TAXES CONSOLIDATION ACT, 1997

• (6) Where the person making the ultimate disposal is or has at any time been a member of the group of companies referred to in subsection (3) or (4), any allowable loss accruing on the disposal shall be reduced to such extent as appears to the inspector, or on appeal the Appeal Commissioners, or on a rehearing by a judge of the Circuit Court, that judge, to be just and reasonable having regard to the depreciatory transaction; but, if the person making the ultimate disposal is not a member of that group when disposing of the shares or securities, no reduction of the loss shall be made by reference to a depreciatory transaction which took place when that person was not a member of that group.

• (7) The inspector, the Appeal Commissioners or the judge of the Circuit Court shall make the decision under subsection (6) on the basis that the allowable loss ought not to reflect any diminution in the value of the company's assets attributable to a depreciatory transaction, but allowance may be made for any other transaction on or after the 6th day of April, 1974, which has enhanced the value of the company's assets and depreciated the value of the assets of any other member of the group.

• (8)
• (a) Where under subsection (6) a reduction is made in an allowable loss, any chargeable gain accruing on a disposal of the shares in or securities of any other company which was a party to the depreciatory transaction by reference to which the reduction was made, being a disposal not later than 10 years after the depreciatory transaction, shall be reduced to such extent as appears to the inspector, or on appeal to the Appeal Commissioners, or on a rehearing by a judge of the Circuit Court, that judge, to be just and reasonable having regard to the effect of the depreciatory transaction on the value of those shares or securities at the time of their disposal.

• (b) Notwithstanding paragraph (a), the total amount of any one or more reductions in chargeable gains made by reference to a depreciatory transaction shall not exceed the amount of the reductions in allowable losses made by reference to that depreciatory transaction.

• (c) All such adjustments, whether by means of discharge or repayment of tax or otherwise, as are required to give effect to this subsection may be made at any time.

622 Dividend stripping. [CTA76 s139]

622.—(1) This section shall apply where one company (in this section referred to as “the first company”) has a holding in another company (in this section referred to as “the second company”) and the following conditions are fulfilled—

• (a) that the holding amounts to, or is an ingredient in a holding amounting to, 10 per cent of all holdings of the same class in the second company,

• (b) that the first company is not a dealing company in relation to the holding,

• (c) that a distribution is or has been made on or after the 6th day of April, 1974, to the first company in respect of the holding, and

• (d) that the effect of the distribution is that the value of the holding is or has been materially reduced.

• (2)
• (a) Where this section applies in relation to a holding, section 621 shall apply in relation to any disposal of any shares or securities comprised in the holding, whether the disposal is by the first company or by any other company to which the holding is transferred by a transfer to which section 617 applies, as if the distribution were a depreciatory transaction and, if the companies concerned are not members of a group of companies, as if they were.

• (b) Notwithstanding paragraph (a), the distribution shall not be treated as a depreciatory transaction to the extent that it consists of a payment which is required to be or has been taken into account, for the purposes of corporation tax on chargeable gains, in computing a chargeable gain or allowable loss accruing to the person making the ultimate disposal.

• (3) This section shall be construed together with section 621.

• (4) For the purposes of this section, a company shall be a dealing company in relation to a holding if a profit on the sale of the holding would be taken into account in computing the company's trading profits.

• (5) References in this section to a holding in a company are references to a holding of shares or securities by virtue of which the holder may receive distributions made by the company, but so that—

• (a) a company's holdings of different classes in another company shall be treated as separate holdings, and

• (b) holdings of shares or securities which differ in the entitlements or obligations they confer or impose shall be regarded as holdings of different classes.

• (6) For the purposes of subsection (1)—

• (a) all a company's holdings of the same class in another company shall be treated as ingredients constituting a single holding, and

• (b) a company's holding of a particular class shall be treated as an ingredient in a holding amounting to 10 per cent of all holdings of that class if the aggregate of that holding and other holdings of that class held by connected persons amounts to 10 per cent of all holdings of that class.

623 Company ceasing to be member of group. [CTA76 s135 and FA96 s51]

623.—(1) For the purposes of this section—

• (a) 2 or more companies shall be associated companies if by themselves they would form a group of companies;

• (b) a chargeable gain shall be deferred on a replacement of business assets if, by one or more claims under section 597, a chargeable gain on the disposal of those assets is treated as not accruing until the new assets within the meaning of that section cease to be used for the purpose of a trade carried on by the company making the claim;

• (c) an asset acquired by the chargeable company shall be treated as the same as an asset owned at a later time by that company or an associated company if the value of the second asset is derived in whole or in part from the first asset, and in particular where the second asset is a freehold, and the first asset was a leasehold and the lessee has acquired the reversion;

• (d) references to a company ceasing to be a member of a group of companies shall not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved where the winding up or dissolution of the member or the other member, as the case may be, is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

• (2) Where a company (in this section referred to as “the chargeable company”) ceases to be a member of a group of companies, this section shall apply as respects any asset which the chargeable company acquired from another company which was at the time of acquisition a member of that group of companies, but only if the time of acquisition fell within the period of 10 years ending with the time when the company ceases to be a member of the group.

• (3)
• (a) Where 2 or more associated companies (in this subsection referred to as “the associated companies”) cease to be members of a group at the same time—

• (i) subsection (2) shall not apply as respects an acquisition by one from another of the associated companies, and

• (ii) where—

• (I) a dividend has been paid or a distribution has been made by one of the associated companies to a company which is not one of the associated companies, and

• (II) the dividend so paid or the distribution so made has been paid or made, as the case may be, wholly or partly out of profits which derive from the disposal of any asset by one to another of the associated companies,

the amount of the dividend paid or the amount or value of the distribution made, to the extent that it is paid or made, as the case may be, out of those profits, shall be deemed for the purposes of the Capital Gains Tax Acts to be consideration (in addition to any other consideration) received by the member of the group or former member of the group in respect of a disposal, being a disposal which gave rise to or was caused by the associated companies ceasing to be members of the group.

