Finance (No. 2) Act 2023

Type Act

Publication 2023-12-18

State In force

Source Irish Statute Book

articles 102

(c) Paragraphs (c) (v) and (d) (iv) of subsection (1) shall apply in respect of accounting periods ending on or after 31 December 2023.

(d) Paragraph (c) (vi) (in so far as it inserts subsection (16) in section 766C of the Principal Act) and paragraph (d) (v) (in so far as it inserts subsection (15) in section 766D of the Principal Act) of subsection (1) shall apply on and from the date of the passing of this Act.

35. Amendment of certain tax exemption provisions

35. (1) The Principal Act is amended—

(a) in section 220—

(i) by the insertion of the following paragraph after paragraph 9:

“10. Ennis 2040 (Strategic Development) Designated Activity Company, registered on 8 December 2020 (registered number 684352).”,

and

(ii) by the insertion of the following paragraph after paragraph 10 (inserted by subparagraph (i)):

“11. Nature Partners Company Limited by Guarantee, registered on 1 November 2021 (registered number 707015).”,

(b) in Schedule 4—

(i) by the insertion of the following paragraph after paragraph 45:

“45A. Grangegorman Development Agency.”,

and

(ii) by the insertion of the following paragraph after paragraph 74AA:

“74AAA. The National Paediatric Hospital Development Board.”,

and

(i) by the insertion of the following paragraph after paragraph 48:

“49. Ennis 2040 (Strategic Development) Designated Activity Company, registered on 8 December 2020 (registered number 684352).”,

and

(ii) by the insertion of the following paragraph after paragraph 49 (inserted by subparagraph (i)):

“50. The National Paediatric Hospital Development Board.”.

(2) (a) Paragraphs (a) (i) and (c) (i) of subsection (1) shall be deemed to have effect from 8 December 2020.

(b) Paragraph (a) (ii) of subsection (1) shall be deemed to have effect from 1 November 2021.

(d) Paragraphs (b) (ii) and (c) (ii) of subsection (1) shall be deemed to have effect from 23 May 2007.

36. Outbound payments defensive measures

36. (1) Part 33 of the Principal Act is amended by the insertion of the following Chapter after section 817T:

CHAPTER 5

Outbound payments defensive measures

Interpretation

817U. (1) In this Chapter—

‘arrangement’ has the same meaning as it has in Part 35A;

‘associated entities’ shall be construed in accordance with subsection (3);

‘controlled foreign company charge’ has the same meaning as it has in Part 35B;

‘domestic tax’ means income tax, corporation tax or capital gains tax;

‘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 which is a contracting party to the EEA Agreement;

‘entity’ has the same meaning as it has in Part 35C;

‘excluded payment’ means a payment, or a portion thereof, made by a company to the extent that it is reasonable to consider that—

(a) an amount of income, profits or gains arising from the payment is within the charge to—

(i) supplemental tax,

(ii) foreign tax at a nominal rate greater than zero per cent, or

(iii) domestic tax, other than as applied by this Chapter,

(b) the payment is made out of an amount of income, profits or gains where—

(i) that income, profits or gains are within the charge to foreign tax at a nominal rate greater than zero per cent, and

(ii) in calculating the amount of foreign tax to which that income, profits or gains are subject, no account is taken of that payment or any amount in respect of that payment,

and includes a payment which would be a payment to which paragraph (a) or (b) applies but for the fact that the entity which would be within the charge to tax—

(I) in respect of that payment, or

(II) in respect of the income, profits or gains out of which the payment is made,

is a pension fund, government body or other entity, resident in a territory other than a specified territory, that, under the laws of that territory, is exempted from tax which generally applies to profits, income or gains in that territory;

‘foreign company charge’ has the same meaning as it has in Part 35B;

‘foreign tax’ has the same meaning as it has in Part 35C;

‘permanent establishment’, in respect of a company, means a fixed place of business situated in a territory other than where that company is resident, through which the business of a company is wholly or partly carried on;

‘qualified IIR’, ‘qualified UTPR’, and ‘qualified domestic top-up tax’ have the same meaning, respectively, as they have in Part 4A;

‘relevant distribution’ has the same meaning as it has in Chapter 8A of Part 6;

‘relevant Member State’ means—

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

(b) not being such a Member State, an EEA State;

‘relevant payment’ means a payment made by a company of an amount of interest or royalties which has been, or may be, in any accounting period, deducted, allowed or relieved in computing its or another company’s profits or losses for the purposes of corporation tax;

‘royalty’ means a payment of any kind for—

(a) the use of, or the right to use—

(i) any copyright of literary, artistic or scientific work, including cinematograph films,

(ii) any patent, trademark, design or model, plan, secret formula or process,

(b) information concerning industrial, commercial or scientific experience;

‘specified territory’ means a territory, other than a relevant Member State, which is a listed territory or a zero-tax territory;

‘supplemental tax’ means—

(a) a foreign company charge,

(b) a qualified IIR,

(d) a qualified domestic top-up tax, or

(e) any other tax which is similar to any of the taxes referred to in paragraphs (a) to (d);

‘tax period’ has the same meaning as it has in section 835Z;

‘zero-tax territory’ means a territory that, other than in respect of an entity whose income, profits or gains are treated by that territory, or would be so treated but for an insufficiency of income, profits or gains, as arising or accruing to another entity—

(a) generally subjects entities to tax at a rate of zero per cent on income, profits and gains, or

(b) does not generally subject entities, whether on a remittance basis or otherwise, to a tax on income, profits and gains.

(2) In this Chapter, ‘listed territory’ has the same meaning as in section 835YA subject to the modification that references to ‘an accounting period beginning’ shall be read as references to ‘the making of a payment or distribution’.

(3) In this Chapter, two entities shall be ‘associated entities’ in respect of each other where—

(a) one entity, directly or indirectly, possesses or is beneficially entitled to—

(i) where the other entity is an entity having share capital, more than 50 per cent of the issued share capital of the other entity, or

(ii) where the other entity is an entity not having share capital, an interest of more than 50 per cent of the ownership rights in the other entity,

(b) one entity, directly or indirectly, is entitled to exercise more than 50 per cent of the voting power in the other entity,

(c) one entity (in this paragraph referred to as ‘the first-mentioned entity’), directly or indirectly, holds such rights as would—

(i) where the other entity is a company, if the whole of the profits of that other entity were distributed, entitle the first-mentioned entity, directly or indirectly, to receive more than 50 per cent of the profits so distributed, or

(ii) where the other entity is an entity other than a company, if the share of the profits of that other entity to which the first-mentioned entity is entitled, directly or indirectly, is more than 50 per cent,

(d) one entity has definite influence in the management of the other entity, or

(e) there is another entity in respect of which the two entities are, in accordance with paragraph (a), (b), (c) or (d), associated entities.

(4) For the purposes of subsection (3)(d), one entity (in this subsection referred to as ‘the first-mentioned entity’) shall be considered to have definite influence in the management of another entity (in this subsection referred to as ‘the second-mentioned entity’) where the first-mentioned entity has the ability to participate, on the board of directors or equivalent governing body of the second-mentioned entity, in the financial and operating policy decisions of the second-mentioned entity, where that ability causes, or could cause, the affairs of the second-mentioned entity to be conducted in accordance with the wishes of the first-mentioned entity.

(5) For the purposes of this Chapter, an entity shall be regarded as being a resident of a territory if—

(a) in a case where the territory is a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made, the entity is regarded as being a resident of that territory under those arrangements, and

(b) in any other case, the entity is by virtue of the law of a territory resident for the purposes of tax in that territory,

but where an entity is not resident in any territory in accordance with paragraph (a) or (b) it shall be regarded as being resident in the territory under whose laws it was created.

(6) For the purposes of this Chapter, where a relevant payment or a relevant distribution is made to an entity or a permanent establishment (in this subsection referred to as ‘the first-mentioned entity or permanent establishment’) and some or all of that payment or distribution is treated as arising or accruing to another entity or permanent establishment (in this section referred to as ‘the second- mentioned entity or permanent establishment’) or an individual, that is resident or situated in a different territory, under the tax law of the territory where—

(a) the first-mentioned entity or permanent establishment is resident or situated, as the case may be, and

(b) the second-mentioned entity or permanent establishment or such individual is resident or situated, as the case may be,

then, for the purposes of this Chapter, the payment or distribution, or the relevant portion thereof, shall be treated as if it had been made to the second-mentioned entity or permanent establishment or that individual.

Payment of interest

817V. (1) This section applies to a relevant payment of interest paid by a company to—

(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or

(b) a permanent establishment of an associated entity which is situated in a specified territory,

to the extent that the relevant payment of interest is not an excluded payment.

(2) Sections 64(2), 198(1)(c), 246(3), 246A(3)(a)(A) and 246A(3)(b)(A) shall not apply to a relevant payment of interest to which this section applies.

(3) Subsection (2) of section 246 shall apply to a relevant payment of interest to which this section applies as if a reference to a payment of yearly interest in that subsection were a reference to a relevant payment of interest to which this section applies.

