which is not taken into account in determining the foreign life assurance fund (within the meaning of section 718(1)) of the company, and

(b) arises out of a contract for the granting of an annuity on human life, being a contract effected, extended or varied on or after the 6th day of May, 1986, and which fails to satisfy any one or more of the following conditions—

(i) that the annuity shall be payable (whether or not its commencement is deferred for any period) until the end of a human life or for a period ascertainable only by reference to the end of a human life (whether or not continuing after the end of a human life),

(ii) that the amount of the annuity shall be reduced only on the death of a person who is an annuitant under the contract or by reference to a bona fide index of prices or investment values, and

(iii) that the policy document evidencing the contract shall expressly and irrevocably prohibit the company from agreeing to commutation in whole or in part of any annuity arising under the contract;

“general annuity business” means any annuity business which is not—

(a) excluded annuity business, or

(b) pension business,

and “pension business” shall be construed in accordance with subsections (2) and (3);

“life business” includes “life assurance business” and “industrial assurance business”, which have the same meanings respectively as in section 3 of the Insurance Act, 1936, and where a company carries on both businesses may mean either;

“life assurance fund” and “industrial assurance fund” have the same meanings respectively as in the Insurance Acts, 1909 to 1969, and “life assurance fund”, in relation to industrial assurance business, means the industrial assurance fund;

“market value'” shall be construed in accordance with section 548;

“overseas life assurance company” means an assurance company having its head office outside the State but carrying on life assurance business through a branch or agency in the State;

“pension fund” and “general annuity fund” shall be construed in accordance with subsection (2);

“periodical return”, in relation to an assurance company, means a return deposited with the Minister for Enterprise, Trade and Employment under the Assurance Companies Act, 1909, and the Insurance Act, 1936;

“policy” and “premium” have the same meanings respectively as in section 3 of the Insurance Act, 1936;

“special investment business”, “special investment fund” and “special investment policy” have the meanings respectively assigned to them by section 723;

“valuation period” means the period in respect of which an actuarial report is made under section 5 of the Assurance Companies Act, 1909, as extended by section 55 of the Insurance Act, 1936.

(2) Any division to be made between general annuity business, pension business and other life assurance business shall be made on the principle of—

(a) referring to pension business any premiums within subsection (3), together with the incomings, outgoings and liabilities referable to those premiums, and the policies and contracts under which they are or have been paid, and

(b) allocating to general annuity business all other annuity business except excluded annuity business,

and references to “pension fund” and “general annuity fund” shall be construed accordingly, whether or not such funds are kept separately from the assurance company's life assurance fund.

(3) The premiums to be referred to pension business shall be those payable under contracts which are (at the time when the premium is payable) within one or other of the following descriptions—

(a) any contract with an individual who is, or but for an insufficiency of profits or gains would be, chargeable to income tax in respect of relevant earnings (within the meaning of section 783) from a trade, profession, office or employment carried on or held by him or her, being a contract approved by the Revenue Commissioners under section 784 or 785 or any contract under which there is payable an annuity in relation to which section 786(3) applies;

(b) any contract (including a contract of assurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme (within the meaning of Chapter 1 of Part 30), being a contract so framed that the liabilities undertaken by the assurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

(c) any contract with the trustees or other persons having the management of a scheme approved under section 784 or 785 or under both of those sections, being a contract which—

(i) was entered into for the purposes only of that scheme, and

(ii) in the case of a contract entered into or varied on or after the 6th day of April, 1958, is so framed that the liabilities undertaken by the assurance company under the contract correspond with liabilities against which the contract is intended to secure the scheme;

and, in this subsection and in subsection (2), “premium” includes any consideration for an annuity.

(4) (a) In this subsection, “deduction” means any deduction, relief or set-off which may be treated for the purposes of corporation tax as reducing profits of more than one description.

(b) For the purposes of the Corporation Tax Acts, any deduction from the profits of an assurance company, being profits of more than one class of life assurance business referred to in section 707(2), shall be treated as reducing the amount of the profits of each such class of business by an amount which bears the same proportion to the amount of the deduction as the amount of the profits of that class of business, before any deduction, bears to the amount of the profits of the company brought into charge to corporation tax.

707 Management expenses. [CTA76 s33(1) to (2); FA86 s59(a); FA92 s44(a); FA93 s11(a) and (b)]

707.—(1) Subject to sections 709 and 710, section 83 shall apply for computing the profits of a company carrying on life business, whether mutual or proprietary (and not charged to corporation tax in respect of it under Case I of Schedule D), whether or not the company is resident in the State, as that section applies in relation to an investment company, except that—

(a) there shall be deducted from the amount treated as expenses of management for any accounting period—

(i) any repayment or refund receivable in the period of the whole or part of a sum disbursed by the company for that period or any earlier period as expenses of management, including commissions (in whatever manner described),

(ii) reinsurance commissions earned by the company in the period, and

(iii) the amount of any fines or fees receivable in the period or profits arising from reversions in the period,

and in calculating profits arising from reversions the company may set off against those profits any losses arising from reversions in any previous accounting period during which any enactment granting this relief was in operation in so far as they have not already been so set off, and

(b) no deduction shall be made under section 83(2)(b).

(2) (a) Where the life assurance business of an assurance company includes more than one of the following classes of business—

(i) pension business,