• (b) Paragraph (a)(ii) shall not apply to a distribution other than a dividend where a company ceases to be a member of a group of companies before the 23rd day of April, 1996.

• (4) If when the chargeable company ceases to be a member of the group the chargeable company, or an associated company also leaving the group, owns otherwise than as trading stock—

• (a) the asset referred to in subsection (2), or

• (b) property on the acquisition of which a chargeable gain in relation to the asset has been deferred on a replacement of business assets,

the chargeable company shall be treated for the purposes of the Capital Gains Tax Acts as if immediately after its acquisition of the asset it had sold and immediately reacquired the asset at market value at that time.

• (5) Where any of the corporation tax assessed on a company in consequence of this section is not paid within 6 months from the date when it becomes payable, then—

• (a) a company which on that date, or immediately after the chargeable company ceased to be a member of the group, was the principal company of the group, and

• (b) a company which owned the asset on that date or when the chargeable company ceased to a member of the group,

may, at any time within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax, and a company paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable company.

• (6) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this section may be made at any time within 10 years from the time when the chargeable company ceased to be a member of the group, and where under this section the chargeable company is to be treated as having disposed of and reacquired an asset, all such recomputations of liability in respect of other disposals, and all such adjustments of tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of this section shall be made.

624 Exemption from charge under section 623 in case of certain mergers. [CTA76 s136]

624.—(1) Section 623 shall not apply in a case where—

• (a) as part of a merger a company (in this section referred to as “company A”) ceases to be a member of a group of companies (in this section referred to as “the A group”), and

• (b) it is shown that the merger was carried out for bona fide commercial reasons and that the avoidance of liability to tax was not the main or one of the main purposes of the merger.

• (2) In this section, “merger” means an arrangement (including a series of arrangements)—

• (a) whereby one or more companies (in this section referred to as “the acquiring company” or, as the case may be, “the acquiring companies”) none of which is a member of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business which, before the arrangement took effect, was carried on by company A,

• (b) whereby one or more members of the A group acquires or acquire, otherwise than with a view to their disposal, one or more interests in the whole or part of the business or each of the businesses which, before the arrangement took effect, was carried on either by the acquiring company or acquiring companies or by a company at least 90 per cent of the ordinary share capital of which was then beneficially owned by 2 or more of the acquiring companies, and

• (c) in respect of which the conditions in subsection (4) are fulfilled.

• (3) For the purposes of subsection (2), a member of a group of companies shall be treated as carrying on as one business the activities of that group.

• (4) The conditions referred to in subsection (2)(c) are—

• (a) that not less than 25 per cent by value of each of the interests acquired as mentioned in paragraphs (a) and (b) of subsection (2) consists of a holding of ordinary share capital, and the remainder of the interest or, as the case may be, of each of the interests acquired as mentioned in paragraph (b) of that subsection consists of a holding of share capital (of any description) or debentures or both,

• (b) that the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2)(a) is substantially the same as the value or, as the case may be, the aggregate value of the interest or interests acquired as mentioned in subsection (2)(b), and

• (c) that the consideration for the acquisition of the interest or interests acquired by the acquiring company or acquiring companies as mentioned in subsection (2)(a), disregarding any part of that consideration which is small by comparison with the total, either consists of, or is applied in the acquisition of, or consists partly of and as to the balance is applied in the acquisition of, the interest or interests acquired by members of the A group as mentioned in subsection (2)(b),

and for the purposes of this subsection the value of an interest shall be determined as at the date of its acquisition.

• (5) Notwithstanding section 616(1)(a), references in this section to a company shall include references to a company resident outside the State.

625 Shares in subsidiary member of group. [CTA76 s137]

625.—(1) (a) This section shall apply if a company (in this section referred to as “the subsidiary”) ceases to be a member of a group of companies, and on an earlier occasion shares in the subsidiary were disposed of by another company (in this section referred to as “the chargeable company”) which was then a member of that group in the course of an amalgamation or reconstruction in the group, but only if that earlier occasion fell within the period of 10 years ending on the date on which the subsidiary ceases to be a member of the group.

• (b) References in this section to a company ceasing to be a member of a group of companies shall not apply to cases where a company ceases to be a member of a group by being wound up or dissolved or in consequence of another member of the group being wound up or dissolved.

• (2) The chargeable company shall be treated for the purposes of the Capital Gains Tax Acts as if immediately before the earlier occasion it had sold and immediately reacquired the shares referred to in subsection (1)(a) at market value at that time.

• (3) Where before the subsidiary ceases to be a member of the group the chargeable company has ceased to exist, or a resolution has been passed, or an order made, for the winding up of the company, or any other act has been done for the like purpose, any corporation tax to which, if the chargeable company had continued in existence, it would have been chargeable in consequence of this section may be assessed and charged (in the name of the chargeable company) on the company which is, at the time when the subsidiary ceases to be a member of the group, the principal company of the group.

• (4) Where any of the corporation tax assessed on a company in consequence of this section, or in pursuance of subsection (3), is not paid within 6 months from the date when it becomes payable, then—

• (a) a company which is on that date, or was on the earlier occasion, the principal company of the group, and

• (b) any company taking an interest in the subsidiary as part of the amalgamation or reconstruction in the group, may at any time within 2 years from the time when the tax became payable, be assessed and charged (in the name of the chargeable company) to all or any part of that tax, and a company paying any amount of tax under this subsection shall be entitled to recover a sum of that amount from the chargeable company or, as the case may be, from the company assessed under subsection (3).

• (5) Notwithstanding any limitation on the time for making assessments, an assessment to corporation tax chargeable in consequence of this section may be made at any time within 10 years from the time when the subsidiary ceased to be a member of the group and, in relation to any disposal of the property after the earlier occasion, there shall be made all such adjustments of tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of this section.

