Finance Act 2003

“106A.—(1) (a) In this section—

‘relevant transaction’ means any scheme, arrangement or understanding under which a person becomes entitled to receive a capital sum and the consideration given for the entitlement to receive the sum consists wholly or mainly of the direct or indirect transfer to another person of a right to receive rent which, in the absence of the scheme, arrangement or understanding, could reasonably have been expected to accrue to the first-mentioned person or to a person connected with that person;

‘rent’ includes any sum which—

• (i) is chargeable to tax under Case V of Schedule D, or

• (ii) would be so chargeable if the source of the sum were in the State.

• (b) For the purposes of this section, a scheme, arrangement or understanding under which a person grants a lease in connection with which—

  • (i) the person is entitled to a capital sum,

  • (ii) rent is payable to another person, and

  • (iii) the consideration given for the entitlement to receive the capital sum consists wholly or mainly of the grant to the other person or a person connected with the other person of a right to rent under the lease, shall be treated as a relevant transaction and this section applies as if the capital sum were a capital sum under the relevant transaction.

• (2)

  • (a) Subject to paragraph (b), where a person other than a company becomes entitled to receive a capital sum under a relevant transaction, the capital sum shall be treated for the purposes of the Tax Acts as being an amount of income of the person chargeable to tax under Case IV of Schedule D for the year of assessment—

    • (i) in which the person becomes entitled to the capital sum, or

    • (ii) if it is earlier, in which the sum was received.

  • (b) Paragraph (a) does not apply to a person, other than an individual, if the consideration for the capital sum—

    • (i) was given by the person, and

    • (ii) is a qualifying asset (within the meaning of section 110) acquired by a qualifying company (within the meaning of that section) in the course of its business.

• (3) Any profits or gains arising by virtue of a relevant transaction to the person to whom the right to receive rent was transferred shall be computed in accordance with section 97, and shall, notwithstanding any other provision of the Tax Acts, be chargeable to tax under Case V of Schedule D: but this subsection does not apply in relation to a person if—

  • (a) the consideration received by the person for the capital sum is a qualifying asset (within the meaning of section 110) acquired by a qualifying company (within the meaning of that section) in the course of its business, and

  • (b) the asset was acquired from a person other than an individual.”.

• (2) This section applies—

• (a) in the case of subsection (2) of section 106A (as inserted by this section) of the Principal Act, as respects any capital sum received on or after 6 February 2003, and

• (b) in the case of subsection (3) of section 106A (as inserted by this section) of the Principal Act, as respects amounts received on or after 6 February 2003.

37 Matching of relevant foreign currency assets with foreign currency liabilities.

37.—(1) The Principal Act is amended by inserting the following after section 79:

“79A.—(1) (a) In this section—

‘foreign currency asset’, in relation to a company, means an asset, not being a relevant monetary item (within the meaning of section 79), of the company the consideration for the acquisition of which consisted solely of an amount denominated in a currency other than the currency of the State;

‘foreign currency liability’, in relation to a company, means—

• (i) a liability, not being a relevant monetary item (within the meaning of section 79), or

• (ii) a sum subscribed for paid-up share capital or contributed to the capital,

of the company which is denominated in a currency other than the currency of the State;

‘rate of exchange’ has the meaning assigned to it by section 79.

• (b) For the purposes of this section—

  • (i) a foreign currency asset is a relevant foreign currency asset in relation to a company if it consists of shares in another company acquired by the company and immediately after the acquisition by the company of the shares in the other company—

    • (I) the company owns not less than 25 per cent of the share capital of the other company, and

    • (II) the other company is a trading company or a holding company of a trading company,

  • (ii) where at any time a company disposes of a relevant foreign currency asset which has been matched with a corresponding foreign currency liability and the company does not discharge the liability at that time, the company shall be deemed to discharge the liability, and to incur a new liability equal to the amount of the liability, at that time,

  • (iii) where in accordance with subsection (2) a company specifies that a relevant foreign currency asset acquired by it at any time is to be matched with a corresponding foreign currency liability incurred by it before that time, the company shall be deemed to discharge the foreign currency liability, and to incur a new liability equal to the amount of the liability, at that time, and

  • (iv) the amount of a gain or loss on the discharge of a foreign currency liability shall be the amount which would be the gain accruing to, or as the case may be the loss incurred by, the company on the disposal of an asset acquired by it at the time the liability was incurred and disposed of at the time at which the liability was discharged if—

    • (I) the amount given by the company to discharge the liability was the amount given by the company as consideration for the acquisition of the asset, and

    • (II) the amount of the liability incurred by the company was the consideration received by the company on the disposal of the asset.