(4) Where this section applies to a relevant payment of interest on a security referred to in section 37(2), section 36(2) shall apply as if ‘shall be paid without the deduction of tax, but all such interest’ were omitted.

(5) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to a relevant payment of interest, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.

(6) Subject to subsection (5), this section shall not apply to a relevant payment of interest by a company where that relevant payment of interest is a payment—

(a) to which section 64(2)(b)(i) or 246A(3)(a)(A) would apply, but for subsection (2), or

(b) to which section 246A(3)(b)(A) would apply, but for subsection (2), solely by virtue of section 246A(3)(b)(ii)(I),

where it is reasonable to consider that the company is not, and should not be, aware that any portion of the relevant payment of interest is made to an associated entity.

(7) This section shall not apply to the portion of the relevant payment of interest made by a company to an entity to the extent that—

(a) a corresponding amount has been paid by that entity to another person in a tax period which commences within 12 months of the end of the tax period in which the payment is made by the company,

(b) the corresponding amount referred to in paragraph (a) would have been an excluded payment had that corresponding amount been paid directly by the company to that other person referred to in that paragraph, and

(8) Nothing in this section shall result in the application of section 246(2) to an entity other than a company which makes a relevant payment of interest.

Payment of royalties

817W. (1) This section applies to a relevant payment of a royalty by a company to—

(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or

(b) a permanent establishment of an associated entity which is situated in a specified territory,

to the extent that the relevant payment of a royalty is not an excluded payment.

(2) (a) The receipt of a relevant payment of a royalty to which this section applies shall be deemed to be annual profits arising to the associated entity, or permanent establishment of the associated entity, referred to in subsection (1), as the case may be, from property in the State for the purposes of section 18(1).

(b) A relevant payment of a royalty to which this section applies shall be an annual payment charged with tax under Schedule D for the purposes of section 238(2).

(c) Subsections (3) and (4) of section 242A shall not apply to a relevant payment of a royalty to which this section applies.

(3) Section 757(2) shall not apply to a relevant payment of a royalty to which this section applies.

(4) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to a relevant payment of a royalty, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.

Making of distribution

817X. (1) This section applies to a relevant distribution where—

(a) a company resident in the State makes a relevant distribution to—

(i) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or

(ii) a permanent establishment of an associated entity which is situated in a specified territory,

(b) to the extent that the relevant distribution is not an excluded payment, and

(c) to the extent that the relevant distribution is made out of income, profits or gains which have not been chargeable, directly or indirectly, to—

(i) domestic tax,

(ii) foreign tax at a nominal rate greater than zero per cent,

(iii) a controlled foreign company charge,

(iv) a supplemental tax, or

(v) any other tax which is similar to any of the taxes referred to in subparagraphs (i) to (iv).

(2) Sections 140(3)(a), 142(2), 153(4), 172B(7), 172D(2) and 172E(1) shall not apply to a relevant distribution to which this section applies.

(3) Where an arrangement is entered into by any person and it is reasonable to consider that the main purpose or one of the main purposes of the arrangement, or any part of the arrangement, is the avoidance of the application of any of the provisions of this section to the making of a relevant distribution, directly or indirectly, to an associated entity in a specified territory, then this section shall apply as if the arrangement, or that part of the arrangement, had not been entered into.

Reporting

817Y. (1) In this section—

‘chargeable period’ has the meaning assigned to it by section 959A;

‘specified return date for the chargeable period’ has the meaning assigned to it by section 959A.

(2) Every company who makes a payment of interest or a royalty, or makes a relevant distribution to—

(a) an associated entity that is resident in a specified territory and is not resident in another territory that is not a specified territory, or

(b) a permanent establishment of an associated entity which is situated in a specified territory,

in a chargeable period shall, in the return required to be delivered under Chapter 3 of Part 41A, provide the following details in respect of each payment or distribution—

(i) the amount of the payment or distribution,

(ii) the amount of tax withheld on the payment or distribution, and

(iii) the territory where the entity or permanent establishment is resident, or situated, as the case may be.

Scope of application

817Z. (1) Subject to subsection (2), this Chapter shall apply to a payment of interest or royalties, or the making of a distribution, on or after 1 April 2024.

(2) Where arrangements are in place on or before 19 October 2023, in respect of which there is a payment of interest or royalties, or the making of a distribution, then this Chapter shall apply to such payment or distribution made, as the case may be, on or after 1 January 2025.”.

(2) The Principal Act is amended—

(a) in section 36(2), by the substitution of “Subject to section 817V, the interest on all” for “The interest on all”,

(b) in section 64(2), by the substitution of “Subject to section 817V, section 246(2)” for “Section 246(2)”,

(d) in section 142(2), by the substitution of “Subject to section 817X, where a distribution” for “Where a distribution”,

(e) in section 153(4), by the substitution of “Subject to section 817X, where for any year” for “Where for any year”,

(f) in section 172B(7), by the substitution of “Subject to section 817X, this section shall not apply” for “This section shall not apply”,

(g) in section 172D(2), by the substitution of “Subject to section 817X, section 172B” for “Section 172B”,

(h) in section 172E(1), by the substitution of “Subject to sections 172F(6) and 817X, section 172B shall not” for “Subject to section 172F(6), section 172B shall not”,

(i) in section 198(1), in paragraph (c), by inserting “subject to section 817V and” after “Notwithstanding any other provision of the Income Tax Acts but”,

(j) in section 242A—

(i) in subsection (3), by the substitution of “Subject to section 817W, where” for “Where”, and

(ii) in subsection (4), by the substitution of “Subject to section 817W, a company” for “A company”,

(k) in section 246(3), by the substitution of “Subject to section 817V, subsection (2)” for “Subsection (2)”,

(l) in section 246A(3), by the substitution of “Subject to section 817V, as respects” for “As respects”, and

(m) in section 452A, by the insertion of the following subsection after subsection (2): “(3) Section 130(2)(d)(iv) shall not apply to an amount of interest to which

section 817V(1) applies from which tax has been properly deducted at the standard rate in force at the time of the payment in accordance with section 246(2) and such tax is not refundable.”.

37. Amendment of Part 6 of Principal Act (company distributions, tax credits, etc.)

37. (1) Section 153 of the Principal Act is amended, in subsection (1)—

(a) in the definition of “qualifying non-resident person”—

(i) by the deletion of “or” before paragraph (b),

(ii) in paragraph (b), by the substitution of “this section, or” for “this section;”, and

(iii) by the insertion of the following paragraph after paragraph (b): “(c) a scheme referred to in section 172C(2)(bd);”,

(b) in the definition of “relevant territory”—

(i) in paragraph (a), by the insertion of “or an EEA state,” after “European Communities”, and

(ii) in paragraph (b), by the insertion of “or an EEA state” after “Member State”, and

“ ‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement;

‘EEA state’ means a state which is a contracting party to the EEA Agreement;”.

(2) Section 172A of the Principal Act is amended, in subsection (1)(a), in the definition of “relevant territory”—

(a) in subparagraph (i), by the insertion of “or an EEA state,” after “European Communities”, and

(b) in subparagraph (ii), by the insertion of “or an EEA state” after “Member State”.

(3) Section 172C of the Principal Act is amended—

(a) in subsection (2), by the insertion of the following paragraph after paragraph (bc):

“(bd) subject to subsection (4), a scheme which—

(i) would, if it were established in the State, be an approved scheme within the meaning of Chapter 1 of Part 30 (in this paragraph referred to as an ‘approved scheme’),

(ii) is authorised by a country, other than an EEA state, with which the State has entered arrangements pursuant to section 826(1B) and is subject to supervisory and regulatory arrangements at least equivalent to those applied to an approved scheme in the State, and

(iii) has made a declaration to the relevant person in relation to the relevant distribution in accordance with paragraph 13 of Schedule 2A,”,

and

(b) by the insertion of the following subsection after subsection (3):

“(4) A person shall not be an excluded person under subsection (2)(bd) in relation to a distribution which is a relevant distribution to which section 817X applies.”.

(4) Schedule 2A to the Principal Act is amended by the insertion of the following paragraph after paragraph 12:

“Declaration to be made by an excluded person, being a non-resident pension scheme under section 172C(2)(bd)

13. The declaration referred to in section 172C(2)(bd) shall be a declaration in writing to the relevant person in relation to the relevant distributions which—

(a) is made by the person (in this paragraph referred to as ‘the declarer’) beneficially entitled to the relevant distributions in respect of which the declaration is made,

(b) is signed by the declarer,

(d) declares that, at the time when the declaration is made, the person beneficially entitled to the relevant distributions is a person referred to in section 172C(2)(bd),

(e) contains the name of the person referred to in subparagraph (d) and the country in which that person is authorised,

(f) contains a statement that, at the time when the declaration is made, the relevant distributions in respect of which the declaration is made will be applied as income of a scheme referred to in section 172C(2)(bd),

(g) contains an undertaking by the declarer that, if the person referred to in subparagraph (d) ceases to be an excluded person, the declarer will, by notice in writing, advise the relevant person in relation to the relevant distributions accordingly, and

(h) contains such other information as the Revenue Commissioners may reasonably require for the purposes of Chapter 8A of Part 6.”.