• (6) For the purposes of this section, there shall be a disposal of shares in the course of an amalgamation or reconstruction in a group of companies if—

• (a) section 586 or 587 applies to shares in a company so as to equate them with shares in or debentures of another company, and

• (b) the companies are members of the same group, or become members of the same group as a result of the amalgamation or reconstruction.

• (7) Where by virtue of section 587 shares are to be treated as cancelled and replaced by a new issue, references in this section to a disposal of shares include references to the occasion of the shares being so treated.

626 Tax on company recoverable from other members of group. [CTA76 s134]

626.—(1) Where at any time a chargeable gain accrues to a company which at that time is a member of a group of companies and any of the corporation tax assessed on the company for the accounting period in which the chargeable gain accrues is not paid within 6 months from the date when it becomes payable by the company, then, if the tax so assessed included any amount in respect of chargeable gains—

• (a) a company which at the time when the gain accrued was the principal company of the group, and

• (b) any other company which in any part of the period of 2 years ending with that time was a member of that group of companies and owned the asset disposed of or any part of it or, where the asset is an interest or right in or over another asset, owned either asset or any part of either asset,

may at any time within 2 years from the time when the tax became payable be assessed and charged (in the name of the company to whom the chargeable gain accrued) to an amount of that corporation tax not exceeding corporation tax on the amount and at the rate charged in respect of that gain in the assessment on the company to which the chargeable gain accrued.

• (2) A company paying any amount of tax under subsection (1) shall be entitled to recover a sum of that amount—

• (a) from the company to which the chargeable gain accrued, or

• (b) if that company is not the company which was the principal company of the group at the time when the chargeable gain accrued, from that principal company,

and a company paying any amount under paragraph (b) shall be entitled to recover a sum of that amount from the company to which the chargeable gain accrued and, in so far as it is not so recovered, to recover from any company which is for the time being a member of the group and which has while a member of the group owned the asset disposed of or any part of that asset (or, where that asset is an interest or right in or over another asset, owned either asset or any part of either asset) such proportion of the amount unrecovered as is just having regard to the value of the asset at the time when the asset, or an interest or right in or over that asset, was disposed of by that company.

CHAPTER 2 Provisions where companies cease to be resident in the State

627 Deemed disposal of assets. [FA97 s42]

627.—(1) (a) In this section and in section 628—

“designated area”, “exploration or exploitation activities” and “exploration or exploitation rights” have the same meanings respectively as in section 13;

“exploration or exploitation assets” means assets used or intended for use in connection with exploration or exploitation activities carried on in the State or in a designated area;

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

“the new assets” and “the old assets” have the meanings respectively assigned to them by section 597.

• (b) For the purposes of this section and section 628, a company shall not be regarded as ceasing to be resident in the State by reason only that it ceases to exist.

• (2)
• (a) In this subsection—

“control” shall be construed in accordance with subsections (2) to (6) of section 432 as if in subsection (6) of that section for “5 or fewer participators” there were substituted “persons resident in a relevant territory”;

“excluded company” means a company of which not less than 90 per cent of its issued share capital is held by a foreign company or foreign companies, or by a person or persons directly or indirectly controlled by a foreign company or foreign companies;

“foreign company” means a company which—

• (i) is not resident in the State,

• (ii) is under the control of a person or persons resident in a relevant territory, and

• (iii) is not under the control of a person or persons resident in the State;

“relevant territory” means—

• (i) the United States of America, or

• (ii) a territory with the government of which arrangements having the force of law by virtue of section 826 have been made.

• (b) Subject to paragraph (c), this section and section 628 shall apply to a company (in this section referred to as a “relevant company”) if at any time (in this section and in section 628 referred to as “the relevant time”) on or after the 21st day of April, 1997, the company ceases to be resident in the State.

• (c) This section and section 628 shall not apply to a company which is an excluded company.

• (3) A relevant company shall be deemed for the purposes of the Capital Gains Tax Acts—

• (a) to have disposed of all its assets, other than assets excepted from this subsection by subsection (5), immediately before the relevant time, and

• (b) to have immediately reacquired them,

at the market value of the assets at that time.

• (4) Section 597 shall not apply where a relevant company—

• (a) has disposed of the old assets, or of its interest in those assets, before the relevant time, and

• (b) acquires the new assets, or its interest in those assets, after the relevant time,

unless the new assets are excepted from this subsection by subsection (5).

• (5) Where at any time after the relevant time a relevant company carries on a trade in the State through a branch or agency—

• (a) any assets which, immediately after the relevant time, are situated in the State and are used in or for the purposes of the trade, or are used or held for the purposes of the branch or agency, shall be excepted from subsection (3), and

• (b) any new assets which, after that time, are so situated and are so used or so held shall be excepted from subsection (4),

and references in this subsection to assets situated in the State include references to exploration or exploitation assets and to exploration or exploitation rights.

628 Postponement of charge on deemed disposal under section 627. [FA97 s43]

628.—(1) (a) In this section—

“deemed disposal” means a disposal which by virtue of section 627(3) is deemed to have been made;

“foreign assets” of a company means any assets of the company which immediately after the relevant time are situated outside the State and are used in or for the purposes of a trade carried on by the company outside the State.

• (b) For the purposes of this section, a company shall be a 75 per cent subsidiary of another company if and so long as not less than 75 per cent of its ordinary share capital (within the meaning of section 2) is owned directly by that other company.

• (2) Where—

• (a) immediately after the relevant time a company (in this section referred to as “the company”) to which this section applies by virtue of section 627 is a 75 per cent subsidiary of another company (in this section referred to as “the principal company”) which is resident in the State, and

• (b) the principal company and the company jointly so elect by notice in writing given to the inspector within 2 years after the relevant time,

the Capital Gains Tax Acts shall apply subject to subsections (3) to (6).

