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FINANCE ACT, 2002

Type Act

Publication 2002-03-25

Last updated 2025-12-23

State Partially repealed superseded text

Text As published

Source Irish Statute Book

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articles 141

This is the act as published. Later amendments are not folded into the text below: each one is a separate act in this repository and an entry in this law's history.

30 amending acts · 2025-12-23, FINANCE ACT 2025

Act to provide for the imposition, repeal, remission, alteration and regulation of taxation, of stamp duties and of duties relating to excise and otherwise to make further provision in connection with finance including the regulation of customs

Reform history JSON API

“(a) In this subsection—

‘offshore fund’ means any of the following—
- (i) a company not resident in the State,

- (ii) a unit trust scheme, the trustees of which are neither resident nor ordinarily resident in the State, and

- (iii) any arrangements not within subparagraphs (i) or (ii) which take effect by virtue of the law of a territory outside the State and which under that law create rights in the nature of co-ownership (without restricting that expression to its meaning in the law of the State),

  in which persons have an interest and which is established for the purposes of collective investment by such persons and references in this subsection to an offshore fund shall be construed as a reference to any such company, unit trust scheme or arrangements, in which such persons have an interest;

  ‘scheme of migration and amalgamation’ means an arrangement whereby the assets of an offshore fund are transferred to an investment undertaking in exchange for the issue by the investment undertaking of units to each of the persons who have an interest in the offshore fund, in proportion to the value of that interest, and as a result of which the value of that interest becomes negligible.
(b) A gain shall not be treated as arising to an investment undertaking on the happening of a chargeable event in respect of a unit holder where—

(i) under a scheme of migration and amalgamation the unit holder acquires units in the investment undertaking in exchange for the unit holder's interest in an offshore fund, and

(ii) within 30 days of the scheme of migration and amalgamation taking place, the investment undertaking forwards to the Collector-General a declaration of a kind referred to in paragraph (c),

otherwise than in respect of a unit holder whose name is included in the schedule referred to in paragraph (c)(ii).”,

and

(d) by substituting the following for subsection (9):

“(9) A gain shall not be treated as arising to an investment undertaking on the happening of a chargeable event in respect of a unit holder, where immediately before the chargeable event the investment undertaking or an investment undertaking associated with the first-mentioned investment undertaking—

(a) is, in relation to the units concerned, in possession of a declaration of a kind referred to in paragraph 13 of Schedule 2B, and

(b) is not in possession of any information which would reasonably suggest that—

(i) the information contained in that declaration is not, or is no longer, materially correct,

(ii) the intermediary failed to comply with the undertaking referred to in paragraph 13(e) of Schedule 2B, or

(iii) any of the persons, on whose behalf the intermediary holds units of, or receives payments from, the investment undertaking, is resident or ordinarily resident in the State.

(9A) A gain shall not be treated as arising to an investment undertaking on the happening of a chargeable event in respect of a unit holder where immediately before the chargeable event the investment undertaking or an investment undertaking associated with the first-mentioned investment undertaking—

(a) is, in relation to the units concerned, in possession of a declaration of a kind referred to in paragraph 14 of Schedule 2B, and

(b) is not in possession of any information which would reasonably suggest that—

(i) the information contained in that declaration is not, or is no longer, materially correct,

(ii) the intermediary failed to comply with the undertaking referred to in paragraph 14(e) of Schedule 2B, or

(iii) any of the persons, on whose behalf the intermediary holds units of, or receives payment from, the investment undertaking, is not a person referred to in paragraphs (a) to (h) of section 739D(6).”.

45 Amendment of Schedule 2B (investment undertakings declarations) to Principal Act.

45.—(1) Schedule 2B to the Principal Act is amended—

(a) in paragraph 13 by substituting the following for subparagraphs (d) and (e):

“(d) declares that—

(i) at the time of making the declaration, to the best of the intermediary's knowledge and belief, the person who has beneficial entitlement to each of the units in respect of which the declaration is made—

(I) is not resident in the State, where that person is a company, and

(II) where that person is not a company, the person is neither resident nor ordinarily resident in the State, and

(ii) unless the investment undertaking is notified in writing to the contrary, every subsequent application by the intermediary to acquire units in the investment undertaking or an investment undertaking associated with the first-mentioned investment undertaking, shall be on behalf of such a person,

(e) contains an undertaking that where the intermediary becomes aware at any time that the declaration made in accordance with subparagraph (d) is no longer correct, the intermediary will notify the investment undertaking in writing accordingly, and”,

and

(b) by inserting the following after paragraph 13:

“Certain resident entities: declaration of intermediary

The declaration referred to in section 739D(9A)(a) is a declaration in writing to the investment undertaking which—

(a) is made and signed by the intermediary,

(b) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(c) contains the name and address of the intermediary,

(d) declares that—

(i) at the time of making the declaration, to the best of the intermediary's knowledge and belief, the person who has beneficial entitlement to each of the units in respect of which the declaration is made is a person referred to in paragraphs (a) to (h) of section 739D(6), and

(ii) unless the investment undertaking is notified in writing to the contrary, every subsequent application by the intermediary to acquire units in the investment undertaking or an investment undertaking associated with the first-mentioned investment undertaking, shall be on behalf of such a person,

(e) contains an undertaking that where the intermediary becomes aware at any time that the declaration made under subparagraph (d) is no longer correct, the intermediary will notify the investment undertaking in writing accordingly, and

(f) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 1A of Part 27.”.

46 Amendment of Chapter 4 (certain offshore funds — taxation and returns) of Part 27 of Principal Act.

46.—(1) Chapter 4 of Part 27 of the Principal Act is amended—

(a) in section 747D by substituting the following for paragraph (b):

“(b) where the person is a company and the payment is not taken into account as a receipt of a trade carried on by the company, the income represented by the payment shall be charged to tax under Case III of Schedule D.”,

and

(b) in section 747E by substituting the following for subsection (1):

“(1) Where on or after 1 January 2001 a person who has a material interest in an offshore fund, disposes of an interest in the offshore fund and the disposal gives rise to a gain computed in accordance with subsection (2) then, notwithstanding sections 745 and 747, where the gain is not taken into account in computing the profits or gains of a trade carried on by a company, the amount of that gain shall—

(a) be treated as an amount of income chargeable to tax under Case IV of Schedule D, and

(b) where the person is not a company, and the person has correctly included details of the disposal in a return made by the person, the rate of income tax to be charged on that income shall, notwithstanding section 15, be the rate determined by the formula—

(S + 3) per cent,

where S is the standard rate per cent.”.

(2) This section shall be deemed to have applied as on and from 1 January 2001.

47 Amendment of section 579A (attribution of gains to beneficiaries) of Principal Act.

47.—(1) Section 579A of the Principal Act is amended—

(a) by substituting the following for subsection (2):

“(2)

(a) This section shall apply to a settlement for any year of assessment (beginning on or after 6 April 1999) during which the trustees are at no time resident or ordinarily resident in the State, and—

(i) the settlor does not have an interest in the settlement at any time in that year of assessment, or

(ii) the settlor does have an interest in the settlement but—

(I) was not domiciled in the State, and

(II) was neither resident nor ordinarily resident in the State,

in that year of assessment, or when the settlor made the settlement.

(b) Section 579 shall not apply as respects chargeable gains accruing after 5 April 1999 to trustees of a settlement to which this section applies; and references in subsections (4) and (5) to capital payments received by beneficiaries do not include references to any payments received before 11 February 1999 or any payments received on or after that date so far as they represent a chargeable gain which accrued to the trustees in respect of a disposal by the trustees before 11 February 1999.

