Finance Act 2003

PART 1 Income Tax, Corporation Tax and Capital Gains Tax

Chapter 1 Interpretation

1 Interpretation (Part 1).

1.—In this Part “Principal Act” means the Taxes Consolidation Act 1997.

Chapter 2 Income Tax

2 Age exemption.

2.—As respects the year of assessment 2003 and subsequent years of assessment, section 188 of the Principal Act is amended, in subsection (2), by substituting “€30,000” for “€26,000” (inserted by the Finance Act 2002) and “€15,000” for “€13,000” (as so inserted).

3 Employee tax credit.

3.—(1) As respects the year of assessment 2003 and subsequent years of assessment, section 472 of the Principal Act is amended, in subsection (4), by substituting “€800” for “€660” (inserted by the Finance Act 2002) in both places where it occurs.

(2) Section 3 of the Finance Act 2002, shall have effect subject to the provisions of this section.

4 Amendment of section 122 (preferential loan arrangements) of Principal Act.

4.—Section 122 of the Principal Act is amended, as respects the year of assessment 2003 and subsequent years of assessment, by substituting in the definition of “the specified rate” in paragraph (a) of subsection (1)—

(a) “4.5 per cent” for “5 per cent” (inserted by the Finance Act 2002) in both places where it occurs, and

(b) “11 per cent” for “12 per cent” (inserted by the Finance Act 2001).

5 Amendment of section 126 (tax treatment of certain benefits payable under Social Welfare Acts) of Principal Act.

5.—Section 126 of the Principal Act is amended by substituting the following for paragraph (b) (inserted by the Finance Act 2002) of subsection (8):

“(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 in relation to unemployment benefit paid or payable, in the period commencing on 6 April 1997 and ending on 31 December 2004, to a person employed in short-time employment.”.

6 Application of PAYE to perquisites, benefits-in-kind, etc.

6.—(1) The Principal Act is amended—

(a) in section 119 by substituting the following for subsection (4):

“(4) For the purposes of subsection (3), the annual value of the use of an asset shall be taken to be—

(a) in the case of an asset being premises, the rent which might reasonably be expected to be obtained on a letting from year to year if the tenant undertook to pay all usual tenant's rates, and if the landlord undertook to bear the costs of repairs and insurance, and the other expenses, if any, necessary for maintaining the premises in a state to command that rent, and

(b) in the case of any other asset, 5 per cent of the market value (within the meaning of section 548) of the asset at the time when it was first applied by the body corporate in making any provision mentioned in section 118(1).”,

(b) in section 121—

(i) in subsection (1)(a)—

(I) by substituting the following for the definition of “car”:

“ ‘car’ means any mechanically propelled road vehicle designed, constructed or adapted for the carriage of the driver or the driver and one or more other persons other than—

(a) a motor-cycle,

(b) a van (within the meaning of section 121A), or

(c) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used;”,

and

(II) by inserting the following definition after the definition of “employment”:

“ ‘motor-cycle’ means a mechanically propelled vehicle with less than four wheels and the weight of which unladen does not exceed 410 kilograms;”,

(ii) in subsection (2)(b), by substituting the following for subparagraph (ii)—

“(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 amount 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.”,

(iii) by substituting the following for paragraph (a) of subsection (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.”,

(iv) in subsection (4)—

(I) by substituting the following for paragraph (a):

“(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 the original market value of the car applicable to the business mileage under the Table to this subsection.”,

(II) by inserting the following after paragraph (b):

“(c) 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 determined by applying paragraph (a) as if—

(i) the figure 15,000 referred to in that paragraph were replaced by a figure (in this paragraph referred to as the ‘new figure’) determined by the formula—

	A
15,000	___
	365

where—

Ais the number of days in the part of the year, and

(ii) each figure in columns (1), (2) and (3) of the Table to this section were reduced in the same proportion as the new figure bears to 15,000.”,

(III) by substituting the following for the Table to that subsection:

	“	TABLE
	Business Mileage		Percentage of original market value
	lower limit	upper limit
	(1)	(2)	(3)
	miles	miles	per cent
	15,000	20,000	24
	20,000	25,000	18
	25,000	30,000	12
	30,000	—	6
			”,

and

(v) in subsection (6), by deleting paragraph (c),

(c) by inserting the following after section 121:

“Benefit of use of van.	121A.—(1) In this section—
	‘van’ means a mechanically propelled road vehicle which—
	(a) is designed or constructed solely or mainly for the carriage of goods or other burden,
	(b) has a roofed area or areas to the rear of the driver's seat, and
	(c) has no side windows or seating fitted in that roofed area or areas.
	(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 van 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 van 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 van, and
	(ii) there shall be treated for that year as emoluments of the employment by reason of which the van is made available, and accordingly chargeable to income tax, the amount, if any, by which the cash equivalent of the benefit of the van 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 van.
	(3) The cash equivalent of the benefit of a van for a year of assessment shall be 5 per cent of the original market value of the van.
	(4) The provisions of subsections (1) (other than the definition of car in paragraph (a)), paragraph (b) of subsection (3), (6) and (7) of section 121 shall apply, with any necessary modifications in relation to a van, for the purposes of this section as they apply in relation to a car for the purposes of that section.”,

and

(d) by inserting the following after section 985:

“Application of section 985 to certain perquisites, etc.	985A.—(1) This section applies to emoluments in the form of—
	(a) perquisites and profits whatever which are chargeable to tax under section 112 excluding perquisites or profits whatever in the form of shares (including stock) in a company, but including—
	(i) an expense incurred by a body corporate in the provision of a benefit, other than a contribution to a PRSA (within the meaning of Chapter 2A of Part 30), for an employee which is treated as a perquisite for the purposes of section 112 by virtue of section 118,
	(ii) the benefit arising from a preferential loan which is treated as a perquisite for the purposes of section 112 by virtue of section 122, and
	(iii) a perquisite to which section 112A applies,
	(b) the benefit of the private use of a car which is chargeable to tax by virtue of section 121, and
	(c) the benefit of the private use of a van which is chargeable to tax by virtue of section 121A.
	(2) Where an employee is in receipt of any emolument to which this section applies, the employer shall be treated for the purposes of this Chapter and regulations under this Chapter as making a payment (in this section referred to as a ‘notional payment’) of an amount equal to the amount referred to in subsection (3).
	(3) The amount referred to in this subsection, is the amount which, on the basis of the best estimate that can reasonably be made, is the amount of income likely to be chargeable to tax under Schedule E in respect of the emolument.
	(4) Where, by reason of an insufficiency of payments actually made to or on behalf of an employee, the employer is unable to deduct the amount (or full amount) of the income tax required to be deducted by virtue of this Chapter and regulations made under this Chapter, the employer shall be liable to remit to the Revenue Commissioners at such time as may be prescribed by regulation an amount of income tax equal to the amount of income tax that the employer would be required, but is unable, to deduct.
	(5) In any case where—
	(a) an employee is in receipt of an emolument to which this section applies,
	(b) the employer is required by virtue of this section and regulations made there-under to remit an amount of income tax (in this subsection referred to as the ‘due amount’) in respect of that emolument, and
	(c) the employee does not, before the end of the year of assessment, make good the due amount to the employer,
	the employee shall be chargeable to tax under Schedule E in respect of the due amount for the next following year of assessment and the due amount shall be treated for that year as an emolument to which this section applies.
	(6) The Revenue Commissioners may make regulations to make provision—
	(a) with respect to the deduction, collection and recovery of amounts to be accounted for in respect of notional payments;
	(b) applying (with or without modifications) any specified provisions of regulations for the time being in force in relation to deductions from actual payments to amounts to be accounted for in respect of any notional payments.”.

(2) This section applies and has effect as on and from 1 January 2004.

7 Payment of tax in respect of share options in certain circumstances.

7.—Part 5 of the Principal Act is amended in section 128A—

(a) in subsection (1)(a), by deleting “on or after 6 April 2000” and substituting “in the period from 6 April 2000 to the date of the passing of the Finance Act 2003”,

(b) by inserting the following after subsection (4):

“(4A) (a) Notwithstanding subsection (4), where an election has been made in accordance with subsection (3) and—

(i) relevant shares are disposed of (in this subparagraph referred to as the ‘first-mentioned disposal’), and

(I) but for this subparagraph, tax would be payable, by reference to the first-mentioned disposal, in accordance with subsection (4)(a), and

(II) the market value of those shares at the date of the first-mentioned disposal is less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares,

then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned disposal or, if later, on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the date of the first-mentioned disposal, or

(ii) relevant shares are held at 31 December in the year of assessment beginning 7 years after the relevant year (in this subparagraph referred to as the ‘first-mentioned date’), and

(I) but for this subparagraph, tax would be payable in accordance with subsection (4)(b), and

(II) the market value of the relevant shares is, at the first-mentioned date, less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares,

then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned date and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the first-mentioned date.

(b) Where a person who is entitled to make an election in accordance with subsection (3), after 6 February 2003 and on or before 31 October in the year of assessment following the relevant year in respect of relevant shares, does not do so, or tax chargeable under section 128, in respect of any gain realised by the exercise before 6 February 2003 of a right to acquire shares, is due after 6 February 2003 but on or before 31 October in the year of assessment following the relevant year, and the market value of the shares on—

(i) that 31 October, or

(ii) where the shares are disposed of before that date, the date of the disposal (referred to in this paragraph as the ‘first-mentioned disposal’) of the shares,

is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the said 31 October, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the said 31 October or the date of the first-mentioned disposal of the shares, as the case may be.

(c) In all cases other than those referred to in paragraph (a) or (b), where tax is chargeable under section 128 on an amount equal to a gain realised by the exercise, at any time before 6 February 2003, of a right to acquire shares in a company, and the market value of the shares on—

(i) that date, or

(ii) where the shares are disposed of before that date, the date of the disposal of the shares,

is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after 6 February 2003.

(d) (i) A payment that is to be made in the event of, and by reference to, disposals of any shares in a year of assessment shall be a payment which is the lesser of—

(I) the aggregate of the balances of unpaid tax referred to in paragraphs (a), (b) and (c), as reduced by tax payable in accordance with this paragraph by reference to disposals of shares in a previous year of assessment, and

(II) the aggregate of the net gains (if any) arising in respect of disposals of shares in the year of assessment.

(ii) For the purposes of subparagraph (i)(II), the net gain arising in relation to a disposal of shares shall be the market value at the date of disposal of those shares reduced by so much of the aggregate of—

(I) the amount of the consideration, if any, given for the shares (including, where relevant, the grant of a right to acquire the shares),

(II)(A) where this subsection does not apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the amount of the income tax so chargeable, or

(B) where this subsection does apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the total amount paid, before the date of the disposal, in respect of that income tax,

and

(III) capital gains tax chargeable by reference to the disposal of the shares,

as does not exceed that market value.

(iii) For the purposes of subparagraph (ii), the income tax or capital gains tax, as the case may be, so chargeable shall be the amount by which the income tax or capital gains tax, as the case may be, chargeable on the taxpayer for the year of assessment would have been reduced if the acquisition or disposal of the shares, as the case may be, had not taken place.