Taxes Consolidation Act 1997

SCHEDULE 14 Capital Gains Tax: Leases

[CGTA75 Sch3; CTA76 s140(2) and Sch2 PtII Par11]

Interpretation

Leases of land as wasting assets: restriction of allowable expenditure

(2) Where at the beginning of the period of ownership of a lease of land it is subject to a sub-lease not at a rent representing the full value of the land together with any buildings on the land, and the value of the lease at the end of the duration of the sub-lease, estimated as at the beginning of the period of ownership, exceeds the expenditure allowable under section 552(1) (a) in computing the gain accruing on a disposal of the lease, the lease shall not be a wasting asset until the end of the duration of the sub-lease.

(3) In the case of a wasting asset which is a lease of land, the rate at which expenditure is assumed to be written off shall, instead of being a uniform rate as provided by section 560(3), be a rate fixed in accordance with the Table to this paragraph.

(4) Accordingly, for the purposes of the computation under Chapter 2 of Part 19 of the gain accruing on a disposal of a lease, and where—

(a) the percentage derived from the Table to this paragraph for the duration of the lease at the beginning of the period of ownership is P (1),

(b) the percentage so derived for the duration of the lease at the time when any item of expenditure attributable to the lease under section 552(1) (b) is first reflected in the nature of the lease is P (2), and

(c) the percentage so derived for the duration of the lease at the time of the disposal is P (3),

then—

(i) there shall be excluded from the expenditure attributable to the lease under section 552(1) (a) a fraction equal to—

P(1) P(3) ___ P(1)

and

(ii) there shall be excluded from any item of expenditure attributable to the lease under section 552(1) (b) a fraction equal to—

P(2) P(3) __ P(2)

(5) This paragraph shall apply notwithstanding that the period of ownership of the lease is a period exceeding 50 years, and accordingly no expenditure shall be written off under this paragraph in respect of any period earlier than the time when the lease becomes a wasting asset.

(6) Section 561 shall apply in relation to this paragraph as it applies in relation to subsections (3) to (5) of section 560.

(7) Where the duration of the lease is not an exact number of years, the percentage to be derived from the Table to this paragraph shall be the percentage for the whole number of years plus one-twelfth of the difference between that percentage and the percentage for the next higher number of years for each odd month, counting an odd 14 days or more as one month.

TABLE

Years	Percentage	Years	Percentage
50 (or more)	100.0	25	81.1
49	99.7	24	79.6
48	99.3	23	78.1
47	98.9	22	76.4
46	98.5	21	74.6
45	98.1	20	72.8
44	97.6	19	70.8
43	97.1	18	68.7
42	96.6	17	66.5
41	96.0	16	64.1
40	95.5	15	61.6
39	94.8	14	59.0
38	94.2	13	56.2
37	93.5	12	53.2
36	92.8	11	50.0
35	92.0	10	46.7
34	91.2	9	43.2
33	90.3	8	39.4
32	89.4	7	35.4
31	88.4	6	31.2
30	87.3	5	26.7
29	86.2	4	22.0
28	85.1	3	17.0
27	83.8	2	11.6
26	82.5	1	6.0
		0	0.0

Premiums for leases

(2) In applying section 557 to such a part disposal, the property which remains undisposed of shall include a right to any rent or other payments (other than a premium) payable under the lease, and that right shall be valued as at the time of the part disposal.

Payments during currency of lease treated as premium

(2) Where as consideration for the variation or waiver of any of the terms of a lease of land a sum becomes payable by the lessee otherwise than as rent, the lease shall be deemed for the purposes of this Schedule to have required the payment of a premium to the lessor (in addition to any other premium) of an amount equal to that sum for the period from the time when the variation or waiver takes effect to the time when it ceases to have effect.

(3) Where under subparagraph (1) or (2) a premium is deemed to have been received by the lessor otherwise than as consideration for the surrender of the lease, then—

(a) subject to clause (b), both the lessor and the lessee shall be treated as if that premium were or were part of the consideration for the grant of the lease due at the time when the lease was granted, but

(b) if the lessor is a lessee under a lease the duration of which does not exceed 50 years, this Schedule shall apply as if—

(i) that premium had been given as consideration for the grant of the part of the sub-lease covered by the period in respect of which the premium is deemed to have been paid, and

(ii) that consideration were expenditure incurred by the sub-lessee and attributable to that part of the sublease under section 552(1) (b).

(4) Where subparagraph (3) (a) applies, the gain accruing to the lessor on the disposal by means of the grant of the lease shall be recomputed and any necessary adjustments of capital gains tax shall be made accordingly, whether by means of assessment for the year in which the premium is deemed to have been received or by means of discharge or repayment of tax.

(5) Where under subparagraph (1) a premium is deemed to have been received as consideration for the surrender of a lease, that premium shall be regarded as consideration for a separate transaction consisting of the disposal by the lessor of the lessor's interest in the lease.

(6) Subparagraph (2) shall apply in relation to a transaction not at arm's length, and in particular in relation to a transaction entered into gratuitously, as if such sum had become payable by the tenant otherwise than as rent as might have been required of the tenant if the transaction had been at arm's length.

(7) Subparagraph (4) shall apply for the purposes of corporation tax as it applies for the purposes of capital gains tax.

Sub-leases out of short leases

(2) In the computation under Chapter 2 of Part 19 of the gain accruing on the part disposal of a lease by means of the grant of a sub-lease for a premium (in this paragraph referred to as “the actual premium”), the expenditure attributable to the lease under paragraphs (a) and (b) of section 552(1) shall be apportioned in accordance with this paragraph, and section 557 shall not apply.

(3) Out of each item of the expenditure attributable to the lease under paragraphs (a) and (b) of section 552(1) there shall be apportioned to the part disposal—

(a) if the amount of the actual premium is not less than the amount which would be obtainable by means of a premium for the sub-lease if the rent payable under the sub-lease were the same as the rent payable under the lease (in this paragraph referred to as “the full premium”), the amount (in this paragraph referred to as “the allowable amount”) which under paragraph 2(3) is to be written off over the period which is the duration of the sub-lease, and

(b) if the amount of the actual premium is less than the full premium, such proportion of the allowable amount as is equal to the proportion which the actual premium bears to the full premium.

(4) Where the sub-lease is a sub-lease of only part of the land comprised in the lease, this paragraph shall apply only in relation to a proportion of the expenditure attributable to the lease under paragraphs (a) and (b) of section 552(1) which is the same as the proportion which the value of the land comprised in the sub-lease at the time when the sub-lease is granted bears to the value of that land and the other land comprised in the lease at that time, and the remainder of that expenditure shall be apportioned to the other land.