(c) For the purposes of this subsection a settlor has an interest in a settlement if—

(i) any relevant property which is, or may at any time become, comprised in the settlement is, or will or may become, applicable for the benefit of or payable in any circumstances to, a relevant beneficiary,

(ii) any relevant income which arises, or may arise, under the settlement is, or will or may become, applicable for the benefit of or payable in any circumstances to, a relevant beneficiary, or

(iii) a relevant beneficiary enjoys a benefit directly or indirectly from any relevant property which is comprised in the settlement or any relevant income arising under the settlement.

(d) In this subsection—

‘relevant beneficiary’ means—
- (i) the settlor,

- (ii) the spouse of the settlor,

- (iii) a company controlled by either or both the settlor and the spouse of the settlor, or

- (iv) a company associated with a company referred to in paragraph (iii) of this definition;

  ‘relevant income’ means income originating from the settlor;

  ‘relevant property’ means property originating from the settlor.
(e) For the purposes of this subsection—

(i) references to property originating from a person are references to property provided by that person, and property representing that property,

(ii) references to income originating from a person are references to income from property originating from that person and income provided by that person,

(iii) whether a company is controlled by a person or persons shall be construed in accordance with section 432 without regard to subsection (6) of that section,

(iv) whether a company is associated with another company shall be construed in accordance with section 432 without regard to subsection (6) of that section, and

(v) references to relevant property comprised in a settlement being, or becoming, applicable for the benefit of or payable in any circumstances to, a relevant beneficiary, do not include references to the repayment of, or obligation to repay, a loan to a settlor which loan was provided by the settlor to the trustees of the settlement on terms that it would be repaid.

(f) Where, for the year of assessment 2002 or any subsequent year of assessment, chargeable gains are treated as accruing to a beneficiary under a settlement by virtue of section 579, then notwithstanding that section such chargeable gains, in so far as they are in respect of a disposal made on or after 7 March 2002 by the trustees of the settlement, shall be treated as accruing to the settlor in relation to the settlement and not to any other person, if the settlor is resident or ordinarily resident in the State, whether or not the settlor is the beneficiary.”,

and

(b) by deleting subsections (10) and (11).

(2) Subsection (1) is deemed to have applied as on and from 11 February 1999.

48 Amendment of Chapter 5 (policyholders — new basis) of Part 26 of Principal Act.

48.—(1) Chapter 5 of Part 26 of the Principal Act is amended—

(a) by substituting the following for section 730D(2)(b)(iii):

“(iii) a person who—

(I) is exempt from income tax under Schedule D by virtue of section 207(1)(b), or

(II) is exempt from corporation tax by virtue of section 207(1)(b) as it applies for the purposes of corporation tax under section 76(6), and”,

(b) by inserting the following after section 730D(2):

“(2A)

(a) In this subsection—

‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;

‘EEA state’ means a State, other than the State, which is a Contracting Party to the EEA Agreement;

‘offshore state’ means a State, other than the State, which is—

(a) a Member State of the European Communities, or

(b) a State which is an EEA state.

(b) A gain shall not be treated as arising on the happening of a chargeable event in relation to a life policy where—

(i) the assurance company which commenced the life policy has established a branch in an offshore state,

(ii) the commitment represented by that life policy is covered through that branch, and

(iii) the assurance company has received written approval from the Revenue Commissioners, to the effect that the provisions of subsection (2)(a) need not apply to the life policy, and that approval has not been withdrawn.

(c) The Revenue Commissioners may give the approval referred to in paragraph (b)(iii) subject to such conditions as they consider necessary.

(d) The Revenue Commissioners may nominate in writing an inspector or other officer to perform any acts and discharge any functions authorised by this subsection to be performed or discharged by the Revenue Commissioners.”,

and

“(iii) (I) a person who is entitled to exemption from income tax under Schedule D by virtue of section 207(1)(b), or

(II) a person who is entitled to exemption from corporation tax by virtue of section 207(1)(b) as it applies for the purposes of corporation tax under section 76(6),”.

49 Amendment of Part 36A (special savings incentive accounts) of Principal Act.

49.—Part 36A of the Principal Act is amended—

(a) in section 848C by substituting the following for paragraph (h):

“(h) for the account to be treated as maturing (otherwise than in respect of the death of the qualifying individual) in accordance with section 848H(1), the qualifying individual shall make a declaration of a kind referred to in section 848I at any time within the period of 3 months ending on the fifth anniversary of the end of the month in which a subscription was first made to the account,”,

(b) in section 848E by inserting the following after subsection (3):

“(3A) The provisions of section 267B(2) shall not apply to shares held in a special share account (within the meaning of section 267A) where the shares are a qualifying asset.”,

(i) by substituting the following for subsection (1)(a):

“(a) on the fifth anniversary of the end of the month in which a subscription was first made to the account where the qualifying individual has made a declaration of a kind referred to in section 848I and the qualifying savings manager is in possession of that declaration at that time, or,”,

and

(ii) by inserting the following after subsection (3):

“(4) Where at any time a special savings incentive account is treated as maturing or, as the case may be, ceasing, the amount of any income which accrues in respect of qualifying assets held in the account, in so far as it was not, but for this subsection, taken into account in determining a gain under section 848J, 848K or 848L, shall, when received, be treated as an amount of cash withdrawn from the account before the account is treated as maturing, or as the case may be, ceasing, and the qualifying savings manager shall be liable to tax in accordance with section 848M on the gain thereby arising under section 848L.”,

and

(d) in section 848M—

(i) by substituting the following for subsection (1):

“(1) A qualifying savings manager shall be liable to tax (in this Part referred to as ‘relevant tax’) representing income tax on a gain treated under this Part as accruing to a special savings incentive account in an amount equal to 23 per cent of the amount of that gain.”,

and

(ii) in subsection (4) by substituting “to the best of the inspector's judgement” for “to the best of his or their judgement”.

50 Amendment of section 838 (special portfolio investment accounts) of Principal Act.

50.—Section 838(4) of the Principal Act is amended by inserting the following after paragraph (b):

“(bb) Notwithstanding paragraph (b), where, at the time a special portfolio investment account is closed, a loss has not been relieved under that paragraph because of an insufficiency of relevant income or gains at that time, that loss shall for the purposes of section 31 be treated as an allowable loss accruing at that time to the individual in whose name the special portfolio investment account was held.”.

51 Amendment of Chapter 2 (payments to subcontractors in certain industries) of Part 18 of Principal Act.

51.—(1) Chapter 2 of Part 18 of the Principal Act is amended—

(a) in section 530(1)—

(i) in paragraph (b) of the definition of “construction operations”, by inserting “telecommunication apparatus,” after “power lines,”, and

(ii) in the definition of “meat processing operations”, by inserting the following after paragraph (f):

“(fa) the rendering of the carcasses or any part of the carcasses of slaughtered cattle, sheep, pigs, domestic fowl, turkeys, guinea-fowl, ducks or geese,”,

and

(b) in section 531—

(i) in subsection (8), by substituting “the Income Tax (Relevant Contracts) Regulations 2000 (S.I. No. 71 of 2000)” for “the Income Tax (Construction Contracts) Regulations, 1971 (S.I. No. 1 of 1971),”,

(ii) in subsection (10), by substituting “the Income Tax (Relevant Contracts) Regulations 2000” for “the Income Tax (Construction Contracts) Regulations, 1971 (S.I. No. 1 of 1971),”, and

(iii) in subsection (11)—

(I) in paragraph (a)(iv)(A), by substituting “taxes, interest and penalties” for “taxes”, and

(II) in paragraph (b), by substituting “subparagraphs (i) to (iv) and (vi)” for “subparagraphs (i) to (iv)”.