38. Medical practitioners operating in partnership

38. The Principal Act is amended, in Part 43, by the insertion of the following section after section 1008:

“1008A. (1) In this section—

‘enactment’ means a statute or an instrument made under a power conferred by statute;

‘medical partnership’ means a partnership—

(a) all of the partners of which are individuals who are medical practitioners, and

(b) that is governed by a partnership agreement;

‘medical practitioner’ has the same meaning as in the Medical Practitioners Act 2007;

‘partnership agreement’ means any valid written agreement of the partners governed by the law of the State and subject to the exclusive jurisdiction of the courts of the State as to the affairs of a partnership and the conduct of its business as may be amended, supplemented or restated from time to time;

‘relevant income’ means all amounts, in respect of relevant medical services, paid to, or for the benefit of, a relevant medical services provider, by the Health Service Executive;

‘relevant medical services’ means services provided by a medical practitioner pursuant to—

(a) regulations made under sections 5 and 29 of the Health Act 1947,

(b) section 58 of the Health Act 1970,

(d) section 62A of the Health Act 1970,

(e) section 67E of the Health Act 1970,

(f) section 70 of the Health Act 1970,

(g) orders made under section 75A of the Health Act 1970,

(h) regulations made under section 75B of the Health Act 1970,

(i) the Health (Amendment) Act 1996,

(j) the Mental Health Act 2001,

(k) the Redress for Women Resident in Certain Institutions Act 2015,

(l) the Misuse of Drugs Acts 1977 to 2017,

(m) the Mother and Baby Institutions Payment Scheme Act 2023,

(n) Regulation (EC) No. 883/2004 of the European Parliament and of the Council of 29 April 2004[^7] on the coordination of social security systems,

(o) the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the one part, and the United Kingdom of Great Britain and Northern Ireland, of the other part, done at Brussels and London on 30 December 2020[^8], and

(p) such other provisions of any other enactment as the Minister for Finance may by order prescribe;

‘relevant medical services provider’ means a medical practitioner with whom the Health Service Executive has entered into a contract to provide relevant medical services;

‘relevant payment’ has the same meaning as in section 520(1).

(2) (a) Where services are provided by medical practitioners which the Minister for Finance, following consultation with the Minister for Health, determines it would be appropriate to treat as relevant medical services for the purposes of this section, then, for those purposes, the Minister for Finance may, by order, prescribe the provisions of the enactment pursuant to which those services are provided.

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

(3) This section shall apply to a medical partnership where—

(a) one, or more than one, partner in the medical partnership is a relevant medical services provider, and

(b) relevant medical services in respect of which one, or more than one, partner in the medical partnership is a relevant medical services provider are ordinarily provided by any medical practitioner who is a partner in, or employed by, that medical partnership.

(4) (a) A medical partnership to which this section applies and a relevant medical services provider who is a partner in the medical partnership may jointly elect to treat such proportion of the relevant income of that relevant medical services provider for the year of assessment as relates to relevant medical services that are, or may be, provided by any medical practitioner who is a partner in, or employed by, that medical partnership as income of that medical partnership for income tax purposes.

(b) The election made under paragraph (a) shall be in such form and manner as may be specified by the Revenue Commissioners.

(5) Where an election is made under subsection (4)—

(a) for the purpose of section 1008, in calculating the amount of the profits or gains of the medical partnership concerned for a year of assessment, relevant income of a relevant medical services provider to whom the election relates, and any expenses laid out or expended for the purpose of earning that relevant income shall, subject to the provisions of the Tax Acts, be treated as if that relevant income was earned and those expenses were laid out or expended by that medical partnership in the course of its partnership trade,

(b) for the purposes of section 529A, each payment by the Health Service Executive to a relevant medical services provider to whom the election relates, in respect of relevant medical services, which is comprised within relevant income to which the election relates, shall be treated as—

(i) a relevant payment to the medical partnership concerned, and

(ii) a payment in respect of a professional service that is provided in the conduct of the trade or profession of that medical partnership,

(c) the relevant medical services provider to whom the election relates shall furnish the tax number (within the meaning of section 524(2)) of the medical partnership concerned to the Health Service Executive and section 524 shall apply as if, in relation to each relevant payment by the Health Service Executive to that relevant medical services provider, in respect of relevant medical services, which is comprised within relevant income to which the election relates, that medical partnership is the specified person (within the meaning of section 520),

(d) the precedent partner of the medical partnership concerned shall include details of the relevant income to which the election relates in the return required to be delivered by that partner under section 880 for the relevant year of assessment, and

(e) the relevant medical services provider to whom the election relates shall, in the return required to be delivered by him or her under section 959I for a year of assessment—

(i) confirm that an election under this section has been made in respect of the year of assessment, and

(ii) provide the name of the medical partnership to which the election relates.”.

CHAPTER 5 Corporation Tax

39. Taxation of leases

39. The Principal Act is amended—

(a) by the substitution of the following section for section 76D:

“Computation of income and expenses from leases

76D. (1) In this section and sections 299 and 403—

‘finance lease’ means a lease which, under generally accepted accounting practice, falls to be treated as a finance lease;

‘lease’ means a finance lease or an operating lease;

‘leased asset’ in relation to a lease, means an asset that is the subject of the lease;

‘lease payments’, in relation to a lease, means amounts payable under the lease to the lessor in relation to the leased asset, and includes—

(a) any residual amount to be paid to the lessor at or after the end of the lease term and guaranteed by the lessee or by a person connected with the lessee or under the terms of any scheme or arrangement between the lessee and any other person, and

(b) any amount to be refunded by the lessor at or after the end of the lease term and guaranteed by the lessor or by a person connected with the lessor or under the terms of any scheme or arrangement between the lessor and any other person;

‘lease term’, in respect of a company, has the meaning given to it by the generally accepted accounting practice in accordance with which that company prepares its accounts;

‘lessee’ and ‘lessor’, in relation to machinery or plant provided for leasing, mean respectively the person to whom the machinery or plant is or is to be leased and the person providing the machinery or plant for leasing, and ‘lessee’ and ‘lessor’ include respectively the successors in title of a lessee or a lessor;

‘operating lease’ means a lease which, under generally accepted accounting practice, does not fall to be treated as a finance lease.

(2) Subject to sections 80A and 299, Chapter 8 of Part 4, and subsection (4), for the purposes of computing income of a company from a trade of leasing, the income of a lessor from a finance lease—

(a) shall not be the amount of income from the lease computed in accordance with generally accepted accounting practice, and

(b) shall be computed, subject to the provisions of the Corporation Tax Acts other than section 76A, by treating—

(i) the total lease payments receivable in respect of the lease as trading receipts of the trade arising evenly over the lease term, and

(ii) as trading expenses of the trade any disbursements or expenses laid out or expended for the purposes of earning those lease payments.

(3) Subject to sections 80A and 299, Chapter 8 of Part 4, and subsection (4), for the purposes of computing the trading profits of a company which is the lessee in respect of a leased asset that is employed in that trade, the amount to be deducted in computing the profits or gains of a lessee—

(a) shall not be the lease related expenses or charges in respect of the lease computed in accordance with generally accepted accounting practice, and

(b) shall be computed, subject to the provisions of the Corporation Tax Acts other than section 76A, by treating the total lease payments payable in respect of the lease as an expense of the trade laid out or expended evenly over the lease term, and no amount shall be prevented from being deducted by virtue only of the fact that for accounting purposes it was taken into account in determining the value of an asset.

(4) (a) Subject to paragraph (b), where, during the lease term, there is a change to the lease term or the amount of the lease payments, then in the accounting period in which the change occurs—

(i) the amount of income under subsection (2), or

(ii) the amount to be deducted under subsection (3),

shall be recalculated.

(b) Where the amount of the lease payments is dependent upon any change in facts or matters arising, after the commencement of the lease, the recalculation referred to in paragraph (a) shall—

(i) where the change in facts or matters arising relates to the accounting period in which the change occurs, cause the lease payments in respect of that accounting period to be increased or decreased, as the case may be, and

(ii) where the change in facts or matters arising relates to more than one accounting period, cause the lease payments in respect of the accounting periods to which that fact or matter arising relates to be recalculated such that the increase or decrease, as the case may be, is spread evenly over those accounting periods.

