TAXES CONSOLIDATION ACT, 1997

• (II) a car made available to an employee by his or her employer or by a person connected with the employer shall be deemed to be made available to him or her by reason of his or her employment (unless the employer is an individual and it can be shown that the car was made so available in the normal course of his or her domestic, family or personal relationships);

• (III) a car shall be treated as available to a person and for his or her private use if it is available to a member or members of his or her family or household;

• (IV) references to a person's family or household are references to the person's spouse, sons and daughters and their spouses, parents and servants, dependants and guests;

• (ii) in relation to a car in respect of which this section applies, expenditure in respect of any costs borne by a person connected with the employer shall be treated as borne by the employer;

• (iii) the original market value of a car shall be the price (including any duty of customs, duty of excise or value-added tax chargeable on the car) which the car might reasonably have been expected to fetch if sold in the State singly in a retail sale in the open market immediately before the date of its first registration in the State under section 6 of the Roads Act, 1920, or under corresponding earlier legislation, or else-where under the corresponding legislation of any country or territory.

• (2)
• (a) In relation to a person chargeable to tax in respect of an employment, this section shall apply for a year of assessment in relation to a car which, by reason of the employment, is made available (without a transfer of the property in it) to the person and is available for his or her private use in that year.

• (b) In relation to a car in respect of which this section applies for a year of assessment—

• (i) Chapter 3 of this Part shall not apply for that year in relation to the expense incurred in connection with the provision of the car, and

• (ii) there shall be treated for that year as emoluments of the employment by reason of which the car is made available, and accordingly chargeable to income tax, the amount, if any, by which the cash equivalent of the benefit of the car for the year exceeds the aggregate for the year of the amounts which the employee is required to make good and actually makes good to the employer in respect of any part of the costs of providing or running the car; but any part of such aggregate in respect of which the cash equivalent is reduced under subsection (3)(a) shall be disregarded for the purposes of this subparagraph.

• (3)
• (a) The cash equivalent of the benefit of a car for a year of assessment shall be 30 per cent of the original market value of the car, but shall be reduced—

• (i) where no part of the cost for that year of the fuel used in the course of the private use of the car by the employee is borne directly or indirectly by the employer, by 4.5 per cent of the original market value of the car,

• (ii) where no part of the cost for that year of the insurance of the car is borne directly or indirectly by the employer, by 3 per cent of the original market value of the car,

• (iii) where no part of the cost for that year of repair and servicing of the car is borne directly or indirectly by the employer, by 3 per cent of the original market value of the car, and

• (iv) where no part of the excise duty for that year on the licence under section 1 of the Finance (Excise Duties) (Vehicles) Act, 1952, relating to the car is borne directly or indirectly by the employer, by 1 per cent of the original market value of the car.

• (b) Where a car in respect of which this section applies in relation to a person for a year of assessment is made available to the person for part only of that year, the cash equivalent of the benefit of that car as respects that person for that year shall be an amount which bears to the full amount of the cash equivalent of the car for that year (ascertained under paragraph (a)) the same proportion as that part of the year bears to that year.

• (4)
• (a) Where in relation to a person the business mileage for a year of assessment exceeds 15,000 miles, the cash equivalent of the benefit of the car for that year, instead of being the amount ascertained under subsection (3), shall be the percentage of that amount applicable to that business mileage under the Table to this subsection.

• (b) In the Table to this subsection, any percentage shown in column (3) shall be that applicable to any business mileage for a year of assessment which—

• (i) exceeds the lower limit shown in column (1), and

• (ii) does not exceed the upper limit (if any) shown in column (2),

opposite the mention of that percentage in column (3).

TABLE

Business mileage	Business mileage	Percentage
lower limit	upper limit	Percentage
(1)	(2)	(3)
Miles	Miles
15,000	16,000	97.5 per cent
16,000	17,000	95 per cent
17,000	18,000	90 per cent
18,000	19,000	85 per cent
19,000	20,000	80 per cent
20,000	21,000	75 per cent
21,000	22,000	70 per cent
22,000	23,000	65 per cent
23,000	24,000	60 per cent
24,000	25,000	55 per cent
25,000	26,000	50 per cent
26,000	27,000	45 per cent
27,000	28,000	40 per cent
28,000	29,000	35 per cent
29,000	30,000	30 per cent
30,000	—	25 per cent

• (5)
• (a) Where for a year of assessment—

• (i) a person, in the performance of the duties of his or her employment, spends 70 per cent or more of his or her time engaged on such duties away from the place of business of his or her employer, and

• (ii) in relation to that person, the business mileage exceeds 5,000 miles,

then, if the person so elects in writing to the inspector, the cash equivalent of the benefit of the car for that year of assessment in relation to the person shall, instead of being the amount ascertained under subsection (3) or (4), as may otherwise be appropriate, be 80 per cent of the amount ascertained under subsection (3).

• (b) When requested in writing by the inspector, a person who makes an election under paragraph (a) for a year of assessment shall within 30 days of the date of such request furnish to the inspector a relevant log book in relation to that year of assessment.

• (c) This subsection shall not apply as respects a year of assessment where—

• (i) when requested to do so, a person fails to deliver to the inspector within the time specified in paragraph (b) a relevant log book in relation to that year of assessment, or

• (ii) the time spent by a person in the performance of the duties of his or her employment in that year of assessment is on average less than 20 hours per week.

• (d) Subsection (7)(e) shall apply for the purposes of this subsection as it applies for the purposes of subsection (7).

• (e) Where a person makes an election under paragraph (a) for a year of assessment, such person shall retain the relevant log book in relation to that year of assessment for a period of 6 years after that end of that year or for such shorter period as the inspector may authorise in writing.

• (6)
• (a) Where any amount is to be treated as emoluments of an employment under subsection (2)(b)(ii) for a year of assessment, it shall be the duty of the person who is chargeable to tax in respect of that amount to deliver in writing to the inspector, not later than 30 days after the end of that year of assessment, particulars of the car, of its original market value and of the business mileage and private mileage for that year of assessment.

