Taxes Consolidation Act 1997

748 Interpretation and application (Chapter 1). [ITA67 s367; F(MP)A68 s3(2) and Sch PtI; CTA76 s140(1) and Sch2 PtI par17]

748.—(1) In this Chapter and in Schedule 21—

“distribution” has the same meaning as in the Corporation Tax Acts;

“interest” includes a distribution and any dividend which is not such a distribution and, in applying references to interest in relation to such a distribution, “gross interest” or “gross amount” means the distribution together with the tax credit to which the recipient of the distribution is entitled in respect of it and “net interest” means the distribution exclusive of any such tax credit;

“person” includes any body of persons, and references to a person entitled to any exemption from income tax include, in a case of an exemption expressed to apply to income of a trust or fund, references to the persons entitled to make claims for the granting of that exemption;

“securities” includes stocks and shares;

securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.

(2) Subject to this section, this Chapter shall apply in the case of a purchase by a person (in this Chapter referred to as “the first buyer”) of any securities and their subsequent sale by the first buyer, where the result of the transaction is that interest becoming payable in respect of the securities (in this Chapter referred to as “the interest”) is receivable by the first buyer.

(3) This Chapter shall not apply in the case where—

(a) the time elapsing between the purchase by the first buyer and the first buyer's taking steps to dispose of the securities exceeds 6 months, or

(b) that time exceeds one month and in the opinion of the Revenue Commissioners the purchase and sale were each effected at the current market price and the sale was not effected in pursuance of an agreement or arrangement made before or at the time of the purchase.

(4) An appeal shall lie to the Appeal Commissioners with respect to any opinion of the Revenue Commissioners under subsection (3)(b) in the like manner as an appeal would lie against an assessment to income tax, and the provisions of the Income Tax Acts relating to appeals shall apply accordingly.

(5) The reference in subsection (3) to the first buyer taking steps to dispose of the securities shall be construed—

(a) if the first buyer sold the securities in the exercise of an option the first buyer had acquired, as a reference to the first buyer's acquisition of the option, and

(b) in any other case, as a reference to the first buyer selling the securities.

(6) (a) For the purposes of this Chapter but subject to paragraph (b), a sale of securities similar to, and of the like nominal amount as, securities previously bought (in this subsection referred to as “the original securities”) shall be equivalent to a sale of the original securities and subsection (5) shall apply accordingly, and, where the first buyer bought parcels of similar securities at different times, a subsequent sale of any of the securities shall, in so far as may be, be related to the last of the parcels to be bought, and then to the last but one, and so on.

(b) A person shall be under no greater liability to tax by virtue of this subsection than would have been the case if instead of selling the similar securities the person had sold the original securities.

(7) Where, at the time when a trade is or is deemed to be set up and commenced, any securities form part of the trading stock belonging to the trade, those securities shall be treated for the purposes of this section as having been sold at that time in the open market by the person to whom they belonged immediately before that time and as having been purchased at that time in the open market by the person thereafter engaged in carrying on the trade, and, subject to this subsection, where there is a change in the persons engaged in carrying on a trade which is not a change on which the trade is deemed to be discontinued, this section shall apply in relation to the person so engaged after the change as if anything done to or by that person's predecessor had been done to or by that person.

749 Dealers in securities. [ITA67 s368]

749.—(1) Subject to this section, where the first buyer is engaged in carrying on a trade which consists of or comprises dealings in securities, then, in computing for any of the purposes of the Tax Acts the profits arising from or loss sustained in the trade, the price paid by the first buyer for the securities shall be reduced by the appropriate amount in respect of the interest determined in accordance with Schedule 21.

(2) Where in the opinion of the Revenue Commissioners the first buyer is bona fide carrying on the business of a discount house in the State, or where the first buyer is a member of a stock exchange in the State who is recognised by the committee of that stock exchange as carrying on the business of a dealer, subsection (1) shall not apply in relation to securities bought in the ordinary course of such business.

(3) Subsection (1) shall not apply if the interest is to any extent required to be taken into account under section 752 as if it were a trading receipt which had not borne tax or would to any extent be so required to be taken into account but for paragraph 2 of Schedule 22.

750 Persons entitled to exemption. [ITA67 s369(1); CTA76 s140(1) and Sch 2 Pt1 par18]

750.—Where the first buyer is entitled under any enactment to an exemption from tax which apart from this section would extend to the interest, then, subject to this section, the exemption shall not extend to an amount equal to the appropriate amount in respect of the interest determined in accordance with Schedule 21; but, if the first buyer is so entitled and any annual payment is payable by the first buyer out of the interest, the annual payment shall be deemed as to the whole of that payment—

(a) to be paid out of profits or gains not brought into charge to tax, and section 238 shall apply accordingly, and

(b) for the purposes of corporation tax, not to be a payment which is a charge on income.

751 Traders other than dealers in securities. [ITA67 s370; CTA76 Sch2 Pt1 par19]

751.—(1) Where the first buyer carries on a trade not within section 749, then, in ascertaining—

(a) for the purposes of income tax, whether any, and if so what, repayment of tax is to be made to the first buyer under section 381 by reference to any loss sustained in the trade for the year of assessment the first buyer's income for which includes the interest, there shall be disregarded—

(i) the appropriate amount in respect of the interest determined in accordance with Schedule 21, and

(ii) any tax paid on that amount;

(b) for the purposes of corporation tax, the income or profits against which the loss may be set off under section 157 or 396, there shall be disregarded the appropriate amount in respect of the interest determined in accordance with Schedule 21.

(2) Where the first buyer is a body corporate and carries on a trade not within section 749 or a business consisting mainly in the making of investments, then, if any annual payment payable by the body corporate is to any extent payable out of the interest, that annual payment shall be deemed to that extent—

(a) for the purposes of income tax, not to be payable out of profits or gains brought into charge to tax, and section 238 shall apply accordingly, and

(b) for the purposes of corporation tax, not to be a payment which is a charge on income.

CHAPTER 2 Purchases of shares by financial concerns and persons exempted from tax, and restriction on relief for losses by repayment of tax in case of dividends paid out of accumulated profits

752 Purchases of shares by financial concerns and persons exempted from tax. [ITA67 s371; F(MP)A68 s3(2) and Sch PtI; CTA76 s140(1), s164, Sch2 Pt1 par20 and Sch3 PtI]

752.—(1) For the purposes of this Chapter and Schedule 22—

(a) references to a dividend shall, except where the context otherwise requires, be construed as including references to a distribution, and to an amount which under any enactment is to be treated as a distribution, made on or after the 6th day of April, 1976,

(b) in relation to such a distribution, including an amount to be so treated as a distribution, references to a dividend being paid or becoming payable or being received or becoming receivable on shares shall be construed as references to a distribution or an amount to be so treated as a distribution being made or received in respect of shares or securities, and

(c) in applying references to a dividend in relation to a distribution, “gross amount” or “gross dividend” means the distribution together with the tax credit to which the recipient of the distribution is entitled in respect of it, and “net amount” or “net dividend” means the distribution exclusive of any such tax credit,

and in this subsection “distribution” has the same meaning as in the Corporation Tax Acts.

(2) (a) In this section and in Schedule 22—

“company” includes any body corporate, but does not include a company not resident in the State;

“control”, in relation to a body corporate, means the power of a person to secure—

(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other body corporate, or

(ii) by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate,

that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person and, in relation to a partnership, means the right to a share of more than 50 per cent of the assets, or of more than 50 per cent of the income, of the partnership;

“person” includes any body of persons, and references to a person entitled to any exemption from tax include, in a case of an exemption expressed to apply to income of a trust or fund, references to the persons entitled to make claims for the granting of that exemption;

“share” includes stock other than debenture or loan stock;

“shares of a class to which this section applies” means shares of any class forming part of a company's share capital, other than a class of fully-paid preference shares carrying only a right to dividends at a rate per cent of the nominal value of the shares which is fixed and which in the opinion of the Appeal Commissioners does not substantially exceed the yield generally obtainable on preference shares the prices of which are quoted on stock exchanges in the State.

