TAXES CONSOLIDATION ACT, 1997

• (c) A certificate under this subsection or any condition of such certificate may be amended, revoked or added to by the Minister by giving notice in writing to the qualifying company concerned of such amendment, revocation or addition, and this section shall apply as if—

• (i) a condition so amended or added to by the notice was specified in the certificate, and

• (ii) a condition so revoked was not specified in the certificate.

• (9) For the purposes of subsection (2)(a)(xiii), “tourist traffic undertakings” means—

• (a) the operation of tourist accommodation facilities for which Bord Fáilte Éireann maintains a register in accordance with the Tourist Traffic Acts, 1939 to 1995, other than hotels, guest houses and self-catering accommodation,

• (b) the operation of such other classes of facilities as may be approved of for the purposes of the relief by the Minister for Finance, in consultation with the Minister for Tourism, Sport and Recreation, on the recommendation of Bord Fáilte Éireann in accordance with specific codes of standards laid down by it, or

• (c) the promotion outside the State of—

• (i) one or more tourist accommodation facilities for which Bord Fáilte Éireann maintains a register in accordance with the Tourist Traffic Acts, 1939 to 1995, or

• (ii) any of the facilities mentioned in paragraph (b).

• (10) The trade shall during the relevant period be conducted on a commercial basis and with a view to the realisation of profits.

497 Relevant trading operations. [FA84 s16A; FA95 s17(1)(g); FA96 s24; FA97 s9(d)]

497.—(1) For the purposes of this Part, “relevant trading operations” means qualifying trading operations (other than those operations referred to in section 496(2)(a)(ix)) in respect of which a certifying agency or a certifying Minister, as the case may be (in this section referred to as “the authority”), has given a certificate under subsection (2).

• (2) Subject to this section, the authority may, in respect of qualifying trading operations carried on or to be carried on by a company, give a certificate to the company certifying that the authority is satisfied, on the basis of such information as is supplied to the authority by the company or which the authority may reasonably require the company to furnish, that the carrying on of such qualifying trading operations by the company is or will be a bona fide new venture which, having regard to—

• (a) the potential for the creation of additional sustainable employment, and

• (b) the desirability of minimising the displacement of existing employment,

may be eligible—

• (i) in the case of qualifying trading operations referred to in section 496(2)(a)(v), based on guidelines agreed, with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Heritage, Gaeltacht and the Islands or the Minister for Enterprise, Trade and Employment (as may be appropriate in the circumstances), for the payment of the grants or the financial assistance referred to in section 496(2)(a)(ii) within a reasonable period after the completion of the feasibility study carried out in relation to the trading operations concerned in accordance with section 496(2)(a)(v), and

• (ii) in any other case but subject to subsection (4), based on guidelines agreed—

• (I) with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Heritage, Gaeltacht and the Islands or the Minister for Enterprise, Trade and Employment or the Minister for the Marine and Natural Resources or the Minister for Tourism, Sport and Recreation (as may be appropriate in the circumstances), or

• (II) between the certifying Minister and the Minister for Finance,

to be grant aided under a scheme of assistance administered by the authority.

• (3) The carrying on of qualifying trading operations referred to in subsection (2) by a company shall not be regarded as not being a bona fide new venture by reason only that they were carried on as or as part of a trade by another person at any time before the issue of the eligible shares in respect of which relief is claimed.

• (4) A certificate to which subsection (2) relates may be given by—

• (a) the Industrial Development Agency (Ireland) in respect of qualifying trading operations referred to in section 496(2)(a)(iv),

• (b) the Minister for Agriculture and Food in respect of qualifying trading operations referred to in section 496(2)(a)(viii), or

• (c) the Minister for Arts, Heritage, Gaeltacht and the Islands in respect of qualifying trading operations referred to in section 496(2)(a)(xii),

without regard to whether such operations are eligible to be grant-aided but, in considering whether to give such a certificate, the agency or the Minister, as the case may be, shall have regard to such guidelines in relation to the giving of such a certificate as may be agreed—

• (i) with the consent of the Minister for Finance, between the agency and the Minister for Enterprise, Trade and Employment, or

• (ii) between the Minister for Agriculture and Food or the Minister for Arts, Heritage, Gaeltacht and the Islands (as may be appropriate) and the Minister for Finance.

• (5) Bord Fáilte Éireann shall not give a certificate under subsection (2) in a case where the value of a company's interests in land and buildings (excluding fixtures and fittings) is or is intended to be greater than 50 per cent of the value of its assets as a whole.

• (6) An authority shall not give a certificate under subsection (2) unless the company concerned undertakes in writing to furnish the authority when requested to do so with such details in relation to the carrying on of the qualifying trading operations as the authority may specify.

• (7)
• (a) For the purposes of this Chapter, as respects a relevant investment made on or after the 10th day of May, 1997, a certificate under subsection (2) may, instead of being given by the authority, be given by a County Enterprise Board (being a board referred to in the Schedule to the Industrial Development Act, 1995) to a company carrying on or intending to carry on one or more qualifying trading operations mentioned in subparagraphs (i), (ii) and (v) of section 496(2)(a), and subsections (2) and (6) shall, subject to the modification specified in paragraph (b) and any other necessary modification, apply accordingly.