(2)
(a) Paragraph (a), and subparagraph (iii)(I) of paragraph (b), of subsection (1) shall apply as on and from 1 April 2002.

(b) Subparagraph (i) and (ii) of subsection (1)(b) shall be deemed to have come into operation as on and from 6 April 2000.

52 Amendment of section 951 (obligation to make a return) of Principal Act.

52.—Section 951(11) of the Principal Act is amended by inserting the following after paragraph (c):

“(d) The Collector-General may designate an address for the delivery of returns which, in accordance with subsection (1), are required to be delivered to him or her by chargeable persons who are chargeable to income tax or capital gains tax for a chargeable period which is a year of assessment, being the year of assessment 2001 or any subsequent year of assessment.

(e) Where the Collector-General designates an address under paragraph (d), that address shall be published in Iris Oifigiúil as soon as is practicable after such designation.”.

CHAPTER 4 Corporation Tax

53 Tonnage tax.

53.—(1) The Principal Act is amended by inserting the following after Part 24:

“PART 24A

SHIPPING: TONNAGE TAX

Interpretation(Part 24A). 697A.—(1) In this Part and in Schedule 18B— ‘bareboat charter terms’, in relation to the charter of a ship, means the letting on charter of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew; ‘chartered in’ means— (a) in relation to a single company, the letting on charter of a ship to the company otherwise than on bareboat charter terms, and (b) in relation to a group of companies, the letting on charter of a ship otherwise than on bareboat charter terms to a qualifying company that is a member of the group by a person who is not a qualifying company that is a member of the group; ‘company election’ and ‘group election’ have the meanings respectively assigned to them by section 697D(1); ‘commencement date’ means the day appointed by the Minister for Finance by order as the day section 53 of the Finance Act, 2002, comes into operation; ‘control’ shall be construed in accordance with subsections (2) to (6) of section 432; ‘initial period’ has the meaning assigned to it by paragraph 2 of Schedule 18B; ‘group of companies’ means— (a) all the companies of which an individual has control, or (b) where a company that is not controlled by another person controls one or more other companies, that company and all the companies of which that company has control, and references to membership of a group and group shall be construed accordingly; ‘Member State’ means a Member State of the European Communities; ‘qualifying company’ means a company— (a) within the charge to corporation tax, (b) that operates qualifying ships, and (c) which carries on the strategic and commercial management of those ships in the State; ‘qualifying group’ means a group of companies of which one or more members are qualifying companies; ‘qualifying ship’ means, subject to subsection (2), a self-propelled seagoing vessel (including a hovercraft) of 100 tons or more gross tonnage which is certificated for navigation at sea by the competent authority of any country or territory, but does not include a vessel (in this Part and in Schedule 18B referred to as a ‘vessel of an excluded kind’) which is— (a) a fishing vessel or a vessel used for subjecting fish to a manufacturing or other process on board the vessel, (b) a vessel of a kind whose primary use is for the purposes of sport or recreation, (c) a harbour, estuary or river ferry, (d) an offshore installation, including a mobile or fixed rig, a platform or other installation of any kind at sea, (e) a tanker used for petroleum extraction activities (within the meaning of Chapter 2 of Part 24), (f) a dredger, including a vessel used primarily as a floating platform for working machinery or as a diving platform, (g) a tug in respect of which a certificate has not been given by the Minister for the Marine and Natural Resources certifying that in the opinion of the Minister the tug is capable of operating in seas outside the portion of the seas which are, for the purposes of the Maritime Jurisdiction Act, 1959, the territorial seas of the State; ‘tonnage tax’ has the meaning assigned to it in section 697B; ‘tonnage tax activities’, in relation to a tonnage tax company, means activities carried on by the company in the course of a trade which consists of one or more than one of the activities described in paragraphs (a) to (j) and paragraph (m) of the definition of ‘relevant shipping income’; ‘tonnage tax asset’ means an asset used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company; ‘tonnage tax company’ and ‘tonnage tax group’ mean, respectively, a company or group in relation to which a tonnage tax election has effect; ‘tonnage tax election’ has the meaning assigned to it in section 697D(1); ‘tonnage tax profits’, in relation to a tonnage tax company, means the company's profits for an accounting period calculated in accordance with section 697C; ‘tonnage tax trade’, in relation to a tonnage tax company, means a trade carried on by the company the income from which is within the charge to corporation tax and which consists solely of the carrying on of tonnage tax activities or, in the case of a trade consisting partly of the carrying on of such activities and partly of other activities, that part of the trade consisting solely of the carrying on of tonnage tax activities and which is treated under section 697L as a separate trade carried on by the company; ‘relevant shipping income’, in relation to a tonnage tax company, means the company's income from— (a) the carriage of passengers by sea in a qualifying ship operated by the company, including income in respect of which the conditions set out in section 697I are met, (b) the carriage of cargo by sea in a qualifying ship operated by the company, including income in respect of which the conditions set out in section 697I are met, (c) towage, salvage or other marine assistance by a qualifying ship operated by the company, (d) transport in connection with other services of a kind necessarily provided at sea by a qualifying ship operated by the company, (e) the provision on board a qualifying ship operated by the company of services ancillary to the carriage of passengers or cargo, (f) the granting of rights by virtue of which another person provides or will provide such ancillary services on board a qualifying ship operated by the company, (g) other ship-related activities that are a necessary and integral part of the business of operating the company's qualifying ships, (h) the provision at sea of marine research facilities on board a qualifying ship operated by the company, (i) the letting on charter of a qualifying ship for use for the carriage by sea of passengers and cargo where the operation of the ship and the crew of the ship remain under the direction and control of the company, (j) the provision of ship management services for qualifying ships operated by the company, (k) a dividend or other distribution of a company not resident in the State (in this Part referred to as the ‘overseas company’) in respect of which the conditions set out in section 697H(1) are met, (l) gains treated as income by virtue of section 697J, (m) activities which are incidental to the activities described in paragraphs (a) to (j) (in this paragraph referred to as the ‘core activities’) where the turnover in an accounting period of the company from all such incidental activities does not exceed 0.25 per cent of the company's turnover from its core activities, ‘relevant shipping profits’, in relation to a tonnage tax company, means— (a) the company's relevant shipping income, and (b) so much of the company's chargeable gains as are excluded from the charge to tax by section 697N; ‘renewal election’ has the meaning assigned to it in paragraph 6 of Schedule 18B; ‘75 per cent limit’ has the meaning assigned to it by section 697E. (2) A vessel is not a qualifying ship for the purposes of this Part if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land. (3) (a) References in this Part and in Schedule 18B to a company or group entering or leaving tonnage tax are references to its becoming or ceasing to be a tonnage tax company or group. (b) References in this Part and in Schedule 18B to a company or group of companies being subject to tonnage tax are references to the company or group being entitled to calculate its profits in accordance with the provisions of this Part and that Schedule. (4) Schedule 18B shall apply for the purposes of this Part.

Application. 697B.—Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, this Part and Schedule 18B shall apply to provide an alternative method (in this Part referred to as ‘tonnage tax’) for computing the profits of a qualifying company for the purposes of corporation tax.