• (3) Any allowable losses accruing to the company on a deemed disposal of foreign assets shall be set off against the chargeable gains so accruing and—

• (a) that deemed disposal shall be treated as giving rise to a single chargeable gain equal to the aggregate of those gains after deducting the aggregate of those losses, and

• (b) the whole of that single chargeable gain shall be treated as not accruing to the company on that disposal but an equivalent amount (in this section referred to as “the postponed gain”) shall be taken into account in accordance with subsections (4) and (5).

• (4)
• (a) In this subsection, “the appropriate proportion” means the proportion which the chargeable gain taken into account in determining the postponed gain in respect of the part of the relevant assets disposed of bears to the aggregate of the chargeable gains so taken into account in respect of the relevant assets held immediately before the time of the disposal.

• (b) Where at any time within 10 years after the relevant time the company disposes of any assets (in this subsection referred to as “relevant assets”) the chargeable gains on which were taken into account in determining the postponed gain, there shall be deemed to accrue to the principal company as a chargeable gain at that time the whole or the appropriate proportion of the postponed gain in so far as not already taken into account under this subsection or subsection (5).

• (5) Where at any time within 10 years after the relevant time—

• (a) the company ceases to be a 75 per cent subsidiary of the principal company, or

• (b) the principal company ceases to be resident in the State,

there shall be deemed to accrue to the principal company as a chargeable gain—

• (i) where paragraph (a) applies, at that time, and

• (ii) where paragraph (b) applies, immediately before that time,

the whole of the postponed gain in so far as not already taken into account under this subsection or subsection (4).

• (6) Where at any time—

• (a) the company has allowable losses which have not been allowed as a deduction from chargeable gains, and

• (b) a chargeable gain accrues to the principal company under subsection (4) or (5),

then, if and to the extent that the principal company and the company jointly so elect by notice in writing given to the inspector within 2 years after that time, those losses shall be allowed as a deduction from that gain.

629 Tax on non-resident company recoverable from another member of group or from controlling director. [FA97 s44]

629.—(1) In this section—

“chargeable period” means a year of assessment or an accounting period, as the case may be;

“controlling director”, in relation to a company, means a director of the company who has control of the company (construing control in accordance with section 432);

“director”, in relation to a company, has the same meaning as in section 116, and includes any person within section 433(4);

“group” has the meaning which would be given by section 616 if in that section references to residence in the State were omitted and for references to “75 per cent subsidiaries” there were substituted references to “51 per cent subsidiaries”, and references to a company being a member of a group shall be construed accordingly;

“specified period”, in relation to a chargeable period, means the period beginning with the specified return date for the chargeable period (within the meaning of section 950) and ending 3 years after the time when a return under section 951 for the chargeable period is delivered to the appropriate inspector (within the meaning of section 950);

“tax” means corporation tax or capital gains tax, as the case may be.

• (2) This section shall apply at any time on or after the 21st day of April, 1997, where tax payable (being tax which but for section 627 or 628 would not be payable) by a company (in this section referred to as “the taxpayer company”) for a chargeable period (in this section referred to as “the chargeable period concerned”) is not paid within 6 months after the date on or before which the tax is due and payable.

• (3) The Revenue Commissioners may, at any time before the end of the specified period in relation to the chargeable period concerned, serve on any person to whom subsection (4) applies a notice—

• (a) stating the amount which remains unpaid of the tax payable by the taxpayer company for the chargeable period concerned and the date on or before which the tax became due and payable, and

• (b) requiring that person to pay that amount within 30 days of the service of the notice.

• (4)
• (a) This subsection shall apply to any person, being—

• (i) a company which is, or during the period of 12 months ending with the time when the gain accrued was, a member of the same group as the taxpayer company, and

• (ii) a person who is, or during that period was, a controlling director of the taxpayer company or of a company which has, or within that period had, control over the taxpayer company.

• (b) This subsection shall apply in any case where the gain accrued before the 21st day of April, 1998, with the substitution in paragraph (a)(i) of “beginning with the 21st day of April, 1997, and” for “of 12 months”.

• (5) Any amount which a person is required to pay by a notice under this section may be recovered from the person as if it were tax due by such person, and such person may recover any such amount paid on foot of a notice under this section from the taxpayer company.

• (6) A payment in pursuance of a notice under this section shall not be allowed as a deduction in computing any income, profits or losses for any tax purposes.

PART 21 Mergers, Divisions, Transfers of Assets and Exchanges of Shares Concerning Companies of Different Member States

630 Interpretation (Part 21). [FA92 s64]

630.—In this Part—

“bilateral agreement” means arrangements having the force of law by virtue of section 826;

“company” means a company from a Member State;

“company from a Member State” has the meaning assigned to it by Article 3 of the Directive;

“the Directive” means Council Directive No. 90/434/EEC of 23 July 1990¹ on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States;

“Member State” means a Member State of the European Communities;

“receiving company” means the company to which the whole or part of a trade is transferred in the course of a transfer;

“securities” means shares and debentures;

“shares” includes stock;

“transfer” means the transfer by a company of the whole or part of its trade in the circumstances set out in section 631(1) or 634(2), as the case may be;

“transferring company” means the company by which the whole or part of a trade is transferred in the course of a transfer.

631 Transfer of assets generally. [FA92 s65]

631.—(1) (a) This section shall apply where a company transfers the whole of a trade carried on by it in the State to another company and the consideration for the transfer consists solely of the issue to the transferring company of securities (in this section referred to as “the new assets”) in the receiving company.

• (b) A company which transfers part of a trade to another company shall be treated for the purposes of this section as having carried on that part of its trade as a separate trade.

• (2)
• (a) The transfer shall not be treated as giving rise to any allowance or charge provided for by section 307 or 308.