• (b) Where in relation to a year of assessment—

• (i) a person makes default in the delivery of particulars in relation to—

• (I) the original market value of a car in respect of which this section applies in relation to him or her,

• (II) his or her business mileage for the year, or

• (III) his or her private mileage for the year,

or

• (ii) the inspector is not satisfied with the particulars which have been delivered by the person,

then, the original market value or business mileage or private mileage which is to be taken into account for the purpose of computing the amount of the tax to which that person is to be charged shall be such value or mileage, as the case may be, as according to the best of the inspector's judgment ought to be so taken into account and, in the absence of sufficient evidence to the contrary, the business mileage for a year of assessment in relation to a person shall be determined by deducting 5,000 from the total number of miles travelled in that year by that person in a car or cars in respect of which this section applies in relation to that person.

• (c) The inspector, in making a computation for the purposes of an assessment or of the Income Tax (Employments) Regulations, 1960 (S.I. No. 28 of 1960), before the end of the year of assessment to which the computation relates, in relation to a person in relation to whom this section applies for that year of assessment, shall make an estimate of that person's business mileage for the purpose of the computation, and section 926 shall, with any necessary modifications, apply in relation to the estimate so made as it applies in relation to an estimate made under that section.

• (d) A value or mileage taken into account under paragraph (b) may be amended by the Appeal Commissioners or the Circuit Court on the hearing or the rehearing of an appeal against an assessment in respect of the employment in the performance of the duties of which the business mileage is done.

• (7)
• (a) This subsection shall apply to any car in the case of which the inspector is satisfied (whether on a claim under this subsection or otherwise) that it has for any year been included in a car pool for the use of the employees of one or more employers.

• (b) A car shall be treated as having been so included for a year if—

• (i) in that year the car was made available to and actually used by more than one of those employees and in the case of each of them was made available to him or her by reason of his or her employment but was not in that year ordinarily used by any one of them to the exclusion of the others,

• (ii) in the case of each of them, any private use of the car made by him or her in that year was merely incidental to his or her other use of the car in the year, and

• (iii) the car was in that year not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

• (c) Where this subsection applies to a car, the car shall be treated under this section as not having been available for the private use of any of the employees for the year in question.

• (d) A claim under this subsection in respect of a car for any year may be made by any one of the employees mentioned in paragraph (b)(i) (they being referred to in paragraph (e) as “the employees concerned”) or by the employer on behalf of all of them.

• (e) (i) Any person aggrieved by a decision of the inspector on any question arising under this subsection may, by notice in writing to that effect given to the inspector within 2 months from the date on which notice of the decision is given to that person, make an application to have his or her claim for relief heard and determined by the Appeal Commissioners.

• (ii) Where an application is made under subparagraph (i), the Appeal Commissioners shall hear and determine the claim in the like manner as an appeal made to them against an assessment, 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.

• (iii) On an appeal against the decision of the inspector on a claim under this section all the employees concerned may take part in the proceedings, and the determination of the Appeal Commissioners or the Circuit Court, as the case may be, shall be binding on all those employees, whether or not they have taken part in the proceedings.

• (iv) Where an appeal against the decision of the inspector on a claim under this subsection has been determined, no appeal against the inspector's decision on any other such claim in respect of the same car while in the same car pool and the same year shall be entertained.

122 Preferential loan arrangements. [ITA67 s195B(3) and (6); FA82 s8(1) to (5), (7) and (9); FA89 s6; FA 93 s10(1); FA95 s9; FA97 s146(1) and Sch9 PtI par12(1)]

122.—(1) (a) In this section—

“employee”, in relation to an employer, means an individual employed by the employer in an employment to which Chapter 3 of this Part applies, including, in a case where the employer is a body corporate, a director (within the meaning of that Chapter) of the body corporate;

“employer”, in relation to an individual, means—

• (i) a person of whom the individual or the spouse of the individual is an employee,

• (ii) a person of whom the individual becomes an employee subsequent to the making of a loan by the person to the individual, and while any part of the loan, or of another loan replacing it, is outstanding, or

• (iii) a person connected with a person referred to in paragraph (i) or (ii);

“loan” includes any form of credit, and references to a loan include references to any other loan applied directly or indirectly towards the replacement of another loan;

“preferential loan” means a loan, in respect of which no interest is payable or interest is payable at a preferential rate, made directly or indirectly to an individual or to the spouse of the individual by a person who in relation to the individual or the spouse is an employer, but does not include any such loan in respect of which interest is payable at a rate that is not less than the rate of interest at which the employer in the course of the employer's trade makes equivalent loans for similar purposes at arm's length to persons other than employees or their spouses;

“preferential rate” means a rate less than the specified rate;

“the specified rate”, in relation to a preferential loan, means—

• (i) in a case where—

• (I) the interest paid on the preferential loan qualifies for relief under section 244, or

• (II) if no interest is paid on the preferential loan, the interest which would have been paid on that loan (if interest had been payable) would have so qualified,

the rate of 7 per cent per annum or such other rate (if any) prescribed by the Minister for Finance by regulations,

• (ii) in a case where—

• (I) the preferential loan is made to an employee by an employer,

• (II) the making of loans for the purposes of purchasing a dwelling house for occupation by the borrower as a residence, for a stated term of years at a rate of interest which does not vary for the duration of the loan, forms part of the trade of the employer, and

• (III) the rate of interest at which, in the course of the employer's trade at the time the preferential loan is or was made, the employer makes or made loans at arm's length to persons, other than employees, for the purposes of purchasing a dwelling house for occupation by the borrower as a residence is less than 7 per cent per annum or such other rate (if any) prescribed by the Minister for Finance by regulations,

the first-mentioned rate in subparagraph (III), or

• (iii) in any other case, the rate of 11 per cent per annum or such other rate (if any) prescribed by the Minister for Finance by regulations.

• (b) For the purposes of this section, a person shall be regarded as connected with another person if such person would be so regarded for the purposes of section 250.