(b) For the purposes of this section and Schedule 22—

(i) shares shall be regarded as of different classes if the rights and obligations respectively attached to them are distinguishable as regards the payment of dividends or the amount paid up or in any other respect;

(ii) any reference to shares acquired in right of other shares includes a reference to shares acquired in pursuance of an offer or invitation which was restricted to holders of those other shares;

(iii) 2 trades shall be regarded as under the same control if they are carried on by persons one of whom is a body of persons over whom the other has control or both of whom are bodies of persons under the control of a third person, and several trades shall be regarded as under the same control if each is under the same control as all of the others, and in this subparagraph “body of persons” includes a partnership.

(3) Where a person engaged in carrying on a trade which consists of or comprises dealings in shares or other investments becomes entitled to receive a dividend on a holding of shares of a class to which this section applies, being shares sold or issued to that person or otherwise acquired by that person not more than 10 years before the date on which the dividend becomes payable, and the dividend is to any extent paid out of profits accumulated before the date on which the shares were so acquired, then, if those shares, or those shares together with—

(a) any other shares the dividend on which is payable to that person and which were sold or issued to that person or otherwise acquired by that person not more than 10 years before the date on which the dividend becomes payable,

(b) in a case where the trade is under the same control as another trade which consists of or comprises dealings in shares or other investments, any shares the dividend on which is payable to the person engaged in carrying on that other trade and which were sold or issued to that person or otherwise acquired by that person not more than 10 years before the date on which the dividend becomes payable, and

(c) any shares to be taken into account under subsection (5),

amount to 10 per cent or more of the issued shares of that class, the net amount of the dividend received on the shares in the holding shall, to the extent to which it was paid out of profits accumulated before the shares were acquired, be taken into account in computing for the purposes of the Tax Acts the profits or gains or losses of the trade as if it were a trading receipt which had not borne tax.

(4) Where a person entitled under the Tax Acts to an exemption from tax which extends to dividends on shares becomes entitled to receive a dividend on a holding of shares of a class to which this section applies, being shares sold or issued to that person or otherwise acquired by that person not more than 10 years before the date on which the dividend becomes payable, and the dividend is to any extent paid out of the profits accumulated before the date on which the shares were so acquired, then, if those shares, or those shares together with—

(a) any other shares the dividend on which is payable to that person and which were sold or issued to that person or otherwise acquired by that person not more than 10 years before the date on which the dividend becomes payable, and

(b) any shares to be taken into account under subsection (5),

amount to 10 per cent or more of the issued shares of that class, the exemption shall, to an extent proportionate to the extent to which the dividend is paid out of profits accumulated before the date on which the shares were acquired, not apply to the dividend; but, if any annual payment is payable by that person out of the dividend, that annual payment shall be deemed as to the whole of that payment—

(i) to be paid out of profits or gains not brought into charge to tax and section 238 shall apply accordingly, and

(ii) for the purposes of corporation tax, not to be a payment which is a charge on income.

(5) Where 2 or more persons, being persons engaged in carrying on trades of the kind mentioned in subsection (3) or entitled to an exemption of the kind mentioned in subsection (4), have each acquired shares in a company and the transactions in pursuance of which the acquisition was made were either transactions entered into by those persons acting in concert or transactions together comprised in any arrangements made by any person, then, in the application of either of those subsections in relation to a dividend payable to one of those persons on shares which include shares so acquired (or shares acquired in right of those shares), there shall be taken into account under subsection (3) (c) or, as the case may be, subsection (4) (b) any shares the dividend on which is payable to any other of those persons, being shares so acquired by that other person (or shares acquired in right of those shares).

(6) Where any shares have been sold or otherwise disposed of by a person who held shares of that kind acquired at different times, it shall be assumed for the purposes of this section that shares which have been held for a longer time have been disposed of before shares which have been held for a shorter time.

(7) Where, at the time when a trade is or is deemed to be set up and commenced, any shares form part of the trading stock belonging to the trade, those shares shall be regarded for the purposes of this section as having been acquired at that time by the person then engaged in carrying on the trade, and, subject to this subsection, where there is a change in the persons engaged in carrying on a trade which is not a change on which the trade is deemed to be discontinued, this section shall apply in relation to the person so engaged after the change as if anything done to or by that person's predecessor had been done to or by that person.

(8) Schedule 22 shall apply for the purpose of ascertaining whether a dividend is to be regarded as paid to any extent out of profits accumulated before a particular date.

753 Restriction on relief for losses by repayment of tax in case of dividends paid out of accumulated profits. [ITA67 s372; CTA76 s140(1) and Sch2 Pt1 par21(1)]

753.—Where a person or a body of persons carries on a trade, other than such a trade mentioned in section 752(3), and the person's or the body of persons' income for any year of assessment or, as the case may be, accounting period includes a dividend the net amount of which would, if the trade were such a trade mentioned in section 752(3), be required to any extent to be taken into account as a trading receipt which has not borne tax, then, in ascertaining—

(a) for the purposes of income tax, whether any or what repayment of tax is to be made to that person or body of persons under section 381 by reference to any loss sustained in the trade for that year of assessment, there shall be disregarded—

(i) the gross amount corresponding to so much of that net amount as would have been required to be taken into account as a trading receipt which has not borne tax, and

(ii) any tax credit in respect of the amount required to be disregarded under subparagraph (i);

(b) for the purposes of corporation tax, the income or profits against which the loss may be set off under section 157 or 396, there shall be disregarded the gross amount corresponding to so much of that net amount as would have been required to be taken into account as a trading receipt which has not borne tax.

PART 29 Patents, Scientific and Certain Other Research, Know-How and Certain Training

CHAPTER 1 Patents

754 Interpretation (Chapter 1). [ITA67 s284; CTA76 s21(1) and Sch1 par35; FA97 s146(1) and Sch9 PtI par1(19)]

754.—(1) In this Chapter—

“the commencement of the patent”, in relation to a patent, means the date from which the patent rights become effective;

“income from patents” means—

(a) any royalty or other sum paid in respect of the user of a patent, and

(b) any amount on which tax is payable for any chargeable period by virtue of this Chapter;

“Irish patent” means a patent granted under the laws of the State;

“patent rights” means the right to do or to authorise the doing of anything which but for that right would be an infringement of a patent;

“the writing-down period” has the meaning assigned to it by section 755(2).

(2) In this Chapter, any reference to the sale of part of patent rights includes a reference to the grant of a licence in respect of the patent in question, and any reference to the purchase of patent rights includes a reference to the acquisition of a licence in respect of a patent; but, if a licence granted by a person entitled to any patent rights is a licence to exercise those rights to the exclusion of the grantor and all other persons for the whole of the remainder of the term for which the rights subsist, the grantor shall be treated for the purposes of this Chapter as thereby selling the whole of the rights.

(3) Where, under section 77 of the Patents Act, 1992, or any corresponding provisions of the law of any country outside the State, an invention which is the subject of a patent is made, used, exercised or vended by or for the service of the State or the government of the country concerned, this Chapter shall apply as if the making, user, exercise or vending of the invention had taken place in pursuance of a licence, and any sums paid in respect thereof shall be treated accordingly.

755 Annual allowances for capital expenditure on purchase of patent rights. [ITA67 s285; CTA76 s21(1) and Sch1 par36]

755.—(1) Where a person incurs capital expenditure on the purchase of patent rights, there shall, subject to and in accordance with this Chapter, be made to that person writing-down allowances in respect of that expenditure during the writing-down period; but no writing-down allowance shall be made to a person in respect of any expenditure unless—

(a) the allowance is to be made to the person in taxing the person's trade, or

(b) any income receivable by the person in respect of the rights would be liable to tax.

(2) (a) Subject to paragraphs (b) to (d), the writing-down period shall be the 17 years beginning with the chargeable period related to the expenditure.