• (b) There shall be made to or on the receiving company in accordance with sections 307 and 308 all such allowances and charges as would, if the transferring company had continued to carry on the trade and had continued to use the transferred assets for the purposes of the trade, have been made to or on the transferring company in respect of any assets transferred in the course of the transfer, and the amount of any such allowance or charge shall be computed as if the receiving company had been carrying on the trade since the transferring company began to do so and as if everything done to or by the transferring company had been done to or by the receiving company.

• (c) This subsection shall not apply as respects assets transferred in the course of a transfer if in consequence of the transfer, or a transaction of which the transfer is a part, the Corporation Tax Acts are to apply subject to subsections (6) to (9) of section 400.

• (3) For the purposes of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains, the Corporation Tax Acts—

• (a) the transfer shall not be treated as involving any disposal by the transferring company, and

• (b) the receiving company shall be treated as if the assets transferred to it in the course of the transfer were acquired by it at the same time and for the same consideration at which they were acquired by the transferring company and as if all things done by the transferring company relating to the assets transferred in the course of the transfer had been done by the receiving company.

• (4) Where, at any time within a period of 6 years commencing on the day on which the assets were transferred in the course of the transfer, the transferring company disposes of the new assets then, for the purposes of the Capital Gains Tax Acts and, in so far as they apply to chargeable gains, the Corporation Tax Acts, in computing any chargeable gain on the disposal of any new assets—

• (a) the aggregate of the chargeable gains less allowable losses which but for subsection (3)(a) would have been chargeable on the transferring company shall be apportioned between the new assets as a whole, and

• (b) the sums allowable as a deduction under section 552(1)(a) shall be reduced by the amount apportioned to the new asset under paragraph (a),

and, if the securities which comprise the new assets are not all of the same type, the apportionment between the securities under paragraph (a) shall be in accordance with their market value at the time they were acquired by the transferring company.

• (5) Subsections (2) to (4) shall not apply if—

• (a) immediately after the time of the transfer—

• (i) the assets transferred in the course of the transfer are not used for the purposes of a trade carried on by the receiving company in the State,

• (ii) the receiving company would not be chargeable to corporation tax or capital gains tax in respect of any chargeable gains accruing to it on a disposal, if it were to make such a disposal, of any assets (other than cash) acquired in the course of the transfer, or

• (iii) any of the assets are assets in respect of which, by virtue of being of a description specified in a bilateral agreement, the receiving company is to be regarded as not liable in the State to corporation tax or capital gains tax on gains accruing to it on a disposal,

or

• (b) the transferring company and the receiving company jointly so elect by notice in writing to the inspector, and such notice shall be made by the time by which a return is to be made by the transferring company under section 951 for the accounting period in which the transfer takes place.

632 Transfer of assets by company to its parent company. [FA92 s66]

632.—(1) Where a company disposes of an asset used for the purposes of a trade carried on by it in the State to another company which holds all of the securities representing the company's capital and but for this section the companies would not be treated in accordance with section 617 in respect of the asset, then, if—

• (a) immediately after the disposal the company acquiring the asset commences to use the asset for the purposes of a trade carried on by it in the State, and

• (b) the disposal is not, or does not form part of, a transfer to which section 631 applies,

sections 617 to 619 shall apply as if the companies were resident in the State.

• (2) Subsection (5) of section 631 shall apply with any necessary modification for the purposes of this section as if references in that subsection to subsections (2) to (4) of that section were references to subsection (1) of this section.

633 Company reconstruction or amalgamation: transfer of development land. [FA92 s67]

633.—Where a company, for the purposes of or in connection with a scheme of reconstruction or amalgamation (within the meaning of section 615), disposes of an asset which consists of development land (within the meaning of section 648) to another company and—

• (a) the disposal is not made in the course of a transfer to which section 631 applies, and

• (b) the company disposing of the asset and the company acquiring the asset would, if—

• (i) the definition of “chargeable gains” in section 78(4), and

• (ii) section 649(1),

were deleted, be treated in accordance with section 615(2) in respect of that asset,

then, the companies shall be treated for the purposes of the Capital Gains Tax Acts as if the asset was acquired by the one company from the other company for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the company making the disposal, and for the purposes of section 556 the acquiring company shall be treated as if the acquisition of the asset by the other company had been the acquiring company's acquisition of the asset.

634 Credit for tax. [FA92 s69]

634.—(1) In this section—

“law of the Member State which has the effect of deferring a charge to tax on a gain” means any law of the Member State concerned which provides—

• (a) that the gain accruing to the transferring company on the disposal of the assets in the course of the transfer is to be treated as not accruing until the disposal of the assets by the receiving company,

• (b) that the receiving company is to be treated as having acquired the assets for a consideration of such amount as would secure that, for the purposes of charging the gain on the disposal to tax in that Member State, neither a gain nor a loss would accrue to the transferring company on the transfer and the receiving company is to be treated as if the acquisition of the assets by the transferring company had been the receiving company's acquisition of the assets, or

• (c) such other deferral of a charge to tax as corresponds to paragraph (a) or (b);

“relevant certificate given by the tax authorities of a Member State” means a certificate so given and which states—

• (a) whether gains accruing to the transferring company on the transfer would have been chargeable to tax under the law of the Member State but for—

• (i) the Directive, or

• (ii) any provision of the law of the Member State which has the effect of deferring a charge to tax on a gain in the case of such a transfer,

• (b) if those gains accruing would have been so chargeable, the amount of tax which would have been payable under that law if, in so far as is permitted under that law, any losses arising on the transfer are set against any gains so arising and any deductions and reliefs available to the transferring company under that law other than the provisions mentioned in paragraph (a) had been claimed.