• (b) The modification referred to in paragraph (a) is that for the purposes of this subsection, the guidelines of the kind mentioned in paragraphs (i) and (ii) of subsection (2) shall be agreed between the Minister for Finance and the Minister for Arts, Heritage, Gaeltacht and the Islands or the Minister for Enterprise, Trade and Employment, as may be appropriate in the circumstances.

498 Disposals of shares. [FA84 s17; FA89 s9(d)]

498.—(1) Where an individual disposes of any eligible shares before the end of the relevant period, then—

• (a) in a case where the disposal is otherwise than by means of a bargain made at arm's length, the individual shall not be entitled to any relief in respect of those shares, and

• (b) in any other case, the amount of relief to which the individual is entitled in respect of those shares shall be reduced by the amount or value of the consideration which the individual receives for those shares.

• (2) Subsection (1) shall not apply to a disposal made by a wife to her husband at a time when she is treated as living with him for income tax purposes in accordance with section 1015 or to a disposal made at such a time by him to her; but where shares issued to one of them have been transferred to the other by a transaction inter vivos—

• (a) that subsection shall apply on the disposal of the shares by the transferee to a third person, and

• (b) if at any time the wife ceases to be treated as living with her husband for income tax purposes in accordance with section 1015 and any of those snares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.

• (3)
• (a) For the purposes of this subsection, references to an option or an agreement shall include references to a right or obligation to acquire or grant an option or enter into an agreement, and references to the exercise of an option shall include references to the exercise of an option which may be acquired or granted by the exercise of such a right or under such an obligation.

• (b) Where in the relevant period an individual, either directly or indirectly—

• (i) (I) acquires an option where the exercise of the option, either under the terms of the option or under the terms of any arrangement or undertaking subject to which or otherwise in connection with which the option is acquired, would—

• (A) bind the person from whom the option was acquired or any other person, or

• (B) cause that person or such other person,

to purchase or otherwise acquire any eligible shares for a price which, having regard to the terms of the option or the terms of such arrangement or undertaking and the net effect of those terms considered as a whole, is other than the market value of the eligible shares at the time the purchase or acquisition is made, or

• (II) enters into an agreement where, either under the terms of the agreement or under the terms of any arrangement or understanding subject to which or otherwise in connection with which the agreement is made, it would—

• (A) bind the person with whom the agreement is made or any other person, or

• (B) cause that person or such other person,

to purchase or otherwise acquire any eligible shares in the manner described in clause (I),

or

• (ii) (I) grants to any person an option where the exercise of the option, either under the terms of the option or under the terms of any arrangement or understanding subject to which or otherwise in connection with which the option is granted, would bind the individual to dispose, or cause the individual to dispose, of any eligible shares to the person to whom the individual granted the option or any other person for a price which, having regard to the terms of the option or the terms of such arrangement or understanding and the net effect of those terms considered as a whole, is other than the market value of the eligible shares at the time the disposal is made, or

• (II) enters into an agreement where, either under the terms of the agreement or under the terms of any arrangement or understanding subject to which or otherwise in connection with which the agreement is made, it would bind the individual to dispose, or cause the individual to dispose, of any eligible shares to the person with whom the agreement is made or any other person in the manner described in clause (I),

the individual shall not be entitled to any relief in respect of the shares to which the option or the agreement relates.

• (4) Where an individual holds ordinary shares of any class in a company and the relief has been given in respect of some shares of that class but not others, any disposal by the individual of ordinary shares of that class in the company shall be treated for the purposes of this section as relating to those in respect of which relief has been given under this Part rather than to others.

• (5) Where the relief has been given to an individual in respect of shares of any class in a company which have been issued to the individual at different times, any disposal by the individual of shares of that class shall be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

• (6) Where shares in respect of which the relief was given have by virtue of any such allotment mentioned in subsection (1) of section 584 (not being an allotment for payment) been treated under subsection (3) of that section as the same asset as a new holding—

• (a) the new holding shall be treated for the purposes of subsection (4) as shares in respect of which the relief has been given, and

• (b) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares.

• (7) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

499 Value received from company. [FA84 s18]

499.—(1) In this section, “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where the credit period given does not exceed 6 months and is not longer than that normally given to the customers of the person carrying on the trade or business.

• (2) In this section—

• (a) any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to the individual indirectly or to his or her order or for his or her benefit, and

• (b) any reference to an individual includes a reference to an associate of the individual and any reference to the company includes a reference to any person connected with the company.

• (3) For the purposes of this section, an individual shall receive value from a company where the company—

• (a) repays, redeems or repurchases any of its share capital or securities which belong to the individual or makes any payment to the individual for giving up his or her right to any of the company's share capital or any security on its cancellation or extinguishment,

• (b) repays any debt owed to the individual other than—

• (i) an ordinary trade debt incurred by the company, or

• (ii) any other debt incurred by the company—

• (I) on or after the earliest date on which the individual subscribed for the shares in respect of which the relief is claimed, and

• (II) otherwise than in consideration of the extinguishment of a debt incurred before that date,

• (c) makes to the individual any payment for giving up his or her right to any debt on its extinguishment other than—

• (i) a debt in respect of a payment of the kind mentioned in paragraph (d) or (e) of section 493(3), or

• (ii) a debt of the kind mentioned in subparagraph (i) or (ii) of paragraph (b),

• (d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of the individual to a third person,

• (e) makes a loan or advance to the individual,

• (f) provides a benefit or facility for the individual,

• (g) transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from the individual for consideration exceeding its market value, or

• (h) makes to the individual any other payment except a payment of the kind mentioned in paragraph (a), (b), (c), (d) or (e) of section 493(3) or a payment in discharge of an ordinary trade debt.