• (c) In this section, a reference to a loan being made by a person includes a reference to a person assuming the rights and liabilities of the person who originally made the loan and to a person arranging, guaranteeing or in any way facilitating a loan or the continuation of a loan already in existence.

• (2) Where an individual has at any time during a year of assessment a preferential loan or loans made directly or indirectly to him or her by a person who at the time the loan is made is, or who at a time subsequent to the making of the loan becomes, an employer in relation to the individual, the individual shall, subject to subsection (4), be treated for the purposes of section 112 or, in a case where profits or gains from an employment with that person would be chargeable to tax under Case III of Schedule D, for the purposes of a charge to tax under that Case as having received in that year of assessment as a perquisite of an office or employment with that person a sum equal to—

• (a) if no interest is payable on the preferential loan or loans, the amount of interest which would have been payable in that year if interest had been payable on the loan or loans at the specified rate, or

• (b) if interest is paid or payable at a preferential rate or rates, the difference between the aggregate amount of interest paid or payable in that year and the amount of interest which would have been payable in that year if interest had been payable on the loan or loans at the specified rate,

and the individual or, in the case of an individual whose spouse is chargeable to tax for the year of assessment in accordance with section 1017, the spouse of the individual shall be charged to tax accordingly.

• (3) Where an individual has a loan made to him or her directly or indirectly in any year of assessment by a person who at the time the loan is made is, or who at a time subsequent to the making of the loan becomes, an employer in relation to the individual and the loan or any interest payable on the loan is released or written off in whole or in part—

• (a) the individual shall be deemed for the purposes of section 112 or, in a case where profits or gains from an employment with that person would be chargeable to tax under Case Ill of Schedule D, for the purposes of a charge to tax under that Case to have received in the year of assessment in which the release or writing off took place as a perquisite of an office or employment with that person a sum equal to the amount which is released or written off, and

• (b) the individual or, in the case of an individual whose spouse is chargeable to tax for the year of assessment in accordance with section 1017, the spouse of the individual shall be charged to tax accordingly.

• (4) Where for any year of assessment a sum is chargeable to tax under subsection (2) in respect of a preferential loan or loans or under subsection (3) in respect of an amount of interest written off or released, the individual to whom the loan or loans was or were made shall be deemed for the purposes of section 244 to have paid in the year of assessment an amount or additional amount of interest, as the case may be, on the loan or loans equal to such sum or the individual by whom the interest written off or released was payable shall be deemed for those purposes to have paid in the year of assessment the interest released or written off.

• (5) This section shall not apply to a loan made by an employer, being an individual, and shown to have been made in the normal course of his or her domestic, family or personal relationships.

• (6) Any amount chargeable to tax by virtue of this section shall not be emoluments for the purpose of section 472.

• (7) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

CHAPTER 5 Miscellaneous charging provisions

123 General tax treatment of payments on retirement or removal from office or employment. [ITA67 s114(1) to (5) and (7)]

123.—(1) This section shall apply to any payment (not otherwise chargeable to income tax) which is made, whether in pursuance of any legal obligation or not, either directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the holding of an office or employment or any change in its functions or emoluments, including any payment in commutation of annual or periodical payments (whether chargeable to tax or not) which would otherwise have been so made.

• (2) Subject to section 201, income tax shall be charged under Schedule E in respect of any payment to which this section applies made to the holder or past holder of any office or employment, or to his or her executors or administrators, whether made by the person under whom he or she holds or held the office or employment or by any other person.

• (3) For the purposes of this section and section 201, any payment made to the spouse or any relative or dependant of a person who holds or has held an office or employment, or made on behalf of or to the order of that person, shall be treated as made to that person, and any valuable consideration other than money shall be treated as a payment of money equal to the value of that consideration at the date when it is given.

• (4) Any payment chargeable to tax by virtue of this section shall be treated as income received on the following date—

• (a) in the case of a payment in commutation of annual or other periodical payments, the date on which the commutation is effected, and

• (b) in the case of any other payment, the date of the termination or change in respect of which the payment is made,

and shall be treated as emoluments of the holder or past holder of the office or employment assessable to income tax under Schedule E.

• (5) In the case of the death of any person who if he or she had not died would have been chargeable to tax in respect of any such payment, the tax which would have been so chargeable shall be assessed and charged on his or her executors or administrators, and shall be a debt due from and payable out of his or her estate.

• (6) Where any payment chargeable to tax under this section is made to any person in any year of assessment, it shall be the duty of the person by whom that payment is made to deliver particulars of the payment in writing to the inspector not later than 14 days after the end of that year.

124 Tax treatment of certain severance payments. [FA93 s7(2)]

124.—(1) This section shall apply to the following payments—

• (a) a termination allowance (other than that part of the allowance which comprises a lump sum) payable in accordance with section 5 of the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992, and any regulations made under that section, and

• (b) a severance allowance or a special allowance payable in accordance with Part V (inserted by the Oireachtas (Allowances to Members) and Ministerial and Parliamentary Offices (Amendment) Act, 1992) of the Ministerial and Parliamentary Offices Act, 1938.

• (2) Notwithstanding any other provision of the Income Tax Acts, payments to which this section applies shall be deemed to be—

• (a) profits or gains accruing from an office or employment (and accordingly tax under Schedule E shall be charged on those payments, and tax so chargeable shall be computed under section 112(1)), and

• (b) emoluments to which Chapter 4 of Part 42 is applied by section 984.

125 Tax treatment of benefits received under permanent health benefit schemes. [FA79 s8(1), (4), (4A) and (6); FA86 s7; FA92 s7]

125.—(1) In this section—

“benefit” means a payment made to a person under a permanent health benefit scheme in the event of loss or diminution of income in consequence of ill health;

“permanent health benefit scheme” means any scheme, contract, policy or other arrangement, approved by the Revenue Commissioners for the purposes of this section, which provides for periodic payments to an individual in the event of loss or diminution of income in consequence of ill health.