• (2) Where—

• (a) a company resident in the State transfers the whole or part of a trade which immediately before the time of the transfer it carried on in a Member State (other than the State) through a branch or agency to a company not resident in the State,

• (b) the transfer includes the whole of the assets of the transferring company used for the purposes of the trade or the part of the trade or the whole of those assets other than cash, and

• (c) the consideration for the transfer consists wholly or partly of the issue to the transferring company of securities in the receiving company,

then, tax specified in a relevant certificate given by the tax authorities of the Member State in which the trade was so carried on shall be treated for the purposes of Chapter 1 of Part 35 as tax—

• (i) payable under the law of that Member State, and

• (ii) in respect of which credit may be allowed under a bilateral agreement.

635 Avoidance of tax. [FA92 s70]

635.—Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, sections 631 to 634 shall not apply as respects a transfer or disposal unless it is shown that the transfer or disposal, as the case may be, is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is avoidance of liability to income tax, corporation tax or capital gains tax.

636 Returns. [FA92 s71]

636.—(1) In this section, “appropriate inspector” has the same meaning as in section 950.

• (2) Where section 631, 632, 633 or 634 applies in relation to a transfer or disposal, the transferring company shall make a return of the transfer or disposal, as the case may be, to the appropriate inspector in such form as the Revenue Commissioners may require.

• (3) Where corporation tax or capital gains tax payable by a company is to be reduced by virtue of section 634, a return under this section shall include a relevant certificate given by the tax authorities of the Member State in which the trade was carried on immediately before the time of the transfer.

• (4) A company shall make a return under this section within 9 months from the end of the accounting period in which the transfer occurs.

637 Other transactions. [FA92 s72]

637.—(1) The Revenue Commissioners may, on an application being made to them in writing in respect of a transaction—

• (a) of a type specified in the Directive, and

• (b) to which this Part does not apply,

give such relief as appears to them to be just and reasonable for the purposes of giving effect to the Directive.

• (2) An application under this section shall be made in such form as the Revenue Commissioners may require.

638 Apportionment of amounts. [FA92 s74]

638.—Where for the purposes of this Part any sum is to be apportioned and at the time of the apportionment it appears that it is material as respects the liability to tax (for whatever period) of 2 or more companies, any question which arises as to the manner in which the sum is to be apportioned shall be determined for the purposes of the tax of all those companies by the Appeal Commissioners who shall determine the question in the like manner as if it were an appeal against an assessment, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall apply accordingly with any necessary modifications, and all those companies shall be entitled to appear and be heard by the Appeal Commissioners or to make representations to them in writing.

TRANSACTIONS IN LAND PART 22 Provisions Relating to Dealing In or Developing Land and Disposals of Development Land

CHAPTER 1 Income tax and corporation tax: profits or gains from dealing in or developing land

639 Interpretation (Chapter 1). [F(MP)A68 s16(1), (2) and (4)]

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

“company” includes any body corporate;

“development”, in relation to any land, means—

• (a) the construction, demolition, extension, alteration or reconstruction of any building on the land, or

• (b) the carrying out of any engineering or other operation in, on, over or under the land to adapt it for materially altered use,

and “developing” and “developed” shall be construed accordingly;

“market value”, in relation to any property, means the price which that property might reasonably be expected to fetch if sold in the open market;

“trading stock” has the same meaning as in section 89;

any reference to the disposal of an interest in land includes a reference to the creation of an interest, and any reference to the acquisition of an interest in land includes a reference to the acquisition of an interest which ceases on the acquisition.

• (2) For the purposes of this Chapter—

• (a) a person shall not be regarded as disposing of an interest in land by reason of the person conveying or transferring the interest by means of security or of the person granting a lease of the land on terms which do not require the payment of any fine, premium or like sum, and

• (b) an option or other right to acquire or dispose of any interest in any land shall be deemed to be an interest in the land.

• (3) This Chapter shall apply notwithstanding Chapter 8 of Part 4.

640 Extension of charge under Case I of Schedule D to certain profits from dealing in or developing land. [F(MP)A68 s17; FA81 s28]

640.—(1) For the purposes of subsection (2)—

• (a) a dealing in land shall be regarded as taking place where a person having an interest in any land disposes, as regards the whole or any part of the land, of that interest or of an interest which derives from that interest, and

• (b) a person who secures the development of any land shall be regarded as developing that land.

• (2)
• (a) Where apart from this section all or some of the activities of a business of dealing in or developing land would not be regarded as activities carried on in the course of a trade within Schedule D but would be so regarded if every disposal of an interest in land included among such activities (including a disposal of an interest in land which apart from this section is a disposal of the full interest in the land which the person carrying on the business had acquired) were treated as fulfilling the conditions specified in paragraph (b), the business shall be deemed to be wholly a trade within Schedule D or, as the case may be, part of such a trade, and the profits or gains of that business shall be charged to tax under Case I of Schedule D accordingly.

• (b) The conditions referred to in paragraph (a) are—

• (i) that the disposal was a disposal of the full interest in the land which the person carrying on the business had acquired, and

• (ii) that the interest disposed of had been acquired by such person in the course of the business.

• (3) Where an interest in land is disposed of in the course of the winding up of a company, the company shall for the purposes of this section be deemed not to have ceased to carry on the trade or business which it carried on before the commencement of the winding up until the completion of the disposal, or of the last such disposal where there is more than one, and the question whether any such disposal was made in the course of a business of dealing in or developing land which is, or is to be deemed to be, a trade or part of a trade shall accordingly be determined without regard to the fact that the company is being wound up.

641 Computation under Case I of Schedule D of profits or gains from dealing in or developing land. [F(MP)A68 s18; FA81 s29(2)(a)]

641.—(1) Where a business of dealing in or developing land is, or is to be regarded as, a trade within Schedule D or a part of such a trade, the provisions applicable to Case I of that Schedule shall, as respects the computation of the profits or gains of the business, apply subject to subsections (2) to (4).