• (2)

  • (a) A company may, by giving notice in writing to the inspector, specify that a relevant foreign currency asset denominated in a currency other than the currency of the State shall be matched with such corresponding foreign currency liability denominated in that currency as is specified by the company.

  • (b) A notice under paragraph (a) shall be given within 3 weeks after the acquisition by the company concerned of the relevant foreign currency asset.

• (3) Where in an accounting period a company disposes of a relevant foreign currency asset which has been matched by the company under subsection (2) with a foreign currency liability of the company, any chargeable gain or allowable loss on the relevant foreign currency asset shall be computed for the purposes of capital gains tax as if the consideration received for the disposal of the asset—

  • (a) where the company incurs a loss on discharge of the liability which loss results directly from a change in a rate of exchange, were reduced by an amount equal to the amount of that loss, but the amount of any such reduction shall not exceed the amount of so much of any gain on the disposal of the asset as results directly from a change in a rate of exchange, and

  • (b) where the company realises a gain on discharge of the liability which gain results directly from a change in a rate of exchange, were increased by an amount equal to the amount of that gain, but the amount of any such increase shall not exceed the amount of so much of any loss incurred on the disposal of the asset which loss results directly from a change in a rate of exchange.”.

• (2) This section applies as respects accounting periods ending on or after 6 February 2003.

38 Exchange of information.

38.—For the purposes of assisting the prevention and detection of tax evasion, by means of the exchange of information between the Revenue Commissioners and the tax authorities of certain other territories, the Principal Act is amended—

• (a) in section 826 by the substitution for subsection (1) of the following:

• “(1) Where the Government by order declare that arrangements specified in the order have been made with the government of any territory outside the State in relation to—

  • (a) affording relief from double taxation in respect of—

    • (i) income tax;

    • (ii) corporation tax in respect of income and chargeable gains;

    • (iii) any taxes of a similar character imposed by the laws of the State or by the laws of that territory,

    or

  • (b) exchanging information for the purposes of the prevention and detection of tax evasion in respect of the taxes specified in paragraph (a),

  and that it is expedient that those arrangements should have the force of law, then, subject to this section and section 835, the arrangements shall, notwithstanding any enactment, have the force of law.”,

and

• (b) by inserting the following after section 912:

39 Amendment of section 404 (restriction on use of capital allowances for certain machinery or plant) of Principal Act.

39.—Section 404 of the Principal Act is amended in subsection (6)(b) by substituting “it is a lease of machinery or plant provided for leasing by a lessor to a lessee” for “the leasing of the asset is carried on”.

40 Amendment of section 407 (restriction on use of losses and capital allowances for qualifying shipping trade) of Principal Act.

40.—Section 407 of the Principal Act is amended in subsection (1) by substituting “31 December 2006” for “31 December 2002” in the definition of “the relevant period”.

41 Amendment and repeals consequential on abolition of tax credits and advance corporation tax.

41.—(1) The Principal Act is amended—

• (a) in section 83 of the Principal Act—

• (i) in subsection (3) by deleting “(other than subsection (5))”, and

• (ii) by deleting subsections (5) and (6),

• (b) in section 137(3) by deleting “and the relevant tax credit”,

• (c) in section 144(8) by substituting the following for the meaning of T:

“T is the amount of the distributions received by the company in the accounting period which is included in its franked investment income of the accounting period with the addition of any amount received by the company in the accounting period to which section 140(3)(a), 141(3)(a), 142(4) or 144(3)(a) applies.”,

• (d) in section 154—

• (i) by substituting in subsection (1) “and 144” for “, 144 and 145” in each place in which it occurs, and

• (ii) by substituting in subsection (6) “the day in question” for “that day”,

• (e) in section 155 by substituting in subsection (3) “or 144(3)(a)” for “, 144(3)(a) or 145”,

• (f) in Chapter 7 of Part 6—

• (i) by substituting the following for section 156—

and

• (ii) by deleting sections 157 and 158,

• (g) in Chapter 8 of Part 6 by deleting sections 159 to 164 and sections 166 and 167,