(b) Where the patent rights are purchased for a specified period, paragraph (a) shall apply with the substitution for the reference to 17 years of a reference to 17 years or the number of years comprised within that period, whichever is the less.

(c) Where the patent rights purchased begin one complete year or more after the commencement of the patent and paragraph (b) does not apply, paragraph (a) shall apply with the substitution for the reference to 17 years of a reference to 17 years less the number of complete years which, when the rights begin, have elapsed since the commencement of the patent or, if 17 complete years have so elapsed, of a reference to one year.

(d) For the purposes of this subsection, any expenditure incurred for the purposes of a trade by a person about to carry on the trade shall be treated as if that expenditure had been incurred by that person on the first day on which that person carries on the trade unless before that first day that person has sold all the patent rights on the purchase of which the expenditure was incurred.

756 Effect of lapse of patent rights. [ITA67 s286; CTA76 s21(1) and Sch1 par37]

756.—(1) Where a person incurs capital expenditure on the purchase of patent rights and, before the end of the writing-down period, any of the following events occurs—

(a) the rights come to an end without being subsequently revived;

(b) the person sells all those rights or so much of those rights as the person still owns;

(c) the person sells part of those rights and the net proceeds of the sale (in so far as they consist of capital sums) are not less than the amount of the capital expenditure remaining unallowed;

no writing-down allowance shall be made to that person for the chargeable period related to the event or for any subsequent chargeable period.

(2) Where a person incurs capital expenditure on the purchase of patent rights and, before the end of the writing-down period, either of the following events occurs—

(a) the rights come to an end without being subsequently revived;

(b) the person sells all those rights or so much of those rights as the person still owns, and the net proceeds of the sale (in so far as they consist of capital sums) are less than the amount of the capital expenditure remaining unallowed;

there shall, subject to and in accordance with this Chapter, be made to that person for the chargeable period related to the event an allowance (in this Chapter referred to as a “balancing allowance”) equal to—

(i) if the event is the rights coming to an end, the amount of the capital expenditure remaining unallowed, and

(ii) if the event is a sale, the amount of the capital expenditure remaining unallowed less the net proceeds of the sale.

(3) Where a person who has incurred capital expenditure on the purchase of patent rights sells all or any part of those rights and the net proceeds of the sale (in so far as they consist of capital sums) exceed the amount of the capital expenditure remaining unallowed, if any, there shall, subject to and in accordance with this Chapter, be made on that person for the chargeable period related to the sale a charge (in this Chapter referred to as a “balancing charge”) on an amount equal to—

(a) the excess, or

(b) where the amount of the capital expenditure remaining unallowed is nil, the net proceeds of the sale.

(4) Where a person who has incurred capital expenditure on the purchase of patent rights sells a part of those rights and subsection (3) does not apply, the amount of any writing-down allowance made in respect of that expenditure for the chargeable period related to the sale or any subsequent chargeable period shall be the amount determined by—

(a) subtracting the net proceeds of the sale (in so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale, and

(b) dividing the result by the number of complete years of the writing-down period which remained at the beginning of the chargeable period related to the sale,

and so on for any subsequent sales.

(5) References in this section to the amount of any capital expenditure remaining unallowed shall in relation to any event be construed as references to the amount of that expenditure less any writing-down allowances made in respect of that expenditure for chargeable periods before the chargeable period related to that event, and less also the net proceeds of any previous sale by the person who incurred the expenditure of any part of the rights acquired by the expenditure, in so far as those proceeds consist of capital sums.

(6) Notwithstanding subsections (1) to (5)—

(a) no balancing allowance shall be made in respect of any expenditure unless a writing-down allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and

(b) the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.

757 Charges on capital sums received for sale of patent rights. [ITA67 s288; CTA76 s21(1) and Sch1 par38]

757.—(1) (a) Subject to paragraphs (b) and (c), where a person resident in the State sells any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, that person shall, subject to this Chapter, be charged to tax under Case IV of Schedule D for the chargeable period in which the sum is received by that person and for successive chargeable periods, being charged in each period on the same fraction of the sum as the period is of 6 years (or such less fraction as has not already been charged).

(b) Where the person by notice in writing served on the inspector not later than 12 months after the end of the chargeable period in which the capital sum was received elects that the whole of that sum shall be charged to tax for the chargeable period in which the sum is received, it shall be charged to tax accordingly.

(c) Where the person by notice in writing served on the inspector not later than 12 months after the end of the chargeable period in which the capital sum was received applies to have the fraction referred to in paragraph (a) determined as being other than the same fraction as the chargeable period is of 6 years, then, if it appears to the Revenue Commissioners that hardship is likely to arise having regard to all the circumstances of the case unless a direction is given under this paragraph, they may direct that the fraction shall be the same fraction of the sum as the chargeable period is of a number of years other than 6 years, and that the charge shall be spread accordingly.

(2) (a) Where a person not resident in the State sells any patent rights and the net proceeds of the sale consist wholly or partly of a capital sum, and the patent is an Irish patent, then, subject to this Chapter—

(i) the person shall be chargeable to tax in respect of that sum under Case IV of Schedule D, 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.

(b) Where, not later than 12 months after the end of the year of assessment in which the sum referred to in paragraph (a) is paid, the person to whom it is paid, by notice in writing to the Revenue Commissioners, elects that the sum shall be treated for the purpose of income tax for that year and for each of the 5 succeeding years as if one-sixth of that sum were included in that person's income chargeable to tax for all 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.

(3) (a) In subsection (2), “tax” shall mean income tax, unless the seller of the patent rights, 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) Where paragraph (a) of subsection (2) applies to charge a company to corporation tax in respect of a sum paid to it, paragraph (b) of that subsection shall not apply; but—

(i) the company may, by notice in writing given to the Revenue Commissioners not later than 12 months after the end of the accounting period in which the sum is paid, elect that the sum shall be treated as arising rateably in the accounting periods ending not later than 6 years from the beginning of the accounting period in which the sum is paid (being accounting periods during which the company remains within the charge to corporation tax by virtue of subsection (2) (a)), and

(ii) there shall be made all such repayments of tax and assessments to tax as are necessary to give effect to any such election.

(4) Where the patent rights sold by a person, or the rights out of which the patent rights sold by a person were granted, were acquired by the person by purchase and the price paid consisted wholly or partly of a capital sum, subsections (1) to (3) shall apply as if any capital sum received by the person on the sale of the rights were reduced by the amount of that sum; but—

(a) where between the purchase and the sale the person has sold part of the patent rights acquired by the person and the net proceeds of that sale consist wholly or partly of a capital sum, the amount of the reduction to be made under this subsection in respect of the subsequent sale shall itself be reduced by the amount of that sum, and

(b) nothing in this subsection shall affect the amount of tax to be deducted and accounted for under section 238 by virtue of subsection (2) 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) This section shall apply in relation to any sale of part of any patent rights as it applies in relation to sales of patent rights.

758 Relief for expenses. [ITA67 s290(1) to (3); CTA76 s21(1) and Sch1 par39]

758.—(1) Notwithstanding section 81, in computing the profits or gains of any trade, there shall be allowed to be deducted as expenses any fees paid or expenses incurred in obtaining for the purposes of the trade the grant of a patent or an extension of the term of a patent.

(2) Where—

(a) a person, otherwise than for the purposes of a trade carried on by the person, pays any fees or incurs any expenses in connection with the grant or maintenance of a patent or the obtaining of an extension of a term of a patent, and

(b) those fees or expenses would, if they had been paid or incurred for the purposes of a trade, have been allowable as a deduction in estimating the profits or gains of the trade,

there shall be made to the person for the chargeable period in which those fees or expenses were paid or incurred an allowance equal to the amount of those fees or expenses.

(3) Where a patent is granted in respect of any invention, an allowance equal to so much of the net amount of any expenses incurred by an individual who, whether alone or in conjunction with any other person, actually devised the invention as is properly ascribable to the devising of that invention (not being expenses in respect of which, or of assets representing which, an allowance is to be made under any other provision of the Tax Acts) shall be made to that individual for the year of assessment in which the expenses were incurred.