Exclusion of premiums taxed under Case V of Schedule D

(2) Where by reference to any premium in respect of a sub-lease granted out of a lease, being a lease the duration of which does not at the time of granting the lease exceed 50 years, income tax has become chargeable under section 98 on any amount, that amount shall be deducted from any gain (as computed in accordance with the provisions of the Capital Gains Tax Acts apart from this subparagraph) accruing on the disposal for which the premium is consideration, but not so as to convert the gain into a loss or to increase any loss.

(3) (a) Subject to clause (b), where income tax has become chargeable under section 100 on any amount (in this subparagraph referred to as “the relevant amount”), the relevant amount shall be excluded from the consideration taken into account in the computation under Chapter 2 of Part 19 of a gain accruing on the disposal of the estate or interest in respect of which income tax becomes so chargeable, except where in an apportionment made under section 557 the value of the consideration is taken into account in the aggregate of that value and the market value of the property which remains undisposed of.

(b) If the part or interest disposed of is the remainder of a lease or a sub-lease out of a lease the duration of which does not exceed 50 years, clause (a) shall not apply, but the relevant amount shall be deducted from any gain (as computed in accordance with the provisions of the Capital Gains Tax Acts apart from this subparagraph) accruing on the disposal, but not so as to convert the gain into a loss or to increase any loss.

(4) References in subparagraphs (1) and (2) to a premium include references to a premium deemed to have been received under subsection (3) or (4) of section 98.

(5) Section 551 shall not be taken as authorising the exclusion of any amount from the consideration for a disposal of assets taken into account in the computation of the gain under Chapter 2 of Part 19 by reference to any amount chargeable to tax under section 75 and Chapter 8 of Part 4.

Disallowance of premium treated as rent under superior lease

(2) Nothing in section 551 shall be taken as applying in relation to any amount on which tax is paid under section 99.

(3) Where any adjustment is made under paragraph (b) of section 100(2), on a claim under that paragraph, any necessary adjustment shall be made to give effect to the consequences of the claim on the operation of this paragraph or paragraph 6.

Expenditure by lessee under terms of lease

Duration of leases

(2) Where the terms of the lease include provision for the determination of the lease by notice given by the lessor, the lease shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice given by the lessor.

(3) Where any of the terms of the lease (whether relating to forfeiture or to any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term of the lease, the lease shall not be treated as having been granted for a term longer than one ending on that date, and this subparagraph shall apply in particular where the lease provides for the rent to be increased after a given date, or for the lessee's obligations to become in any other respect more onerous after a given date, but includes provision for the determination of the lease on that date by notice given by the lessee, and those provisions render it unlikely that the lease will continue beyond that date.

(4) Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the lessee, this paragraph shall apply as if the term of the lease extended for as long as it could be extended by the lessee, but subject to any right of the lessor by notice to determine the lease.

(5) The duration of a lease shall be decided in relation to the grant or any disposal of the lease by reference to the facts which were known or ascertainable at the time when the lease was acquired or created.

Leases of property other than land

(2) In the case of a lease of a wasting asset which is movable property, the lease shall be assumed to terminate not later than the end of the life of the wasting asset.

SCHEDULE 15 List of Bodies for Purposes of Section 610

[CGTA75 s23; FA89 s33; FA91 s20(2) and s44; FA94 s32(5); FA95 s44(1) and (3); FA96 s39(1) and (6) and s64]

PART 1

PART 2

SCHEDULE 16 Building Societies: Change of Status

[FA90 Sch3]

Capital allowances

(2) There shall be made to or on the successor company in accordance with sections 307 and 308 all such allowances and charges as would have been made to or on the society if the society had continued to carry on the trade, and the amount of any such allowance or charge shall be computed as if the successor company had been carrying on the trade since the society began to do so and as if everything done to or by the society had been done to or by the successor company.

(3) The conversion of the society into the successor company shall not be treated as giving rise to any such allowance or charge.

Financial assets

“financial assets” means assets held by the society in accordance with subsections (1) and (3) of section 39 of the Building Societies Act, 1989;

“financial trading stock” means such of the financial assets of the society as would constitute trading stock for the purposes of section 89.

(2) For the purposes of section 89, the financial trading stock of the society concerned shall be valued at an amount equal to its cost to the society.

(3) Where a society converts itself into the successor company, the vesting in the successor company of any financial assets, the profits or gains on the disposal of which would be chargeable to tax under Case I of Schedule D, shall be treated for the purposes of corporation tax as not constituting a disposal of those assets by the society; but, on the disposal of any of those assets by the successor company, the profits or gains accruing to the successor company shall be calculated (for the purposes of corporation tax) as if those assets had been acquired by the successor company at their cost to the society.

Capital gains: assets vested in the successor company, etc

(a) a disposal by the society of assets owned by it immediately before the conversion, or

(b) the acquisition at that time by the successor company of assets which immediately before the conversion were owned by the society.

(2) The Capital Gains Tax Acts, and the Corporation Tax Acts in so far as those Acts relate to chargeable gains, shall apply where a society has converted itself into the successor company as if the successor company had—

(a) acquired the assets which vested in the successor company on conversion at the same time and for the same consideration at which they were acquired by the society,

(b) been in existence as a company at all times since the society was incorporated,

(c) done all things done by the society relating to the acquisition and disposal of the assets which vested in the successor company on conversion, and

(d) done all other things done by the society before the conversion.

Capital gains: shares, and rights to shares, in successor company

“free shares”, in relation to a member of the society, means any shares issued by the successor company to that member in connection with the conversion but for no new consideration;

“member”, in relation to the society, means a person who is or has been a member of the society, in that capacity, and any reference to a member includes a reference to a member of any particular class or description;

“new consideration” means consideration other than—

(a) consideration provided directly or indirectly out of the assets of the society or the successor company, or

(b) consideration derived from a member's shares or other rights in the society or the successor company.

(2) Where in connection with the conversion there are conferred on members of the society concerned any rights—

(a) to acquire shares in the successor company in priority to other persons,

(b) to acquire shares in that company for consideration of an amount or value lower than the market value of the shares, or

(c) to free shares in that company,

any such rights so conferred on a member shall be regarded for the purposes of capital gains tax as an option (within the meaning of section 540) granted to and acquired by the member for no consideration and having no value at the time of that grant and acquisition.