• (4) For the purposes of this section, an individual shall also receive value from the company where the individual receives in respect of ordinary shares held by the individual any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution within section 495(8).

• (5) For the purposes of this section, an individual shall also receive value from the company where any person who for the purposes of section 493 would be treated as connected with the company—

• (a) purchases any of its share capital or securities which belong to the individual, or

• (b) makes any payment to the individual for giving up any right in relation to any of the company's share capital or securities.

• (6) The value received by an individual shall be—

• (a) in a case within paragraph (a), (b) or (c) of subsection (3), the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question,

• (b) in a case within subsection (3)(d), the amount of the liability,

• (c) in a case within subsection (3)(e), the amount of the loan or advance,

• (d) in a case within subsection (3)(f), the cost to the company of providing the benefit or facility less any consideration given for it by the individual,

• (e) in a case within subsection (3)(g), the difference between the market value of the asset and the consideration (if any) given for it,

• (f) in a case within subsection (3)(h), the amount of the payment,

• (g) in a case within subsection (4), the amount of the payment or, as the case may be, the market value of the asset, and

• (h) in a case within subsection (5), the amount receivable by the individual or, if greater, the market value of the shares or securities in question.

• (7) For the purposes of subsection (3)(d), a company shall be treated as having released or waived a liability where the liability is not discharged by payment within 12 months of the time when it ought to have been discharged by payment.

• (8) For the purposes of subsection (3)(e), there shall be treated as if it were a loan made by the company to the individual—

• (a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company, and

• (b) the amount of any debt due from the individual to a third person which has been assigned to the company.

• (9) Where an individual who subscribes for eligible shares in a company—

• (a) has, before the issue of the shares but within the relevant period, received any value from the company, or

• (b) on or after their issue but before the end of the relevant period, receives any such value,

then, the amount of the relief to which the individual is entitled in respect of the shares shall be reduced by the value so received.

• (10) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

500 Replacement capital. [FA84 s19]

500.—(1) In this section—

“subsidiary” means a subsidiary of a kind which a qualifying company may have by virtue of section 507;

“trade” includes any business, profession or vocation, and references to a trade previously carried on include references to part of such a trade.

• (2) An individual to whom subsection (3) applies shall not be entitled to relief in respect of any shares in a company where at any time in the relevant period the company or any of its subsidiaries—

• (a) begins to carry on, as its trade or as a part of its trade, a trade previously carried on at any time in that period otherwise than by the company or any of its subsidiaries, or

• (b) acquires the whole or greater part of the assets used for the purposes of a trade previously so carried on.

• (3) This subsection shall apply to an individual where—

• (a) any person or group of persons to whom an interest amounting in the aggregate to more than a 50 per cent share in the trade (as previously carried on) belonged at any time in the relevant period is a person or a group of persons to whom such an interest in the trade carried on by the company, or any of its subsidiaries, belongs or has at any such time belonged, or

• (b) any person or group of persons who controls or at any such time has controlled the company is a person or a group of persons who at any such time controlled another company which previously carried on the trade,

and the individual is that person or one of those persons.

• (4) An individual shall not be entitled to relief in respect of any shares in a company where—

• (a) the company comes to acquire all of the issued share capital of another company at any time in the relevant period, and

• (b) any person or group of persons who controls or has at any such time controlled the company is a person or a group of persons who at any such time controlled that other company,

and the individual is that person or one of those persons.

• (5) For the purposes of subsection (3)—

• (a) the person or persons to whom a trade belongs and, where a trade belongs to 2 or more persons, their respective shares in that trade shall be determined in accordance with paragraphs (a) and (b) of subsection (1), and subsections (2) and (3), of section 400, and

• (b) any interest, rights or powers of a person who is an associate of another person shall be treated as those of that other person.

501 Value received by persons other than claimants. [FA84 s20]

501.—(1) The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with subsection (4) if at any time in the relevant period the company repays, redeems or repurchases any of its share capital which belongs to any member other than—

• (a) that individual, or

• (b) another individual whose relief is thereby reduced by virtue of section 499(3),

or makes any payment to any such member for giving up such member's right to any of the company's share capital on its cancellation or extinguishment.

• (2) Subsection (1) shall not apply in relation to the redemption of any share capital for which the redemption date was fixed before the 26th day of January, 1984.

• (3) Where—

• (a) after the 5th day of April, 1984, a company issues share capital (in this subsection referred to as “the original shares”) of nominal value equal to the authorised minimum (within the meaning of the Companies (Amendment) Act, 1983) for the purposes of complying with the requirements of section 6 of that Act, and

• (b) after the registrar of companies has issued the company with a certificate under section 6 of that Act the company issues eligible shares,

subsection (1) shall not apply in relation to any redemption of any of the original shares within 12 months of the date on which those shares were issued.

• (4) Where subsection (1) applies, the amount of relief to which an individual is entitled shall be reduced by the amount receivable by the member or, if greater, the nominal value of the share capital in question and, where apart from this subsection 2 or more individuals would be entitled to relief, the reduction shall be made in proportion to the amounts of relief to which those individuals would have been entitled apart from this subsection.