• (h) in section 448(1)(a) by deleting “157, 158,”,

• (i) in section 679(3)(a) by deleting “section 157,”,

• (j) in section 716(3) by deleting “(including, where a claim is made under section 157 for the purposes mentioned in subsection (2)(a) of that section, any franked investment income)”,

• (k) in section 751(1)(b) by deleting “157 or”,

• (l) in section 753(b) by deleting “157 or”,

• (m) in section 817 by deleting subsection (6),

• (n) by inserting the following after section 845A:

• (o) in section 884 by deleting subsection (2)(c), and

• (p) in section 1085—

• (i) in subsection (2) by deleting subparagraphs (d) and (e), and

• (ii) by substituting the following for subsections (3) and (4):

• “(3) Subject to subsection (4), any restriction or reduction imposed by paragraph (a), (b), (ba), (c), (ca) or (cb) of subsection (2) in respect of a chargeable period in the case of a company which fails to deliver a return of income on or before the specified return date for the chargeable period shall apply subject to a maximum restriction or reduction, as the case may be, of €158,715 in each case for the chargeable period.

• (4) Where in relation to a chargeable period a company, having failed to deliver a return of income on or before the specified return date for the chargeable period, delivers that return before the expiry of 2 months from the specified return date for the chargeable period, paragraphs (a) to (cb) of subsection (2) shall apply as if the references in those paragraphs to ‘50 per cent’ were references to ‘75 per cent’ in the case of paragraphs (a) and (b) and ‘25 per cent’ in the case of paragraphs (ba), (c), (ca) and (cb) subject to a maximum restriction or reduction, as the case may be, of €31,740.”,

and

• (q) in Chapter 2 of Part 24 by deleting section 691.

• (2) This section applies as respects accounting periods ending on or after 6 February 2003.

42 Amendment of Part 41 (self assessment) of Principal Act.

42.—(1) Part 41 of the Principal Act is amended—

• (a) in section 950(1), by substituting the following for paragraphs (b) and (c) of the definition of “specified return date for the chargeable period”:

• “(b) where the chargeable period is an accounting period of a company and subject to paragraph (c), the last day of the period of 9 months commencing on the day immediately following the end of the accounting period, but in any event not later than day 21 of the month in which that period of 9 months ends, and

• (c) where the chargeable period is an accounting period of a company which ends on or before the date of commencement of the winding up of the company and the specified return date in respect of that accounting period would apart for this paragraph fall on a day after the date of commencement of the winding up but not within a period of 3 months after that date, the day which falls 3 months after the date of commencement of the winding up but in any event not later than day 21 of the month in which that period of 3 months ends.”,

• (b) in section 951—

• (i) in subsection (1), by substituting for all the words from “Every chargeable person” down to “a return in the prescribed form of—” the following:

“Every chargeable person shall as respects a chargeable period prepare and deliver to the Collector-General on or before the specified return date for the chargeable period a return in the prescribed form of—”,

• (ii) in subsection (3), by substituting “the Collector-General” for “the Collector-General or an inspector, as the case may be”,

• (iii) in subsection (4), by substituting “the Collector-General” for “the Collector-General or the appropriate inspector, as the case may be”, and

• (iv) in subsection (11), by substituting the following for paragraph (d):

• “(d) The Collector-General may designate an address for the delivery of returns which in accordance with this section are required to be delivered to the Collector-General by chargeable persons.”,

and

• (c) in section 958—

• (i) in subsection (1)(a)—

• (I) by substituting “number of days” for “number of months” in both places in which it occurs in the definition of “corresponding corporation tax for the preceding chargeable period”,

• (II) by inserting the following after the definition of “corresponding corporation tax for the preceding chargeable period”:

“ ‘tax payable for the initial period’, in relation to a chargeable period which is a year of assessment for capital gains tax (being the year of assessment 2003 or any subsequent year of assessment), means the tax which would be payable by the chargeable person if the year of assessment ended on 30 September in that year instead of 31 December in that year;

‘tax payable for the later period’, in relation to a chargeable period which is a year of assessment for capital gains tax (being the year of assessment 2003 or any subsequent year of assessment), means the tax payable for the year of assessment less the tax payable for the initial period in relation to that year of assessment;”,

• (ii) in subsection (2A) by substituting the following for paragraphs (b) to (e):

• “(b) The first of the 2 instalments referred to in paragraph (a) (in this section referred to as the ‘first instalment’) shall be due and payable not later than the day which is 31 days before the day on which the accounting period ends, but where that day is later than day 21 of the month in which the first-mentioned day occurs, the first instalment shall be due and payable not later than day 21 of that month.