Calculation of profits of tonnage tax company. 697C.—(1) The tonnage tax profits of a tonnage tax company shall be charged to corporation tax in place of the company's relevant shipping profits. (2) Where the profits of a tonnage tax company would be relevant shipping income, any loss accruing to the company in respect of its tonnage tax activities or any loss which would, but for this subsection, be taken into account by virtue of section 79 in computing the trading income of the company shall not be brought into account for the purposes of corporation tax. (3) A company's tonnage tax profits for an accounting period in respect of each qualifying ship operated by the company shall be calculated in accordance with this section by reference to the net tonnage of each qualifying ship operated by the company and, for this purpose, the net tonnage of a ship shall be rounded down (if necessary) to the nearest multiple of 100 tons. (4) The daily profit to be attributed to each qualifying ship operated by the company shall be determined by reference to the net tonnage of the ship as follows: (a) for each 100 tons up to 1,000 tons, €1.00, (b) for each 100 tons between 1,000 and 10,000 tons, €0.75, (c) for each 100 tons between 10,000 and 25,000 tons, €0.50, and (d) for each 100 tons above 25,000 tons, €0.25. (5) The profit to be attributed to each qualifying ship for the accounting period shall be determined by multiplying the daily profit as determined under subsection (4) by— (a) the number of days in the accounting period, or (b) if the ship was operated by the company as a qualifying ship for only part of the period, by the number of days in that part of the accounting period. (6) The amount of the company's tonnage tax profits for the accounting period shall be the aggregate of the profit determined in respect of each qualifying ship operated by the company in accordance with subsection (5). (7) If 2 or more companies are to be regarded as operators of a ship by virtue of a joint interest in the ship, or in an agreement for the use of the ship, the tonnage tax profits of each company shall be calculated as if each were entitled to a share of the profits proportionate to its share of that interest. (8) If 2 or more companies are to be treated as the operator of a ship otherwise than as mentioned in subsection (7), the tonnage tax profits of each shall be computed as if each were the only operator.

Election for tonnage tax. 697D.—(1) Tonnage tax shall apply only if an election (in this Part and Schedule 18B referred to as a ‘tonnage tax election’) under this Part to that effect is made by a qualifying single company (in this Part and in Schedule 18B referred to as a ‘company election’) or by a qualifying group of companies (in this Part and in Schedule 18B referred to as a ‘group election’). (2) (a) Tonnage tax shall only apply to a company which is a member of a group of companies if the company joins in a group election which shall be made jointly by all the qualifying companies in the group. (b) A group election shall have effect in relation to all qualifying companies in the group. (3) A tonnage tax election shall be made only if the requirements of section 697E and 697F are met. (4) Part 1 of Schedule 18B shall apply for the purposes of making and giving effect to an election under this Part.

Requirement that not more than 75 per cent of fleet tonnage is chartered in. 697E.—(1) It shall be a requirement (in this Part and Schedule 18B referred to as the ‘75 per cent limit’) of entering or remaining within tonnage tax— (a) in the case of a single company, that not more than 75 per cent of the net tonnage of the qualifying ships operated by it is chartered in, (b) in the case of a group of companies, that not more than 75 per cent of the aggregate net tonnage of the qualifying ships operated by the members of the group that are qualifying companies is chartered in. (2) A ship shall not be counted more than once in determining for the purposes of subsection (1)(b) the aggregate net tonnage of the qualifying ships operated by the members of a group that are qualifying companies. (3) Where a tonnage tax election (not being a renewal election) is made before the end of the initial period and the 75 per cent limit is exceeded in the first relevant accounting period, the election shall be treated as never having been of any effect. (4) Where a tonnage tax election (not being a renewal election) is made after the end of the initial period, then— (a) if the 75 per cent limit is exceeded in the first relevant accounting period, the election shall not have effect in relation to that period, (b) if the 75 per cent limit is exceeded in the first and second relevant accounting periods, the election shall not have effect in relation to either of those periods, and (c) if the 75 per cent limit is exceeded in the first, second and third relevant accounting periods, the election shall be treated as never having been of any effect. (5) For the purposes of subsection (3) and (4) the first, second or third relevant accounting period means— (a) in relation to a single company, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of the company after its entry into tonnage tax, and (b) in relation to a group of companies, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of a member of the group that would have been a tonnage tax company. (6) Reference in this section to the 75 per cent limit being exceeded in an accounting period are to the limit being exceeded on average over the accounting period in question. (7) (a) If the 75 per cent limit is exceeded in 2 or more consecutive accounting periods of a tonnage tax company (in this subsection referred to as the ‘relevant company’) the Revenue Commissioners may give notice excluding the relevant company or the group of companies of which the relevant company is a member from tonnage tax. (b) The effect of any such notice is that the relevant company's tonnage tax election or the tonnage tax election of the group of which the relevant company is a member shall cease to be in force from such date as may be specified in the notice. (c) The specified date shall not be earlier than the beginning of the accounting period of the relevant company that follows the second consecutive accounting period of that company in which the limit is exceeded. (d) Subject to any arrangement under paragraph 22 of Schedule 18B, a notice under this subsection need only be given to the relevant company.

Requirement not to enter into tax avoidance arrangements. 697F.—(1) It shall be a condition of remaining within tonnage tax that a company is not a party to any transaction or arrangement that is an abuse of the tonnage tax regime. (2) A transaction or arrangement shall be such an abuse as is referred to in subsection (1) if in consequence of its being, or having been, entered into the provisions of this Part and Schedule 18B may be applied in a way that results (or would but for this subsection result) in— (a) a tax advantage (within the meaning of section 811) being obtained for— (i) a company other than a tonnage tax company, or (ii) a tonnage tax company in respect of its non-tonnage tax activities, or (b) the amount of the tonnage tax profits of a tonnage tax company being artificially reduced. (3) If a tonnage tax company is a party to any such transaction or arrangement as is referred to in subsection (1), the Revenue Commissioners may— (a) if it is single company, give notice excluding it from tonnage tax; (b) if it is a member of a group, subject to paragraph 22 of Schedule 18B, give notice to the tonnage tax company excluding the group from tonnage tax. (4) The effect of such a notice as is referred to in subsection (3)— (a) in the case of a single company, is that the company's tonnage tax election shall cease to be in force from the beginning of the accounting period in which the transaction or arrangement was entered into, and (b) in the case of a group, is that the group's tonnage tax election shall cease to be in force from such date as may be specified in the notice, but the date so specified shall not be earlier than the beginning of the earliest accounting period in which any member of the group entered into the transaction or arrangement in question. (5) The provisions of sections 697P apply where a company ceases to be a tonnage tax company by virtue of this section.

Appeals. 697G.—Any person aggrieved by the giving of such a notice as is referred to in section 697E or 697F may by notice in writing to that effect made to the Revenue Commissioners within 30 days from the date of the giving of the first-mentioned notice appeal to the Appeal Commissioners. In the case of a notice given to a tonnage tax company which is a member of a group of companies only one appeal may be brought, but it may be brought jointly by 2 or more members of the group concerned.

Relevant shipping income: distributions of overseas shipping companies. 697H.—(1) The conditions referred to in paragraph (k) of the definition of ‘relevant shipping income’ in section 697A are— (a) that the overseas company operates qualifying ships; (b) that more than 50 per cent of the voting power in the overseas company is held by a company resident in a Member State, or that 2 or more companies each of which is resident in a Member State hold in aggregate more than 50 per cent of that voting power; (c) that the 75 per cent limit is not exceeded in relation to the overseas company in any accounting period in respect of which the distribution is paid; (d) that all the income of the overseas company is such that, if it were a tonnage tax company, it would be relevant shipping income; (e) that the distribution is paid entirely out of profits arising at a time when— (i) the conditions in paragraphs (a) to (d) were met, and (ii) the tonnage tax company was subject to tonnage tax; and (f) the profits of the overseas company out of which the distribution is paid are subject to a tax on profits (in the country of residence of the company or elsewhere, or partly in that country and partly elsewhere). (2) A dividend or other distribution of an overseas company which is made out of profits which are referable to a dividend or other distribution in relation to which the conditions of subsection (1) are met shall be deemed for the purposes of this Part to be a dividend or other distribution in respect of which the conditions in subsection (1) are met. (3) Section 440 shall not apply to dividends and other distributions of an overseas company which is relevant shipping income of a tonnage tax company.