(3) Where in connection with the conversion shares in the successor company are issued by that company to a member of the society concerned, those shares shall be regarded for the purposes of capital gains tax—

(a) as acquired by the member for a consideration of an amount or value equal to the amount or value of any new consideration given by the member for the shares or, if no new consideration is given, as acquired for no consideration, and

(b) as having at the time of their acquisition by the member a value equal to the amount or value of the new consideration so given or, if no new consideration is given, as having no value;

but this subparagraph is without prejudice to the application where appropriate of subparagraph (2).

(4) Subparagraph (5) shall apply in any case where—

(a) in connection with the conversion, shares in the successor company are issued by that company to trustees on terms which provide for the transfer of those shares to members of the society for no new consideration, and

(b) the circumstances are such that in the hands of the trustees the shares constitute settled property within the meaning of the Capital Gains Tax Acts.

(5) Where this subparagraph applies, then, for the purposes of capital gains tax—

(a) the shares shall be regarded as acquired by the trustees for no consideration,

(b) the interest of any member in the settled property constituted by the shares shall be regarded as acquired by that member for no consideration and as having no value at the time of its acquisition, and

(c) where on the occasion of a member becoming absolutely entitled as against the trustees to any of the settled property, both the trustees and the member shall be treated as if, on the member becoming so entitled, the shares in question had been disposed of and immediately reacquired by the trustees, in their capacity as trustees within section 567(2), for a consideration of such an amount as would secure that on the disposal neither a gain nor a loss would accrue to the trustees and, accordingly, section 576(1) shall not apply in relation to that occasion.

(6) References in this paragraph to the case where a member becomes absolutely entitled to settled property as against the trustees shall be taken to include references to the case where the member would become so entitled but for being a minor or otherwise under a legal disability.

SCHEDULE 17 Reorganisation into Companies of Trustee Savings Banks

[FA90 Sch4]

Interpretation

“bank” means either or both a trustee savings bank and a bank within the meaning of section 57(3) (c) (i) of the Trustee Savings Banks Act, 1989, as the context requires;

“successor” means the company to which any property, rights, liabilities and obligations are transferred in the course of a transfer;

“transfer” means the transfer by a trustee savings bank of all or part of its property and rights and all of its liabilities or obligations under an order made by the Minister for Finance under section 57 of the Trustee Savings Banks Act, 1989, authorising the reorganisation of one or more trustee savings banks into a company or the reorganisation of a company referred to in subsection (3) (c) (i) of that section into a company referred to in subsection (3) (c) (ii) of that section.

Capital allowances

(a) allowances and charges provided for in Part 9, section 670, Chapter 1 of Part 29 and sections 765 and 769, or any other provision of the Tax Acts relating to the making of allowances or charges under or in accordance with that Part or Chapter or those sections, and

(b) allowances or charges provided for by sections 307 and 308.

(2) The transfer shall not be treated as giving rise to any allowance or charge provided for under subparagraph (1).

(3) There shall be made to or on the successor in accordance with sections 307 and 308 all such allowances and charges as would, if the bank had continued to carry on the trade, have been made to or on the bank, and the amount of any such allowance or charge shall be computed as if the successor had been carrying on the trade since the trustee savings bank began to do so and as if everything done to or by the bank had been done to or by the successor; but the successor shall not be entitled to any amount which would have been made to the trustee savings bank by virtue only of section 304(4).

Trading losses

(a) a company referred to in subsection (3) (c) (i) of section 57 of the Trustee Savings Banks Act, 1989, which becomes a company referred to in subsection (3) (c) (ii) of that section shall not be entitled to relief under section 396(1) in respect of any loss incurred by the company in a trade in any accounting period or part of an accounting period in which it was a company referred to in subsection (3) (c) (i) of section 57 of the Trustee Savings Banks Act, 1989, and

(b) a company referred to in subsection (3) (c) (ii) of section 57 of that Act shall not be entitled to relief under section 396(1) in respect of any loss incurred by a company referred to in subsection (3) (c) (i) of section 57 of that Act.

Financial assets

(2) For the purposes of section 89, the financial trading stock of the bank concerned shall be valued at an amount equal to or treated for the purposes of subparagraph (3) as its cost to that bank.

(3) The acquisition in the course of a transfer by the successor of any assets, the profits or gains on the disposal of which by the bank would be chargeable to tax under Case I of Schedule D, shall be treated for the purposes of income tax and corporation tax as not constituting a disposal of those assets by that bank; but, on the disposal of any of those assets by the successor, the profits or gains accruing to the successor shall be calculated (for the purposes of corporation tax) as if those assets had been acquired by the successor at their cost to the bank.

Capital gains

(2) The disposal of an asset by a bank to a company in the course of a transfer shall be deemed to be for a consideration of such amount as would secure that on the disposal neither a gain nor a loss would accrue to the bank.

(3) Where subparagraph (2) has applied in relation to the disposal of an asset by the bank, then, in relation to a subsequent disposal of the asset, the successor shall be treated as if the acquisition or provision of the asset by—

(a) the trustee savings bank, or

(b) if the asset was not acquired or provided by the trustee savings bank, the bank within the meaning of section 57(3) (c) (i) of the Trustee Savings Banks Act, 1989,

were the successor's acquisition or provision of the asset.

(4) Any allowable losses accruing at any time to a bank shall, on a transfer and in so far as they have not been allowed as a deduction from chargeable gains, be treated as allowable losses which accrued at that time to the successor.

(5) For the purposes of section 597, the bank and the successor shall be treated as if they were the same person.

(6) Where the liability in respect of any debt owed to a bank is transferred in the course of a transfer to a successor, the successor shall be treated as the original creditor for the purposes of section 541.

SCHEDULE 18 Accounting for and Payment of Tax Deducted from Relevant Payments and Undistributed Relevant Income

[FA89 Sch1 par1(1) to (7) (d) and (8) and par2; FA97 s146(2) and Sch7 PtII]

Time and manner of payment

(2) A collective investment undertaking which is not a specified collective investment undertaking shall, within 15 days from the 5th day of April each year, make a return to the Collector-General of all amounts from which it was required by section 734(5) to deduct tax in the year ending on that date and of the amount of appropriate tax which it was required to deduct from those amounts.

(3) The appropriate tax required to be included in a return shall be due and payable at the time by which the return is to be made and shall be paid by the collective investment undertaking to the Collector-General, and the appropriate tax so due shall be payable by the collective investment undertaking without the making of an assessment; but the appropriate tax which has become so due may be assessed on the collective investment undertaking (whether or not it has been paid when the assessment is made) if that tax or any part of it is not paid on or before the due date.