• (5) Where at any time in the relevant period a member of a company receives or is entitled to receive any value from the company within the meaning of this subsection, then, for the purposes of section 493(4) in its application to any subsequent time—

• (a) the amount of the company's issued ordinary share capital, and

• (b) the amount of the part of that capital which consists of the shares relevant to section 493(4) and the amount of the part consisting of the remainder,

shall each be treated as reduced in accordance with subsection (6).

• (6) The amount of each of the parts mentioned in subsection (5)(b) shall be treated as equal to such proportion of that amount as the amount subscribed for that part less the relevant value bears to the amount subscribed, and the amount of the issued share capital shall be treated as equal to the sum of the amounts treated under this subsection as the amount of those parts respectively.

• (7) In subsection (5)(b), the reference to the part of the capital which consists of the shares relevant to section 493(4) is a reference to the part consisting of shares which (within the meaning of that section) the individual directly or indirectly possesses or is entitled to acquire, and in subsection (6) “the relevant value”, in relation to each of the parts mentioned in that subsection, means the value received by the member or members entitled to the shares of which that part consists.

• (8) For the purposes of subsection (5), a member of a company receives or is entitled to receive value from the company within the meaning of that subsection in any case in which an individual would receive value from the company by virtue of paragraph (d), (e), (f), (g) or (h) of section 499(3) (but treating as excepted from paragraph (h) all payments made for full consideration), and the value received shall be determined as for the purposes of that section.

• (9) For the purposes of subsection (8), a person shall be treated as entitled to receive anything which the person is entitled to receive at a future date or will at a future date be entitled to receive.

• (10) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in the company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

502 Prevention of misuse. [FA84 s21]

502.—An individual shall not be entitled to relief in respect of any shares unless the shares are subscribed and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

503 Claims. [FA84 s22; FA93 s25(h); FA95 s17(1)(h)(i)]

503.—(1) A claim for the relief in respect of eligible shares issued by a company in any year of assessment shall be made—

• (a) not earlier than—

• (i) in the case of a relevant investment, the date on which the company commences to carry on the relevant trading operations, and

• (ii) in any other case, the end of the period of 4 months mentioned in section 489(7)(a) (i) (II),

and

• (b) not later than 2 years after the end of that year of assessment or, if that period of 4 months ended after the end of that year, not later than 2 years after the end of that period.

• (2) A claim for relief in respect of eligible shares in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, in so far as they apply to the company and the trade, are satisfied in relation to those shares.

• (3) Before issuing a certificate under subsection (2), a company shall furnish the inspector with a statement to the effect that it satisfies the conditions for the relief, in so far as they apply in relation to the company and the trade, and has done so at all times since the beginning of the relevant period.

• (4) No such certificate shall be issued without the authority of the inspector or where the company or a person connected with the company has given notice to the inspector under section 505(2).

• (5) Any statement under subsection (3) shall—

• (a) contain such information as the Revenue Commissioners may reasonably require,

• (b) be in such form as the Revenue Commissioners may direct, and

• (c) contain a declaration that it is correct to the best of the company's knowledge and belief.

• (6) Where a company has issued a certificate under subsection (2) or furnished a statement under subsection (3), and—

• (a) the certificate or statement is made fraudulently or negligently, or

• (b) the certificate was issued in contravention of subsection (4) the company shall be liable to a penalty not exceeding £500 or, in the case of fraud, £1,000, and such penalty may, without prejudice to any other method of recovery, be proceeded for and recovered summarily in the like manner as in summary proceedings for the recovery of any fine or penalty under any Act relating to the excise.

• (7) For the purpose of regulations made under section 986, no regard shall be had to the relief unless a claim for it has been duly made and admitted.

• (8) For the purposes of section 1080, income tax charged by an assessment—

• (a) shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief, but

• (b) shall, unless paid earlier or due and payable later, be regarded as paid, to the extent that relief from tax is due under this Part, on the date of the making of the claim on which the relief is given,

and section 1081 shall not apply in consequence of any discharge or repayment for giving effect to the relief.

504 Assessments for withdrawing relief. [FA84 s23; FA93 s25(i)(i); FA95 s17(1)(i)]

504.—(1) Where any relief has been given which is subsequently found not to have been due, that relief shall be withdrawn by the making of an assessment to income tax under Case IV of Schedule D for the year of assessment for which the relief was given.

• (2) Where any relief given in respect of shares for which either a married person or his or her spouse has subscribed, and which were issued while the married person was assessed in accordance with section 1017, is to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them and at the time of the disposal the married person is not so assessable, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that reduction under subsections (2) and (3) of section 1024 or of any allocation of a repayment of income tax under section 1020.

• (3) Subject to this section, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within 10 years after the end of the year of assessment in which that event occurs.

• (4) No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his or her death.

• (5) Where a person has, by a disposal or disposals to which section 498(1)(b) applies, disposed of all the ordinary shares issued to the person by a company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when the person is connected with the company within the meaning of section 493.

• (6) Subsection (3) is without prejudice to section 924(2)(c).