• (2)
• (a) A policy of permanent health insurance, sickness insurance or other similar insurance issued in respect of an insurance made on or after the 6th day of April, 1986, shall be a permanent health benefit scheme within the meaning of this section if it conforms with a form which, at the time the policy is issued, is either—

• (i) a standard form approved by the Revenue Commissioners as a standard form of permanent health benefit scheme, or

• (ii) a form varying from a standard form so approved in no other respect than by making such alterations to that standard form as are, at the time the policy is issued, approved by the Revenue Commissioners as being compatible with a permanent health benefit scheme when made to that standard form and satisfying any conditions subject to which the alterations are so approved.

• (b) In approving a policy as a standard form of permanent health benefit scheme in pursuance of paragraph (a), the Revenue Commissioners may disregard any provision of the policy which appears to them insignificant.

• (3)
• (a) Any benefit received by a person under a permanent health benefit scheme, whether as of right or not, shall be deemed to be—

• (i) profits or gains arising or accruing from an employment, and

• (ii) emoluments within the meaning of Chapter 4 of Part 42.

• (b) Tax under Schedule E shall be charged on every person to whom any benefit referred to in paragraph (a) is paid in respect of all such benefits paid to such person, and tax so chargeable shall be computed under section 112(1).

• (4) The Revenue Commissioners may nominate any of their officers, including an inspector, to perform any acts and discharge any functions authorised by this section to be performed or discharged by them.

126 Tax treatment of certain benefits payable under Social Welfare Acts. [ITA67 s224(1), (2) and (4); FA71 s12; FA92 s15; FA95 s10(1); FA97 s4]

126.—(1) In this section, “the Acts” means the Social Welfare (Consolidation) Act, 1993, and any subsequent enactment together with which that Act may be cited.

• (2)
• (a) This subsection shall apply to the following benefits payable under the Acts—

• (i) widow's (contributory) pension,

• (ii) orphan's (contributory) allowance,

• (iii) retirement pension, and

• (iv) old age (contributory) pension.

• (b) Payments of benefits to which this subsection applies shall be deemed to be emoluments to which Chapter 4 of Part 42 applies.

• (3)
• (a) This subsection shall apply to the following benefits payable under the Acts—

• (i) disability benefit,

• (ii) unemployment benefit,

• (iii) injury benefit which is comprised in occupational injuries benefit, and

• (iv) pay-related benefit.

• (b) Amounts to be paid on foot of the benefits to which this subsection applies (other than amounts so payable in respect of a qualified child within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 1993) shall be deemed—

• (i) to be profits or gains arising or accruing from an employment (and accordingly tax under Schedule E shall be charged on every person to whom any such benefit is payable in respect of amounts to be paid on foot of such benefits, and tax so chargeable shall be computed under section 112(1)), and

• (ii) to be emoluments to which Chapter 4 of Part 42 is applied by section 984.

• (4)
• (a) In this subsection, “income tax week” means one of the successive periods of 7 days in a year of assessment beginning on the 1st day of that year, or on any 7th day after that day, and the last day of a year of assessment (or the last 2 days of a year of assessment ending in a leap year) shall be taken as included in the last income tax week of that year of assessment.

• (b) Notwithstanding subsection (3), the first £10 of the aggregate of the amounts of unemployment benefit payable to a person in respect of one or more days of unemployment comprised in any income tax week (other than an amount so payable in respect of a qualified child within the meaning of section 2(3)(a) of the Social Welfare (Consolidation) Act, 1993) shall be disregarded for the purposes of the Income Tax Acts.

• (5) Notwithstanding subsection (3), the aggregate of the amounts of disability benefit, injury benefit or both disability benefit and injury benefit payable to a person in respect of—

• (a) for the year of assessment 1997-98, the first 18 days, and

• (b) for the year of assessment 1998-99 and subsequent years of assessment, the first 36 days,

incapacity for work for which the person is entitled to payment of either disability benefit or injury benefit shall be disregarded for the purposes of the Income Tax Acts.

• (6)
• (a) Subsection (3) shall come into operation on such day or days as may be fixed for that purpose by order or orders of the Minister for Finance, either generally or with reference to any particular benefit to which that subsection applies, or with reference to any category of person in receipt of any particular benefit to which that subsection applies, and different days may be so fixed for different benefits or categories of persons in receipt of benefits.

• (b) Where an order is proposed to be made under this subsection, a draft of the order shall be laid before Dáil Éireann, and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.

• (7)
• (a) The Revenue Commissioners may, in order to provide for the efficient collection and recovery of any tax due in respect of benefits to which subsection (3) applies, make regulations modifying the Income Tax (Employment) Regulations, 1960 (S.I. No. 28 of 1960), in their application to those benefits, the employees in receipt of those benefits, the tax-free allowances appropriate to such employees, and employers of such employees or certificates of tax-free allowances or tax deduction cards held by employers of such employees in respect of those employees.

• (b) Without prejudice to the generality of paragraph (a), regulations under that paragraph may include provision for the reallocation by the Revenue Commissioners (without the issue of amended notices of determination of tax-free allowances, amended certificates of tax-free allowances or amended tax deduction cards) of the tax-free allowances appropriate to employees between the benefits to which subsection (3) applies and other emoluments receivable by them.

• (c) Every regulation made under this subsection shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

• (8)
• (a) In this subsection, “short-time employment” has the same meaning as it has for the purposes of the Social Welfare Acts, but also includes an employment referred to in section 79(2)(b) of the Social Welfare (Consolidation) Act, 1993.

• (b) Notwithstanding subsection (3) and the Finance Act, 1992 (Commencement of Section 15) (Unemployment Benefit and Pay-Related Benefit) Order, 1994 (S.I. No. 19 of 1994), subsection (3)(b) shall not apply as respects the year of assessment 1997-98 in relation to unemployment benefit paid or payable to a person employed in short-time employment.