(5) Notwithstanding subsections (2) and (3), where a rebate of lease payments, other than as referred to in paragraph (b) of the definition of ‘lease payments’, is payable or receivable on the termination of a lease, the amount of that rebate shall be—

(a) in respect of the lessor, deductible in the year in which it is paid or accrued, whichever is the later, and

(b) in respect of the lessee, taxable in the year in which it is received or accrued, whichever is the earlier.”,

(b) in section 77, by the insertion of the following subsection after subsection (3):

“(3A) In respect of a company that carries on a leasing activity in respect of which the company is within the charge to corporation tax under Case IV of Schedule D, in computing the income from such leasing activity so chargeable, section 76(5)(b) shall not prevent the deduction of yearly interest.”,

(i) by the insertion of the following subsection after subsection (1):

“(1A) Notwithstanding subsection (1) and subject to this section, where either of the following events occur in the case of any machinery or plant in respect of which an initial allowance or a wear and tear allowance has been made for any chargeable period to a person carrying on a trade—

(a) after the setting up and before the permanent discontinuance of the trade, the entering into a lease of machinery or plant, as lessor, on the terms described in section 299(1), notwithstanding the fact that the machinery or plant has not ceased to belong to the person carrying on the trade, or

(b) after the setting up and before the permanent discontinuance of the trade the right to use the machinery or plant reverts to a lessor following the conclusion of a relevant lease (within the meaning of section 299) in respect of which a valid election or claim under section 299 was made, notwithstanding the fact that the machinery or plant belonged to the lessor—

(i) prior to entering into the relevant lease,

(ii) during the term of the relevant lease, and

(iii) following the conclusion of the relevant lease,

and did not belong to the person carrying on the trade,

a balancing allowance or a balancing charge shall, in the circumstances mentioned in this section, be made to or, as the case may be, on that person for the chargeable period related to that event.”,

(ii) in subsection (2), by the substitution of “Subject to subsection (6B), where there are no sale” for “Where there are no sale”, and

(iii) by the insertion of the following subsection after subsection (6A):

“(6B) (a) For the purposes of subsection (2), in the case of an event referred to in subsection (1A)(a) occurring, an amount calculated as the higher of—

(i) the open-market price (within the meaning of section 289(1)) of the machinery or plant, and

(ii) the discounted present value of the lease payments under the lease, where the payments are discounted at the interest rate implicit in the lease under generally accepted accounting practice,

shall be deemed to be sale, insurance, salvage or compensation moneys arising on entering into the lease.

(b) For the purposes of subsection (2), in the case of an event referred to in subsection (1A)(b) occurring, an amount calculated as the higher of—

(i) the open-market price (within the meaning of section 289(1)) of the machinery or plant, and

(ii) the amount payable or expected to be payable under a residual value guarantee in respect of the machinery or plant which forms part of a lease accounted for under generally accepted accounting practice at the end of the lease term,

shall be deemed to be sale, insurance, salvage or compensation moneys arising on the transfer.”,

(d) in section 299—

(i) in subsection (1), by the substitution of “relevant lease” for “finance lease (within the meaning of section 76D)”,

(ii) by the insertion of the following subsection after subsection (1):

“(1A) For the purpose of this section, a lease shall be a relevant lease where—

(a) the lease is a finance lease, or

(b) the lease is an operating lease, and each of the following criteria apply at the inception of the lease:

(i) under the terms of the lease, the discounted present value of the lease payments which are payable during the lease term amounts to 80 per cent or more of the fair value of the leased asset where the payments are discounted at the relevant rate;

(ii) the lease term is greater than or equal to 65 per cent of the predictable useful life (within the meaning of section 80A) of the leased asset;

(iii) the lease is granted on such terms that the use and enjoyment of the leased asset is obtained by the lessee for a period at the end of which it is considered likely that the leased asset will pass to the lessee.

(c) For the purposes of paragraph (b)(i), the relevant rate shall be the interest rate implicit in the lease under generally accepted accounting practice, but where such rate is unknown to a lessee, the lessee may use the incremental borrowing rate under generally accepted accounting practice.”,

(iii) in subsection (3)—

(I) by the substitution of the following paragraph for paragraph (a):

“(a) In this section, ‘fair value’, in relation to a leased asset, means an amount equal to such consideration as might be expected to be paid for the asset at the inception of the lease on a sale negotiated on an arm’s length basis, less any grants receivable by the lessor towards the purchase of the asset.”,

(II) in paragraph (b), by the substitution of “Where the lessee is an individual, subsection (1)” for “Subsection (1)”, and

(III) in paragraph (c)—

(A) in subparagraph (i), by the substitution of “relevant lease” for “finance lease”, and

(B) by the substitution of “lease term” for “term of the lease” in each place where it occurs,

and

(iv) by the insertion of the following subsections after subsection (3):

“(4) Where this section applies and the lessor is a company, the amount to be included in the income of the lessor in respect of a relevant lease shall be—

(a) where the relevant lease is a finance lease, the amount of income from such a lease computed in accordance with generally accepted accounting practice, or

(b) where the relevant lease is an operating lease, the amount of income from such a lease as would be computed in accordance with generally accepted accounting practice if the relevant lease was a finance lease.

(5) Subsection (4) shall only apply to a lessor, in respect of a relevant lease, where—

(a) notwithstanding the provisions of subsection (1), the leased asset belongs to the lessor—

(i) immediately prior to the lessor entering into the relevant lease, and

(ii) throughout the relevant lease term,

(b) the lease is on the terms described in subsection (1),

(d) the leased asset is not new machinery or plant for the purposes of an election by the lessor under section 290,

(e) the relevant lease has been entered into by way of a bargain made at arm’s length,

(f) where the lessee is not tax resident in the State, it is reasonable to consider that the amount which may be taken into account by the lessee as an expenditure or expense, or which may otherwise be deducted, allowed or relieved in computing the profits or gains on which tax falls finally to be borne for the purposes of foreign tax (within the meaning of section 835Z(1)) is similar to that calculated under subsection (3) and not similar to that calculated under section 76D,

(g) it is reasonable to consider that the relevant lease—

(i) has been entered into for bona fide commercial reasons, and

(ii) does not form part of any arrangement or scheme of which the main purpose, or one of the main purposes, is the avoidance of tax,

and

(h) the lessee—

(i) is an individual, an election is made under subsection (3)(b) and the information specified in subsection (9) is provided in the return required to be delivered under Part 41A, or

(ii) is not an individual, a claim is made in the return required to be delivered under Part 41A and, where the lessor and lessee are both within the charge to tax under Schedule D, the lessor and lessee jointly agree in writing at the commencement of the relevant lease that, under the terms of the relevant lease, the burden of wear and tear of the machinery or plant in fact falls directly on the lessee.

(6) Subsection (3)(c) shall only apply to a lessee, in respect of a relevant lease, where—

(a) the relevant lease is—

(i) an operating lease and the conditions specified in paragraphs (a) to (g) of subsection (5) are satisfied, or

(ii) a finance lease,

and

(b) the lessee—

(i) is an individual, an election is made under subsection (3)(b) and the information specified in subsection (9) is provided in the return required to be filed under Part 41A, or

(7) In making a claim under subsection (5)(h)(ii) the lessor shall provide the following information in respect of each relevant lease:

(a) the name of the lessee;

(b) where—

(i) the lessee is resident in the State, the tax reference number (within the meaning of section 891B) of the lessee,

(ii) the lessee is not resident in the State but is, under arrangements that have the force of law by virtue of section 826(1), regarded as being a resident of a territory with the government of which such arrangements have been made, the name of that territory,

(iii) the lessee is not resident in the State or a territory referred to in paragraph (ii) but is, by virtue of the law of another territory regarded as a resident in that other territory, the name of that other territory, or

(iv) an entity is not regarded as resident in any territory in accordance with subparagraph (i), (ii) or (iii), the name of the territory under whose laws it was created;

(d) the open-market price (within the meaning of section 289(1)) of the leased asset;

(e) the discounted present value of the lease payments under the lease and the discount rate used;

(f) the amount of the capital allowances foregone by the lessor.

(8) In making a claim under subsection (6)(b)(ii) the lessee shall provide the following information in respect of each relevant lease:

(a) the name of the lessor;

(b) where—

(i) the lessor is resident in the State, the tax reference number (within the meaning of section 891B) of the lessor,

(ii) the lessor is not resident in the State but is, under arrangements that have the force of law by virtue of section 826(1), regarded as being a resident of a territory with the government of which such arrangements have been made, the name of that territory,

(iii) the lessor is not resident in the State or a territory referred to in subparagraph (ii) but is, by virtue of the law of another territory regarded as a resident in that other territory, the name of that other territory, or

(iv) an entity is not regarded as resident in any territory in accordance with subparagraph (i), (ii) or (iii), the name of the territory under whose laws it was created;

(d) the open-market price (within the meaning of section 289(1)) of the leased asset;

(e) the discounted present value of the lease payments under the lease and the discount rate used;

(f) the amount to be deducted in computing the profits or gains to be charged to tax under Case I of Schedule D in the period in respect of which the return is made;

(g) the amount of the capital expenditure deemed to have been incurred by the lessee by reason of the relevant lease;

(h) the wear and tear allowance claim made by the lessee in the period in respect of which the return is made;

(i) confirmation that a joint agreement has been made in respect of the relevant lease.