(4) Where it appears to the inspector that there is an amount of appropriate tax which ought to have been and has not been included in a return, or the inspector is dissatisfied with any return, he or she may make an assessment on the collective investment undertaking to the best of his or her judgment, and any amount of appropriate tax due under an assessment made by virtue of this subparagraph shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

(5) Where any item has been incorrectly included in a return, the inspector may make such assessments, adjustments or set-offs as may in his or her judgment be required for securing that the resulting liabilities to tax (including interest on unpaid tax) whether of the collective investment undertaking or any other person are, in so far as possible, the same as they would have been if the item had not been so included.

(6) (a) Any appropriate tax assessed on a collective investment undertaking under this Schedule shall be due within one month after the issue of the notice of assessment (unless that tax is due earlier under subparagraph (3)) subject to any appeal against the assessment, but no such appeal shall affect the date when any amount is due under subparagraph (3).

(b) On the determination of an appeal against an assessment under this Schedule any appropriate tax overpaid shall be repaid.

(7) (a) The provisions of the Income Tax Acts relating to—

(i) assessments to income tax,

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

(iii) the collection and recovery of income tax,

shall, with any necessary modifications, apply to the assessment, collection and recovery of appropriate tax.

(b) Any amount of appropriate tax payable in accordance with this Schedule without the making of an assessment shall carry interest at the rate of 1.25 per cent for each month or part of a month from the date when the amount becomes due and payable until payment.

(c) Subsections (2) to (4) of section 1080 shall apply in relation to interest payable under clause (b) as they apply in relation to interest payable under section 1080.

(d) In its application to any appropriate tax charged by an assessment made in accordance with this Schedule, section 1080 shall apply as if subsection (1) (b) of that section were deleted.

(8) Every return shall be in a form prescribed by the Revenue Commissioners and shall include a declaration to the effect that the return is correct and complete.

Statement to be given on making of relevant payment

(a) the amount of the relevant payment,

(b) the amount equal to the aggregate of the appropriate tax deducted from the relevant payment and any amount or amounts deducted pursuant to paragraphs (i) and (ii) of the definition of “appropriate tax” in section 734(1) (a) in determining the appropriate tax or, if by reason of those paragraphs there was no appropriate tax to deduct from the amount of the relevant payment, the aggregate of the amounts referred to in those paragraphs in so far as they refer to the relevant payment,

(c) the net amount of the relevant payment,

(d) the date of the relevant payment, and

(e) such other information in relation to the relevant payment as shall be necessary to enable the correct amount of tax, if any, payable by or repayable to the unit holder in respect of the relevant payment to be determined.

SCHEDULE 19 Offshore Funds: Distributing Funds

[FA90 Sch5]

PART 1

Requirements as to distributions

(a) a distribution is made for the account period or for some other period which in whole or in part falls within that account period,

(b) subject to Part 2 of this Schedule, the amount of the distribution which is paid to the holders of material and other interests in the fund—

(i) represents at least 85 per cent of the income of the fund for the period, and

(ii) is not less than 85 per cent of the fund's Irish equivalent profits for the period,

(c) the distribution is made during the account period or not more than 6 months after the expiry of that period, and

(d) the form of the distribution is such that, if any sum forming part of it were received in the State by a person resident in the State and did not form part of the profits of a trade, profession or vocation, that sum would be chargeable to tax under Case III of Schedule D,

and any reference in this subparagraph to a distribution made for an account period includes a reference to any 2 or more distributions so made or, in the case of clause (b), the aggregate of those distributions.

(2) Subject to subparagraph (3), with respect to any account period for which—

(a) there is no income of the fund, and

(b) there are no Irish equivalent profits of the fund,

the fund shall be treated as pursuing a full distribution policy notwithstanding that no distribution is made as mentioned in subparagraph (1).

(3) For the purposes of Chapter 2 of Part 27, an offshore fund shall be regarded as not pursuing a full distribution policy with respect to an account period for which the fund does not make up accounts.

(4) For the purposes of this paragraph—

(a) where a period for which an offshore fund makes up accounts includes the whole or part of 2 or more account periods of the fund, then, subject to clause (c), income shown in those accounts shall be apportioned between those account periods on a time basis according to the number of days in each account period comprised in the period for which the accounts are made up,

(b) where a distribution is made for a period which includes the whole or part of 2 or more account periods of the fund, then, subject to subparagraph (5), the distribution shall be apportioned between those account periods on a time basis according to the number of days in each account period which are comprised in the period for which the distribution is made,

(c) where a distribution is made out of specified income but is not made for a specified period, that income shall be attributed to the account period of the fund in which it in fact arose and the distribution shall be treated as made for that account period, and

(d) where a distribution is made neither for a specified period nor out of specified income, then, subject to subparagraph (5), the distribution shall be treated as made for the last account period of the fund which ended before the distribution was made.

(5) Where but for this subparagraph the amount of a distribution made, or treated by virtue of subparagraph (4) as made, for an account period would exceed the income of that period, then, for the purposes of this paragraph—

(a) if the amount of the distribution was determined by apportionment under subparagraph (4) (b), the excess shall be reapportioned, as may be just and reasonable, to any other account period which, in whole or in part, falls within the period for which the distribution was made or, if there is more than one such period, between those periods, and

(b) subject to clause (a), the excess shall be treated as an additional distribution or series of additional distributions made for preceding account periods in respect of which the distributions or the aggregate distributions, as the case may be, would otherwise be less than the income of the period, applying the excess to later account periods before earlier ones until it is exhausted.

(6) In any case where—

(a) for a period which is or includes an account period an offshore fund is subject to any restriction as regards the making of distributions, being a restriction imposed by the law of any territory, and

(b) the fund is subject to that restriction by reason of an excess of losses over profits (applying the concept of “profits” and “losses” in the sense in which, and to the extent to which, they are relevant for the purposes of the law in question),

then, in determining for the purposes of subparagraphs (1) to (5) the amount of the fund's income for that account period, there shall be allowed as a deduction any amount which apart from this subparagraph would form part of the income of the fund for that account period and which may not be distributed by virtue of the restriction.