127 Tax treatment of restrictive covenants. [ITA67 s525; FA92 s18(1) and (3); FA97 s146(1) and Sch9 PtI par1(35)]

127.—(1) In this section—

“accounting period” means an accounting period determined in accordance with section 27;

“basis period” means the period on the profits or gains of which income tax is to be finally computed under Schedule D or, where by virtue of the Income Tax Acts the profits or gains of any other period are to be taken to be the profits or gains of that period, that other period;

“office or employment” means any office or employment whatever such that the emoluments of that office or employment, if any, are or would be chargeable to income tax under Schedule E or under Case III of Schedule D for any year of assessment;

references to the giving of valuable consideration shall not include references to the mere assumption of an obligation to make over or provide valuable property, rights or advantages, but shall include references to the doing of anything in or towards the discharge of such an obligation.

• (2) Where—

• (a) an individual who holds, has held or is about to hold an office or employment gives, in connection with the holding of the office or employment, an undertaking (whether absolute or qualified and whether legally valid or not), the tenor or effect of which is to restrict the individual as to his or her conduct or activities,

• (b) in respect of the giving of that undertaking by the individual, or of the total or partial fulfilment of that undertaking by the individual, any sum is paid either to the individual or to any other person, and

• (c) apart from this section, the sum paid would not be treated as profits or gains from the office or employment,

the sum paid shall be deemed—

• (i) to be profits or gains arising or accruing from the office or employment, and accordingly—

• (I) in a case where the profits or gains from the office or employment are or would be chargeable to tax under the Schedule E, tax under that Schedule shall be charged on that sum, and tax so chargeable shall be computed under section 112(1), or

• (II) in a case where the profits or gains from the office or employment are or would be chargeable to tax under Case III of Schedule D, tax under that Case shall be charged on that sum,

and

• (ii) in a case within paragraph (i)(I), to be emoluments to which Chapter 4 of Part 42 is applied by section 984,

for the year of assessment in which the sum is paid; but where the individual has died before the payment of the sum this subsection shall apply as if the sum had been paid immediately before the individual's death.

• (3) Where valuable consideration otherwise than in the form of money is given in respect of the giving of, or of the total or partial fulfilment of, any undertaking, subsection (2) shall apply as if a sum had instead been paid equal to the value of that consideration.

• (4) Notwithstanding section 81(2), where any sum paid or valuable consideration given by a person carrying on a trade or profession is chargeable to tax in accordance with subsection (2), the sum paid or the value of the consideration given, as the case may be, may be deducted as an expense in computing for the purposes of Schedule D the profits or gains of that person's trade or profession, as the case may be—

• (a) in the case of a person chargeable to income tax, for the basis period, or

• (b) in the case of a person chargeable to corporation tax, for the accounting period,

in which the sum is paid or valuable consideration is given.

• (5) Where any sum paid or valuable consideration given by an investment company (within the meaning of section 83), or a company to which section 83 applies by virtue of section 707, is chargeable to tax in accordance with subsection (2), the sum paid or the value of consideration given, as the case may be, shall for the purposes of section 83 be treated as an expense of management for the accounting period in which the sum is paid or valuable consideration is given.

• (6) This section shall apply in relation to any sum paid or consideration given in respect of the giving of, or the total or partial fulfilment of, any undertaking whenever given.

128 Tax treatment of directors of companies and employees granted rights to acquire shares or other assets. [FA86 s9(1)(a) and (b)(i) and (iii), and (2) to (11)(a)]

128.—(1) (a) In this section, except where the context otherwise requires—

“company” has the same meaning as in section 4;

“director” and “employee” have the meanings respectively assigned to them by section 770(1);

“right” means a right to acquire any asset or assets including shares in any company;

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

“shares” includes securities within the meaning of section 135 and stock.

• (b) In this section—

• (i) references to the release of a right include references to agreeing to the restriction of the exercise of the right;

• (ii) a person shall be regarded as acquiring a right as a director of a company or as an employee—

• (I) if by reason of the person's office or employment it is granted to the person, or to another person who assigns the right to the person, and

• (II) if section 71(3) does not apply in charging to tax the profits or gains of that office or employment,

and clauses (I) and (II) shall apply to a right granted by reason of a person's office or employment before the person has commenced to hold it or after the person has ceased to hold it as they would apply if the person had commenced to hold the office or employment or had not ceased to hold the office or employment, as the case may be.

• (2) Where a person realises a gain by the exercise of, or by the assignment or release of, a right obtained by the person on or after the 6th day of April, 1986, as a director of a company or employee, the person shall be chargeable to tax under Schedule E for the year of assessment in which the gain is so realised on an amount equal to the amount of his or her gain as computed in accordance with this section.

• (3) Subject to subsection (5), where tax may by virtue of this section become chargeable in respect of any gain which may be realised by the exercise of a right, tax shall not be chargeable under any other provision of the Tax Acts in respect of the receipt of the right.

• (4) The gain realised by—

• (a) the exercise of any right at any time shall be taken to be the difference between the market value of the asset or assets, as the case may be, at the time of acquisition and the aggregate amount or value of the consideration, if any, given for the asset or assets and for the grant of the right, and

• (b) the assignment or release of any right shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration, if any, given for the grant of the right,

and for this purpose the inspector may make a just apportionment of any entire consideration given for the grant of the right or for the grant of the right and for something besides; but neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with an office or employment, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection.

• (5)
• (a) Where a right mentioned in subsection (2) is obtained as mentioned in that subsection and the right is capable of being exercised later than 7 years after it is obtained, subsection (3) shall not prevent the charging of tax under any other provision of the Tax Acts in respect of the receipt of the right; but where tax is charged under such provision it shall be deducted from any tax which under subsection (2) is chargeable by reference to the gain realised by the exercise, assignment or release of the right.

• (b) For the purpose of any charge to tax enabled to be made by this subsection, the value of a right shall be taken to be not less than the market value at the time the right is obtained of the asset or assets which may be acquired by the exercise of the right or of any asset or assets for which the asset or assets so acquired may be exchanged, reduced by the amount or value (or, if variable, the least amount or value) of the consideration for which the asset or assets may be so acquired.