759 Spreading of revenue payments over several years. [ITA67 s195B(3) and (6) and s291; CTA76 s21(1) and Sch1 par40; FA93 s10(1)]

759.—(1) In this section, any reference to the tax payable by a person includes, in cases where the income of an individual's spouse is deemed to be the income of the individual, references to the income tax payable by the individual's spouse.

(2) Where a royalty or other sum to which section 237 or 238 applies is paid in respect of the user of a patent and that user extended over a period of 6 complete years or more, the person receiving the payment may require that the tax payable by that person by reason of the receipt of that sum shall be reduced so as not to exceed the total amount of tax which would have been payable by that person if that royalty or sum had been paid in 6 equal instalments at yearly intervals, the last of which was paid on the date on which the payment was in fact made.

(3) Subsection (2) shall apply in relation to a royalty or other sum where the period of the user is 2 complete years or more but less than 6 complete years as it applies to the royalties and sums mentioned in that subsection, but with the substitution for the reference to 6 equal instalments of a reference to so many equal instalments as there are complete years comprised in that period.

(4) Nothing in this section shall apply to any sum to which section 238 applies by virtue of section 757.

760 Capital sums: effect of death, winding up and partnership changes. [ITA67 s195B(3) and (6) and s293; CTA76 s21(1) and Sch1 par42; FA93 s10(1)]

760.—(1) In this section, any references to tax paid or borne or payable or to be paid or borne by a person include, in cases where the income of an individual's spouse is deemed to be income of the individual, references to the income tax paid or borne, or payable or to be paid or borne, by the individual's spouse.

(2) Where a person on whom, by reason of the receipt of a capital sum, a charge is to be, or would otherwise be, made under section 757 dies or, being a body corporate, commences to be wound up—

(a) no sums shall be charged under that section on that person for any chargeable period subsequent to that in which the death takes place or the winding up commences, and

(b) the amount to be charged for the chargeable period in which the death occurs or the winding up commences shall be increased by the total amounts which but for the death or winding up would have been charged for subsequent chargeable periods.

(3) (a) In the case of a death, the personal representatives may, by notice in writing served on the inspector not later than 21 days after notice has been served on them of the charge to be made by virtue of this section, require that the tax payable out of the estate of the deceased by reason of the increase provided for by this section shall be reduced so as not to exceed the amount determined in accordance with paragraph (b).

(b) The amount referred to in paragraph (a) shall be the total amount of tax which would have been payable by the deceased or out of his or her estate by reason of the operation of section 757 in relation to the capital sum if, instead of the amount to be charged for the year in which the death occurs being increased by the whole amount of the sums charged for subsequent years, the several amounts to be charged for the years beginning with that in which the capital sum was received and ending with that in which the death occurred had each been increased by that whole amount divided by the number of those years.

(4) (a) In this subsection, “the relevant period” has the same meaning as in Part 43.

(b) Where, under Chapter 4 of Part 9 as modified by Part 43, charges under section 757 are to be made on 2 or more persons as being the persons for the time being carrying on a trade, and the relevant period comes to an end, subsection (2) shall apply in relation to the ending of the relevant period as it applies where a body corporate commences to be wound up.

(c) Where paragraph (b) applies—

(i) the additional sums which under subsection (2) are to be charged for the year in which the relevant period ends shall be aggregated and apportioned among the members of the partnership immediately before the ending of the relevant period according to their respective interests in the partnership profits at that time and each partner (or, if that partner is dead, his or her personal representatives) charged for his or her proportion, and

(ii) each partner (or, if that partner is dead, his or her personal representatives) shall have the same right to require a reduction of the total tax payable by him or her or out of his or her estate by reason of the increase provided for by this section as would have been exercisable by the personal representatives under subsection (3) in the case of a death, and that subsection shall apply accordingly but as if the reference to the amount of tax which would have been payable by the deceased or out of his or her estate in the event mentioned in that subsection were a reference to the amount of tax which would in that event have been paid or borne by the partner in question or out of his or her estate.

761 Manner of making allowances and charges. [ITA67 s292; CTA76 s21(1) and Sch1 par41]

761.—(1) An allowance or charge under this Chapter shall be made to or on a person in taxing the person's trade if—

(a) the person is carrying on a trade the profits or gains of which are, or, if there were any, would be, chargeable to tax under Case I of Schedule D for the chargeable period for which the allowance or charge is made, and

(b) at any time in the chargeable period or its basis period the patent rights in question, or other rights out of which they were granted, were or were to be used for the purposes of that trade;

but nothing in this subsection shall affect the preceding provisions of this Chapter allowing a deduction as expenses in computing the profits or gains of a trade or requiring a charge to be made under Case IV of Schedule D.

(2) Except where provided for in subsection (1), an allowance under this Chapter shall be made by means of discharge or repayment of tax and shall be available against income from patents, and a charge under this Chapter shall be made under Case IV of Schedule D.

762 Application of Chapter 4 of Part 9. [ITA67 s299(4) (b) (iii) and s303(1); CTA76 s21(1) and Sch1 par46 and par49]

762.—(1) Subject to subsection (2), Chapter 4 of Part 9 shall apply as if this Chapter were contained in that Part, and any reference in the Tax Acts to any capital allowance to be given by means of discharge or repayment of tax and to be available or available primarily against a specified class of income shall include a reference to any capital allowance given in accordance with section 761 (2).

(2) In Chapter 4 of Part 9, as applied by virtue of subsection (1) to patent rights—

(a) the reference in section 312(5) (a) (i) to the sum mentioned in paragraph (b) shall in the case of patent rights be construed as a reference to the amount of the capital expenditure on the acquisition of the patent rights remaining unallowed, computed in accordance with section 756, and

(b) the reference in section 316 (1) to any expenditure or sum in the case of which a deduction of tax is to be or may be made under section 237 or 238 shall not include a sum in the case of which such a deduction is to be or may be so made by virtue of section 757.

CHAPTER 2 Scientific and certain other research

763 Interpretation (sections 764 and 765). [ITA67 s244(1), (8) and (9); CTA76 s21(1) and Sch1 par9; FA92 s39]

763.—(1) In this section—

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

“exploring for specified minerals” means searching in the State for deposits of specified minerals or testing such deposits or winning access to such deposits, and includes the systematic searching for areas containing specified minerals and searching by drilling or other means for specified minerals within those areas, but does not include operations in the course of developing or working a mine;

“licence” means—

(a) an exploration licence,

(b) a petroleum prospecting licence,

(c) a petroleum lease, or

(d) a reserved area licence, duly granted before the 11th day of June, 1968, in respect of an area in the State, or on or after the 11th day of June, 1968, in respect of either or both a designated area and an area in the State, and which was or may be so granted subject to such licensing terms as were presented to each House of the Oireachtas, and includes any such licence the terms of which have been duly amended or varied from time to time;

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

“mine” means an underground excavation for the purpose of getting specified minerals;

“petroleum” includes—

(a) any mineral oil or relative hydrocarbon and natural gas and other liquid or gaseous hydrocarbons and their derivatives or constituent substances existing in its natural condition in strata (including, without limitation, distillate, condensate, casinghead gasoline and such other substances as are ordinarily produced from oil and gas wells), and

(b) any other mineral substance contained in oil or natural gas brought to the surface with them in the normal process of extraction, but does not include coal and bituminous shales and other stratified deposits from which oil can be extracted by distillation,

won or capable of being won under the authority of a licence;

“petroleum exploration activities” means activities of a person carried on by the person or on behalf of the person in searching for deposits in a licensed area, in testing or appraising such deposits or in winning access to such deposits for the purposes of such searching, testing and 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;

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

“specified minerals” means the following minerals occurring in non-bedded deposits of such minerals, that is, barytes, felspar, serpentinous marble, quartz rock, soapstone, ores of copper, ores of gold, ores of iron, ores of lead, ores of manganese, ores of molybdenum, ores of silver, ores of sulphur and ores of zinc.