• (c) Notwithstanding paragraph (b), in a case where an accounting period of a company is less than one month and one day in length, the first instalment shall be due and payable not later than the last day of the accounting period, but where that day is later than day 21 of the month in which that day occurs, the first instalment shall be due and payable not later than day 21 of that month.

• (d) The second of the 2 instalments referred to in paragraph (a) (in this section referred to as the ‘second instalment’) shall be due and payable within the period of 6 months from the end of the accounting period, but in any event the second instalment shall be due and payable not later than day 21 of the month in which that period of 6 months ends.”,

• (iii) by substituting the following for subsection (2B):

• “(2B)

  • (a) Preliminary tax appropriate to a chargeable period which is an accounting period of a company ending on or after 1 January 2006 shall be due and payable not later than the day which is 31 days before the day on which the accounting period ends, but where that day is later than day 21 of the month in which the first-mentioned day occurs, that tax shall be due and payable not later than day 21 of that month.

  • (b) Notwithstanding paragraph (a), in a case where an accounting period of a company ending on or after 1 January 2006 is less than one month and one day in length, preliminary tax shall be due and payable not later than the last day of the accounting period, but where that day is later than day 21 of the month in which that day occurs, that tax shall be due and payable not later than day 21 of that month.”,

• (iv) by substituting the following for subsection (3):

• “(3)

  • (a) Subject to subsections (3A), (4), (4B), (4C), (4D) and (4E), tax payable by a chargeable person for a chargeable period shall be due and payable—

    • (i) subject to subparagraphs (ii) and (iii), where an assessment is made on the chargeable person for the chargeable period before the due date for the payment of an amount of preliminary tax for the chargeable period, on or before that date,

    • (ii) where an assessment is made on the chargeable person for the chargeable period (being a year of assessment for income tax) before the specified return date for the chargeable period, on or before that date,

    • (iii) where an assessment has not been made on the chargeable person for the chargeable period (being a year of assessment for income tax) on or before the specified return date for the chargeable period,

    • (iv) where an assessment has not been made on the chargeable person for the chargeable period (being the year of assessment 2002 for capital gains tax), on or before the specified return date for the chargeable period,

    • (v) where the chargeable period is a year of assessment for capital gains tax (being the year of assessment 2003 for capital gains tax or any subsequent year of assessment for capital gains tax) and an assessment has not been made on the chargeable person for the year of assessment—

      • (I) as respects tax payable for the initial period, on or before 31 October in the year of assessment, and

      • (II) as respects tax payable for the later period, on or before 31 January in the next following year of assessment, or

    • (vi) where the chargeable period is an accounting period of a company, on or before the specified return date for the chargeable period.

  • (b) Where in relation to a chargeable period (being a year of assessment for income tax) the tax payable by a chargeable person for a year of assessment is due and payable in accordance with paragraph (a)(iii), then, the tax specified in any subsequent assessment made on the chargeable person for that year shall be deemed to have been due and payable on or before the specified return date for the chargeable period.

  • (c) (i) Where in relation to a chargeable period (being the year of assessment 2002 for capital gains tax) the tax payable by a chargeable person for the year of assessment is due and payable in accordance with paragraph (a)(iv), then, the tax specified in any subsequent assessment made on the chargeable person for that year shall be deemed to have been due and payable on or before the specified return date for the chargeable period.

    • (ii) Where in relation to a chargeable period (being the year of assessment for capital gains tax 2003 or any subsequent year of assessment for capital gains tax) the tax payable by a chargeable person for a year of assessment is due and payable in accordance with paragraph (a)(v), then, the tax specified in any subsequent assessment made on the chargeable person for that year shall be deemed to have been due and payable—

      • (I) on or before 31 October in the year of assessment as respects tax payable for the initial period, and

      • (II) on or before 31 January in the next following year of assessment as respects tax payable for the later period.