Funds operating equalisation arrangements

(2) Subparagraph (1) shall apply to a disposal which—

(a) is a disposal of a material interest in the offshore fund concerned,

(b) is a disposal to which Chapter 2 of Part 27 applies (whether by virtue of subsection (3) of section 742 or otherwise) or is one to which that Chapter would apply if subsections (5) and (6) of that section applied generally and not only for the purpose of determining whether, by virtue of subsection (3) of that section, there is a disposal to which that Chapter applies,

(c) is not a disposal with respect to which the conditions in subsection (4) of section 742 are fulfilled, and

(d) is a disposal to the fund itself or to the persons concerned in the management of the fund (in this paragraph referred to as “the managers of the fund”) in their capacity as such.

(3) On a disposal to which subparagraph (1) applies, the part of the consideration which represents income accrued to the date of the disposal shall be, subject to subparagraph (4) and paragraph 4(4), the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if on the date of the disposal the material interest disposed of were acquired by another person by means of initial purchase.

(4) Where, after the beginning of the period by reference to which the accrued income referred to in subparagraph (3) is calculated, the material interest disposed of by a disposal to which subparagraph (1) applies was acquired by means of initial purchase (whether or not by the person making the disposal), then—

(a) the amount which on that acquisition was credited to the equalisation account in respect of accrued income shall be deducted from the amount which in accordance with subparagraph (3) would represent income accrued to the date of the disposal, and

(b) if in that period there has been more than one such acquisition of that material interest by means of initial purchase, the deduction to be made under this subparagraph shall be the amount so credited to the equalisation account on the latest such acquisition before the disposal in question.

(5) Where by virtue of this paragraph an offshore fund is treated for the purposes of this Part of this Schedule as making a distribution on the occasion of a disposal, the distribution shall be treated for those purposes as—

(a) complying with paragraph 1(1) (d),

(b) made out of the income of the fund for the account period in which the disposal occurs, and

(c) paid immediately before the disposal to the person who was then the holder of the interest disposed of.

(6) In any case where—

(a) a distribution in respect of an interest in an offshore fund is made to the managers of the fund,

(b) their holding of that interest is in their capacity as such, and

(c) at the time of the distribution the fund is operating equalisation arrangements,

then, the distribution shall not be taken into account for the purposes of paragraph 1(1) except to the extent that the distribution is properly referable to that part of the period for which the distribution is made during which that interest has been held by the managers of the fund in their capacity as such.

(7) Subsection (2) of section 742 shall apply for the purposes of this paragraph as it applies for the purposes of that section.

Income taxable under Case III of Schedule D

(a) the holders of interests in the fund who are either companies resident in the State or individuals domiciled and resident in the State—

(i) are chargeable to tax under Case III of Schedule D in respect of such of those sums as are referable to their interests, or

(ii) if any of that income is derived from assets in the State, would be so chargeable had the assets been outside the State,

and

(b) the holders of interests, who are not such companies or individuals, would be chargeable as mentioned in subclause (i) or (ii) of clause (a) if they were resident in the State or, in the case of individuals, if they were domiciled and both resident and ordinarily resident in the State.

(2) To the extent that sums within subparagraph (1) do not actually form part of a distribution complying with clauses (c) and (d) of paragraph 1(1), they shall be treated for the purposes of this Part of this Schedule—

(a) as a distribution complying with those clauses and made out of the income of which they form part, and

(b) as paid to the holders of the interests to which they are referable.

Commodity income

“commodities” means tangible assets (other than currency, securities, debts or other assets of a financial nature) dealt with on a commodity exchange in any part of the world;

“dealing”, in relation to dealing in commodities, includes dealing by means of futures contracts and traded options.

(2) To the extent that the income of an offshore fund for any account period includes profits from dealing in commodities, 50 per cent of those profits shall be disregarded in determining for the purposes of paragraphs 1(1)(b) and 5—

(a) the income of the fund for that period, and

(b) the fund's Irish equivalent profits for that period;

but in any account period in which an offshore fund incurs a loss in dealing in commodities the amount of that loss shall not be varied by virtue of this paragraph.

(3) Where the income of an offshore fund for any account period consists of profits from dealing in commodities and other income, then—

(a) in determining whether the condition in paragraph 1(1) (b) is fulfilled with respect to that account period, the expenditure of the fund shall be apportioned in such manner as is just and reasonable between the profits from dealing in commodities and the other income, and

(b) in determining whether and to what extent any expenditure is deductible under section 83 in computing the fund's Irish equivalent profits for that period, so much of the business of the fund as does not consist of dealing in commodities shall be treated as a business carried on by a separate company.

(4) Where there is a disposal to which paragraph 2(1) applies, then, to the extent that any amount which was or would be credited to the equalisation account in respect of accrued income, as mentioned in subparagraph (3) or (4) of paragraph 2, represents profits from dealing in commodities, 50 per cent of that accrued income shall be disregarded in determining under those subparagraphs the part of the consideration for the disposal which represents income accrued to the date of the disposal.

Irish equivalent profits

(2) A reference in this Schedule to the Irish equivalent profits of an offshore fund for an account period shall be construed as a reference to the amount which, on the assumptions in subparagraph (3), would be the total profits of the fund for that period on which, after allowing for any deductions available against those profits, corporation tax would be chargeable.

(3) The assumptions referred to in subparagraph (2) are that—

(a) the offshore fund is a company which in the account period is resident in the State,

(b) the account period is an accounting period of that company, and

(c) any dividends or distributions which by virtue of section 129 should be disregarded in computing income for corporation tax purposes are nevertheless to be taken into account in that computation in the like manner as if they were dividends or distributions of a company resident outside the State.

(4) Without prejudice to any deductions available apart from this subparagraph, the deductions referred to in subparagraph (2) include—

(a) a deduction equal to any amount which by virtue of paragraph 1(6) is allowed as a deduction in determining the income of the fund for the account period in question,

(b) a deduction equal to any amount of Irish income tax paid by deduction or otherwise by, and not repaid to, the offshore fund in respect of the income of the account period, and

(c) a deduction equal to any amount of tax (paid under the law of a territory outside the State) taken into account as a deduction in determining the income of the fund for the account period in question but which, because it is referable to capital rather than income, is not to be taken into account by virtue of section 71(1) or 77(6);

but section 2(4) shall be disregarded for the purposes of clause (b).

(5) For the avoidance of doubt it is hereby declared that, if any sums forming part of the offshore fund's income for any period have been received by the fund without any deduction of or charge to tax by virtue of section 43, 49, 50 or 63, the effect of the assumption in subparagraph (3) (a) is that those sums are to be taken into account in determining the total profits referred to in subparagraph (2).