• (6) Subject to subsection (7), a person shall, in the case of a right granted by reason of the person's office or employment, be chargeable to tax under this section in respect of a gain realised by another person—

• (a) if the right was granted to that other person, or

• (b) if the other person acquired the right otherwise than by or under an assignment made by means of a bargain at arm's length, or if the 2 persons are connected persons at the time when the gain is realised;

but in a case within paragraph (b) the gain realised shall be treated as reduced by the amount of any gain realised by a previous holder on an assignment of the right.

• (7) A person shall not be chargeable to tax by virtue of subsection (6)(b) in respect of any gain realised by another person if the first-mentioned person was divested of the right by operation of law on the first-mentioned person's bankruptcy or otherwise, but the other person shall be chargeable to tax in respect of the gain under Case IV of Schedule D.

• (8) Where a right is assigned or released in whole or in part for a consideration which consists of or comprises another right, that other right shall not be treated as consideration for the assignment or release; but this section shall apply in relation to that other right as it applies in relation to the right assigned or released and as if the consideration for its acquisition did not include the value of the consideration given for the grant of the right assigned or released in so far as that has not been offset by any valuable consideration for the assignment or release other than the consideration consisting of the other right.

• (9)
• (a) Where as a result of 2 or more transactions a person ceases to hold a right and the person or a connected person comes to hold another right (whether or not acquired from the person to whom the other right was assigned) and any of those transactions was effected under arrangements to which 2 or more persons holding rights in respect of which tax may be chargeable under this section were parties, those transactions shall be treated for the purposes of subsection (8) as a single transaction whereby the one right is assigned for a consideration which consists of or comprises the other right.

• (b) This subsection shall apply in relation to 2 or more transactions, whether they involve an assignment preceding, coinciding with, or subsequent to, an acquisition.

• (10) Where a gain chargeable to tax under subsection (2) or (6) is realised by the exercise of a right, section 552 shall apply as if a sum equal to the amount of the gain so chargeable to tax formed part of the consideration given by the person acquiring the shares for their acquisition by that person.

• (11) Where in any year of assessment a person grants a right in respect of which tax may be chargeable under this section, or allots any shares or transfers any asset in pursuance of such a right, or gives any consideration for the assignment or release in whole or in part of such a right, or receives written notice of the assignment of such a right, the person shall deliver particulars thereof in writing to the inspector not later than 30 days after the end of that year.

PART 6 Company Distributions, Tax Credits, Franked Investment Income and Advance Corporation Tax

CHAPTER 1 Taxation of company distributions

129 Irish resident company distributions not generally chargeable to corporation tax. [CTA76 s2]

129.—Except where otherwise provided by the Corporation Tax Acts, corporation tax shall not be chargeable on dividends and other distributions of a company resident in the State, nor shall any such dividends or distributions be taken into account in computing income for corporation tax.

CHAPTER 2 Meaning of distribution

130 Matters to be treated as distributions. [CTA76 s84]

130.—(1) The following provisions of this Chapter, together with sections 436 and 437, shall, subject to any express exceptions, apply with respect to the meaning in the Corporation Tax Acts of “distribution” and for determining the persons to whom certain distributions are to be treated as made; but references in the Corporation Tax Acts to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.

• (2) In relation to any company, “distribution” means—

• (a) any dividend paid by the company, including a capital dividend;

• (b) any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except, subject to section 132, so much of the distribution, if any, as represents a repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;

• (c) any amount met out of assets of the company (whether in cash or otherwise) in respect of the redemption of any security issued by the company in respect of shares in, or securities of, the company otherwise than wholly for new consideration, or in the redemption of such part of any such security so issued as is not properly referable to new consideration;

• (d) any interest or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured, and, without prejudice to section 135(9), for this purpose no amount shall be regarded as representing the principal secured by a security in so far as it exceeds any new consideration received by the company for the issue of the security), where the securities are—

• (i) securities issued as mentioned in paragraph (c), but excluding securities issued before the 27th day of November, 1975,

• (ii) securities convertible directly or indirectly into shares in the company or securities carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted,

• (iii) securities under which—

• (I) the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company's business or any part of the company's business, or

• (II) the consideration so given represents more than a reasonable commercial return for the use of that principal; but this shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal,

• (iv) securities issued by the company and held by a company not resident in the State, where—

• (I) the company which issued the securities is a 75 per cent subsidiary of the other company,

• (II) both companies are 75 per cent subsidiaries of a third company which is not resident in the State, or

• (III) except where 90 per cent or more of the share capital of the company which issued the securities is directly owned by a company resident in the State, both the company which issued the securities and the company not resident in the State are 75 per cent subsidiaries of a third company which is resident in the State,

or

• (v) securities connected with shares in the company, where “connected with” means that, in consequence of the nature of the rights attaching to the securities or shares, and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or acquire, a proportionate holding of the shares;

• (e) any amount required to be treated as a distribution by subsection (3) or by section 131.

• (3)
• (a) Where on a transfer of assets or liabilities by a company to its members or to a company by its members the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by the member, the company shall be treated as making a distribution to the member of an amount equal to the difference (in paragraph (b) referred to as “the relevant amount”).

• (b) Notwithstanding paragraph (a), where the company and the member receiving the benefit are both resident in the State and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident, the relevant amount shall not be treated as a distribution.

• (4) The question whether one company is a subsidiary of another company for the purpose of subsection (3) shall be determined as a question whether it is a 51 per cent subsidiary of that other company, except that that other company shall be treated as not being the owner of—

• (a) any share capital which it owns directly in a company, if a profit on a sale of the shares would be treated as a trading receipt of its trade,

• (b) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

• (c) any share capital which it owns directly or indirectly in a company not resident in the State.