• (7) In its application to an assessment made by virtue of this section, section 1080 shall apply as if the date on which the income tax charged by the assessment becomes due and payable were—

• (a) in the case of relief withdrawn by virtue of section 493, 495, 496, 498 or 501(1) in consequence of any event after the grant of the relief, the date of that event;

• (b) in the case of relief withdrawn by virtue of section 498(1) in consequence of a disposal after the grant of the relief, the date of the disposal;

• (c) in the case of relief withdrawn by virtue of section 499 in consequence of a receipt of value after the grant of the relief, the date of the receipt;

• (d) in the case of relief withdrawn by virtue of section 502—

• (i) in so far as effect has been given to the relief in accordance with regulations under section 986, the 5th day of April in the year of assessment in which effect was so given, and

• (ii) in so far as effect has not been so given, the date on which the relief was granted;

• (e) in the case of relief withdrawn by virtue of—

• (i) a specified individual failing or ceasing to hold a relevant employment, or

• (ii) an individual ceasing to be a specified individual, the date of the failure or the cessation, as the case may be.

• (8) For the purposes of subsection (7), the date on which the relief shall be granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.

505 Information. [FA84 s24(1) to (8)]

505.—(1) Where an event occurs by reason of which any relief given to an individual is to be withdrawn by virtue of section 493, 498 or 499, the individual shall within 60 days of coming to know of the event give a notice in writing to the inspector containing particulars of the event.

• (2) Where an event occurs by reason of which any relief in respect of any shares in a company is to be withdrawn by virtue of section 495, 496, 499, 500, 501 or 502—

• (a) the company, and

• (b) any person connected with the company who has knowledge of that matter,

shall within 60 days of the event or, in the case of a person within paragraph (b), of that person coming to know of it, give a notice in writing to the inspector containing particulars of the event or payment.

• (3) Where the inspector has reason to believe that a person has not given a notice which the person is required to give under subsection (1) or (2) in respect of any event, the inspector may by notice in writing require that person to furnish him or her within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Part.

• (4) Where relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any arrangement or scheme mentioned in section 493(11), 495(10) or 502, the inspector may by notice in writing require any person concerned to furnish him or her within such time (not being less than 60 days) as may be specified in the notice with—

• (a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed, and

• (b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

• (5) References in subsection (4) to the person concerned are, in relation to sections 493(11) and 502, references to the claimant and, in relation to sections 495(10) and 502, references to the company and any person controlling the company.

• (6) Where relief has been given in respect of shares in a company—

• (a) any person who receives from the company any payment or asset which may constitute value received (by that person or another) for the purposes of section 499 or 501(5), and

• (b) any person on whose behalf such a payment or asset is received,

shall, if so required by the inspector, state whether the payment or asset received by that person or on that person's behalf is received on behalf of any person other than that person and if so the name and address of that other person.

• (7) Where relief has been claimed in respect of shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by that person or on that person's behalf are or were held on behalf of any person other than that person and if so the name and address of that other person.

• (8) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.

506 Capital gains tax. [FA84 s25]

506.—(1) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to the lesser of—

• (a) the amount of that relief, and

• (b) the excess;

but this subsection shall not apply to a disposal within section 1028(5).

• (2) In relation to shares in respect of which relief has been given and not withdrawn, any question—

• (a) as to which of any such shares issued to a person at different times a disposal relates, or

• (b) whether a disposal relates to such shares or to other shares,

shall for the purposes of capital gains tax be determined as for the purposes of section 498.

• (3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some of the shares but not others, then, if there is a reorganisation (within the meaning of section 584) affecting those shares, section 584(3) shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind shall be treated as a separate holding of original shares and identified with a separate new holding).

• (4) There shall be made all such adjustments of capital gains tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

507 Application to subsidiaries. [FA84 s26; FA85 s13(d); FA91 s15(1)(f)]

507.—(1) A qualifying company may in the relevant period have one or more subsidiaries if—

• (a) the conditions in subsection (2) are satisfied in respect of the subsidiary or each subsidiary and, except where provided in subsection (3), continue to be so satisfied until the end of the relevant period, and

• (b) the subsidiary or each subsidiary is a company—

• (i) within section 495(3)(a)(i), or

• (ii) which exists solely for the purpose of carrying on any trade which consists solely of any one or more of the following trading operations—

• (I) the purchase of goods or materials for use by the qualifying company or its subsidiaries,

• (II) the sale of goods or materials produced by the qualifying company or its subsidiaries, or

• (III) the rendering of services to or on behalf of the qualifying company or its subsidiaries.

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

• (a) that the subsidiary is a 51 per cent subsidiary of the qualifying company,

• (b) that no other person has control of the subsidiary within the meaning of section 11, and

• (c) that no arrangements are in existence by virtue of which the conditions in paragraphs (a) and (b) could cease to be satisfied.

• (3) The conditions referred to in subsection (1)(a) shall not be regarded as ceasing to be satisfied by reason only of the fact that the subsidiary or the qualifying company is wound up or dissolved without winding up if—

• (a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

• (b) the net assets, if any, of the subsidiary or, as the case may be, the qualifying company are distributed to its members before the end of the relevant period or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up.

• (4) Where a qualifying company has one or more subsidiaries in the relevant period, this Part shall apply subject to Schedule 10.

508 Nominees and designated funds. [FA84 s27 and FA85 s13(e)]

508.—(1) Shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by that individual.

• (2)
• (a) Relief shall be given, and section 490(1) (a) shall not apply, in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund designated by the Revenue Commissioners for the purposes of this section (in this Part referred to as “the managers of a designated fund”) where the amount so subscribed forms part of the fund.

• (b) Except where provided by paragraph (a), relief shall not be given in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund where the amount so subscribed forms part of the fund.

• (3) The Revenue Commissioners may, if they think fit, having regard to the facts of the particular case and after such consultation, if any, as may seem to them to be necessary with such person or body of persons as in their opinion may be of assistance to them, and subject to such conditions, if any, as they think proper to attach to the designation, designate an investment fund for the purposes of this Part.

• (4)
• (a) The Revenue Commissioners may, by notice in writing given to the managers of a designated investment fund, withdraw the designation given for the purposes of this section to the fund in accordance with subsection (3) and, on the giving of the notice, the fund shall cease to be a designated fund as respects any subscriptions made after the date of the notice referred to in paragraph (b).

• (b) Where the Revenue Commissioners withdraw the designation of any fund for the purposes of this section, notice of the withdrawal shall be published as soon as may be in Iris Oifigiúil.

• (5) Where an individual claims relief in respect of eligible shares in a company which have been issued to the managers of a designated fund as nominee for the individual, section 503(2) shall apply as if it required—

• (a) the certificate referred to in that section to be issued by the company to the managers, and

• (b) the claim for relief to be accompanied by a certificate issued by the managers, in such form as the Revenue Commissioners may authorise, furnishing such information as the Revenue Commissioners may require and certifying that the managers hold certificates issued to them by the companies concerned, for the purposes of section 503(2) in respect of the holdings of eligible shares shown on the managers' certificate.

• (6) The managers of a designated fund may be required by a notice given to them by an inspector or other officer of the Revenue Commissioners to deliver to the officer within the time limited by the notice a return of the holdings of eligible shares shown on certificates issued by them in accordance with subsection (5) in the year of assessment to which the return relates.

• (7) Section 503(6) shall not apply in relation to any certificate issued by the managers of a designated fund for the purposes of subsection (5).

• (8) Without prejudice to the generality of subsection (3), the Revenue Commissioners shall designate a fund for the purposes of this Part only if they are satisfied that—

• (a) the fund is established under irrevocable trusts for the sole purpose of enabling individuals who qualify for the relief (in this subsection referred to as “qualifying individuals”) to invest in eligible shares of a qualifying company, and

• (b) under the terms of the trusts it is provided that—

• (i) the entire fund is to be invested without undue delay in eligible shares,

• (ii) the fund is to subscribe only for shares which, subject to the circumstances of the qualifying individuals participating in the fund (in this subsection referred to as “participants”), qualify those participants for relief,

• (iii) pending investment in eligible shares, any moneys subscribed for the purchase of shares are to be placed on deposit in a separate account with a bank licensed to transact business in the State,

• (iv) any amounts received by means of dividends or interest are, subject to a commission in respect of management expenses at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund has been established, to be paid without undue delay to the participants,

• (v) any charges to be made by means of management or other expenses in connection with the establishment, the running, the winding down or the termination of the fund shall be at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund is established,

• (vi) audited accounts of the fund are submitted annually to the Revenue Commissioners as soon as may be after the end of each period for which accounts of the fund are made up,

• (vii) the managers, the trustees of the fund and any of their associates are not for the time being connected either directly or indirectly with any company whose shares comprise part of the fund,

• (viii) any discounts on eligible shares received by the trustees or managers of the fund are accepted solely for the benefit of the participants,

• (ix) the fund is a closed fund and the closing date for participation precedes the making of the first investment,

• (x) if a limit is placed on the size of the fund or a minimum amount for investment is stipulated, any subscriptions not accepted are to be returned without undue delay, and

• (xi) no participant is allowed to have any shares in any company in which the fund has invested transferred into his or her name until 5 years have elapsed from the date of the issue of the shares to the fund.

PART 17 Profit Sharing Schemes and Employee Share Ownership Trusts

CHAPTER 1 Profit sharing schemes

509 Interpretation (Chapter 1). [FA82 s50]

509.—(1) In this Chapter and in Schedule 11—

“the appropriate percentage”, in relation to any shares, shall be construed in accordance with section 511(3);

“approved scheme” shall be construed in accordance with section 510(1);

“the company concerned” has the meaning assigned to it by paragraph 3(1) of Schedule 11;

“group scheme” and, in relation to such a scheme, “participating company” have the meanings respectively assigned to them by paragraph 3(2) of Schedule 11;

“initial market value”, in relation to any shares, shall be construed in accordance with section 510(2);

“locked-in value”, in relation to any shares, shall be construed in accordance with section 512(1);

“market value”, in relation to any shares, shall be construed in accordance with section 548;

“participant” shall be construed in accordance with section 510(1)(a);

“the period of retention” has the meaning assigned to it by section 511(1)(a);

“the release date” has the meaning assigned to it by section 511(2);

“shares” includes stock;

“the trust instrument”, in relation to an approved scheme, means the instrument referred to in paragraph 3(3)(c) of Schedule 11;

“the trustees”, in relation to an approved scheme or a participant's shares, means the body of persons for the establishment of which the scheme shall provide as mentioned in paragraph 3(3) of Schedule 11.