(9) Where an election is made under subsection (3)(b), both the lessor and the lessee shall include the following details in the return required to be made under Part 41A:

(a) in respect of each relevant lease—

(i) confirmation that an election under subsection (3)(b) was made,

(ii) whether the lessor is an associated enterprise of the lessee for the purpose of Chapter 4 of Part 35C, and

(iii) the open-market price (within the meaning of section 289(1)) of the leased asset;

(b) the total number of relevant leases to which these provisions apply in the chargeable period (within the meaning of section 959A) to which the return relates;

(d) the total open-market price (within the meaning of section 289(1)) of the leased asset at the time the allowances referred to in paragraph (c) were originally transferred.

(10) Notwithstanding the generality of this section, section 539 shall not apply to a lease of machinery or plant other than a lease in respect of which a valid election or claim under this section was made.”,

(e) in section 396A(1), by the deletion of paragraph (b) of the definition of “relevant trading loss”,

(f) in section 402(2), by the insertion of the following paragraph after paragraph (c):

“(d) Where an amount unallowed is carried forward to a succeeding accounting period under section 308(3), and that allowance has been computed in terms of the company’s functional currency pursuant to this subsection, then that allowance in that succeeding accounting period shall be expressed in terms of the currency of the State by reference to the rate of exchange which—

(i) is used to express in terms of the currency of the State the amount of the profits from the leasing activity for the accounting period in which the allowance is to be set off, or

(ii) would be so used if there were such income.”,

(g) in section 403—

(i) in subsection (1)—

(I) in paragraph (a), by the insertion of the following definition:

“ ‘lease adjacent activities’, in relation to a company, means the activities referred to in clauses (II) to (V) of paragraph (d)(ii),”,

(II) in paragraph (d)(i)—

(A) in clause (II), by the deletion of “or”,

(B) in clause (III), by the substitution of “(within the same meaning), or” for “(within the same meaning)”, and

“(IV) of the company and all companies that are members of the same group of companies construed in accordance with section 411(1),”,

(III) in paragraph (d)(ii)—

(A) by the insertion of the following clause after clause (II):

“(IIA) the provision of finance to a member of the leasing business group (in this clause referred to as ‘the intermediate financing company’) that carries on the activity referred to in clause (II), subject to the following requirements:

(A) the provision of finance and guarantees by the intermediate financing company is to a member of the leasing business group who carries on activities referred to in clause (I) (in this clause referred to as ‘the borrower company’);

(B) the moneys provided by the intermediate financing company are moneys which it has borrowed from persons who are not connected with any member of the leasing business group;

(C) the moneys so provided as referred to in subclause (B) are repaid by the borrower company on the disposal of the machinery or plant.”,

(B) by the substitution of the following clause for clause (IV):

“(IV) the disposal of machinery or plant acquired by the company for the purpose of carrying on the activity referred to in clause (I);”,

“(IVA) the disposal of the right to acquire machinery or plant (or an interest therein) of a type which is similar to the type of machinery or plant leased by the leasing business group where, at the time that the contract giving rise to the right to acquire the machinery or plant was entered into it was intended that the machinery or plant would be—

(A) acquired by the leasing business group, and

(B) used by the leasing business group for the activity referred to in clause (I);

(IVB) the disposal by a company of any part of an item of plant or machinery, not including the creation of an interest or a right in or over the plant or machinery, where that plant or machinery was in use by that company for the activity referred to in clause (I);”,

(D) in clause (V), by the substitution of “clauses (I) to (IVB)” for “clauses (I) to (IV)”, and

(E) by the substitution for all of the words from and including “then, subject to section 80A(2)(c)” down to and including “adjustment made under section 556(2).” of the following:

“then, subject to paragraph (c) and section 80A(2)(c), the activities referred to in clause (I) and the lease adjacent activities carried on by such a company shall, for the purposes of this section, be regarded as the leasing business of that company, and references in this section to profits of the leasing business shall be construed as references to the profits arising directly from these activities.”,

and

(IV) by the insertion of the following paragraph after paragraph (d):

“(e) For the purposes of this section, where a company carries on a leasing business, that company shall form a leasing business group with those companies that are relevant to determining its status as a company carrying on a leasing business under paragraph (d).”,

(ii) by the insertion of the following subsection after subsection (2):

“(2A) Where the person carrying on the trade of leasing is a company, any lease adjacent activities carried on by that company which would, but for subsection (2), be part of the same trade as the leasing of machinery or plant, shall, for the purposes of subsection (2), be treated as part of the separate trade of leasing.”,

(iii) in subsection (4)—

(I) by the substitution of the following paragraph for paragraph (a):

“(a) A company shall have incurred a relevant leasing loss where—

(i) the company is carrying on a trade of leasing and incurs a loss in that trade, and

(ii) any specified capital allowances have been treated by virtue of section 307 or 308 as trading expenses in arriving at the amount of the loss.”,

(II) in paragraph (b), by the substitution of “For the purposes of paragraph (c)” for “For the purposes of paragraph (a)”, and

(III) by the insertion of the following paragraph after paragraph (b):

“(c) Where in an accounting period a company incurs a relevant leasing loss, the relevant amount of that loss shall not be available for relief under—

(i) section 396A(3), except to the extent that the amount can be used to reduce the income of the leasing business of the company,

(ii) section 396B, except to the extent that the amount can be used to reduce the relevant corporation tax chargeable on the profits of the leasing business of the company,

(iii) section 420A, except to the extent the amount can be surrendered by the company for set off against the relevant trading income arising from—

(I) the leasing of machinery or plant by a company, or

(II) the leasing business of a member of the company’s leasing business group,

(iv) section 420B, except to the extent that the amount can be surrendered by the company to reduce the relevant corporation tax chargeable on the profits of the leasing business of a member of the company’s leasing business group.”,

(iv) by the substitution of the following subsection for subsection (5):

“(5) (a) Section 305(1)(b) shall not apply in relation to capital allowances other than capital allowances in respect of machinery or plant to which subsection (6) or (7) applies.

(b) Where a capital allowance in respect of machinery or plant to be made to a company in an accounting period is a specified capital allowance, arising other than in the course of a trade, to which sections 308(4) and 420(2) apply, those allowances shall not be available—

(i) for relief under section 308(4), except to the extent that the amount can be used against profits of the leasing business of the company, or

(ii) for relief under section 420(2), except to the extent that the amount can be set off against profits of—

(I) the leasing of machinery or plant by a company, or

(II) the leasing business of a member of the company’s leasing business group.”,

and

(v) by the insertion of the following subsection after subsection (10):

“(11) A company, the capital allowances of which are subject to the restrictions in subsection (4) or (5), shall provide the following information, where it is required by the return required under Part 41A:

(a) details of the specified capital allowances claimed in the period to which the return relates including—

(i) the amounts claimed, both in the course of a trade and otherwise than in the course of a trade, and

(ii) where an event referred to in section 288 occurs in relation to an asset on which specified capital allowances are made in the period, details relating to that event including the amount of any balancing allowance or charge made on the asset;

(b) the amount of any relevant leasing loss, within the meaning of this section, available for set off at the commencement of the period to which the return relates;

(c) details of any claims of relevant losses made for set off in the period to which the return relates, under section 396(1), 396A or 396B, as the case may be, insofar as those losses pertain to relevant leasing losses;

(d) details in respect of relevant leasing losses surrendered under section 420A or 420B insofar as those losses pertain to relevant leasing losses, in the period to which the return relates, including details of the relationship between the claimant company and the surrendering company (both within the meaning of section 411(2));

(e) details of any claims made under section 308(4) in the period to which the return relates, insofar as the capital allowances concerned pertain to specified capital allowances;

(f) details in respect of capital allowances surrendered under section 420(4) in the period to which the return relates, insofar as those capital allowances pertain to specified capital allowances, including details of the relationship between the claimant company and the surrendering company (both within the meaning of section 411(2));

(g) where, in the period to which the return relates, a company disposes of machinery or plant in respect of which specified capital allowances were claimed details—

(i) in respect of any chargeable gain or capital loss arising, or

(ii) in relation to the appropriation of that asset into trading stock under section 596.”,

(h) in section 420A(1), by the deletion of paragraph (b) of the definition of “relevant trading loss”,

(i) in section 555, by the insertion of the following subsection after subsection (3):

“(4) Where the disposal is of an asset of machinery or plant that is, or has previously been, the subject of a lease on the terms described in section 299(1), the amount of capital allowances to be excluded from the sums allowable as a deduction shall also include the capital allowances that would have been, or may have been, made in respect of that expenditure, but for the transfer of that burden of wear and tear to the lessee.”,

and

(j) in section 603—

(i) in subsection (2)(a), by the substitution of “subject to subsection (5), from the beginning” for “from the beginning”, and

(ii) by the insertion of the following subsection after subsection (4):

“(5) Subsection (1) shall not apply to the disposal of machinery or plant, or an interest in machinery or plant, where—

(a) the machinery or plant was previously the subject of a lease, on the terms described in section 299(1), and

(b) the person disposing of the asset is or was the lessor in respect of that lease.”.