PART 2

Exclusion of investments in distributing offshore funds

(2) In any case where—

(a) in an account period of an offshore fund (in this Part of this Schedule referred to as “the primary fund”), the assets of the fund consist of or include interests in another offshore fund,

(b) those interests (together with other interests which the primary fund may have) are such that, by virtue of paragraph (a) of subsection (3) of section 744 or, if the other fund concerned is a company, paragraph (b) or (c) of that subsection, the primary fund could not apart from this paragraph be certified as a distributing fund in respect of the account period, and

(c) without regard to this paragraph, that other fund could be certified as a distributing fund in respect of its account period or, as the case may be, each of its account periods which comprises the whole or any part of the account period of the primary fund,

then, in determining whether in section 744(3) (other than paragraph (d)) anything prevents the primary fund being certified as mentioned in clause (b), the interests of the primary fund in that other fund shall be disregarded except for the purposes of determining the total value of the assets of the primary fund.

(3) In a case within subparagraph (2)—

(a) section 744(3) (other than paragraph (d)) shall apply in relation to the primary fund with the modification in paragraph 7 (in addition to that provided for by subparagraph (2)), and

(b) Part 1 of this Schedule shall apply in relation to the primary fund with the modification in paragraph 8.

(a) at any time in the account period referred to in paragraph 6(2), the assets of the primary fund include an interest in an offshore fund or in any company (whether an offshore fund or not),

(b) that interest is to be taken into account in determining whether in section 744(3) (other than paragraph (d)) anything prevents the primary fund being certified as a distributing fund in respect of that account period, and

(c) at any time in that account period the assets of the qualifying fund include an interest in the offshore fund or company referred to in clause (a),

then, for the purposes of the application in relation to the primary fund of section 744(3) (other than paragraph (d)), at any time when the assets of the qualifying fund include the interest referred to in clause (c), the primary fund's share of that interest shall be treated as an additional asset of the primary fund.

(2) For the purposes of this paragraph, the excess income of the qualifying fund for any account period of that fund shall be the amount (if any) by which its Irish equivalent profits for that account period exceed the amount of the distributions made for that account period, as determined for the purposes of the application of paragraph 1(1) to the qualifying fund.

(3) Where an account period of the qualifying fund coincides with an account period of the primary fund, the excess income (if any) of the qualifying fund for that account period shall be the excess income which is attributable to that account period of the primary fund.

(4) In a case where subparagraph (3) does not apply, the excess income of the qualifying fund attributable to an account period of the primary fund shall be the appropriate fraction of the excess income (if any) of the qualifying fund for any of its account periods which comprises the whole or any part of the account period of the primary fund and, if there is more than one such account period of the qualifying fund, the aggregate of the excess income (if any) of each of them.

(5) For the purposes of subparagraph (4), the appropriate fraction shall be determined by reference to the formula—

A __ B

where—

A is the number of days in the account period of the primary fund which are also days in an account period of the qualifying fund, and

B is the number of days in that account period of the qualifying fund or, as the case may be, in each of those account periods of that fund which comprises the whole or any part of the account period of the primary fund.

(a) an interest forming part of the assets of the qualifying fund, or

(b) the excess income (within the meaning of paragraph 8) of the qualifying fund,

shall be construed as references to the fraction specified in subparagraph (2) of that interest or excess income.

(2) In relation to any account period of the primary fund, the fraction referred to in subparagraph (1) shall be determined by reference to the formula—

C __ D

where—

C is the average value of the primary fund's holding of interests in the qualifying fund during that account period, and

D is the average value of all the interests of the qualifying fund held by any persons during that account period.

Offshore funds investing in trading companies

“commodities” has the same meaning as in paragraph 4(1);

“dealing”, in relation to commodities, currency, securities, debts or other assets of a financial nature, includes dealing by means of futures contracts and traded options;

“trading company” means a company whose business consists wholly of the carrying on of a trade or trades and does not to any extent consist of—

(a) dealing in commodities, currency, securities, debts or other assets of a financial nature, or

(b) banking or money-lending.

(2) In any case where the assets of an offshore fund for the time being include an interest in a trading company, section 744(3) shall apply subject to the modifications in subparagraphs (3) and (4).

(3) In the application of section 744(3) (b) to so much of the assets of an offshore fund as for the time being consists of interests in a single trading company, “20 per cent” shall be substituted for “10 per cent”.

(4) In the application of section 730(3) (c) to an offshore fund, for “more than 10 per cent”, in so far as it would otherwise refer to the share capital of a trading company or to any class of such share capital, “50 per cent or more” shall be substituted.

Offshore funds with wholly-owned subsidiaries

(2) Subject to subparagraph (3), for the purposes of this paragraph, a company shall be a wholly-owned subsidiary of an offshore fund if and so long as the whole of the issued share capital of the company is—

(a) in the case of an offshore fund within section 743(1) (a), directly and beneficially owned by the fund,

(b) in the case of an offshore fund within section 743(1) (b), directly owned by the trustees of the fund for the benefit of the fund, and

(c) in the case of an offshore fund within section 743(1) (c), owned in a manner which as near as may be corresponds either to clause (a) or (b).

(3) In the case of a company which has only one class of issued share capital, the reference in subparagraph (2) to the whole of the issued share capital shall be construed as a reference to at least 95 per cent of that share capital.

(4) The modifications referred to in subparagraph (1) are that for the purposes of section 744(3) and Part 1 of this Schedule—

(a) the percentage of the receipts, expenditure, assets and liabilities of the subsidiary which is equal to the percentage of the issued share capital of the company concerned which is owned as mentioned in subparagraph (2) shall be regarded as the receipts, expenditure, assets and liabilities of the fund, and

(b) there shall be disregarded the interest of the fund in the subsidiary and any distributions or other payments made by the subsidiary to the fund or by the fund to the subsidiary.

Offshore funds with interests in dealing and management companies

(a) a wholly-owned subsidiary of the fund which is within subparagraph (2), or

(b) a subsidiary management company of the fund (within the meaning of subparagraph (3)).

(2) A company which is a wholly-owned subsidiary of an offshore fund shall be one to which subparagraph (1) (a) applies if—

(a) the business of the company consists wholly of dealing in material interests in the offshore fund for the purposes of and in connection with the management and administration of the business of the fund, and

(b) the company is not entitled to any distribution in respect of any material interest for the time being held by the company,

and paragraph 11(2) shall apply to determine whether a company is for the purposes of this paragraph a wholly-owned subsidiary of an offshore fund.

(3) A company (being a company in which an offshore fund has an interest) shall be a subsidiary management company of the fund for the purposes of subparagraph (1) (b) if—

(a) the company carries on no business other than providing services within subparagraph (4) either for the fund alone or for the fund and for any other offshore fund which has an interest in the company, and

(b) the company's remuneration for the services it provides to the fund is not greater than it would be if it were determined at arm's length between the fund and a company in which the fund has no interest.

(4) The services referred to in subparagraph (3) are—

(a) holding property (being property of any description) occupied or used in connection with the management or administration of the fund, and

(b) providing administrative, management and advisory services to the fund.

(5) In determining in accordance with subparagraph (3) whether a company in which an offshore fund has an interest is a subsidiary management company of that fund—

(a) every business carried on by a wholly-owned subsidiary of the company shall be treated as carried on by the company,

(b) no account shall be taken of so much of the company's business as consists of holding its interests in a wholly-owned subsidiary, and

(c) any reference in subparagraph (3) (b) to the company shall be taken to include a reference to a wholly-owned subsidiary of the company.

(6) A reference in subparagraph (5) to a wholly-owned subsidiary of a company shall be construed as a reference to another company, the whole of the issued share capital of which is for the time being directly and beneficially owned by the first-mentioned company.

Disregarding of certain investments forming less than 5 per cent of a fund

(2) In any case where—

(a) in any account period of an offshore fund the assets of the fund include a holding of issued share capital (or any class of issued share capital) of a company, and

(b) that holding is such that by virtue of section 744(3) (c) the fund could not (apart from this paragraph) be certified as a distributing fund in respect of that account period,

then, if the condition in subparagraph (3) is fulfilled, that holding shall be disregarded for the purposes of section 744(3) (c).

(3) The condition referred to in subparagraph (2) is that at no time in the account period in question does that portion of the fund which consists of—

(a) excess holdings, and

(b) interests in other offshore funds which are not qualifying funds,

exceed 5 per cent by value of all the assets of the fund.

Power of Revenue Commissioners to disregard certain breaches of conditions

(a) occurred inadvertently, and

(b) was remedied without unreasonable delay,

then, the Revenue Commissioners may disregard the failure for the purposes of determining whether to certify the fund as a distributing fund in respect of that account period.

PART 3

Application for certification

(a) an application in respect of that period is made under this paragraph,

(b) the application is accompanied by the accounts of the fund for, or for a period which includes, the account period to which the application relates,

(c) such information as the Revenue Commissioners may reasonably require for the purpose of determining whether the fund should be so certified is furnished to the Revenue Commissioners, and

(d) the Revenue Commissioners are satisfied that nothing in subsection (2) or (3) of section 744 prevents the fund being so certified.

(2) An application under this paragraph shall be made to the Revenue Commissioners by the fund or by a trustee or officer of the fund on behalf of the fund and may be so made before the expiry of the period of 6 months beginning at the end of the account period to which the application relates.

(3) In any case where on an application under this paragraph the Revenue Commissioners determine that the offshore fund concerned should not be certified as a distributing fund in respect of the account period to which the application relates, they shall give notice of that determination to the fund.

(4) Where at any time it appears to the Revenue Commissioners that—

(a) the accounts accompanying an application under this paragraph in respect of any account period of an offshore fund are not such, or

(b) any information furnished to them in connection with such an application is not such,

as to make full and accurate disclosure of all facts and considerations relevant to the application, the Revenue Commissioners shall give notice to the fund accordingly, specifying the period concerned.

(5) Where a notice is given by the Revenue Commissioners under subparagraph (4), they shall be deemed never to have certified the offshore fund in respect of the account period in question.

Appeals

(a) against a determination referred to in paragraph 15(3), or

(b) against a notification under paragraph 15(4),

may be made by the offshore fund or by a trustee or officer of the fund on behalf of the fund, and shall be so made by notice specifying the grounds of appeal and given to the Revenue Commissioners within 30 days of the date of the notice under subparagraph (3) or (4) of paragraph 15 as the case may be.

(2) The Appeal Commissioners shall hear and determine an appeal under subparagraph (1) in accordance with the principles to be followed by the Revenue Commissioners in determining applications under paragraph 15 and, subject to those principles, in the like manner as in the case of an appeal to the Appeal Commissioners against an assessment to income tax, and the provisions of the Income Tax Acts relating to such an appeal (including the provisions 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.

(3) The jurisdiction of the Appeal Commissioners on an appeal under this paragraph shall include jurisdiction to review any decision of the Revenue Commissioners relevant to a ground of the appeal.

PART 4

Assessment: effect of non-certification

(2) Subject to subparagraphs (3) and (5), where the Revenue Commissioners receive a notice under subparagraph (1) they shall by notice, given in such manner as they consider appropriate in the circumstances, invite the offshore fund concerned to make an application under paragraph 15 in respect of the period in question.

(3) Where subparagraph (2) applies, the Revenue Commissioners shall not be required to give notice under that subparagraph before the expiry of the account period to which the notice is to relate nor if an application under paragraph 15 has already been made; but where notice is given under subparagraph (2), an application under paragraph 15 shall not be out of time under paragraph 15(2) if it is made within 90 days of the date of that notice.

(4) Where an offshore fund to which notice is given under subparagraph (2) does not make an application under paragraph 15 in respect of the account period in question within the time allowed by subparagraph (3) or paragraph 15(2), as the case may be, the Revenue Commissioners shall proceed to determine the question of certification in respect of that period as if such an application had been made.

(5) Where the Revenue Commissioners receive more than one notice under subparagraph (1) with respect to the same account period of the same offshore fund, their obligations under subparagraphs (2) and (4) shall be taken to be fulfilled with respect to each of those notices if they are fulfilled with respect to any of them.

(6) Notwithstanding anything in subparagraph (5), for the purpose of a determination under subparagraph (4) with respect to an account period of an offshore fund, the Revenue Commissioners shall have regard to accounts and other information furnished by all persons who have given notice under subparagraph (1) with respect to that account period, and paragraph 15 shall apply as if accounts and information so furnished had been furnished in compliance with subparagraph (1) of that paragraph.

(7) Without prejudice to subparagraph (5), in any case where—

(a) at a time after the Revenue Commissioners have made a determination under subparagraph (4) that an offshore fund should not be certified as a distributing fund in respect of an account period, notice is given under subparagraph (1) with respect to that period, and

(b) the person giving that notice furnishes the Revenue Commissioners with accounts or information which had not been furnished to them at the time of the earlier determination,

then, the Revenue Commissioners shall reconsider their previous determination in the light of the new accounts or information and, if they consider it appropriate, may determine to certify the fund accordingly.