• (5)
• (a) No transfer of assets (other than cash) or of liabilities between one company and another company shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (3) if they are companies—

• (i) both of which are resident in the State and neither of which is a 51 per cent subsidiary of a company not so resident, and

• (ii) which neither at the time of the transfer nor as a result of it are under common control.

• (b) For the purposes of this subsection, 2 companies shall be under common control if they are under the control of the same person or persons, and for this purpose “control” shall be construed in accordance with section 11.

• (c) Any amount which would be a distribution by virtue of subsection (3)(a) shall not constitute a distribution by virtue of subsection (2)(b).

131 Bonus issues following repayment of share capital. [CTA76 s85]

131.—(1) In this section—

“ordinary shares” means shares other than preference shares;

“preference shares” means shares—

• (a) which do not carry any right to dividends other than dividends at a rate per cent of the nominal value of the shares which is fixed, and

• (b) which carry rights in respect of dividends and capital which are comparable with those general for fixed-dividend shares quoted on a stock exchange in the State;

“new consideration not derived from ordinary shares” means new consideration other than consideration consisting of the surrender, transfer or cancellation of ordinary shares of the company or any other company or consisting of the variation of rights in ordinary shares of the company or any other company, and other than consideration derived from a repayment of share capital paid in respect of ordinary shares of the company or of any other company.

• (2) Where a company—

• (a) repays any share capital or has done so at any time on or after the 27th day of November, 1975, and

• (b) at or after the time of that repayment, issues as paid up, otherwise than by the receipt of new consideration, any share capital,

the amount so paid up shall be treated as a distribution made in respect of the shares on which it is paid up, except in so far as that amount exceeds the amount or aggregate amount of share capital so repaid less any amounts previously so paid up and treated by virtue of this subsection as distributions.

• (3) Subsection (2) shall not apply where the repaid share capital consists of fully paid up preference shares—

• (a) if those shares existed as issued and fully paid preference shares on the 27th day of November, 1975, and throughout the period from that date until the repayment those shares continued to be fully paid preference shares, or

• (b) if those shares were issued after the 27th day of November, 1975, as fully paid preference shares wholly for new consideration not derived from ordinary shares and throughout the period from their issue until the repayment those shares continued to be fully paid preference shares.

• (4) Except in relation to a close company within the meaning of section 430, this section shall not apply if the issue of share capital mentioned in subsection (2)(b)—

• (a) is of share capital other than redeemable share capital, and

• (b) takes place more than 10 years after the repayment of share capital mentioned in subsection (2)(a).

132 Matters to be treated or not treated as repayments of share capital. [CTA76 s86]

132.—(1) In this section, “relevant distribution” means so much of any distribution made in respect of shares representing the relevant share capital as apart from subsection (2)(a) would be treated as a repayment of share capital, but by virtue of that subsection cannot be so treated.

• (2)
• (a) Where—

• (i) a company issues any share capital as paid up otherwise than by the receipt of new consideration, or has done so on or after the 27th day of November, 1975, and

• (ii) any amount so paid up is not to be treated as a distribution,

then, for the purposes of sections 130 and 131, distributions made afterwards by the company in respect of shares representing that share capital shall not be treated as repayments of share capital, except to the extent to which those distributions, together with any relevant distributions previously so made, exceed the amounts so paid up (then or previously) on such shares after that date and not treated as distributions.

• (b) For the purposes of paragraph (a), all shares of the same class shall be treated as representing the same share capital, and where shares are issued in respect of other shares, or are directly or indirectly converted into or exchanged for other shares, all such shares shall be treated as representing the same share capital.

• (3) Where share capital is issued at a premium representing new consideration, the amount of the premium shall be treated as forming part of that share capital for the purpose of determining under this Chapter whether any distribution made in respect of shares representing the share capital is to be treated as a repayment of share capital; but this subsection shall not apply in relation to any part of the premium after that part has been applied in paying up share capital.

• (4) Subject to subsection (3), premiums paid on redemption of share capital shall not be treated as repayments of capital.

• (5) Except in relation to a close company within the meaning of section 430, subsection (2)(a) shall not prevent a distribution being treated as a repayment of share capital if it is made—

• (a) more than 10 years after the issue of share capital mentioned in subsection (2)(a)(i), and

• (b) in respect of share capital other than redeemable share capital.

133 Limitation on meaning of “distribution” — general. [CTA76 s84A, FA87 s28(5)(b); FA89 s21(1)(a) and (2), FA90 s41(4) and s46; FA91 s28; FA92 s40; FA93 s45; FA94 s50; FA97 s146(1) and Sch9 PtI par10(2)(b)]

133.—(1) (a) In this section—

“agricultural society” and “fishery society” have the meanings respectively assigned to them by section 443(16);

“relevant principal” means an amount of money advanced to a borrower by a company which is within the charge to corporation tax and the ordinary trading activities of which include the lending of money, where—

• (i) the consideration given by the borrower for that amount is a relevant security, and

• (ii) interest or any other distribution is paid out of the assets of the borrower in respect of that security;

“selling by wholesale” means selling goods of any class to a person who carries on a business of selling goods of that class or uses goods of that class for the purposes of a trade or undertaking carried on by the person;

“specified trade” means, subject to paragraphs (b), (d) and (e), a trade which consists wholly or mainly of the manufacture of goods, including activities which, if the borrower were to make a claim for relief in respect of the trade under Part 14, would be regarded for the purposes of that Part as the manufacture of goods, but not including trading activities in respect of which a certificate has been given by the Minister for Finance under section 445.

• (b) Where the borrower mentioned in subsection (5) is a 75 per cent subsidiary of—

• (i) an agricultural society, or

• (ii) a fishery society,

“specified trade”, in that subsection, means a trade of the borrower which consists wholly or mainly of either or both of—

• (I) the manufacture of goods within the meaning of the definition of “specified trade” in paragraph (a), and

• (II) the selling by wholesale of—

• (A) where subparagraph (i) applies, agricultural products, or

• (B) where subparagraph (ii) applies, fish.