  • (d) Where in relation to a chargeable period (being an accounting period of a company) the tax payable by a chargeable person for an accounting period is due and payable in accordance with paragraph (a)(vi), then, the tax specified in any subsequent assessment made on the chargeable person for that accounting period shall be deemed to have been due and payable on or before the specified return date for the chargeable period.”,

and

• (v) by substituting the following for subsection (3A):

• “(3A)

  • (a) In this paragraph the ‘specified amount’, in relation to a year of assessment for income tax and the year of assessment 2002 for capital gains tax, means the greater of—

    • (i) 5 per cent of the tax payable by that person for that year or €3,175, whichever is the lesser, and

    • (ii) €635.

  • (b) Subject to subsection (3), where—

    • (i) an assessment to tax has not been made on a chargeable person on or before the specified return date for the chargeable period (being a year of assessment for income tax and the year of assessment 2002 for capital gains tax), and

    • (ii) the chargeable person has—

      • (I) delivered a return for the year of assessment by the specified return date for the chargeable period,

      • (II) made in the return a full and true disclosure of all material facts necessary for the making of a correct assessment for the year of assessment, and

      • (III) paid an amount of tax for the year of assessment on or before the specified return date, being an amount which is less than the tax payable by the chargeable person for that year of assessment by not more than the specified amount,

      then, subject to subsection (8), any additional tax payable by that person for that year shall be due and payable on or before 31 December in the next following year of assessment.”.

• (2)
• (a) This section is deemed to have come into operation in relation to income tax and capital gains tax, as on and from 1 January 2003.

• (b) This section applies in relation to corporation tax—

• (i) in the case of the amendment made to paragraphs (b) and (c) of subsection (2A) of section 958 by subsection (1)(c)(ii), as respects accounting periods of companies ending on or after 2 July 2003, and

• (ii) in any other case, as respects accounting periods of companies ending on or after 1 January 2003.

43 National Development Finance Agency.

43.—(1) The Principal Act is amended—

• (a) in section 38 by substituting the following for subsection (1):

• “(1) This section applies to any securities which are issued by a body corporate and in respect of which the payment of interest and the repayment of principal are guaranteed by a Minister of the Government under statutory authority; but does not apply to securities—

  • (a) specified in the Table to section 37, or

  • (b) issued by a company formed by the National Development Finance Agency in accordance with section 5 of the National Development Finance Agency Act 2002.”,

• (b) by inserting the following after section 230A:

• (c) by inserting in subsection (1) of section 256 the following after subparagraph (iiib) of paragraph (a) of the definition of “relevant deposit”:

“(iiic) the National Development Finance Agency,”,

and

• (d) by inserting the following after paragraph (f) of subsection (1) of section 607—

• “(fa) securities issued by the National Development Finance Agency under section 6 of the National Development Finance Agency Act 2002,”.

• (2) This section applies on and from 6 February 2003.

44 Restriction on deductibility of certain interest.

44.—(1) Part 33 of the Principal Act is amended by inserting the following after section 817B:

“817C.—(1) In this section—

‘chargeable period’ and ‘basis period’ have the same meanings as they have for the purposes of section 817B;

‘relevant date’, in relation to a chargeable period, means the date on which the basis period for the chargeable period ends;

‘relevant liability’ means a liability of one person to another person.

• (2) This section applies where—

  • (a) interest is payable by a person, directly or indirectly, to a connected person (being interest which, if it were paid, would be chargeable to tax under Schedule D),

  • (b) the interest would, apart from this section, be allowable in computing trading income of a trade carried on by the person, and

  • (c) (i) in a case where the connected person is chargeable to tax in respect of the interest, the interest does not fall to be taken into account, or

    • (ii) in any other case, if the connected person were resident in the State the interest would not fall to be taken into account,

    in computing the trading income of a trade carried on by the connected person.

• (3) Where this section applies, so much of any interest payable, or treated under subsection (4) as payable, by a person, directly or indirectly, to a connected person in respect of a relevant liability shall not be allowable in computing trading income chargeable on the person for a chargeable period (in this subsection referred to as the ‘first-mentioned chargeable period’) as is greater than the excess of A over B where—

A is the aggregate of amounts of interest on the relevant liability which are chargeable to tax as income of the connected person, or would be so chargeable but for the provisions of section 198 or of arrangements having the force of law by virtue of section 826, for all chargeable periods the basis periods for which end on or before the relevant date in relation to the first-mentioned chargeable period, and

B is the aggregate of the amounts of interest on the relevant liability which have been allowed as deductions in computing trading income for the purposes of tax for, or have otherwise been allowed or relieved for the purposes of tax in, chargeable periods the basis periods for which end before the relevant date in relation to the first-mentioned chargeable period.