40. Taxation of certain qualifying financing companies

40. The Principal Act is amended—

(a) by the insertion of the following section after section 76D:

“Computation of profits and gains: deductions for interest paid by qualifying financing companies

76E. (1) In this section—

‘arrangements’, other than in paragraph (b)(ii) of the definition in this subsection of ‘qualifying subsidiary’, includes any agreement, understanding, scheme, transaction or series of transactions (whether enforceable or not);

‘associated enterprise’, in respect of a company, means an enterprise that is an associated enterprise of that company for the purposes of Chapter 4 of Part 35C;

‘control’ shall be construed in accordance with section 432;

‘EEA state’ means a state, not being a Member State or the State, which is a contracting party to 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;

‘enterprise’ has the same meaning as in Part 35C;

‘external interest’ means the amount of interest payable on an external loan;

‘external loan’, subject to subsection (11), in respect of a company, means a loan from a person who—

(a) does not have the beneficial ownership of, or the ability to control, directly or through the medium of a connected company or connected companies or by any other indirect means, more than 5 per cent of the ordinary share capital of the company, and

(b) is not an associated enterprise of the company;

‘indirect qualifying subsidiary’ means, in respect of a qualifying financing company, a company that would be a qualifying subsidiary but for the fact that 75 per cent or more of its ordinary share capital is held directly by an intermediate holding company;

‘intermediate holding company’ means a company 75 per cent or more of the ordinary share capital of which is held directly by a qualifying financing company and whose business consists wholly of the holding of ordinary share capital in one or more than one indirect qualifying subsidiary of that qualifying financing company;

‘qualifying financing company’ means a company that—

(a) holds a direct ownership of 75 per cent or more of the ordinary share capital of one or more than one qualifying subsidiary, or intermediate holding company, as the case may be,

(b) borrows money for the purpose of on-lending that money by way of the making of relevant loans to one or more than one qualifying subsidiary, or indirect qualifying subsidiary, as the case may be, and

‘qualifying subsidiary’, in respect of a qualifying financing company, means a company—

(a) that exists wholly or mainly for the purpose of carrying on any trade or trades,

(b) that is—

(i) tax resident in a Member State or an EEA State, or

(ii) regarded as resident in a territory under arrangements having force of law by virtue of section 826(1) made with the government of that territory,

and

(c) in which a qualifying financing company holds a direct ownership of 75 per cent or more of the ordinary share capital of the company;

‘relevant loan’ means a loan of money—

(a) entered into by way of a bargain made at arm’s length,

(b) advanced by a qualifying financing company to—

(i) a qualifying subsidiary, or

(ii) an indirect qualifying subsidiary,

where the company referred to in subparagraph (i) or (ii) is a 75 per cent subsidiary of the qualifying financing company concerned, and

(c) where the money so advanced has been used by the qualifying subsidiary or indirect qualifying subsidiary, as the case may be, referred to in paragraph (b) wholly and exclusively for the purpose of carrying on a trade or trades, and not for the redemption of or subscription for shares, or any other payments relating to shares or the capital structure of any company.

(2) References in this section to a relevant loan being repaid, in whole or in part, shall include any of the following:

(a) the repayment, in whole or in part, of the principal amount of money advanced under the relevant loan;

(b) the disposal, in whole or in part, of, or the disposal of an interest in or over, the relevant loan, and references in subsection (5)(a) to the repayment of the principal amount of money advanced shall be to the higher of—

(i) the outstanding principal so disposed of, and

(ii) the market value of the loan so disposed of;

(c) the write off or forgiveness of a relevant loan, in whole or in part, and references in subsection (5)(a) to the repayment of the principal amount advanced shall be construed as references to the amount so written off or forgiven;

(d) the disposal of any shares in a company such that the disposal causes a company to which a relevant loan was made to no longer be a qualifying subsidiary or an indirect qualifying subsidiary, as the case may be, of the qualifying financing company that advanced the relevant loan and references in subsection (5)(a) to the repayment of the principal amount advanced shall be to the higher of—

(i) the outstanding principal on the loan, and

(ii) the market value of the shares so disposed of;

(e) the repayment, redemption or purchase by—

(i) a company to whom a relevant loan was made, or

(ii) in a case where a relevant loan was made to an indirect qualifying subsidiary, the intermediate holding company that directly holds 75 per cent or more of the ordinary share capital of the indirect qualifying subsidiary,

of any of its own share capital and references in subsection (5)(a) to the repayment of the principal amount advanced shall be construed as the amount paid for the repayment, redemption or purchase of the share capital of the company or the intermediate holding company, as the case may be.

(3) For the purposes of subsection (6)(b), the reference to the money received by the qualifying financing company is, for each of the events referred to in paragraphs (a), (b) and (c) of subsection (2), the lower of the amount of money received by that qualifying financing company and the amount treated as the repayment of the principal amount advanced for the purposes of subsection (5)(a).

(4) For each chargeable period, for the purposes of computing the profits of a qualifying financing company chargeable to tax under Case III or IV of Schedule D in respect of each relevant loan, notwithstanding sections 70(3) and 76(5)(b), the company shall be entitled to deduct the amount of external interest paid by that company in that chargeable period as has arisen in relation to such portion of the external loan that is, in accordance with subsection (6), matched with that relevant loan.

(5) (a) Subject to paragraph (b), where the principal amount of a relevant loan is repaid, in whole or in part, then no deduction shall be available under subsection (4) in respect of any external interest arising after that repayment on the portion of the external loan that is, or was, matched to the relevant loan or that portion of that relevant loan, represented by the amount that was repaid.

(b) Where a replacement loan is made, external interest arising after the making of the replacement loan on the portion of the external loan that is matched to that replacement loan may be deductible under subsection (4) against interest from that replacement loan.

(6) (a) Subject to paragraphs (c) and (d), where the moneys advanced under an external loan, or a portion of those moneys, are, at or about the time of the borrowing of the moneys under the external loan, on-lent under a relevant loan, the relevant loan shall be matched to that external loan, or that portion of that external loan.

(b) Subject to paragraph (c), where a repayment of the principal amount of a relevant loan (in this paragraph referred to as ‘the first-mentioned loan’) occurs, in whole or in part, in accordance with paragraph (a), (b) or (c) of subsection (2), and the money received by the qualifying financing company is used to make another relevant loan (in this section referred to as the ‘replacement loan’), then that replacement loan shall be matched to the lowest of the following:

(i) the amount of the external loan against which the first-mentioned loan, or the part of the first-mentioned loan as appropriate, was matched;

(ii) the portion of the external loan against which the first-mentioned loan, or the part of the first-mentioned loan as appropriate, was matched that is not matched against any other relevant loan at the time of the making of the replacement loan;

(iii) the money actually received by the qualifying company in respect of the repayment.

(c) The total amount of moneys advanced under a relevant loan that is matched with an external loan shall not exceed the total amount of moneys borrowed under the external loan.

(d) For the purposes of paragraph (a), where an external loan was in place on 1 January 2024, any relevant loans also in place on that date shall be matched against the external loan as if, at or about the time the moneys were borrowed under that external loan, they were on-lent under those relevant loans.

(7) Where a qualifying financing company refinances an external loan (referred to in this subsection as ‘the refinanced external loan’) in respect of which relevant loans were matched in accordance with subsection (6) with another external loan (referred to in this subsection as ‘the second external loan’), the relevant loans shall be matched to the second external loan as they were matched to the refinanced external loan.

(8) No deduction shall be available under subsection (4) in respect of interest on any relevant loan unless, had the qualifying subsidiary or indirect qualifying subsidiary, as the case may be, borrowed the matched external loan, or portion thereof, as the case may be, directly, the qualifying subsidiary or indirect qualifying subsidiary, as the case may be, would be entitled to deduct interest on that loan under section 81, and where the qualifying subsidiary or indirect qualifying subsidiary, as the case may be, is not within the charge to tax in the State it would be, if it was so chargeable, entitled to such a deduction.

(9) No deduction shall be available under subsection (4) in respect of interest that is deductible under any other provision of the Tax Acts.

(10) This section shall not apply to the payment of interest by a qualifying financing company where it is reasonable to consider that any arrangement entered into in relation to the payment of that interest was not for bona fide commercial reasons and forms part of any arrangement or scheme of which the main purpose, or one of the main purposes, is the avoidance of tax.