Relevant shipping income: cargo and passengers. 697I.—The conditions referred to in paragraphs (a) and (b) of the definition of ‘relevant shipping income’ in section 697A are— (a) that the income arises from the transport of passengers or cargo, (b) that there is a single contract between the tonnage tax company and a customer for the transport of cargo or passengers which includes carriage by sea in a qualifying ship operated by the company, and (c) that the transport for the remainder of the journey is purchased or obtained by the tonnage tax company by way of a bargain made at arm's length such as would be made between persons who are not connected.

Relevant shipping income: foreign currency gains. 697J.—(1) This section shall apply to— (a) any gain, whether realised or unrealised, attributable to a relevant monetary item (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company's tonnage tax trade in accordance with section 79, and (b) any gain, whether realised or unrealised, attributable to a relevant contract (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company's tonnage tax trade in accordance with section 79. (2) Where this section applies to any gain, the gain shall be treated as income for the purposes of the definition of ‘relevant shipping income’ in section 697A.

General exclusion of investment income. 697K.—(1) Income from investments shall not be relevant shipping income, and for this purpose ‘income from investments’ includes any income chargeable to tax under Case III, IV or V of Schedule D or under Schedule F. (2) To the extent that an activity gives rise to income from investments it shall not be regarded as part of a company's tonnage tax activities. (3) Subsection (1) shall not apply to income that is relevant shipping income under sections 697H and 697I or to income that is relevant shipping income by virtue of paragraph (m) of the definition of ‘relevant shipping income’.

Tonnage tax trade. 697L.—(1) Subject to section 697M, where in an accounting period a tonnage tax company carries on as part of a trade tonnage tax activities, those activities shall be treated for the purposes of the Corporation Tax Acts (other than any provision of those Acts relating to the commencement or cessation of a trade) as a separate trade distinct from all other activities carried on by the company as part of the trade. (2) An accounting period of a company shall end (if it would not otherwise do so) when the company enters or leaves tonnage tax.

Exclusion of reliefs, deductions and set-offs. 697M.—(1) No relief, deduction or set-off of any description is allowed against the amount of a company's tonnage tax profits. (2) (a) When a company enters tonnage tax, any losses that have accrued to it before entry and are attributable— (i) to activities that under tonnage tax become part of the company's tonnage tax trade, or (ii) to a source of income that under tonnage tax becomes relevant shipping income, shall not be available for loss relief in any accounting period beginning on or after the company's entry into tonnage tax. (b) Any apportionment necessary to determine the losses so attributable shall be made on a just and reasonable basis. (c) In paragraph (a) ‘loss relief’ includes any means by which a loss might be used to reduce the amount in respect of which that company, or any other company, is chargeable to tax. (3) (a) Any relief or set-off against a company's tax liability for an accounting period shall not apply in relation to so much of that tax liability as is attributable to the company's tonnage tax profits. (b) Relief to which this subsection applies includes, but is not limited to, any relief or set-off under section 826, 828 or Part 2 of Schedule 24. (c) This subsection shall not apply to any set-off under section 24(2) or 25(3).

Chargeable gains. 697N.—(1) Where for one or more continuous periods of at least 12 months part of an asset has been used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company and part has not, this section shall apply as if the part so used were a separate asset. (2) Where subsection (1) applies, any necessary apportionment of the gain or loss on the disposal of the whole asset shall be made on a just and reasonable basis. (3) (a) When an asset is disposed of that is or has been a tonnage tax asset— (i) any gain or loss on the disposal, which but for this paragraph would have been the amount of the chargeable gain or the allowable loss, shall be a chargeable gain or allowable loss only to the extent (if any) to which it is referable to periods during which the asset was not a tonnage tax asset, and (ii) any such chargeable gain or allowable loss on a disposal by a tonnage tax company shall be treated as arising otherwise than in the course of the company's tonnage tax trade. (b) For the purposes of paragraph (a), the proportion of the gain or loss referable to periods during which the asset was not a tonnage tax asset shall be determined by the formula:

(P — T)

P

where P is the total length of the period since the asset was created or, if later, the last third-party disposal, and T is the length of the period (or the aggregate length of the periods) since— (I) the asset was created, or (II) if later, the last third-party disposal, during which the asset was a tonnage tax asset. (c) In paragraph (b) a ‘third-party disposal’ means a disposal (or deemed disposal) that is not treated as one on which neither a gain nor a loss accrues to the person making the disposal. (4) A tonnage tax election shall not affect the deduction under section 31 as applied by section 78(2) of relevant allowable losses (within the meaning of section 78) that accrued to a company before it became a tonnage tax company.

Capital allowances: general. 697O.—(1) A company's tonnage tax trade shall not be treated as a trade for the purposes of determining the company's entitlement to capital allowances under Part 9 or under any other provision which is to be construed as one with that Part, but nothing in this subsection shall be taken as preventing the making of a balancing charge under those provisions as applied by Schedule 18B. (2) Notwithstanding any other provision of the Tax Acts, Part 9 insofar as it relates to machinery or plant shall not apply to machinery or plant provided for leasing by a lessor (within the meaning of section 403) who is an individual to a lessee (within the meaning of section 403) for use in a tonnage tax trade carried on or to be carried on by the lessee. (3) Part 3 of Schedule 18B shall apply for the purposes of applying the provisions of Part 9 or any other provision which is to be construed as one with that Part for the purposes of a tonnage tax trade of a tonnage tax company.

Withdrawal of relief etc. on company leaving tonnage tax. 697P.—(1) This section shall apply where a company ceases to be a tonnage tax company— (a) on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or (b) under section 697F. (2) Where this section applies, section 697N shall apply in relation to chargeable gains (within the meaning of the Capital Gains Tax Acts), but not losses, on all relevant disposals as if the company had never been a tonnage tax company and for this purpose a ‘relevant disposal’ means a disposal— (a) on or after the day on which the company ceases to be a tonnage tax company, or (b) at any time during the period of 6 years immediately preceding that day when the company was a tonnage tax company. (3) Where subsection (2) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in subparagraph (2)(b), the gain is treated to the extent of the increase— (a) as arising immediately before the company ceased to be a tonnage tax company, and (b) as not being relevant shipping profits of the company. (4) No relief, deduction or set-off of any description shall be allowed against the amount of that increase or the corporation tax charged on that amount. (5) Where this section applies and in a relevant accounting period during which the company was a tonnage tax company the company was liable to a balancing charge in relation to which paragraph 16 or 17, as appropriate, of Schedule 18B applied to reduce the amount of the charge, then the company shall be treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced. (6) For the purposes of subsection (5) a ‘relevant accounting period’ means an accounting period ending not more than 6 years before the day on which the company ceased to be a tonnage tax company. (7) The additional profits referred to in subsection (5) shall be treated— (a) as arising immediately before the company ceased to be a tonnage tax company, and (b) as not being relevant shipping profits of the company. (8) No relief, deduction or set-off of any description shall be allowed against those profits or against the corporation tax charged on them.

Ten year disqualification from re-entry into tonnage tax. 697Q.—(1) This section shall apply in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election. (2) Where this section applies— (a) a company election made by a former tonnage tax company shall be ineffective if made before the end of the period of 10 years beginning with the date on which the company ceased to be a tonnage tax company, and (b) a group election that— (i) is made in respect of a group whose members include a former tonnage tax company, and (ii) would result in that company becoming a tonnage tax company, shall be ineffective if made before the end of the period of 10 years beginning with the date on which that company ceased to be a tonnage tax company. (3) This section shall not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part 4 of Schedule 18B. (4) In this section ‘former tonnage tax company’ means a company that is not a tonnage tax company but has previously been a tonnage tax company.”.


Interpretation(Part 24A).	697A.—(1) In this Part and in Schedule 18B— ‘bareboat charter terms’, in relation to the charter of a ship, means the letting on charter of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew; ‘chartered in’ means— (a) in relation to a single company, the letting on charter of a ship to the company otherwise than on bareboat charter terms, and (b) in relation to a group of companies, the letting on charter of a ship otherwise than on bareboat charter terms to a qualifying company that is a member of the group by a person who is not a qualifying company that is a member of the group; ‘company election’ and ‘group election’ have the meanings respectively assigned to them by section 697D(1); ‘commencement date’ means the day appointed by the Minister for Finance by order as the day section 53 of the Finance Act, 2002, comes into operation; ‘control’ shall be construed in accordance with subsections (2) to (6) of section 432; ‘initial period’ has the meaning assigned to it by paragraph 2 of Schedule 18B; ‘group of companies’ means— (a) all the companies of which an individual has control, or (b) where a company that is not controlled by another person controls one or more other companies, that company and all the companies of which that company has control, and references to membership of a group and group shall be construed accordingly; ‘Member State’ means a Member State of the European Communities; ‘qualifying company’ means a company— (a) within the charge to corporation tax, (b) that operates qualifying ships, and (c) which carries on the strategic and commercial management of those ships in the State; ‘qualifying group’ means a group of companies of which one or more members are qualifying companies; ‘qualifying ship’ means, subject to subsection (2), a self-propelled seagoing vessel (including a hovercraft) of 100 tons or more gross tonnage which is certificated for navigation at sea by the competent authority of any country or territory, but does not include a vessel (in this Part and in Schedule 18B referred to as a ‘vessel of an excluded kind’) which is— (a) a fishing vessel or a vessel used for subjecting fish to a manufacturing or other process on board the vessel, (b) a vessel of a kind whose primary use is for the purposes of sport or recreation, (c) a harbour, estuary or river ferry, (d) an offshore installation, including a mobile or fixed rig, a platform or other installation of any kind at sea, (e) a tanker used for petroleum extraction activities (within the meaning of Chapter 2 of Part 24), (f) a dredger, including a vessel used primarily as a floating platform for working machinery or as a diving platform, (g) a tug in respect of which a certificate has not been given by the Minister for the Marine and Natural Resources certifying that in the opinion of the Minister the tug is capable of operating in seas outside the portion of the seas which are, for the purposes of the Maritime Jurisdiction Act, 1959, the territorial seas of the State; ‘tonnage tax’ has the meaning assigned to it in section 697B; ‘tonnage tax activities’, in relation to a tonnage tax company, means activities carried on by the company in the course of a trade which consists of one or more than one of the activities described in paragraphs (a) to (j) and paragraph (m) of the definition of ‘relevant shipping income’; ‘tonnage tax asset’ means an asset used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company; ‘tonnage tax company’ and ‘tonnage tax group’ mean, respectively, a company or group in relation to which a tonnage tax election has effect; ‘tonnage tax election’ has the meaning assigned to it in section 697D(1); ‘tonnage tax profits’, in relation to a tonnage tax company, means the company's profits for an accounting period calculated in accordance with section 697C; ‘tonnage tax trade’, in relation to a tonnage tax company, means a trade carried on by the company the income from which is within the charge to corporation tax and which consists solely of the carrying on of tonnage tax activities or, in the case of a trade consisting partly of the carrying on of such activities and partly of other activities, that part of the trade consisting solely of the carrying on of tonnage tax activities and which is treated under section 697L as a separate trade carried on by the company; ‘relevant shipping income’, in relation to a tonnage tax company, means the company's income from— (a) the carriage of passengers by sea in a qualifying ship operated by the company, including income in respect of which the conditions set out in section 697I are met, (b) the carriage of cargo by sea in a qualifying ship operated by the company, including income in respect of which the conditions set out in section 697I are met, (c) towage, salvage or other marine assistance by a qualifying ship operated by the company, (d) transport in connection with other services of a kind necessarily provided at sea by a qualifying ship operated by the company, (e) the provision on board a qualifying ship operated by the company of services ancillary to the carriage of passengers or cargo, (f) the granting of rights by virtue of which another person provides or will provide such ancillary services on board a qualifying ship operated by the company, (g) other ship-related activities that are a necessary and integral part of the business of operating the company's qualifying ships, (h) the provision at sea of marine research facilities on board a qualifying ship operated by the company, (i) the letting on charter of a qualifying ship for use for the carriage by sea of passengers and cargo where the operation of the ship and the crew of the ship remain under the direction and control of the company, (j) the provision of ship management services for qualifying ships operated by the company, (k) a dividend or other distribution of a company not resident in the State (in this Part referred to as the ‘overseas company’) in respect of which the conditions set out in section 697H(1) are met, (l) gains treated as income by virtue of section 697J, (m) activities which are incidental to the activities described in paragraphs (a) to (j) (in this paragraph referred to as the ‘core activities’) where the turnover in an accounting period of the company from all such incidental activities does not exceed 0.25 per cent of the company's turnover from its core activities, ‘relevant shipping profits’, in relation to a tonnage tax company, means— (a) the company's relevant shipping income, and (b) so much of the company's chargeable gains as are excluded from the charge to tax by section 697N; ‘renewal election’ has the meaning assigned to it in paragraph 6 of Schedule 18B; ‘75 per cent limit’ has the meaning assigned to it by section 697E. (2) A vessel is not a qualifying ship for the purposes of this Part if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land. (3) (a) References in this Part and in Schedule 18B to a company or group entering or leaving tonnage tax are references to its becoming or ceasing to be a tonnage tax company or group. (b) References in this Part and in Schedule 18B to a company or group of companies being subject to tonnage tax are references to the company or group being entitled to calculate its profits in accordance with the provisions of this Part and that Schedule. (4) Schedule 18B shall apply for the purposes of this Part.
Application.	697B.—Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, this Part and Schedule 18B shall apply to provide an alternative method (in this Part referred to as ‘tonnage tax’) for computing the profits of a qualifying company for the purposes of corporation tax.
Calculation of profits of tonnage tax company.	697C.—(1) The tonnage tax profits of a tonnage tax company shall be charged to corporation tax in place of the company's relevant shipping profits. (2) Where the profits of a tonnage tax company would be relevant shipping income, any loss accruing to the company in respect of its tonnage tax activities or any loss which would, but for this subsection, be taken into account by virtue of section 79 in computing the trading income of the company shall not be brought into account for the purposes of corporation tax. (3) A company's tonnage tax profits for an accounting period in respect of each qualifying ship operated by the company shall be calculated in accordance with this section by reference to the net tonnage of each qualifying ship operated by the company and, for this purpose, the net tonnage of a ship shall be rounded down (if necessary) to the nearest multiple of 100 tons. (4) The daily profit to be attributed to each qualifying ship operated by the company shall be determined by reference to the net tonnage of the ship as follows: (a) for each 100 tons up to 1,000 tons, €1.00, (b) for each 100 tons between 1,000 and 10,000 tons, €0.75, (c) for each 100 tons between 10,000 and 25,000 tons, €0.50, and (d) for each 100 tons above 25,000 tons, €0.25. (5) The profit to be attributed to each qualifying ship for the accounting period shall be determined by multiplying the daily profit as determined under subsection (4) by— (a) the number of days in the accounting period, or (b) if the ship was operated by the company as a qualifying ship for only part of the period, by the number of days in that part of the accounting period. (6) The amount of the company's tonnage tax profits for the accounting period shall be the aggregate of the profit determined in respect of each qualifying ship operated by the company in accordance with subsection (5). (7) If 2 or more companies are to be regarded as operators of a ship by virtue of a joint interest in the ship, or in an agreement for the use of the ship, the tonnage tax profits of each company shall be calculated as if each were entitled to a share of the profits proportionate to its share of that interest. (8) If 2 or more companies are to be treated as the operator of a ship otherwise than as mentioned in subsection (7), the tonnage tax profits of each shall be computed as if each were the only operator.
Election for tonnage tax.	697D.—(1) Tonnage tax shall apply only if an election (in this Part and Schedule 18B referred to as a ‘tonnage tax election’) under this Part to that effect is made by a qualifying single company (in this Part and in Schedule 18B referred to as a ‘company election’) or by a qualifying group of companies (in this Part and in Schedule 18B referred to as a ‘group election’). (2) (a) Tonnage tax shall only apply to a company which is a member of a group of companies if the company joins in a group election which shall be made jointly by all the qualifying companies in the group. (b) A group election shall have effect in relation to all qualifying companies in the group. (3) A tonnage tax election shall be made only if the requirements of section 697E and 697F are met. (4) Part 1 of Schedule 18B shall apply for the purposes of making and giving effect to an election under this Part.