• (2) Any provision of this Chapter with respect to—

• (a) the order in which any of a participant's shares are to be treated as disposed of for the purposes of this Chapter, or

• (b) the shares in relation to which an event is to be treated as occurring for any such purpose,

shall apply notwithstanding any direction given to the trustees with respect to shares of a particular description or to shares appropriated to the participant at a particular time.

• (3) For the purposes of capital gains tax—

• (a) no deduction shall be made from the consideration for the disposal of any shares by reason only that an amount determined under this Chapter is chargeable to income tax,

• (b) any charge to income tax by virtue of section 513 shall be disregarded in determining whether a distribution is a capital distribution within the meaning of section 583, and

• (c) nothing in any provision referred to in subsection (2) shall affect the rules applicable to the computation of a gain accruing on a part disposal of a holding of shares or other securities which were acquired at different times.

510 Approved profit sharing schemes: appropriated shares. [FA82 s51(1) to (7)]

510.—(1) In this Chapter, references to an approved scheme are references to a scheme approved of as is mentioned in subsection (3) and, in relation to such a scheme—

• (a) any reference to a participant is a reference to an individual to whom the trustees of the scheme have appropriated shares, and

• (b) subject to section 514, any reference to a participant's shares is a reference to the shares which have been appropriated to the participant by the trustees of an approved scheme.

• (2) Any reference in this Chapter to the initial market value of any of a participant's shares is a reference to the market value of those shares determined—

• (a) except where paragraph (b) applies, on the date on which the shares were appropriated to the participant, and

• (b) if the Revenue Commissioners and the trustees of the scheme agree in writing, on or by reference to such earlier date or dates as may be provided for in the agreement.

• (3) This section shall apply where the trustees of a profit sharing scheme approved of in accordance with Part 2 of Schedule 11 appropriate shares—

• (a) which have previously been acquired by the trustees, and

• (b) as to which the conditions in Part 3 of that Schedule are fulfilled,

to an individual who participates in the scheme.

• (4) Notwithstanding anything in the Income Tax Acts, a charge to tax shall not be made on any individual in respect of the receipt of a right to receive the beneficial interest in shares passing or to be passed to that individual by virtue of such an appropriation of shares as is mentioned in subsection (3).

• (5) Notwithstanding anything in the approved scheme concerned or in the trust instrument or in section 511, for the purposes of capital gains tax a participant shall be treated as absolutely entitled to his or her shares as against the trustees.

• (6) Where the trustees of an approved scheme acquire any shares as to which the conditions in Part 3 of Schedule 11 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme—

• (a) section 805 shall not apply to income consisting of dividends on those shares received by the trustees, and

• (b) any gain accruing to the trustees on the appropriation of those shares shall not be a chargeable gain,

and, for the purpose of determining whether any shares are appropriated within that period of 18 months, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.

• (7) The Revenue Commissioners may by notice in writing require any person to furnish to them, within such time as they may direct (but not being less than 30 days), such information as they think necessary for the purposes of their functions under this Chapter, including in particular information to enable them—

• (a) to determine whether to approve of a scheme or withdraw an approval already given, and

• (b) to determine the liability to tax, including capital gains tax, of any participant in an approved scheme.

511 The period of retention, release date and appropriate percentage. [FA82 s52; FA86 s11; FA97 s50(a)]

511.—(1) (a) In this Chapter, “the period of retention”, in relation to any of a participant's shares, means the period beginning on the date on which those shares are appropriated to the participant and ending on the second anniversary of that date or, if it is earlier—

• (i) the date on which the participant ceases to be an employee or director of a relevant company by reason of injury or disability or on account of his or her being dismissed by reason of redundancy (within the meaning of the Redundancy Payments Acts, 1967 to 1991),

• (ii) the date on which the participant reaches pensionable age (within the meaning of section 2 of the Social Welfare (Consolidation) Act, 1993), or

• (iii) the date of the participant's death.

• (b) In paragraph (a), “relevant company” means the company concerned or, if the scheme in question is a group scheme, a participating company and, in the application of paragraph (a) to a participant in a group scheme, the participant shall not be treated as ceasing to be an employee or director of a relevant company until such time as he or she is no longer an employee or director of any of the participating companies.

• (2) In this Chapter, “the release date”, in relation to any of a participant's shares, means—

• (a) as on and from the 10th day of May, 1997, the third anniversary of the date on which the shares were appropriated to the participant, and

• (b) before the 10th day of May, 1997, the fifth anniversary of the date on which the shares were appropriated to the participant.

• (3) Subject to section 515(4), for the purposes of the provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of the individual's shares, any reference to the appropriate percentage in relation to those shares shall be determined according to the time of that event, as follows—

• (a) as respects such an occurrence as on and from the 10th day of May, 1997—

• (i) if the event occurs before the third anniversary of the date on which the shares were appropriated to the participant and subparagraph (ii) does not apply, the appropriate percentage shall be 100 per cent, and

• (ii) if, in a case where at the time of the event the participant—

• (I) has ceased to be an employee or director of a relevant company as mentioned in subsection (1)(a)(i), or

• (II) has reached pensionable age (within the meaning of section 2 of the Social Welfare (Consolidation) Act, 1993),

the event occurs before the third anniversary of the date on which the shares were appropriated to the participant, the appropriate percentage shall be 50 per cent, and

• (b) as respects such an occurrence before the 10th day of May, 1997—

• (i) if the event occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and subparagraph (iii) does not apply, the appropriate percentage shall be 100 per cent,

• (ii) if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and subparagraph (iii) does not apply, the appropriate percentage shall be 75 per cent, and

• (iii) if, in a case where at the time of the event the participant—

• (I) has ceased to be an employee or director of a relevant company as mentioned in subsection (1)(a)(i), or

• (II) has reached pensionable age (within the meaning of section 2 of the Social Welfare (Consolidation) Act, 1993),

the event occurs before the fifth anniversary of the date on which the shares were appropriated to the participant, the appropriate percentage shall be 50 per cent.