• (2)
• (a) Any consideration (other than rent or an amount treated as rent under section 98) for the disposal of an interest in any land or in a part of any land shall be treated as a consideration for the disposal of trading stock and accordingly shall be taken into account as a trading receipt.

• (b) Any interest in any land which is held by a person carrying on a trade (in this section referred to as “the trader”) and which has become trading stock of the trade shall thereafter, until the discontinuance of the trade, continue to be such trading stock.

• (c) Where the trader has acquired an interest in any land otherwise than for consideration in money or money's worth, the trader shall, subject to paragraph (d), be deemed to have purchased the interest for a consideration equal to its market value at the time of acquisition.

• (d) Where at the time of acquisition of an interest in any land the trade had not been commenced or the interest was not then appropriated as trading stock, the trader shall be deemed to have purchased the interest for a consideration equal to its market value at the time of its appropriation as trading stock.

• (e) Any consideration (other than receipts within section 75(1)(b) the profits or gains arising from which are by virtue of that section chargeable to tax under Case V of Schedule D) for the granting by the trader of any right in relation to the development of any land shall be taken into account as a trading receipt.

• (3) Account shall not be taken of any sum (in this subsection referred to as “the relevant sum”) which is paid or is payable at any time by the trader as consideration for the forfeiture or surrender of the right of any person to an annuity or other annual payment unless—

• (a) the annuity or other annual payment arises under—

• (i) a testamentary disposition, or

• (ii) a liability incurred for—

• (I) valuable and sufficient consideration all of which is required to be taken into account in computing for the purposes of income tax or corporation tax the income of the person to whom that consideration is given, or

• (II) consideration given to a person who—

• (A) has not at any time carried on a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, and

• (B) is not and was not at any time connected with any of the following persons—

• (aa) the trader,

• (bb) a person who is or was at any time connected with the trader, and

• (cc) any other person who, in the course of a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, holds or held an interest in land on which the annuity or other annual payment was charged or reserved,

or

• (b) the relevant sum is required to be taken into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the relevant sum is payable.

• (4)
• (a) Paragraph (b) shall apply where—

• (i) a sum (in this subsection referred to as “the relevant sum”) is payable—

• (I) by a person (in this subsection referred to as “the relevant person”) who is not the trader, and

• (II) as consideration for the forfeiture or surrender of the right (in this subsection referred to as “the right”) of any person to an annuity or other annual payment,

• (ii) the relevant sum is not required to be taken into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the relevant sum is payable, and

• (iii) the trader incurs expenditure (in this subsection referred to as “the cost”) in acquiring any interest (in this subsection referred to as “the interest”) in land on which the annuity or other annual payment had been reserved or charged.

• (b) Where this paragraph applies—

• (i) the trader shall be treated as having expended in acquiring the interest an amount equal to the amount which would have been expended if the right had not been forfeited or surrendered, and

• (ii) the excess of the cost over the amount determined in accordance with subparagraph (i) shall be treated for the purposes of subsection (3) as having been payable by the trader as consideration for the forfeiture or surrender of the right.

• (c) For the purposes of this subsection, all such apportionments and valuations shall be made as appear to the inspector or on appeal to the Appeal Commissioners to be just and reasonable.

• (d) This subsection shall not apply where the relevant person carries on a trade of dealing in or developing land and pays the relevant sum in the course of carrying on that trade.

642 Transfers of interests in land between certain associated persons. [F(MP)A68 s19]

642.—(1) Where an interest in land is disposed of by any person (in this subsection referred to as “the disponer”) to a person connected with the disponer (in this subsection referred to as “the transferee”) and—

• (a) the interest is disposed of at a price greater than its market value, and

• (b) the price—

• (i) is not to be taken into account in relation to the disponer in computing for tax purposes the profits or gains of a trade which is or includes a business of dealing in or developing land, but

• (ii) is to be so taken into account in relation to the transferee,

the transferee shall for tax purposes be deemed to have acquired the interest at a price equal to the market value of the interest at the time of its acquisition by the transferee.

• (2)
• (a) Where an interest in land is disposed of by any person (in this subsection referred to as “the disponer”) to a person connected with the disponer (in this subsection referred to as “the transferee”) and—

• (i) the interest is disposed of at a price less than its market value, and

• (ii) the price—

• (I) is not to be taken into account in relation to the transferee in computing for tax purposes the profits or gains of a trade which is or includes a business of dealing in or developing land, but

• (II) is to be so taken into account in relation to the disponer,

the disponer shall for tax purposes be deemed to have disposed of the interest at a price equal to the market value of the interest at the time of the disposal by the disponer.

• (b) A disposal by means of gift shall be regarded for the purposes of this subsection as being a disposal at a nominal price.

• (3) In the application of this section to a case in which a lease is granted, any reference to price shall be construed as a reference to the fine, premium or like sum payable for the grant of the lease.

643 Tax to be charged under Case IV on gains from certain disposals of land. [F(MP)A68 s20; FA81 s29(3)]

643.—(1) In this section and in section 644—

“capital amount” means any amount in money or money's worth which apart from this section is not to be included in any computation of income for the purposes of the Tax Acts, and other expressions which include the word “capital” shall be construed accordingly;

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

“land” includes any interest in land, and references to the land include references to all or any part of the land;

“share” includes stock;

references to property deriving its value from land include references to—

• (a) any shareholding in a company, or any partnership interest, or any interest in settled property, deriving its value or the greater part of its value directly or indirectly from land, and

• (b) any option, consent or embargo affecting the disposition of land.

• (2) This section shall not apply to a gain accruing to an individual which by virtue of section 604 is exempt from capital gains tax or which would be so exempt but for subsection (14) of that section.