(2) In sections 764 and 765—

“asset” includes part of an asset;

“expenditure on scientific research” does not include any expenditure incurred in the acquisition of rights in or arising out of scientific research;

“scientific research” means, subject to subsections (3) and (4), any activities in the fields of natural or applied science for the extension of knowledge.

(3) For the purposes of the definition of “scientific research”, that definition shall, subject to subsection (4), be construed as including and be deemed always to have included a provision excluding from that definition the following activities—

(a) exploring for specified minerals,

(b) petroleum exploration activities, and

(c) petroleum extraction activities.

(4) As respects activities carried on before the 29th day of January, 1992, subsection (3) shall not apply for the purpose of computing any charge to income tax or corporation tax on a person who has before the 3rd day of December, 1991, made a claim in respect of expenditure incurred in exploring for specified minerals or in respect of petroleum exploration activities or in respect of petroleum extraction activities.

(5) For the purposes of sections 764 and 765, expenditure shall not be regarded as incurred by a person in so far as it is or is to be met directly or indirectly out of moneys provided by the Oireachtas or by any person other than the first-mentioned person.

(6) The same expenditure shall not be taken into account for any of the purposes of section 764 or 765 in relation to more than one trade.

764 Deduction for revenue expenditure on scientific research. [ITA67 s244(2) and (2A); CTA76 s21(1) and Sch1 par9]

764.—(1) Where a person carrying on a trade either—

(a) incurs non-capital expenditure on scientific research relating to the trade, or

(b) pays any sum to—

(i) a body carrying on scientific research and approved for the purposes of this section by the Minister for Finance, or

(ii) an Irish university,

in order that such body or university may undertake scientific research,

then, the expenditure so incurred or the sum so paid shall be deducted as an expense in computing the profits or gains of the trade.

(2) Where a person carrying on a trade—

(a) incurs non-capital expenditure on scientific research or pays any sum to a body or university referred to in subsection (1)(b) in order that the body or university may undertake scientific research, and

(b) the expenditure so incurred or the sum so paid is not deductible as an expense under subsection (1) because the scientific research is not related to any trade being carried on by the person,

then, the expenditure so incurred or the sum so paid shall be deducted as an expense in computing the profits or gains of the person's trade.

765 Allowances for capital expenditure on scientific research. [ITA67 s244(3), (4), (5), (6) and (7); CTA76 s21(1) and Sch1 par9; FA80 s17(3); FA96 s132(2) and Sch5 PtII]

765.—(1) Where a person—

(a) incurs capital expenditure on scientific research,

(b) (i) is then carrying on a trade to which such expenditure relates, or

(ii) subsequently sets up and commences a trade which is related to such research,

(c) applies to the inspector for an allowance under this subsection in respect of such expenditure, and

(d) so applies—

(i) in the case where the expenditure was incurred while carrying on the trade, within 24 months after the end of the chargeable period in which it was incurred, or

(ii) in the case where the expenditure was incurred before the setting up and commencement of the trade, within 24 months after the end of the chargeable period in which the trade was set up and commenced,

then, subject to this section, there shall be made in taxing the trade for the chargeable period mentioned in whichever of subparagraphs (i) and (ii) of paragraph (d) is applicable an allowance equal to the amount of the expenditure.

(2) Where a person carrying on a trade incurs capital expenditure on scientific research in respect of which an allowance may not be made under subsection (1) because the scientific research is not related to any trade being carried on by that person, there shall be made in taxing that person's trade for the chargeable period in which the expenditure was incurred an allowance equal to the amount of the expenditure.

(3) Where an asset representing capital expenditure on scientific research ceases at any time from any cause whatever to be used for such research, relating to the trade carried on by the person who incurred the expenditure, then—

(a) an amount equal to the allowance made under this section in respect of that expenditure, or, if the value of the asset immediately before the cessation is less than that allowance, equal to that value, shall be treated as a trading receipt of the trade accruing immediately before the cessation, and

(b) in the application of section 284 to an allowance made in respect of the asset for any chargeable period after that in which the cessation takes place, the actual cost of the asset shall be treated as being reduced by the amount of the allowance effectively made.

(4) Where an allowance under this section is made to a person for any chargeable period in respect of expenditure represented wholly or partly by assets, no allowance in respect of those assets shall be made to that person under section 85 or 284 for that chargeable period.

(5) Section 304(4) shall apply in relation to an allowance under subsection (1) or (2) as it applies in relation to allowances to be made under Part 9.

766 Deduction for certain expenditure on research and development. [FA95 s59(1) to (4); FA96 s57(1)]

766.—(1) (a) In this section—

“appropriate inspector” has the same meaning as in section 950;

“base period” means the period of 12 months ending immediately before the commencement of the first relevant period;

“expenditure on research and development” means non-capital expenditure incurred by a company, being—

(i) an amount equal to 115 per cent of the aggregate of the amounts of—

(I) such part of the emoluments paid by the company to employees of the company engaged in the carrying out of research and development activities related to the company's trade as is laid out for the purposes of those activities, and

(II) expenditure incurred by the company on materials or goods used solely by the company in the carrying out of research and development activities related to the company's trade,

but where expenditure referred to in clauses (I) and (II) is incurred by a company (in this definition referred to as “the first-mentioned company”) which is a member of a group on behalf of another company which is a member of the group, the other company shall be treated for the purposes of the Corporation Tax Acts as having incurred the expenditure and the first-mentioned company shall be treated for those purposes as not having incurred the expenditure, and

(ii) a sum paid to another person, not being a person connected with the company, in order that such person may carry out research and development activities related to the company's trade;

“group base expenditure on research and development” means the aggregate of the amounts of expenditure on research and development incurred in the base period by qualified companies which throughout that period are members of the group;

“group expenditure on research and development”, in relation to a relevant period, means the aggregate of the amounts of expenditure on research and development—

(i) incurred, or treated as incurred, in the relevant period by qualified companies which throughout the relevant period are members of the group, and

(ii) certified as having been incurred by those companies in certificates given to the companies by persons who are auditors of the companies appointed under section 160 of the Companies Act, 1963, or under the law of any territory where any such company is duly incorporated and which corresponds to that section;

“qualified company”, in relation to a relevant period, means a company which—

(i) throughout the relevant period carries on a trade which consists wholly or mainly of the manufacture of goods in the State, but trading operations of a company shall not be treated for the purposes of this section as the manufacture of goods in the State by virtue of any section of the Tax Acts other than section 443,

(ii) holds a certificate given to it by Forbairt which certifies that in the opinion of Forbairt the research and development activities which are proposed to be carried on by or on behalf of the company have the potential to achieve the purposes set out in paragraph (iii) of the definition of “research and development activities”,

(iii) notifies the appropriate inspector before the commencement of the research and development activities of its intention to carry out such activities or to have such activities carried out on its behalf,

(iv) maintains a record of expenditure incurred in the carrying on by it or on its behalf of research and development activities in accordance with a system approved by Forbairt of recording such expenditure, and

(v) does not, at any time during the period commencing on the 10th day of May, 1995, and ending 3 years after the commencement of the first relevant period, raise any amount through the issue of eligible shares within the meaning of section 488;

“qualifying expenditure on research and development attributable to a qualified company”, in relation to a relevant period, means so much of the amount of qualifying group expenditure on research and development in the relevant period as bears to that amount the same proportion as the amount of expenditure on research and development incurred by the company in the relevant period bears to the group expenditure on research and development in the relevant period;

“qualifying group expenditure on research and development”, in relation to a relevant period, means an amount determined by the formula—

E (D £25,000)

where—

E is the amount of group expenditure on research and development in the relevant period, and

D is—

(i) where the relevant period commences before the 1st day of June, 1996, the greater of—

(I) the amount of group base expenditure on research and development, and

(II) the amount of group expenditure on research and development in any relevant period preceding that relevant period,

and

(ii) where the relevant period commences on or after the 1st day of June, 1996, the amount of group base expenditure on research and development,

but—

(A) the qualifying group expenditure on research and development in relation to a relevant period shall not in any case exceed £150,000, and