• (4) No scheme shall be approved of as is mentioned in section 510(3) unless the Revenue Commissioners are satisfied that, whether under the terms of the scheme or otherwise, every participant in the scheme is bound in contract with the company concerned—

• (a) to permit his or her shares to remain in the hands of the trustees throughout the period of retention,

• (b) not to assign, charge or otherwise dispose of his or her beneficial interest in his or her shares during that period,

• (c) if he or she directs the trustees to transfer the ownership of his or her shares to him or her at any time before the release date, to pay to the trustees before the transfer takes place a sum equal to income tax at the standard rate on the appropriate percentage of the locked-in value of the shares at the time of the direction, and

• (d) not to direct the trustees to dispose of his or her shares at any time before the release date in any other way except by sale for the best consideration in money that can reasonably be obtained at the time of the sale.

• (5) No obligation placed on the participant by virtue of subsection (4)(c) shall be construed as binding his or her personal representatives to pay any sum to the trustees.

• (6) Any obligation imposed on a participant by virtue of subsection (4) shall not prevent the participant from—

• (a) directing the trustees to accept an offer for any of his or her shares (in this paragraph referred to as “the original shares”) if the acceptance or agreement will result in a new holding (within the meaning of section 584) being equated with the original shares for the purposes of capital gains tax,

• (b) directing the trustees to agree to a transaction affecting his or her shares or such of those shares as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting—

• (i) all the ordinary share capital of the company in question or, as the case may be, all the shares of the class in question, or

• (ii) all the shares, or shares of the class in question, held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved scheme,

• (c) directing the trustees to accept an offer of cash, with or without other assets, for his or her shares if the offer forms part of a general offer made to holders of shares of the same class as his or her shares or of shares in the same company and made in the first instance on a condition such that if it is satisfied the person making the offer will have control (within the meaning of section 11) of that company, or

• (d) agreeing, after the expiry of the period of retention, to sell the beneficial interest in his or her shares to the trustees for the same consideration as in accordance with subsection (4)(d) would be required to be obtained for the shares themselves.

• (7) If in breach of his or her obligation under subsection (4)(b) a participant assigns, charges or otherwise disposes of the beneficial interest in any of his or her shares, the participant shall as respects those shares be treated for the purposes of this Chapter as if, at the time they were appropriated to him or her, he or she was ineligible to participate in the scheme, and section 515 shall apply accordingly.

512 Disposals of scheme shares. [FA82 s53]

512.—(1) Subject to sections 514 and 515(6), any reference in this Chapter to the locked-in value of any of a participant's shares at any time shall be construed as follows:

• (a) if before that time the participant has become chargeable to income tax by virtue of section 513 on a percentage of the amount or value of any capital receipt (within the meaning of that section) which is referable to those shares, the locked-in value of the shares shall be the amount by which their initial market value exceeds the amount or value of that capital receipt or, if there has been more than one such receipt, the aggregate of those receipts, and

• (b) in any other case, the locked-in value of the shares shall be their initial market value.

• (2) Where the trustees dispose of any of a participant's shares at any time before the release date or, if it is earlier, the date of the participant's death, the participant shall, subject to subsections (3) and (4), be chargeable to income tax under Schedule E for the year of assessment in which the disposal takes place on the appropriate percentage of the locked-in value of the shares at the time of the disposal.

• (3) Subject to subsection (4), if on a disposal of shares within subsection (2) the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (2) shall apply as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.

• (4) Where at any time before the disposal of any of a participant's shares a payment was made to the trustees to enable them to exercise rights arising under a rights issue, subsections (2) and (3) shall, subject to subsection (5)(b), apply as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one such payment, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant's shares held by the trustees at that time.

• (5)
• (a) In this subsection, “shares”, in relation to shares allotted or to be allotted on a rights issue, includes securities and rights of any description.

• (b) For the purposes of subsection (4)—

• (i) no account shall be taken of any payment to the trustees if or to the extent that it consists of the proceeds of a disposal of rights arising under a rights issue, and

• (ii) in relation to a particular disposal, the amount of the payment or, as the case may be, of the aggregate of the payments referred to in that subsection shall be taken to be reduced by an amount equal to the total of the reduction (if any) previously made under that subsection in relation to earlier disposals,

and any reference in subsection (4) or subparagraph (i) to the rights arising under a rights issue is a reference to rights conferred in respect of a participant's shares, being rights to be allotted, on payment, other shares in the same company.

• (6) Where the disposal referred to in subsection (2) is made from a holding of shares appropriated to the participant at different times, then, in determining for the purposes of this Chapter—

• (a) the initial market value and the locked-in value of each of those shares, and

• (b) the percentage which is the appropriate percentage in relation to each of those shares,

the disposal shall be treated as being of shares appropriated earlier before those appropriated later.