• (3) This section shall apply in any case where—

• (a) land or any property deriving its value from land is acquired with the sole or main object of realising a gain from disposing of the land,

• (b) land is held as trading stock, or

• (c) land is developed by a company with the sole or main object of realising a gain from disposing of the land when developed,

and any gain of a capital nature is obtained from disposing of the land—

• (i) by the person acquiring, holding or developing the land, or by a person connected with that person, or

• (ii) where any arrangement or scheme is effected as respects the land which enables the gain to be realised directly or indirectly by any transaction, or by any series of transactions, by any person who is a party to or concerned in the arrangement or scheme,

and this subsection shall apply whether that gain is obtained by any such person for that person's benefit or for the benefit of any other person.

• (4) Where this section applies, the whole of any gain mentioned in subsection (3) shall for the purposes of the Tax Acts be treated—

• (a) as being income which arises at the time when the gain is realised and which constitutes profits or gains chargeable to tax under Case IV of Schedule D for the chargeable period in which the gain is realised, and

• (b) subject to subsections (5) to (17), as being income of the person by whom the gain is realised.

• (5) For the purposes of this section, land shall be treated as disposed of if, by any one or more transactions or by any arrangement or scheme, whether concerning the land or property deriving its value from the land, the property in the land or control over the land is effectively disposed of, and references in subsection (3) to the acquisition or development of land or property with the sole or main object of realising a gain from disposing of the land shall be construed accordingly.

• (6) For the purposes of this section—

• (a) where, whether by a premature sale or otherwise, a person directly or indirectly makes available to another person the opportunity of realising a gain, the gain of that other person shall be treated as having been obtained for that other person by the first-mentioned person, and

• (b) any number of transactions may be regarded as constituting a single arrangement or scheme if a common purpose is discerned in those transactions or if there is other sufficient evidence of a common purpose.

• (7) In applying this section, account shall be taken of any method, direct or indirect, by which—

• (a) any property or right is transferred or transmitted to another person, or

• (b) the value of any property or right is enhanced or diminished,

and accordingly the occasion of the transfer or transmission of any property or right by whatever method and the occasion when the value of any property or right is enhanced may be treated as an occasion on which tax becomes chargeable under this section.

• (8) Subsection (7) shall apply in particular to—

• (a) sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,

• (b) any method by which any property or right, or the control of any property or right, is transferred or transmitted to any person by assigning—

• (i) share capital or other rights in a company,

• (ii) rights in a partnership, or

• (iii) an interest in settled property,

• (c) the creation of any option or consent or embargo affecting the disposition of any property or right, and to the consideration given for the option, or for the giving of the consent or the release of the embargo, and

• (d) the disposal of any property or right on the winding up, dissolution or termination of any company, partnership or trust.

• (9) For the purposes of this section, such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land and allowing only such expenses as are attributable to the land disposed of, and in applying this subsection—

• (a) where an interest in land is acquired and the reversion is retained on disposal, account may be taken of the way in which the profits or gains under Case I of Schedule D of a person dealing in land are computed in such a case, and

• (b) account may be taken of the adjustments to be made in computing such profits or gains under sections 99(2) and 100(4).

• (10) Paragraph (c) of subsection (3) shall not apply to so much of any gain as is fairly attributable to the period, if any, before the intention to develop that land was formed, and which would not be within paragraph (a) or (b) of that subsection, and in applying this subsection account shall be taken of the treatment under Case I of Schedule D of a person who appropriates land as trading stock.

• (11) If all or any part of the gain accruing to any person is derived from value, or an opportunity of realising a gain, provided directly or indirectly by some other person (whether or not put at the disposal of the first-mentioned person), subsection (4)(b) shall apply to the gain or that part of the gain with the substitution of that other person for the person by whom the gain was realised.

• (12) Where there is a disposal of shares in—

• (a) a company which holds land as trading stock, or

• (b) a company which owns directly or indirectly 90 per cent or more of the ordinary share capital of another company which holds land as trading stock,

and all the land so held is disposed of in the normal course of its trade by the company which held the land, and so as to procure that all opportunity of profit in respect of the land arises to that company, then, notwithstanding subsection (3)(i), this section shall not apply to any gain accruing to the holder of shares as being a gain on property deriving value from that land (but without prejudice to any liability under subsection (3)(ii)).

• (13) In ascertaining for the purposes of this section the intentions of any person, the objects and powers of any company, partners or trustees, as set out in any memorandum or articles of association or other document, shall not be conclusive.

• (14) For the purposes of ascertaining whether and to what extent the value of any property or right is derived from any other property or right, value may be traced through any number of companies, partnerships and trusts, and the property held by any company, partnership or trust shall be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is just and reasonable.

• (15) In applying this section—

• (a) any expenditure, receipt, consideration or other amount may be apportioned by such method as is just and reasonable, and

• (b) all such valuations shall be made as may be necessary to give effect to this section.

• (16) For the purposes of this section, partners, trustees of settled property or personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being partners, trustees or personal representatives.

• (17) This section shall apply to a person, whether resident in the State or not, if all or any part of the land in question is situated in the State.

644 Provisions supplementary to section 643. [F(MP)A68 s21; FA81 s29(3)]

644.—(1) (a) Where a person (in this subsection referred to as “the first-mentioned person”) is assessed to tax under section 643 and that assessment to tax arises in consequence of and in respect of consideration receivable by another person (in this subsection referred to as “the second-mentioned person”)—

• (i) the first-mentioned person shall be entitled to recover from the second-mentioned person any part of that tax which the first-mentioned person has paid,

• (ii) if any part of that tax remains unpaid at the expiration of 6 months from the date when it became due and payable, it shall be recoverable from the second-mentioned person as though the second-mentioned person were the person so assessed, but without prejudice to the right to recover the tax from the first-mentioned person, and

• (iii) for the purposes of subparagraph (i), the inspector shall on request furnish a certificate specifying the amount of income in respect of which tax has been paid and the amount of tax so paid, and the certificate shall be evidence until the contrary is proved of any facts stated in the certificate.