(8) Where any person has given notice to the Revenue Commissioners under subparagraph (1) with respect to an account period of an offshore fund and no application has been made under paragraph 15 with respect to that period, then—

(a) the Revenue Commissioners shall notify that person of their determination with respect to certification under subparagraph (4), and

(b) paragraph 16 shall not apply in relation to that determination.

Information as to decisions on certification etc.

a) any determination of the Revenue Commissioners or (on appeal) the Appeal Commissioners as to whether an offshore fund should or should not be certified as a distributing fund in respect of any account period, or

(b) the content and effect of any notice given by the Revenue Commissioners under paragraph 15(4).

SCHEDULE 20 Offshore Funds: Computation of Offshore Income Gains

[FA90 Sch6]

PART 1

Interpretation

Calculation of unindexed gain

(2) Subject to subsections (2) to (6) of section 741 and paragraph 3, the unindexed gain accruing on a material disposal shall be the amount which would be the gain on that disposal for the purposes of the Capital Gains Tax Acts if it were computed without regard to—

(a) any charge to income tax or corporation tax by virtue of section 745, and

(b) any adjustment (in this Part of this Schedule referred to as “the indexation allowance”) made under section 556(2) to sums allowable as deductions in the computation of chargeable gains.

(2) Notwithstanding sections 538 and 546, where apart from this subparagraph the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil, and accordingly for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal.

Gains since the 6th day of April, 1990

(a) the interest in the offshore fund which is disposed of by the person making a material disposal was acquired by that person before the 6th day of April, 1990, or

(b) that person is treated by virtue of any provision of subparagraphs (3) and (4) as having acquired the interest before that date.

(2) Where this paragraph applies, the amount which would have been the gain on the material disposal shall be determined for the purposes of this Part of this Schedule—

(a) on the assumption that on the 6th day of April, 1990, the interest was disposed of and immediately reacquired for a consideration equal to its market value at that time, and

(b) subject to that assumption, on the basis that the gain is computed in the like manner as the unindexed gain on the material disposal is determined under paragraphs 2 and 3,

and that amount is in paragraph 5(2) referred to as “the gain since the 6th day of April, 1990”.

(3) Where the person making the material disposal acquired the interest disposed of—

(a) on or after the 6th day of April, 1990, and

(b) in such circumstances that by virtue of any enactment other than section 556(4) that person and the person (in this subparagraph and subparagraph (4) referred to as “the previous owner”) from whom that person acquired the interest disposed of were to be treated for the purposes of the Capital Gains Tax Acts as if that person's acquisition were for a consideration of such an amount as would secure that, on the disposal under which that person acquired the interest disposed of, neither a gain or a loss accrued to the previous owner,

then, the previous owner's acquisition of the interest shall be treated as that person's acquisition of the interest.

(4) Where the previous owner acquired the interest disposed of—

(a) on or after the 6th day of April, 1990, and

(b) in circumstances similar to those referred to in subparagraph (3),

then, the acquisition of the interest by the predecessor of the previous owner shall be treated for the purposes of this paragraph as the previous owner's acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before the 6th day of April, 1990, or, as the case may be, until an acquisition on a material disposal on or after that date.

The offshore income gain

(2) In any case where—

(a) paragraph 4 applies, and

(b) the gain since the 6th day of April, 1990 (within the meaning of paragraph 4(2)) is less than the unindexed gain on the disposal,

the offshore income gain to which the disposal gives rise shall be an amount equal to the income gain since the 6th day of April, 1990 (within the meaning of that paragraph).

PART 2

(2) Subject to subparagraphs (4) to (6), the equalisation element relevant to the asset disposed of by a disposal within subparagraph (1) shall be the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset disposed of were acquired by another person by means of initial purchase.

(3) In the following provisions of this Part of this Schedule, a disposal within subparagraph (1) is referred to as a “disposal involving an equalisation element”.

(4) Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, the amount which apart from this subparagraph would be the equalisation element relevant to that asset shall be reduced by the following amount, that is—

(a) if that acquisition took place on or after the 6th day of April, 1990, the amount which on that acquisition was credited to the equalisation account of the offshore fund concerned in respect of accrued income or, as the case may be, would have been so credited if that acquisition had been an acquisition by means of initial purchase, and

(b) in any other case, the amount which would have been credited to that account in respect of accrued income if that acquisition had been an acquisition by means of initial purchase taking place on the 6th day of April, 1990.

(5) In any case where—

(a) the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal at or before the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, and

(b) that period began before the 6th day of April, 1990, and ends after that date,

the amount which apart from this subparagraph would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in clause (a) had been an acquisition by means of initial purchase taking place on the 6th day of April, 1990.

(6) Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income (as mentioned in subparagraph (2), (3), (4) or (5)) represents profits from dealing in commodities (within the meaning of paragraph 4 of Schedule 19), 50 per cent of that accrued income shall be disregarded in determining under those subparagraphs the equalisation element relevant to the asset disposed of by that disposal.

(2) Notwithstanding anything in paragraph 6—

(a) where there is no Part 1 gain on a disposal involving an equalisation element, that disposal shall not give rise to an offshore income gain, and

(b) where apart from this paragraph the offshore income gain on a disposal involving an equalisation element would exceed the Part 1 gain on that disposal, the offshore income gain to which that disposal gives rise shall be reduced to an amount equal to that Part 1 gain.

(2) For the purposes only of the application of Part 1 of this Schedule to determine the Part 1 gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 742 shall apply as if in subsection (5) of that section “by virtue of subsection (3)” were deleted.

(3) Where a disposal involving an equalisation element is one which by virtue of any enactment other than section 556(4) is treated for the purposes of the Capital Gains Tax Acts as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part 1 gain (if any) on the disposal, that enactment shall be deemed not to apply to such a disposal (but without prejudice to the application of that enactment to any earlier disposal).

SCHEDULE 21 Purchase and Sale of Securities: Appropriate Amount in Respect of the Interest

[ITA67 Sch11; F(MP) A68 s3(2) and Sch PtI]

(a) the period beginning on the first relevant date and ending on the day before the day on which the first buyer bought the securities,

bears to—

(b) the period beginning on the first relevant date and ending on the day before the second relevant date.

(2) In subparagraph (1)—

“the first relevant date” means—