(B) the aggregate of the amounts of qualifying group expenditure on research and development in all relevant periods shall not exceed the aggregate of the amounts specified in certificates given by Forbairt to companies which are members of the group;

“relevant period” means—

(i) in the case of a company which is a member of a group the end of the accounting periods of the members of which coincide, the period of 12 months throughout which one or more members of the group carried on a trade and ending at the end of the first accounting period of the company which commences on or after the 1st day of June, 1995,

(ii) in the case of a company which is a member of a group the end of the accounting periods of which do not coincide, the period specified in a notice in writing made jointly by companies which are members of the group and given to the appropriate inspector within a period of 9 months after the end of the period so specified, being a period of 12 months throughout which one or more members of the group carries on a trade and ending at the end of the first accounting period of a company which is a member of the group which accounting period commences on or after the 1st day of June, 1995, and

(iii) in any other case, the period of 12 months commencing on the 1st day of June, 1995,

and each subsequent period of 12 months, commencing immediately after the end of the preceding relevant period, which falls wholly in the period of 3 years commencing at the beginning of the first relevant period, but a period shall not be a relevant period if it commences on or after the 1st day of June, 1999;

“research and development activities” means systematic, investigative or experimental activities which—

(i) are carried on wholly or mainly in the State,

(ii) involve innovation or technical risk, and

(iii) are carried on for the purpose of—

(I) acquiring new knowledge with a view to that knowledge having a specific commercial application, or

(II) creating new or improved materials, products, devices, processes or services,

and other activities carried on wholly or mainly in the State for a purpose directly related to the carrying on of activities of the kind referred to in paragraph (iii), but activities that are carried on by means of—

(A) market research, market testing, market development, sales promotion or consumer surveys,

(B) quality control,

(C) the making of cosmetic modifications or stylistic changes to products, processes or production methods,

(D) management studies or efficiency surveys, or

(E) research in social sciences, arts or humanities,

shall not be research and development activities.

(b) For the purposes of this section—

(i) 2 companies shall be deemed to be members of a group if one company is an associated company (within the meaning of section 432) of the other company;

(ii) a company and all its associated companies shall form a group; but a company which is not a member of a group shall be treated as if it were a member of a group which consists of that company, and accordingly references to group expenditure on research and development, group base expenditure and qualifying group expenditure on research and development shall be construed as if they were respectively references to expenditure on research and development, base expenditure and qualifying expenditure on research and development;

(iii) systematic, investigative or experimental activities, or other activities, shall be regarded as carried on wholly or mainly in the State only if not less than 75 per cent of the total amount expended in the course of such activities is expended in the State;

(iv) as respects any relevant period commencing before the 1st day of June, 1996, expenditure on research and development shall not be regarded as having been incurred by a company which is a member of a group if any expenditure on research and development incurred in a relevant period or in the base period by a company which is a member of the group has been or is to be met directly or indirectly by the State or any person other than a company which is a member of the group;

(v) as respects any relevant period commencing on or after the 1st day of June, 1996, expenditure on research and development shall not be regarded as having been incurred in a relevant period by a company which is a member of a group if—

(I) in the relevant period the aggregate of amounts received by companies which are members of the group, being amounts paid directly or indirectly to the companies by the State or a person, other than a company which is a member of the group, to enable the company to meet the cost of such expenditure, exceeds £50,000, or

(II) it is expenditure—

(A) approved by Forbairt under any scheme administered by it, and

(B) which has been or is to be met to any extent directly or indirectly by the State or any person other than a company which is a member of the group.

(2) (a) In this subsection—

“income from the sale of goods” has the same meaning as in section 454;

“a loss from the sale of goods” has the same meaning as in section 455.

(b) On making a claim in that behalf, a qualified company shall be entitled, in computing the trading income for an accounting period of a trade carried on by it, to deduct an amount equal to treble the qualifying expenditure on research and development attributable to the qualified company as is referable to the accounting period and, subject to paragraph (c), the company shall be entitled to such a deduction in addition to any deduction to which the qualified company may otherwise be entitled in respect of expenditure incurred on research and development.

(c) Where the amount referred to in paragraph (b) exceeds an amount which apart from this subsection would be the income from the sale of goods of the trade so referred to for the accounting period, then, the excess—

(i) shall not be deductible by virtue of paragraph (b), and

(ii) shall be treated as a loss incurred in that trade, which is a loss from the sale of goods, for the purposes of relief under—

(I) section 455 or 456, or

(II) to the extent that such relief does not exceed the income from the sale of goods in the course of that trade in the accounting period for which that relief is given, section 396(1).

(3) For the purposes of subsection (2)—

(a) where a relevant period coincides with an accounting period of a qualified company, the amount of qualifying expenditure on research and development attributable to the qualified company which relates to the accounting period of the company shall be the amount of that qualifying expenditure attributable to the qualified company, and

(b) where the relevant period does not coincide with an accounting period of the company—

(i) the qualifying expenditure on research and development attributable to the qualified company shall be apportioned to the accounting periods which fall wholly or partly in the relevant period, and

(ii) the amount so apportioned to an accounting period shall be treated as the amount of qualifying expenditure on research and development attributable to the qualified company which relates to that accounting period of the company.

(4) Where a company makes a claim under this section, the company shall be treated for the purpose of Part 16 as not being a qualifying company in respect of any amount raised, at any time during the period commencing on the 10th day of May, 1995, and ending 3 years after the commencement of the first relevant period, by the issue of eligible shares within the meaning of section 488.

767 Payment to universities and other approved bodies for research in, or teaching of, approved subjects. [FA73 s21; FA85 s15]

767.—(1) In this section—

“approved body” means—

(a) the College of Industrial Relations, Ranelagh, Dublin, or

(b) any of the following colleges established under the Vocational Education Act, 1930—

(i) colleges forming part of the Dublin Institute of Technology,

(ii) the Limerick College of Art, Commerce and Technology, or

(iii) regional technical colleges;

“approved subject” means—

(a) industrial relations,

(b) marketing, or

(c) any other subject which is approved for the purposes of this section by the Minister for Finance.

(2) Where a person carrying on a trade or profession—

(a) pays any sum to—

(i) an Irish university, or

(ii) an approved body,

for the purpose of enabling the university or the approved body to undertake research in, or engage in the teaching of, an approved subject, and

(b) the sum so paid is not income to which section 792 applies,

the sum so paid shall, if not otherwise so deductible, be deducted as an expense in computing the profits or gains of the person's trade or profession.

CHAPTER 3 Know-how and certain training

768 Allowance for know-how. [FA68 s2]

768.—(1) In this section—

“control” has the same meaning as in section 312;

“know-how” means industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the carrying out of any agricultural, forestry, fishing, mining or other extractive operations;

references to a body of persons include references to a partnership.

(2) (a) For the purposes of this subsection, a person incurring expenditure on know-how before the setting up and commencement of the trade in which it is used shall be treated as incurring it on that setting up and commencement.

(b) Where a person incurs expenditure on know-how for use in a trade carried on by the person or, having incurred expenditure on know-how, sets up and commences a trade in which it is used, there shall, subject to this section, be allowed to be deducted as expenses, in computing for the purposes of Case I of Schedule D the profits or gains of the trade, such part of the expenditure as would but for this section not be allowed to be so deducted.

(3) Where a person acquires a trade or part of a trade and, together with the trade or the part of the trade, know-how used in the trade or part of the trade, no amount shall be allowed to be deducted under this section in respect of expenditure incurred on the acquisition of the know-how.

(4) Subsection (2) shall not apply on any sale of know-how where the buyer is a body of persons over whom the seller has control, or the seller is a body of persons over whom the buyer has control, or both the seller and the buyer are bodies of persons and some other person has control over both of them.

769 Relief for training of local staff before commencement of trading. [ITA67 s305; CTA76 s21(1) and Sch1 par51; FA93 s34(1) (c)]

769.—(1) Where, before the day of the setting up or commencement of a trade consisting of the production for sale of manufactured goods, a person who is about to carry on the trade incurs or has incurred expenditure on the recruitment and training, with a view to their employment in the trade, of persons all or a majority of whom are Irish citizens, there shall be made to such person allowances in respect of that expenditure during a writing-down period of 3 years beginning on that day, and such allowances shall be made in taxing the trade.

(2) For the purposes of this section—

(a) expenditure shall not include any expenditure incurred by a person in respect of which no deduction would have been allowable to the person, in computing the profits or gains of the trade under the provisions of the Tax Acts applicable to Case I of Schedule D, if it had been incurred on or after the day of the setting up or commencement of the trade;

(b) expenditure shall not be regarded as having been incurred by a person in so far as it has been or is to be met directly or indirectly by the State or by any person other than the first-mentioned person;

(c) the date on which any expenditure is incurred shall be taken to be the date on which the sum in question becomes payable.

(3) Section 304(4) shall apply in relation to an allowance under subsection (1) as it applies in relation to an allowance to be made under Part 9.

(4) For the purposes of the Income Tax Acts, any claim by a person for an allowance under this section shall be included in the annual statement required to be delivered under those Acts of the profits or gains of the person's trade and shall be accompanied by a certificate signed by the claimant (which shall be deemed to form part of the claim) stating that the expenditure was incurred on the recruitment and training, with a view to their employment in the trade, of persons all or a majority of whom are Irish citizens and giving such particulars as show that the allowance is to be made.

PART 30 Occupational Pension Schemes, Retirement Annuities, Purchased Life Annuities and Certain Pensions

CHAPTER 1 Occupational pension schemes

770 Interpretation and supplemental (Chapter 1). [FA72 s13(1), (2) and (4); FA74 s86 and Sch2 PtII]

770.—(1) In this Chapter, except where the context otherwise requires—

“administrator”, in relation to a retirement benefits scheme, means the person or persons having the management of the scheme, and references to the administrator of a scheme shall be deemed to include the person mentioned in section 772(2) (c);

“approved scheme” means a retirement benefits scheme for the time being approved by the Revenue Commissioners for the purposes of this Chapter;

“company” includes any body corporate or unincorporated body of persons other than a partnership;

“director”, in relation to a company, includes—

(a) in the case of a company the affairs of which are managed by a board of directors or similar body, a member of that board or body,

(b) in the case of a company the affairs of which are managed by a single director or similar person, that director or person,

(c) in the case of a company the affairs of which are managed by the members themselves, a member of that company,

and includes a person who is to be or has been a director;

“employee”—

(a) in relation to a company, includes an officer of the company, any director of the company and any other person taking part in the management of the affairs of the company, and

(b) in relation to any employer, includes a person who is to be or has been an employee,

and “employer” and other cognate expressions shall be construed accordingly;

“exempt approved scheme” has the meaning assigned to it by section 774;

“final remuneration” means the average annual remuneration of the last 3 years' service;

“pension” includes annuity;

“relevant benefits” means any pension, lump sum, gratuity or other like benefit—

(a) given or to be given on retirement or on death or in anticipation of retirement or, in connection with past service, after retirement or death, or

(b) to be given on or in anticipation of or in connection with any change in the nature of the service of the employee in question,

but does not include any benefit which is to be afforded solely by reason of the death or disability of a person resulting from an accident arising out of or in the course of his or her office or employment and for no other reason;

“service” means service as an employee of the employer in question and other expressions, including “retirement”, shall be construed accordingly;

“statutory scheme” means a retirement benefits scheme established by or under any enactment.

(2) Any reference in this Chapter to the provision of relevant benefits, or of a pension, for employees of an employer includes a reference to the provision of those benefits or that pension by means of a contract between the administrator or the employer and a third person.

(3) Schedule 23 shall apply for the purposes of supplementing this Chapter and shall be construed as one with this Chapter.

771 Meaning of “retirement benefits scheme”. [FA72 s14]

771.—(1) In this Chapter, “retirement benefits scheme” means, subject to this section, a scheme for the provision of benefits consisting of or including relevant benefits, but does not include any scheme under the Social Welfare (Consolidation) Act, 1993, providing such benefits.

(2) References in this Chapter to a scheme include references to a deed, agreement, series of agreements or other arrangements providing for relevant benefits, notwithstanding that it relates or they relate only to—

(a) a small number of employees or to a single employee, or

(b) the payment of a pension starting immediately on the making of the arrangements.

(3) The Revenue Commissioners may if they think fit treat a retirement benefits scheme relating to employees of 2 or more different classes or descriptions as being for the purposes of this Chapter 2 or more separate retirement benefits schemes relating respectively to such one or more of those classes or descriptions of those employees as the Revenue Commissioners think fit.

(4) For the purposes of this Chapter—

(a) employees may be regarded as belonging to different classes or descriptions if they are employed by different employers, and

(b) a particular class or description of employee may consist of a single employee or any number of employees.

772 Conditions for approval of schemes and discretionary approval. [FA72 s15(1) to (7); FA74 s64(1); FA92 s6(a); FA96 s131(2) and Sch5 PtII; FA97 s146(1) and Sch9 PtI par5(1)]

772.—(1) Subject to this section, the Revenue Commissioners shall approve any retirement benefits scheme for the purposes of this Chapter if it satisfies all of the prescribed conditions, namely—

(a) the conditions set out in subsection (2), and

(b) the conditions as respects benefits set out in subsection (3).

(2) The conditions referred to in subsection (1) (a) are—

(a) that the scheme is bona fide established for the sole purpose of providing relevant benefits in respect of service as an employee, being benefits payable to, or to the widow or widower, children or dependants or personal representatives of, the employee;

(b) that the scheme is recognised by the employer and employees to whom it relates, and that every employee who is or has a right to be a member of the scheme has been given written particulars of all essential features of the scheme which concern the employee;

(c) that there is a person resident in the State who will be responsible for the discharge of all duties imposed on the administrator of the scheme under this Chapter;

(d) that the employer is a contributor to the scheme;

(e) that the scheme is established in connection with some trade or undertaking carried on in the State by a person resident in the State;

(f) that no amount can be paid, whether during the subsistence of the scheme or later, by means of repayment of an employee's contributions under the scheme.

(3) The conditions as respects benefits referred to in subsection (1) (b) are—

(a) that any benefit for an employee is a pension on retirement at a specified age not earlier than 60 years and not later than 70 years, or on earlier retirement through incapacity, which does not exceed one-sixtieth of the employee's final remuneration for each year of service up to a maximum of 40 years;

(b) that any pension for any widow or widower of an employee who dies before retirement shall be a pension payable on the employee's death of an amount that does not exceed two-thirds of any pension or pensions which, consonant with the condition in paragraph (a), could have been provided for the employee on retirement on attaining the specified age, if the employee had continued to serve until the employee attained that age at an annual rate of remuneration equal to the employee's final remuneration;

(c) that any lump sums provided for any widow or widower, children, dependants or personal representatives of an employee who dies before retirement shall not exceed in the aggregate 4 times the employee's final remuneration;

(d) that any benefit for any widow or widower of an employee payable on the employee's death after retirement is a pension such that the amount payable to the widow or widower does not exceed two-thirds of any pension or pensions payable to the employee;

(e) that any pensions for the children or dependants of an employee who dies before retirement or on the employee's death after retirement shall not exceed in the aggregate one-half of the pension specified in paragraph (b) or (d), as the case may be;

(f) that no pension is capable in whole or in part of surrender, commutation or assignment, except in so far as the scheme allows an employee on retirement to obtain by commutation of the employee's pension a lump sum or sums not exceeding in all three-eightieths of the employee's final remuneration for each year of service up to a maximum of 40 years;

(g) that no other benefits are payable under the scheme.

(4) (a) The Revenue Commissioners may if they think fit having regard to the facts of a particular case and subject to such conditions, if any, as they think proper to attach to the approval, approve a retirement benefits scheme for the purposes of this Chapter, notwithstanding that it does not satisfy one or more of the prescribed conditions.

(b) The Revenue Commissioners may in particular approve by virtue of this subsection a scheme which—

(i) exceeds the limits imposed by the prescribed conditions as respects benefits for less than 40 years' service,

(ii) allows benefits to be payable on retirement within 10 years of the specified age or on earlier incapacity,

(iii) provides for the return in certain contingencies of employees' contributions and payment of interest (if any) on the contributions, or

(iv) relates to a trade or undertaking carried on only partly in the State and by a person not resident in the State.

(5) Where in the opinion of the Revenue Commissioners the facts concerning any scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time, by notice in writing to the administrator, withdraw their approval on such grounds, and from such date, as may be specified in the notice.

(6) Where an alteration has been made in a retirement benefits scheme, no approval given as regards the scheme before the alteration shall apply after the date of the alteration unless the alteration has been approved by the Revenue Commissioners.

(7) For the purpose of determining whether a retirement benefits scheme, in so far as it relates to a particular class or description of employees, satisfies or continues to satisfy the prescribed conditions, that scheme shall be considered in conjunction with any other retirement benefits scheme or schemes relating to employees of that class or description, and, if those conditions are satisfied in the case of both or all of those schemes taken together, they shall be taken to be satisfied in the case of each of them but otherwise those conditions shall be taken to be satisfied in the case of none of them.

773 General Medical Services: scheme of superannuation. [FA91 s12]

773.—(1) The Revenue Commissioners may, if they think fit and subject to any undertakings and conditions that they think proper to attach to the approval, approve for the purposes of this Chapter a scheme of superannuation provided for under an agreement for the provision of services under section 58 of the Health Act, 1970 (in this section referred to as a “relevant scheme”) as if it were a retirement benefits scheme within the meaning of this Chapter and notwithstanding that it does not satisfy one or more of the conditions set out in subsections (2) and (3) of section 772.

(2) As respects a relevant scheme approved under this section, this Chapter and Schedule 23 shall apply subject to any necessary modifications and in particular as if in this Chapter and in that Schedule—

(a) “employee” included a registered medical practitioner providing services under an agreement for the provision of services under section 58 of the Health Act, 1970 (in this section referred to as an “agreement”),

(b) “service” included services by a registered medical practitioner under an agreement and an “office or employment” included the provision of such services, and

(c) a reference to Schedule E were a reference to Case II of Schedule D except in section 779.

(3) Chapter 2 of this Part shall apply as if a member of a relevant scheme were the holder of a pensionable office or employment and such member's income assessable to tax under Case II of Schedule D arising from an agreement were remuneration from such an office or employment.

774 Certain approved schemes: exemptions and reliefs. [FA72 s16(1) to (5) and (7); CTA76 s164 and Sch3 PtI; FA88 s30(1) and (2) (a); FA91 s38; FA97 s41(1) (a) and (3)]

774.—(1) This section shall apply as respects—

(a) any approved scheme shown to the satisfaction of the Revenue Commissioners to be established under irrevocable trusts, or

(b) any other approved scheme as respects which the Revenue Commissioners, having regard to any special circumstances, direct that this section shall apply,

and any scheme which is for the time being within paragraph (a) or (b) is in this Chapter referred to as an “exempt approved scheme”.

(2) This section shall apply only as respects income arising or contributions paid at a time when a scheme is an exempt approved scheme.

(3) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits of a scheme if, or to such extent as the Revenue Commissioners are satisfied that, it is income from investments or deposits held for the purposes of the scheme.

(4) (a) In this subsection, “financial futures” and “traded options” mean respectively financial futures and traded options for the time being dealt in or quoted on any futures exchange or any stock exchange, whether or not that exchange is situated in the State.

(b) For the purposes of subsection (3), a contract entered into in the course of dealing in financial futures or traded options shall be regarded as an investment.

(5) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Revenue Commissioners are satisfied that, the underwriting commissions are applied for the purposes of the scheme, and in respect of which the trustees of the scheme would but for this subsection be chargeable to tax under Case IV of Schedule D.

(6) (a) For the purposes of this section and section 775—

(i) a reference to a “chargeable period” shall be construed as a reference to a “chargeable period or its basis period” (within the meaning of section 321), and

(ii) in relation to an employer whose chargeable period is a year of assessment, “basis period” means the period on the profits or gains of which income tax for that year of assessment is to be finally computed for the purposes of Case I or II of Schedule D in respect of the trade, profession or vocation of the employer.

(b) Any sum paid by an employer by means of contribution under the scheme shall for the purposes of Case I or II of Schedule D and of sections 83 and 707(4) be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid but no other sum shall for those purposes be allowed to be deducted as an expense, or expense of management, in respect of the making, or any provision for the making, of any contributions under the scheme.

(c) The amount of an employer's contributions which may be deducted under paragraph (b) shall not exceed the amount contributed by that employer under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to income tax or corporation tax, as the case may be.

(d) A sum not paid by means of an ordinary annual contribution shall for the purposes of paragraph (b) be treated, as the Revenue Commissioners may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Revenue Commissioners think proper.

(e) In the case of any employer for a chargeable period, being—

(i) where the chargeable period is an accounting period of a company, an accounting period ending on or before the 21st day of April, 1997, and

(ii) where the chargeable period is a year of assessment, any year of assessment the employer's basis period for which ends on or before that date,

this subsection shall apply subject to paragraph 26 of Schedule 32.

(7) (a) Any ordinary annual contribution paid under the scheme by an employee shall, in assessing income tax under Schedule E, be allowed to be deducted as an expense incurred in the year in which the contribution is paid.

(b) Any contribution, which is not an ordinary annual contribution, paid or borne by an employee under the scheme may, as the Revenue Commissioners think proper—

(i) be treated, as respects the year in which it is paid, as an ordinary annual contribution paid in that year, or

(ii) be apportioned among such years as the Revenue Commissioners direct, and the amount of the contribution attributed thereby to any year shall be treated as an ordinary annual contribution paid in that year.

(c) The aggregate amount of any contributions (whether ordinary annual contributions or contributions treated as ordinary annual contributions) allowed to be deducted in any year shall not exceed 15 per cent of the remuneration for that year of the office or employment in respect of which the contributions are paid.

775 Certain approved schemes: provisions supplementary to section 774(6). [FA72 s16A; FA97 s41(1) (b)]

775.—(1) Where—

(a) after the 21st day of April, 1997, there is an actual payment by an employer of a contribution under an exempt approved scheme,

(b) apart from this section that payment would be allowed to be deducted as an expense, or expense of management, of the employer in relation to any chargeable period, and

(c) the total of previously allowed deductions exceeds the relevant maximum,

then, the amount allowed to be so deducted in respect of the payment mentioned in paragraph (a) and of any other actual payments of contributions under the scheme which, having been made after the 21st day of April, 1997, are within paragraph (b) in relation to the same chargeable period shall be reduced by whichever is the lesser of the excess and the amount which reduces the deduction to nil.

(2) In relation to any such actual payment by an employer of a contribution under an exempt approved scheme as would be allowed to be deducted as mentioned in subsection (1) in relation to any chargeable period—

(a) the reference in that subsection to the total of previously allowed deductions is a reference to the aggregate of every amount in respect of the making, or any provision for the making, of that or any other contribution under the scheme, which has been allowed to be deducted as an expense, or expense of management, of that person in relation to all previous chargeable periods, and

(b) the reference to the relevant maximum is a reference to the amount which would have been that aggregate if the restriction on deductions for sums other than actual payments imposed by virtue of section 774(6) had been applied in relation to every previous chargeable period,

and for the purposes of this subsection an amount the deduction of the whole or any part of which is to be taken into account as allowed in relation to more than one chargeable period shall be treated as if the amount allowed were a different amount in the case of each of those periods.