• (4) Interest which, by virtue of subsection (3), is not allowable in computing trading income for a chargeable period shall be treated as being payable in the basis period for the following chargeable period.

• (5) Where under arrangements made by any person (in this subsection referred to as the ‘first person’)—

  • (a) interest is payable by the first person to another person such that this section does not apply by virtue only of the fact that the persons concerned are not connected, and

  • (b) interest is payable by some other person to a person (in this subsection referred to as the ‘second person’) connected with the first person such that this section does not apply by virtue only of the fact that the other person and the second person are not connected,

  then, subsections (3) and (4) shall apply as if the interest had been payable by the first person to the second person.”.

• (2) This section applies as respects any chargeable period ending on or after 6 February 2003.

45 Amendment of Chapter 2 (additional matters to be treated as distributions, charges to tax in respect of certain loans and surcharges on certain undistributed income) of Part 13 of Principal Act.

45.—(1) Chapter 2 of Part 13 of the Principal Act is amended—

• (a) in section 438(6) by substituting “to a company not resident in a Member State of the European Communities and, for the purposes of this subsection, a company is a resident of a Member State of the European Communities if the company is by virtue of the law of that Member State resident for the purposes of tax (being, in the case of the State, corporation tax and, in any other case, being any tax imposed in the Member State which corresponds to corporation tax in the State) in such Member State” for the words “to a company not resident in the State”, and

• (b) by inserting the following section after section 438:

• (2) This section applies as respects—

• (a) the making of a loan,

• (b) the advance of any money,

• (c) the incurring of any debt, or

• (d) the assignment of any debt,

on or after 6 February 2003.

46 Amendment of section 249 (rules relating to recovery of capital and replacement loans) of Principal Act.

46.—(1) Section 249 of the Principal Act is amended—

• (a) by substituting the following for paragraph (a) of subsection (1):

• “(a) (i) In this section—

‘specified loan’, in relation to a company, means—

- (I) any loan or advance made to the company before 6 February 2003 (other than a loan referred to in paragraph (II)), or

- (II) any loan or advance in respect of which any interest paid is, or if charged would be, deductible if the company were within the charge to Irish tax—

- (A) in computing the company's profits or gains for the purposes of Case I of Schedule D, or

- (B) in computing the company's profits or gains for the purposes of Case V of Schedule D;

  ‘relevant period’, in relation to a loan to which section 247 applies, means the period beginning 2 years before the date of application of the proceeds of the loan and ending on the date of application of the proceeds of the loan.

- (ii) Where at any time in the relevant period in relation to a loan to which section 247 applies the investing company recovered any amount of capital from the company concerned, other than a repayment in respect of a specified loan, the investing company shall immediately after the application of the loan to which section 247 applies be treated for the purposes of this section as if the investing company had repaid out of the loan an amount equal to the amount of capital recovered and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered, but this subparagraph shall not apply to so much of the capital so recovered as was applied by the investing company—

    - (I) before the application of the loan to which section 247 applies, in repayment of any other loan to which section 247 applies, or

    - (II) in accordance with paragraph (*a*) or (*b*) of section 247(2);

      and, for the purposes of this section, the investing company shall not be treated as having repaid so much of an amount out of a loan as does not exceed the amount, if any, of capital so recovered which has been previously treated under this section as being in repayment of a loan.

- (iii) Where at any time after the application of the proceeds of the loan to which section 247 applies the investing company—

    - (I) has recovered any amount of capital from the company concerned or from a connected company, or

    - (II) is deemed, under subsection (2)(*aa*), to have recovered any amount of capital from the company concerned,

      without using the amount recovered or an amount equal to the amount deemed to have been recovered in repayment of the loan, the investing company shall be treated for the purposes of this section as if the investing company had at that time repaid out of the loan an amount equal to the amount of capital recovered or deemed to have been recovered and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered or so deemed to have been recovered.