(11) A loan shall not be an external loan where any of the following arrangements are in place:

(a) arrangements pursuant to which—

(i) interest is payable by a qualifying financing company to another person such that this section does not apply by virtue only of the fact that the qualifying financing company and the person concerned are not associated, and

(ii) interest is payable by some other enterprise not associated with the qualifying financing company to an enterprise associated with the qualifying financing company;

(b) arrangements pursuant to which—

(i) interest is payable by a qualifying financing company to another enterprise (in this paragraph referred to as ‘the first-mentioned enterprise’) where the qualifying financing company and the first-mentioned enterprise concerned are not associated, and

(ii) the first-mentioned enterprise—

(I) has been advanced an amount by another enterprise that is an associate of the qualifying financing company, or

(II) has received a deposit from another enterprise that is an associate of the qualifying financing company,

equal to some or all of the principal amount of the loan in respect of which the interest referred to in subparagraph (i) is payable;

(c) arrangements entered into in relation to a qualifying financing company the effect of which is that any amount has been advanced, or funds have been made available, indirectly from an associate of a qualifying financing company to the qualifying financing company, or interest is payable by a qualifying financing company indirectly to an associate of that qualifying financing company, in circumstances other than those referred to in paragraph (a) or (b);

(d) arrangements pursuant to which—

(i) associates of a qualifying financing company (in this paragraph referred to as ‘the first-mentioned qualifying financing company’) advance amounts, or make funds available, directly or indirectly to a qualifying financing company with whom they are not associated (in this paragraph referred to as ‘the second- mentioned qualifying financing company’), and

(ii) associates of the second-mentioned qualifying financing company advance amounts, or make funds available, directly or indirectly to the first-mentioned qualifying financing company,

and those qualifying financing companies, or those associates, are acting in concert or under arrangements made by any enterprise.

(12) Subsection (4) shall only apply to interest paid on an external loan (or a portion thereof) by a qualifying financing company where the company provides details of the relevant loan to which the external loan (or a portion thereof) is matched in the return required to be delivered under Part 41A.

(13) (a) Where a relevant loan is deemed to be repaid, in whole or in part, under paragraph (b), then no deduction shall be available under subsection (4) in respect of any external interest arising after the deemed repayment on the portion of the external loan, represented by the amount that has been paid to the qualifying financing company, which is, or was, matched to the relevant loan.

(b) For the purposes of paragraph (a), a relevant loan shall be deemed to be repaid, in whole or in part, where it is reasonable to consider that a payment has been made to the qualifying financing company by the indirect qualifying subsidiary, whether directly or indirectly, and the amount has not been applied by the qualifying financing company in repaying the external loan.

and

(b) in section 840A, by the substitution of the following subsection for subsection (7):

“(7) This section shall not apply to interest payable to a company (in this subsection referred to as ‘the first-mentioned company’) by an investing company in either of the following circumstances:

(a) where the sole business of the first-mentioned company is the on-lending to the investing company of moneys which the first-mentioned company has borrowed from persons who are not connected with either or both the first-mentioned company and the investing company;

(b) where the first-mentioned company is a qualifying financing company within the meaning of section 76E.”.

41. Amendment of section 481 of Principal Act (relief for investment in films)

41. (1) Section 481 of the Principal Act is amended, in subsection (1), in paragraph (c) of the definition of “film corporation tax credit”, by the substitution of “€125,000,000” for “€70,000,000”.

(2) Subsection (1) shall apply to a qualifying film (within the meaning of section 481 of the Principal Act) in respect of which the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media issues a certificate (within the said meaning) after the coming into operation of this section.

(3) This section shall come into operation on such day as the Minister for Finance may appoint by order which day shall not be earlier than 1 January 2024.

42. Amendment of section 82 of Principal Act (pre-trading expenditure)

42. (1) Section 82 of the Principal Act is amended, in subsection (3), by the substitution of “396(2), 396A, 396B, 420, 420A or 420B” for “396(2) or 420”.

(2) Subsection (1) shall apply for accounting periods commencing on or after 1 January 2024.

43. Amendment of Chapter 5 of Part 12 of Principal Act (group relief)

43. (1) The Principal Act is amended in Chapter 5 of Part 12—

(a) in section 422, by the substitution of the following subsection for subsection (2):

“(2) Where an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—

(a) the amount which may—

(i) be set off against the total profits under section 420,

(ii) under subsection (3) of section 420A, be set off against income specified in subparagraph (i), (ii) or (iii) of paragraph (a) of that subsection, or

(iii) reduce the relevant corporation tax under subsection (3) of section 420B,

of the claimant company for the corresponding accounting period, shall be reduced by applying the fraction—

(A)/(B)

(if that fraction is less than unity), and

(b) the amount of—

(i) the total profits against which the amount mentioned in paragraph (a)(i) (as reduced where so required) may be set off,

(ii) the income against which the amount mentioned in paragraph (a)(ii) (as reduced where so required) may be set off, and

(iii) the relevant corporation tax (within the meaning of section 420B) which may be reduced by the amount mentioned in paragraph (a)(iii) (as reduced where so required),

shall be reduced by applying the fraction—

(A)/(C)

(if that fraction is less than unity),

where—

A is the length of the period common to the 2 accounting periods,

B is the length of the accounting period of the surrendering company, and

C is the length of the corresponding accounting period of the claimant company.”,

(b) in section 423—

(i) in subsection (2), by the substitution of the following paragraph for paragraph (b):

“(b) that the amount of total profits, income or relevant corporation tax for the true accounting period of the company against which group relief may be allowed in accordance with section 421(2), 420A(3) or 420B(3), as the case may be, is also so apportioned to the component accounting periods.”,

and

(ii) in subsection (3)—

(I) by the substitution of the following paragraph for paragraph (a):

“(a) references in—

(i) section 420 to accounting periods, profits, losses, allowances, expenses of management and charges on income of the surrendering company,

(ii) section 420A to accounting periods, relevant trading loss, relevant trading charges on income (or an excess thereof) and income (against which amounts may be set off under section 420A(3)), and

(iii) section 420B to accounting periods, relevant trading loss, relevant trading charges on income (or an excess thereof), relevant corporation tax and relievable loss,

shall be construed in accordance with subsection (2);”;

and

(II) by the substitution of the following paragraph for paragraph (c):

“(c) references in section 422 to—

(i) the amount which may—

(I) be set off against the total profits under section 420,

(II) under subsection (3) of section 420A, be set off against income specified in paragraph (a)(i), (a)(ii) or (a)(iii) of that subsection, or

(III) reduce the relevant corporation tax under subsection (3) of section 420B,

and

(ii) total profits, income and relevant corporation tax, shall be so construed that an amount apportioned under subsection (2) to a component accounting period may fall to be reduced under section 422(2).”,

and

(i) by the deletion of “to be set off against its total profits”, and

(ii) by the deletion of “to be set off against its profits”.

(2) This section shall apply for accounting periods commencing on or after 1 January 2024.

44. Amendment of section 835YA of Principal Act (non-cooperative jurisdictions: modified application of sections 835T, 835U and 835V)

44. Section 835YA of the Principal Act is amended by the substitution of the following subsection for subsection (1):

“(1) In this section, ‘listed territory’ means—

(a) in relation to an accounting period beginning on or after 1 January 2021 but before 1 January 2022, a territory included in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes[^9], as replaced by the EU list of non- cooperative jurisdictions for tax purposes Report by the Code of Conduct Group (business taxation) suggesting amendments to the Annexes to the Council conclusions of 18 February 2020[^10],

(b) in relation to an accounting period beginning on or after 1 January 2022 but before 1 January 2023, a territory included in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes[^11],

(c) in relation to an accounting period beginning on or after 1 January 2023 but before 1 January 2024, a territory included in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes[^12], and

(d) in relation to an accounting period beginning on or after 1 January 2024, a territory included in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes[^13].”.

45. Amendment of Part 35C of Principal Act (Implementation of Council Directive (EU) 2016/1164 of 12 July 2016 as regards hybrid mismatches)

45. Part 35C of the Principal Act is amended—

(a) in section 835Z(1), in the definition of “entity”, by the substitution of the following paragraph for paragraph (e):

“(e) any other legal arrangement, of whatever nature or form, that is within the charge to any of the taxes covered by this Part;”,

and

(b) in section 835AVB—

(i) by the substitution of the following subsection for subsection (6):

“(6) In a case in which a relevant investment undertaking, has not satisfied the conditions in paragraphs (a) and (b) of the definition of ‘collective investment scheme’ in subsection (1), the relevant investment undertaking will be treated as satisfying those conditions in the period of 24 months from the date on which the undertaking makes its first investment (in this subsection referred to as the ‘relevant period’) where it would be reasonable to consider that—

(a) the conditions will be satisfied within the relevant period, and

(b) the failure to satisfy the conditions is temporary and unavoidable, having regard to—

(i) the means through which the investment objective of the relevant investment undertaking is to be achieved, as set out in its prospectus,

(ii) the circumstances giving rise to the conditions not being satisfied, and

(iii) the steps taken, if any, to ensure the conditions will be satisfied.”,

and

(ii) by the substitution of the following subsection for subsection (7):

“(7) In a case in which a relevant investment undertaking, having satisfied the conditions in paragraphs (a) and (b) of the definition of ‘collective investment scheme’ in subsection (1)—

(a) ceases to satisfy one or both of those conditions, and

(b) the failure to satisfy the condition or both of those conditions, as the case may be, is due to the commencement of the winding down of the relevant investment undertaking,

the relevant investment undertaking will be treated as satisfying those conditions in the period of 12 months from the date on which the condition or both of those conditions, as the case may be, first ceased to be satisfied as a result of the winding down.”.