Requirement that not more than 75 per cent of fleet tonnage is chartered in.	697E.—(1) It shall be a requirement (in this Part and Schedule 18B referred to as the ‘75 per cent limit’) of entering or remaining within tonnage tax— (a) in the case of a single company, that not more than 75 per cent of the net tonnage of the qualifying ships operated by it is chartered in, (b) in the case of a group of companies, that not more than 75 per cent of the aggregate net tonnage of the qualifying ships operated by the members of the group that are qualifying companies is chartered in. (2) A ship shall not be counted more than once in determining for the purposes of subsection (1)(b) the aggregate net tonnage of the qualifying ships operated by the members of a group that are qualifying companies. (3) Where a tonnage tax election (not being a renewal election) is made before the end of the initial period and the 75 per cent limit is exceeded in the first relevant accounting period, the election shall be treated as never having been of any effect. (4) Where a tonnage tax election (not being a renewal election) is made after the end of the initial period, then— (a) if the 75 per cent limit is exceeded in the first relevant accounting period, the election shall not have effect in relation to that period, (b) if the 75 per cent limit is exceeded in the first and second relevant accounting periods, the election shall not have effect in relation to either of those periods, and (c) if the 75 per cent limit is exceeded in the first, second and third relevant accounting periods, the election shall be treated as never having been of any effect. (5) For the purposes of subsection (3) and (4) the first, second or third relevant accounting period means— (a) in relation to a single company, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of the company after its entry into tonnage tax, and (b) in relation to a group of companies, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of a member of the group that would have been a tonnage tax company. (6) Reference in this section to the 75 per cent limit being exceeded in an accounting period are to the limit being exceeded on average over the accounting period in question. (7) (a) If the 75 per cent limit is exceeded in 2 or more consecutive accounting periods of a tonnage tax company (in this subsection referred to as the ‘relevant company’) the Revenue Commissioners may give notice excluding the relevant company or the group of companies of which the relevant company is a member from tonnage tax. (b) The effect of any such notice is that the relevant company's tonnage tax election or the tonnage tax election of the group of which the relevant company is a member shall cease to be in force from such date as may be specified in the notice. (c) The specified date shall not be earlier than the beginning of the accounting period of the relevant company that follows the second consecutive accounting period of that company in which the limit is exceeded. (d) Subject to any arrangement under paragraph 22 of Schedule 18B, a notice under this subsection need only be given to the relevant company.
Requirement not to enter into tax avoidance arrangements.	697F.—(1) It shall be a condition of remaining within tonnage tax that a company is not a party to any transaction or arrangement that is an abuse of the tonnage tax regime. (2) A transaction or arrangement shall be such an abuse as is referred to in subsection (1) if in consequence of its being, or having been, entered into the provisions of this Part and Schedule 18B may be applied in a way that results (or would but for this subsection result) in— (a) a tax advantage (within the meaning of section 811) being obtained for— (i) a company other than a tonnage tax company, or (ii) a tonnage tax company in respect of its non-tonnage tax activities, or (b) the amount of the tonnage tax profits of a tonnage tax company being artificially reduced. (3) If a tonnage tax company is a party to any such transaction or arrangement as is referred to in subsection (1), the Revenue Commissioners may— (a) if it is single company, give notice excluding it from tonnage tax; (b) if it is a member of a group, subject to paragraph 22 of Schedule 18B, give notice to the tonnage tax company excluding the group from tonnage tax. (4) The effect of such a notice as is referred to in subsection (3)— (a) in the case of a single company, is that the company's tonnage tax election shall cease to be in force from the beginning of the accounting period in which the transaction or arrangement was entered into, and (b) in the case of a group, is that the group's tonnage tax election shall cease to be in force from such date as may be specified in the notice, but the date so specified shall not be earlier than the beginning of the earliest accounting period in which any member of the group entered into the transaction or arrangement in question. (5) The provisions of sections 697P apply where a company ceases to be a tonnage tax company by virtue of this section.
Appeals.	697G.—Any person aggrieved by the giving of such a notice as is referred to in section 697E or 697F may by notice in writing to that effect made to the Revenue Commissioners within 30 days from the date of the giving of the first-mentioned notice appeal to the Appeal Commissioners. In the case of a notice given to a tonnage tax company which is a member of a group of companies only one appeal may be brought, but it may be brought jointly by 2 or more members of the group concerned.
Relevant shipping income: distributions of overseas shipping companies.	697H.—(1) The conditions referred to in paragraph (k) of the definition of ‘relevant shipping income’ in section 697A are— (a) that the overseas company operates qualifying ships; (b) that more than 50 per cent of the voting power in the overseas company is held by a company resident in a Member State, or that 2 or more companies each of which is resident in a Member State hold in aggregate more than 50 per cent of that voting power; (c) that the 75 per cent limit is not exceeded in relation to the overseas company in any accounting period in respect of which the distribution is paid; (d) that all the income of the overseas company is such that, if it were a tonnage tax company, it would be relevant shipping income; (e) that the distribution is paid entirely out of profits arising at a time when— (i) the conditions in paragraphs (a) to (d) were met, and (ii) the tonnage tax company was subject to tonnage tax; and (f) the profits of the overseas company out of which the distribution is paid are subject to a tax on profits (in the country of residence of the company or elsewhere, or partly in that country and partly elsewhere). (2) A dividend or other distribution of an overseas company which is made out of profits which are referable to a dividend or other distribution in relation to which the conditions of subsection (1) are met shall be deemed for the purposes of this Part to be a dividend or other distribution in respect of which the conditions in subsection (1) are met. (3) Section 440 shall not apply to dividends and other distributions of an overseas company which is relevant shipping income of a tonnage tax company.
Relevant shipping income: cargo and passengers.	697I.—The conditions referred to in paragraphs (a) and (b) of the definition of ‘relevant shipping income’ in section 697A are— (a) that the income arises from the transport of passengers or cargo, (b) that there is a single contract between the tonnage tax company and a customer for the transport of cargo or passengers which includes carriage by sea in a qualifying ship operated by the company, and (c) that the transport for the remainder of the journey is purchased or obtained by the tonnage tax company by way of a bargain made at arm's length such as would be made between persons who are not connected.
Relevant shipping income: foreign currency gains.	697J.—(1) This section shall apply to— (a) any gain, whether realised or unrealised, attributable to a relevant monetary item (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company's tonnage tax trade in accordance with section 79, and (b) any gain, whether realised or unrealised, attributable to a relevant contract (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company's tonnage tax trade in accordance with section 79. (2) Where this section applies to any gain, the gain shall be treated as income for the purposes of the definition of ‘relevant shipping income’ in section 697A.
General exclusion of investment income.	697K.—(1) Income from investments shall not be relevant shipping income, and for this purpose ‘income from investments’ includes any income chargeable to tax under Case III, IV or V of Schedule D or under Schedule F. (2) To the extent that an activity gives rise to income from investments it shall not be regarded as part of a company's tonnage tax activities. (3) Subsection (1) shall not apply to income that is relevant shipping income under sections 697H and 697I or to income that is relevant shipping income by virtue of paragraph (m) of the definition of ‘relevant shipping income’.
Tonnage tax trade.	697L.—(1) Subject to section 697M, where in an accounting period a tonnage tax company carries on as part of a trade tonnage tax activities, those activities shall be treated for the purposes of the Corporation Tax Acts (other than any provision of those Acts relating to the commencement or cessation of a trade) as a separate trade distinct from all other activities carried on by the company as part of the trade. (2) An accounting period of a company shall end (if it would not otherwise do so) when the company enters or leaves tonnage tax.
Exclusion of reliefs, deductions and set-offs.	697M.—(1) No relief, deduction or set-off of any description is allowed against the amount of a company's tonnage tax profits. (2) (a) When a company enters tonnage tax, any losses that have accrued to it before entry and are attributable— (i) to activities that under tonnage tax become part of the company's tonnage tax trade, or (ii) to a source of income that under tonnage tax becomes relevant shipping income, shall not be available for loss relief in any accounting period beginning on or after the company's entry into tonnage tax. (b) Any apportionment necessary to determine the losses so attributable shall be made on a just and reasonable basis. (c) In paragraph (a) ‘loss relief’ includes any means by which a loss might be used to reduce the amount in respect of which that company, or any other company, is chargeable to tax. (3) (a) Any relief or set-off against a company's tax liability for an accounting period shall not apply in relation to so much of that tax liability as is attributable to the company's tonnage tax profits. (b) Relief to which this subsection applies includes, but is not limited to, any relief or set-off under section 826, 828 or Part 2 of Schedule 24. (c) This subsection shall not apply to any set-off under section 24(2) or 25(3).
Chargeable gains.	697N.—(1) Where for one or more continuous periods of at least 12 months part of an asset has been used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company and part has not, this section shall apply as if the part so used were a separate asset. (2) Where subsection (1) applies, any necessary apportionment of the gain or loss on the disposal of the whole asset shall be made on a just and reasonable basis. (3) (a) When an asset is disposed of that is or has been a tonnage tax asset— (i) any gain or loss on the disposal, which but for this paragraph would have been the amount of the chargeable gain or the allowable loss, shall be a chargeable gain or allowable loss only to the extent (if any) to which it is referable to periods during which the asset was not a tonnage tax asset, and (ii) any such chargeable gain or allowable loss on a disposal by a tonnage tax company shall be treated as arising otherwise than in the course of the company's tonnage tax trade. (b) For the purposes of paragraph (a), the proportion of the gain or loss referable to periods during which the asset was not a tonnage tax asset shall be determined by the formula:


	where P is the total length of the period since the asset was created or, if later, the last third-party disposal, and T is the length of the period (or the aggregate length of the periods) since— (I) the asset was created, or (II) if later, the last third-party disposal, during which the asset was a tonnage tax asset. (c) In paragraph (b) a ‘third-party disposal’ means a disposal (or deemed disposal) that is not treated as one on which neither a gain nor a loss accrues to the person making the disposal. (4) A tonnage tax election shall not affect the deduction under section 31 as applied by section 78(2) of relevant allowable losses (within the meaning of section 78) that accrued to a company before it became a tonnage tax company.
Capital allowances: general.	697O.—(1) A company's tonnage tax trade shall not be treated as a trade for the purposes of determining the company's entitlement to capital allowances under Part 9 or under any other provision which is to be construed as one with that Part, but nothing in this subsection shall be taken as preventing the making of a balancing charge under those provisions as applied by Schedule 18B. (2) Notwithstanding any other provision of the Tax Acts, Part 9 insofar as it relates to machinery or plant shall not apply to machinery or plant provided for leasing by a lessor (within the meaning of section 403) who is an individual to a lessee (within the meaning of section 403) for use in a tonnage tax trade carried on or to be carried on by the lessee. (3) Part 3 of Schedule 18B shall apply for the purposes of applying the provisions of Part 9 or any other provision which is to be construed as one with that Part for the purposes of a tonnage tax trade of a tonnage tax company.
Withdrawal of relief etc. on company leaving tonnage tax.	697P.—(1) This section shall apply where a company ceases to be a tonnage tax company— (a) on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or (b) under section 697F. (2) Where this section applies, section 697N shall apply in relation to chargeable gains (within the meaning of the Capital Gains Tax Acts), but not losses, on all relevant disposals as if the company had never been a tonnage tax company and for this purpose a ‘relevant disposal’ means a disposal— (a) on or after the day on which the company ceases to be a tonnage tax company, or (b) at any time during the period of 6 years immediately preceding that day when the company was a tonnage tax company. (3) Where subsection (2) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in subparagraph (2)(b), the gain is treated to the extent of the increase— (a) as arising immediately before the company ceased to be a tonnage tax company, and (b) as not being relevant shipping profits of the company. (4) No relief, deduction or set-off of any description shall be allowed against the amount of that increase or the corporation tax charged on that amount. (5) Where this section applies and in a relevant accounting period during which the company was a tonnage tax company the company was liable to a balancing charge in relation to which paragraph 16 or 17, as appropriate, of Schedule 18B applied to reduce the amount of the charge, then the company shall be treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced. (6) For the purposes of subsection (5) a ‘relevant accounting period’ means an accounting period ending not more than 6 years before the day on which the company ceased to be a tonnage tax company. (7) The additional profits referred to in subsection (5) shall be treated— (a) as arising immediately before the company ceased to be a tonnage tax company, and (b) as not being relevant shipping profits of the company. (8) No relief, deduction or set-off of any description shall be allowed against those profits or against the corporation tax charged on them.
Ten year disqualification from re-entry into tonnage tax.	697Q.—(1) This section shall apply in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election. (2) Where this section applies— (a) a company election made by a former tonnage tax company shall be ineffective if made before the end of the period of 10 years beginning with the date on which the company ceased to be a tonnage tax company, and (b) a group election that— (i) is made in respect of a group whose members include a former tonnage tax company, and (ii) would result in that company becoming a tonnage tax company, shall be ineffective if made before the end of the period of 10 years beginning with the date on which that company ceased to be a tonnage tax company. (3) This section shall not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part 4 of Schedule 18B. (4) In this section ‘former tonnage tax company’ means a company that is not a tonnage tax company but has previously been a tonnage tax company.”.

(2) The Principal Act is amended by inserting the following after Schedule 18A:

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