- (iv) Where, after the application of the proceeds of a loan to which section 248 applies, the individual has recovered any amount of capital from the company concerned or from a connected company without using that amount in repayment of the loan, the individual shall be treated for the purposes of this section as if the individual had repaid that amount out of the loan and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.”,

and

• (b) by substituting the following for paragraph (a) of subsection (2):

• “(a) The investing company or the individual, as the case may be (in this paragraph referred to as the ‘borrower’) shall be treated as having recovered an amount of capital from the company concerned or from a connected company if—

  • (i) the borrower receives consideration of that amount or value for the sale of any part of the ordinary share capital of the company concerned or of a connected company or any consideration of that amount or value by means of repayment of any part of that ordinary share capital,

  • (ii) the company concerned or a connected company repays that amount of a loan or advance from the borrower,

  • (iii) the borrower receives consideration of that amount or value for assigning any debt due to the borrower from the company concerned or from a connected company.

• (aa) (i) Where the company concerned is a company to which section 247(2)(a)(ii) applies, the investing company shall be deemed to have recovered from the company concerned an amount equal to so much of any capital recovered by the company concerned from another company, being a company more than 50 per cent of the ordinary share capital of which was directly owned by the company concerned, as is not applied by the company concerned—

  • (I) in repayment of any loan or part of a loan made to it by the investing company,

  • (II) in redemption, repayment or purchase of any of its ordinary share capital acquired by the investing company,

  • (III) in accordance with paragraph (a) or (b) of section 247(2), or

  • (IV) in repayment of a loan to which section 247 applies.

  • (ii) The company concerned shall be treated as having recovered an amount of capital from another company if—

    • (I) the company concerned receives consideration of that amount or value for the sale of any part of the ordinary share capital of the other company or any consideration of that amount or value by means of repayment of any part of that ordinary share capital,

    • (II) the other company repays that amount of a loan or advance from the company concerned, other than a repayment in respect of a specified loan,

    • (III) the company concerned receives consideration of that amount or value for assigning any debt due to the company concerned from the other company.

  • (iii) Where subparagraph (i) applies and more than one investing company has either—

    • (I) made a loan to the company concerned, or

    • (II) acquired any part of its share capital,

    the amount deemed to have been recovered under that subparagraph shall be apportioned between the investing companies in proportion to the aggregate amount of any loan made and any money applied in acquiring that share capital by each company, but if the companies concerned agree between them to such other apportionment of the amount as they may consider appropriate and jointly specify in writing to the inspector, then the amount deemed to have been so recovered shall be apportioned accordingly.”.

• (2) This section applies as respects any recovery of capital or deemed recovery of capital (within the meaning of section 249 as amended by this section) effected on or after 6 February 2003.

47 Amendment of section 289 (calculation of balancing allowances and balancing charges in certain cases) of Principal Act.

47.—(1) Section 289 of the Principal Act is amended—

• (a) in subsection (6) by substituting “Subject to subsection (6A), where in a case within subsection (5)” for “Where in a case within subsection (5)”, and

• (b) by inserting the following after subsection (6):

• “(6A)

  • (a) Subsection (6) shall only apply in a case where the donor or seller is connected with the recipient or purchaser.

  • (b) Notwithstanding paragraph (a), subsection (6) shall not apply in any case where the donor or seller is not a company and the recipient or purchaser is a company.”.

• (2) This section shall apply as respects a gift or sale of machinery or plant on or after 6 February 2003.

48 Securitisation and related matters.

48.—(1) Chapter 9 of Part 4 of the Principal Act is amended by substituting the following for section 110:

• (2) Section 246(3) of the Principal Act is amended by inserting the following after paragraph (c):

• “(cc) interest paid in the State to a qualifying company (within the meaning of section 110),

• (ccc) interest paid by a qualifying company (within the meaning of section 110) to a person who, by virtue of the law of a relevant territory, is resident for the purposes of tax in the relevant territory, except, in a case where the person is a company, where such interest is paid to the company in connection with a trade or business which is carried on in the State by the company through a branch or agency,”.