CHAPTER 6 Capital Gains Tax

46. Relief for investment in innovative enterprises

46. (1) The Principal Act is amended—

(a) in Part 19, by the insertion of the following Chapter after section 600A:

“CHAPTER 6A Relief for investment in innovative enterprises

Interpretation

600B. In this Chapter—

‘accounting period’ shall be determined in accordance with section 27;

‘arrangement’ includes any agreement, understanding, scheme, transaction or series of transactions (whether enforceable or not);

‘associate’ has the same meaning in relation to a person as it has by virtue of subsection (3) of section 433 in relation to a participator;

‘authorised officer’ means an officer of the Revenue Commissioners authorised under section 600Q(1);

‘business plan’ has the same meaning as in section 493;

‘certificate of going concern’ has the meaning given to it by section 600F(3);

‘certificate of commercial innovation’ has the meaning given to it by section 600F(4);

‘certificates of qualification’ means—

(a) a certificate of going concern, and

(b) a certificate of commercial innovation;

‘control’ shall be construed in accordance with subsections (2) to (6) of section 432;

‘date of investment’ means the date of the issue of the eligible shares;

‘director’ shall be construed in accordance with section 433(4);

‘EEA State’ has the same meaning as in section 489;

‘employee’ has the same meaning as in section 983;

‘eligible shares’ shall be construed in accordance with section 494;

‘expansion risk finance investment’ has the same meaning as in section 493;

‘follow-on risk finance investment’ has the same meaning as in section 493;

‘General Block Exemption Regulation’ has the same meaning as in Part 16;

‘innovative enterprise’ has the meaning given to it by Article 2(80) of the General Block Exemption Regulation;

‘linked businesses’ has the same meaning as in Part 16;

‘partner businesses’ has the same meaning as in Part 16;

‘qualifying company’ shall be construed in accordance with section 600C;

‘qualifying investment’ section 600J; shall be construed in accordance with

‘qualifying partnership’ section 600N; shall be construed in accordance with

‘qualifying subsidiary’ section 600D; shall be construed in accordance with

‘relevant trading activities’ has the same meaning as in Part 16;

‘relief group’ means a company, its partner businesses and linked businesses, taken together, and includes any relief group of which a company is a member and any company that was, at any time, a member of a relief group with a qualifying company or its qualifying subsidiaries;

‘SME’ has the same meaning as in Part 16;

‘undertaking in difficulty’ has the same meaning as in the General Block Exemption Regulation;

‘unlisted’ has the same meaning as in Part 16.

Qualifying company

600C. For the purposes of this Chapter, a company shall be a qualifying company if it holds certificates of qualification.

Qualifying subsidiary

600D. For the purposes of this Chapter, a subsidiary shall be a qualifying subsidiary where it is a company to which section 600F(2)(a)(ii) applies and satisfies the following conditions:

(a) the subsidiary is a 51 per cent subsidiary of the qualifying company;

(b) no other person has control of the subsidiary;

(c) no arrangements are in existence by virtue of which the conditions specified in paragraphs (a) and (b) could cease to be satisfied.

Qualifying investment (company perspective)

600E.(1) An investment shall not be a qualifying investment unless it is based on a business plan.

(2) An investment shall not be a qualifying investment if it is an expansion risk finance investment or a follow-on risk finance investment.

(3) An investment shall not be a qualifying investment unless the qualifying company provides a copy of the certificates of qualification to the qualifying investor or qualifying partnership, as the case may be.

Certificates of qualification

600F. (1)(a) Subject to subsection (2), a company (in this section referred to as the ‘applicant company’) that is seeking to raise investments from qualifying investors or qualifying partnerships may apply to the Revenue Commissioners for the purpose of obtaining—

(i) a certificate of going concern, and

(ii) a certificate of commercial innovation.

(b) An application under paragraph (a) shall include—

(i) a business plan in respect of which the company is seeking investment,

(ii) details of each of the shareholders of the company including each shareholder’s name and address and shareholdings or ownership interests, as the case may be, in linked businesses or partner businesses, and

(iii) such other information and explanations as may be requested by the Revenue Commissioners for the purposes of making a determination as to whether the company complies with the conditions specified in subsection (2).

(2) A company shall not make an application under subsection (1) unless the following conditions are satisfied:

(a) the applicant company—

(i) is incorporated in the State, another EEA State or the United Kingdom,

(ii) is tax resident in the State, another EEA State or the United Kingdom and carries on, or intends to carry on, relevant trading activities from a fixed place of business in the State,

(iii) holds a tax clearance certificate within the meaning of section 1095,

(iv) is a company which—

(I) does not control (or together with any person connected with the company does not control) another company other than a qualifying subsidiary, and

(II) is not under the control of another company (or of another company and any person connected with that other company), unless such control is exercised by the National Asset Management Agency, or by a company referred to in section 616(1)(g),

and no arrangements are in existence by virtue of which the applicant company would fall within clause (I) or (II) in the period of 3 years following the issue of a certificate of commercial innovation,

(v) is a company—

(I) which exists wholly for the purpose of carrying on relevant trading activities, or

(II) whose business consists, or will consist, wholly of—

(A) the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company, or

(B) both the holding of such shares or securities or the making of such loans and the carrying on of relevant trading activities where relevant trading activities are carried on from a fixed place of business in the State,

and where a company raises any amount through the issue of eligible shares for the purposes of raising money for relevant trading activities which are being carried on by a qualifying subsidiary or which such a qualifying subsidiary intends to carry on, the amount so raised shall be used for the purpose of acquiring eligible shares in the qualifying subsidiary and for no other purpose,

(vi) is an innovative enterprise, and

(vii) is a company that it is reasonable to consider intends to, and has sufficient expertise and experience to, implement the business plan;

(b) each company that is a member of the relief group of which the applicant company is a member—

(i) is unlisted, and no arrangements are in existence in relation to the company becoming a listed company,

(ii) is not subject to an outstanding recovery order following a previous decision of the European Commission that declared an aid illegal and incompatible with the internal market, and

(iii) has all of its issued shares fully paid up;

(c) no company that is a member of the relief group of which the applicant company is a member has been registered, or where any company that is a member of the relief group was formed by way of merger no company that was party to the merger has been registered, more than 5 years prior to the date of the certificate of commercial innovation issued under this section;

(d) the relief group of which the applicant company is a member—

(i) is an SME, and

(ii) is not an undertaking in difficulty.

(3) (a) Subject to paragraphs (b) and (c), the Revenue Commissioners shall issue—

(i) a certificate (in this Chapter referred to as a ‘certificate of going concern’) to a company where the company demonstrates to the satisfaction of the Revenue Commissioners that the relief group of which the applicant company is a member satisfies the conditions specified in subsection (2)(d), or

(ii) a determination that the applicant company has not demonstrated to the satisfaction of the Revenue Commissioners that the relief group of which the applicant company is a member satisfies the condition specified in paragraph (i) or (ii), as the case may be, of subsection (2)(d) and the reasons for the determination.

(b) The Revenue Commissioners may issue to the applicant company a certificate, or renewal of a certificate, of going concern, as the case may be, having taken account of any recommendations or report which Enterprise Ireland may make to the Revenue Commissioners following such consultation by them with Enterprise Ireland as they consider appropriate for those purposes (including by the provision to Enterprise Ireland of such information in relation to the application as is necessary for the purposes of such consultation).

(c) The Revenue Commissioners shall not issue a certificate, or a renewal of a certificate, of going concern, as the case may be, if they have reason to believe that any condition specified in subparagraphs (i) to (v) of paragraph (a), or paragraphs (b) and (c) of subsection (2) is not, or, in the case of the renewal of a certificate, is no longer, satisfied by the relief group or any company that is a member of the relief group, as the case may be.

(d) A person aggrieved by a determination issued under paragraph (a)(ii) may appeal the determination to the Appeal Commissioners, in accordance with section 949I, within the period of 30 days after the date of the notice of that determination.

(e) Where a company holds a valid certificate of commercial innovation but the certificate of going concern has expired or is about to expire, the company may apply to the Revenue Commissioners for a renewal of its certificate of going concern and the provisions of this section shall, with any necessary modifications, apply to an application for a renewal of a certificate of going concern as those provisions apply to an application for a certificate of going concern.

(f) Subject to section 600P, a certificate of going concern shall be valid until the later of—

(i) the day which is 3 years from the date of registration of the first so registered company that is a member of the relief group, or, if earlier, where any company that is a member of the relief group was formed by way of merger, the day which is 3 years from the date of registration of any company that was party to the merger, or

(ii) the earlier of—

(I) the last day of the accounting period, of the company to which the certificate was issued, in which that certificate was issued, or

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