• (c) For the purposes of the definition of “specified trade” in paragraph (a) and of paragraph (b), a trade shall be regarded, as respects an accounting period, as consisting wholly or mainly of particular activities only if the total amount receivable by the borrower from sales made in the course of those activities in the accounting period is not less than 75 per cent of the total amount receivable by the borrower from all sales made in the course of the trade in that period.

• (d) A qualifying shipping trade (within the meaning of section 407) shall not be regarded as a specified trade for the purposes of this section.

• (e) This section shall apply as respects any interest paid to a company in respect of relevant principal advanced before the 20th day of April, 1990, by the company to another company which carries on in the State a trade which but for section 443(6) would be a specified trade as if that trade were a specified trade.

• (2) Any interest or other distribution which—

• (a) is paid out of assets of a company (in this section referred to as “the borrower”) to another company within the charge to corporation tax, and

• (b) is so paid in respect of a security (in this section referred to as a “relevant security”) within subparagraph (ii), (iii)(I) or (v) of section 130(2)(d),

shall not be a distribution for the purposes of the Corporation Tax Acts unless the application of this subsection is excluded by subsection (3), (4) or (5).

• (3) Subsection (2) shall not apply where the principal secured has been advanced by a company out of money subscribed for the share capital of the company and that share capital is beneficially owned directly or indirectly by a person or persons resident outside the State.

• (4) Subsection (2) shall not apply in a case where the consideration given by the borrower for the use of the principal secured represents more than a reasonable commercial return for the use of that principal; but, where this subsection applies, nothing in subparagraph (ii), (iii)(I) or (v) of section 130(2)(d) shall operate so as to treat as a distribution for the purposes of the Corporation Tax Acts so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal.

• (5) Subject to subsections (6) and (7), subsection (2) shall not apply to any interest paid by the borrower, in an accounting period of the borrower, to another company in respect of relevant principal advanced by that other company, where—

• (a) in that accounting period the borrower carries on in the State a specified trade,

• (b) the relevant principal in respect of which the interest is paid is used in the course of the specified trade—

• (i) for the activities of the trade which consist of the manufacture of goods within the meaning of the definition of “specified trade” in paragraph (a) of subsection (1), or

• (ii) where paragraph (b) of subsection (1) applies, for the activities of the trade which consist of such selling by wholesale as is referred to in paragraph (II) of the definition of “specified trade” in that paragraph,

and

• (c) the interest, if it were not a distribution, would be treated as a trading expense of that trade for that accounting period.

• (6) Subsection (5) shall not apply to interest paid in respect of relevant principal to a company which on the 12th day of April, 1989, had no outstanding amounts of relevant principal advanced.

• (7) Notwithstanding subsection (5), where at any time after the 12th day of April, 1989, the total of the amounts of relevant principal (in this subsection referred to as “the current amounts of relevant principal”) advanced by a company in respect of relevant securities held directly or indirectly by the company at that time is in excess of a limit, being a limit equal to 110 per cent of the total of the amounts of relevant principal advanced by the company in respect of relevant securities held directly or indirectly by the company on the 12th day of April, 1989, then, such part of any interest paid at that time to the company in respect of relevant principal as bears, in relation to the total amount of interest so paid to the company, the same proportion as the excess bears in relation to the current amounts of relevant principal shall not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company.

• (8)
• (a) In this subsection and in subsection (10), “specified period”, in relation to relevant principal, means the period commencing on the date on which the relevant principal was advanced and ending on the date on which the relevant principal is to be repaid under the terms of the agreement to advance the relevant principal or, if earlier—

• (i) in the case of relevant principal advanced before the 11th day of April, 1994, the 11th day of April, 2001, and

• (ii) in any other case, a date which is 7 years after the date on which the relevant principal was advanced.

• (b) Notwithstanding subsection (5), where at any time on or after the 31st day of January, 1990, the total of the amounts of relevant principal (in this subsection and in subsections (9) and (10) referred to as “the current amounts of relevant principal”) advanced by a company in respect of relevant securities held directly or indirectly by the company at that time is in excess of a limit, being a limit equal to 75 per cent of the total of the amounts of relevant principal advanced by the company in respect of relevant securities held directly or indirectly by the company on the 12th day of April, 1989, then, any interest paid to the company in respect of relevant principal advanced by the company on or after the 31st day of January, 1990, being relevant principal which is included in the current amounts of relevant principal, shall not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company.

• (c) Where apart from this paragraph any part of any interest paid to a company in respect of relevant principal advanced by the company on or after the 31st day of January, 1990, would not be treated as a distribution for the purposes of the Corporation Tax Acts in the hands of the company by virtue only of paragraph (b), then, that paragraph shall not apply in relation to so much of that interest as is paid for a specified period in respect of relevant principal advanced and which was, at the time the relevant principal was advanced, specified in the list referred to in subparagraph (iv) if—

• (i) the relevant principal is advanced by the company to a borrower who was in negotiation before the 31st day of January, 1990, with any company for an amount of relevant principal,

• (ii) the borrower had received before the 31st day of January, 1990, a written offer of grant aid from the Industrial Development Authority, the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta in respect of a specified trade or a proposed specified trade for the purposes of which trade the relevant principal is borrowed,

• (iii) the specified trade is a trade which the borrower commenced to carry on after the 31st day of January, 1990, or is a specified trade of the borrower in respect of which the borrower is committed, under a business plan approved by the Industrial Development Authority, the Shannon Free Airport Development Company Limited or Údarás na Gaeltachta, to the creation of additional employment,

• (iv) before the 25th day of March, 1992, the specified trade of the borrower was included in a list prepared by the Industrial Development Authority and approved before that day by the Minister for Industry and Commerce and the Minister for Finance, being a list specifying a particular amount of relevant principal in respect of each trade which amount is considered to be essential for the success of that trade, and

• (v) the borrower or a company connected with the borrower is not a company which commenced to carry on relevant trading operations (within the meaning of section 446) after the 20th day of April, 1990, or intends to commence to carry on such trading operations;