• (3) Section 198(1) of the Principal Act is amended—

• (a) in paragraph (c)(ii)(II), by deleting “and”,

• (b) in paragraph (c)(iii)—

• (i) by substituting “paid” for “payable”, and

• (ii) by substituting “section 3 of the Asset Covered Securities Act 2001, and” for “section 2 of the Asset Covered Securities Act 2001.”,

and

• (c) by inserting after paragraph (c)(iii) the following:

• “(iv) a person shall not be chargeable to income tax in respect of interest paid by a qualifying company (within the meaning of section 110) if the person is not a resident of the State and is regarded as being a resident of a relevant territory for the purposes of this subsection, and the interest is paid out of the assets of the qualifying company.”.

• (4)
• (a) Subsection (1) shall apply as respects any asset—

• (i) acquired or, as a result of an arrangement with another person, held or managed, by a qualifying company (within the meaning of section 110 of the Principal Act as amended by this section), or

• (ii) in relation to which a qualifying company (within that meaning) has entered into a legally enforceable arrangement with another person,

on or after 6 February 2003.

• (b) Subsections (2) and (3) shall apply as respects interest paid on or after 6 February 2003.

49 Wholesale debt instruments and related matters.

49.—(1) Chapter 3 of Part 8 of the Principal Act is amended by inserting the following after section 246:

• (2) Subsection (1) shall apply as respects a wholesale debt instrument (within the meaning of section 246A of the Principal Act) issued on or after such day as the Minister for Finance may appoint by order.

• (3)
• (a) Section 64 of the Principal Act is amended, as respects a “quoted eurobond” (within the meaning of that section) issued on or after the date of the passing of this Act, by—

• (i) deleting the definition of “recognised clearing system” in subsection (1),

• (ii) inserting the following after subsection (1):

• “(1A) The definition of ‘recognised clearing system’ in section 246A(2) applies for the purposes of this section as it applies for the purposes of section 246A.”,

and

• (iii) deleting subsection (6).

• (b) The Interest On Quoted Eurobonds (Designation of Registered Clearing Systems) Order 1995 (S.I. No. 15 of 1995) is revoked.

• (c) Section 739B of the Principal Act is amended as on and from the passing of this Act by—

• (i) deleting the definition of “recognised clearing system”, and

• (ii) inserting the following after subsection (1):

• “(1A) The definition of ‘recognised clearing system’ in section 246A(2) applies for the purposes of this Chapter as it applies for the purposes of section 246A.”.

• (4) Section 904A of the Principal Act is amended in subsection (3)(b) by substituting the following for subparagraph (ii):

• “(ii) the relevant deposit taker is, in respect of each deposit in the sample of deposits, in possession of—

  • (I) a declaration mentioned in section 246A(3)(b)(ii)(III) or 263,

  • (II) the number referred to in paragraph (f)(ii) or (h)(ii) of the definition of ‘relevant deposit’ in section 256, or

  • (III) as respects a case within paragraph (b)(ii)(I) or (b)(ii)(II) of subsection (3) of section 246A, the tax reference number referred to in subsection (4) of that section,

  as the case may be, and”.

• (5) Section 20 of the Finance Act 2002 is amended by substituting the following for subsection (2):

• “(2)

  • (a) Subject to paragraph (b), subsection (1) applies as respects deposits made on or after the date of the passing of this Act.

  • (b) Paragraph (b) (in so far as it relates to a pension scheme) and paragraph (c) of subsection (1) apply to interest paid or credited on or after 1 January 2003 in respect of a deposit made on or after the date of the passing of this Act.”.

50 Amendment of section 737 (special investment schemes) of Principal Act.

50.—Section 737 of the Principal Act is amended in subsection (8) by inserting the following after paragraph (b):

• “(bb) Where in a year of assessment (in this section referred to as the ‘year of cessation’) the business of a special investment scheme ceases and an amount, but for that cessation, would under paragraph (b)(iii) be treated as an amount of allowable loss incurred in the next year of assessment, that amount may be deducted from chargeable gains accruing to the special investment scheme in the 3 years of assessment preceding the year of cessation taking chargeable gains accruing in a later year before those accruing in an earlier year, and there shall be made all such amendments of assessments or repayments as may be necessary to give effect to this paragraph.”.

51 Amendment of Chapter 1 (income tax and corporation tax) of Part 45 of Principal Act.

51.—(1) Chapter 1 of Part 45 of the Principal Act is amended—

• (a) in section 1035 by substituting “Subject to section 1035A, a non-resident person” for “A non-resident person”, and

• (b) by inserting after section 1035 the following section: