Finance Act, 1984

Farming: amendment of provisions relating to relief in respect of increase in stock values.

33.— (1) This section shall have effect only as respects a trade of farming carried on in an accounting period which ends on or after the 6th day of April, 1983.

(2) Section 31A (inserted by the Finance Act, 1976 ) of the Finance Act, 1975 , is hereby amended—

(a) by the substitution of “1984” for “1983” (inserted by the Finance Act, 1983 ) in paragraph (iv) (inserted by the Finance Act, 1979 ) of the proviso to subsection (4) (a),

(b) by the substitution of the following subsection for subsection (7) (inserted by the Finance Act, 1977 )—

“(7) Where in relation to an accounting period a company's opening stock value exceeds its closing stock value, the amount of the excess (in this section referred to as the company's ‘decrease in stock value’) shall, if the accounting period ends on a date before the 6th day of April, 1984, be treated in the computation of the company's trading income for the purposes of corporation tax, as a trading receipt of the company's trade for that accounting period:

Provided that the amount which is treated as a trading receipt of the company's trade for any accounting period (hereafter in this proviso referred to as ‘the first-mentioned period’) shall not exceed the amount determined by the formula—

A + B − C

where—

A is the aggregate amount of the deductions which, under the provisions of this section, the company was entitled to make in computing its trading income for accounting periods which end in the period (hereafter in this proviso referred to as ‘the relevant period’) beginning 10 years before the commencement of the first-mentioned period and ending on the day immediately preceding such commencement,

B is the aggregate amount of the deductions which, by virtue of section 26 (1) (a) (i) of the Finance Act, 1976 , the company was entitled to make in computing its trading profits for the purposes of income tax, for accounting periods which end in the relevant period, and

C is the aggregate of the amounts which, under this subsection, were treated as trading receipts of the company's trade for accounting periods which end in the relevant period.”, and

(c) by the substitution of the following subsection for subsection (9) (inserted by the Finance Act, 1977 )—

“(9) In the computation of a company's trading income for the purposes of corporation tax for any accounting period which ends on or after the 6th day of April, 1984, in which there is a decrease in stock value, there shall be treated as a trading receipt of the company's trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the company's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1984,

B is the aggregate amount of the company's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1984, and

C is the aggregate of the amounts which under this subsection are treated as trading receipts of the company's trade for preceding accounting periods:

Provided that the amount which is treated as a trading receipt of the company's trade for any accounting period (hereafter in this proviso referred to as ‘the first-mentioned period’) shall not exceed the amount determined by the formula—

D + E − F

where—

D is the aggregate amount of the deductions which, under the provisions of this section, the company was entitled to make in computing its trading income for accounting periods which end in the period (hereafter in this proviso referred to as ‘the relevant period’) beginning 10 years before the commencement of the first-mentioned period and ending on the day immediately preceding such commencement,

E is the aggregate amount of the deductions which, by virtue of section 26 (1) (a) (i) of the Finance Act, 1976 , the company was entitled to make in computing its trading profits, for the purposes of income tax, for accounting periods which end in the relevant period, and

F is the aggregate of the amounts which, under the provisions of this section, were treated as trading receipts of the company's trade for accounting periods which end in the relevant period.”,

and the said paragraph (iv), as so amended, is set out in the Table to this subsection.

TABLE

(iv) a deduction shall not be allowed under the provisions of this section in computing a company's trading income for any accounting period which ends on or after the 6th day of April, 1984.

(3) Section 12 of the Finance Act, 1976 , is hereby amended—

(a) by the substitution in subsection (3) of “1984-85” for “1983-84” (inserted by the Finance Act, 1983 ),

(b) by the substitution of the following subsection for subsection (5) (inserted by the Finance Act, 1978 )—

“(5) In the computation of a person's trading profits for an accounting period in which there is a decrease in stock value and which ends on a date in the period from the 6th day of April, 1976, to the 5th day of April, 1984, the amount of that decrease shall be treated as a trading receipt of the trade for that accounting period:

Provided that the amount which is so treated for any accounting period (hereafter in this proviso referred to as ‘the first-mentioned period’) shall not exceed an amount determined by the formula—

A−C

where—

A is the aggregate amount of the deductions which, under the provisions of this section, the person was entitled to make in computing his trading profits for accounting periods which end in the period (hereafter in this proviso referred to as ‘the relevant period’) beginning on the 6th day of April, 1975, or, if later, 10 years before the commencement of the first-mentioned period and ending on the day immediately preceding such commencement, and

C is the aggregate of the amounts which, under the provisions of this subsection, were treated as trading receipts of the person's trade for accounting periods which end in the relevant period.”,

and

(c) by the substitution of the following subsection for subsection ‘(6) (inserted by the Finance Act, 1977 )—

“(6) In the computation of a person's trading profits for any accounting period in which there is a decrease in stock value and which ends on or after the 6th day of April, 1984, there shall be treated as a trading receipt of the trade for that accounting period the amount (if any) by which A exceeds the aggregate of B and C

where—

A is the aggregate amount of the person's decreases in stock value in all accounting periods which ended on or after the 6th day of April, 1984,

B is the aggregate amount of the person's increases in stock value in all accounting periods which ended on or after the 6th day of April, 1984, and

C is the aggregate of the amounts which are treated as trading receipts of the person's trade for preceding accounting periods which ended on or after the 6th day of April, 1984:

Provided that the amount which, by virtue of this subsection, is treated as a trading receipt of the person's trade, for any accounting period (hereafter in this proviso referred to as ‘the first-mentioned period’) shall not exceed an amount determined by the formula—

D−E

where—

D is the aggregate amount of the deductions which, under the provisions of this section, the person was entitled to make in computing his trading profits for accounting periods which end in the period (hereafter in this proviso referred to as ‘the relevant period’) beginning on the 6th day of April, 1975, or, if later, ten years before the commencement of the first-mentioned period and ending on the day immediately preceding such commencement, and

E is the aggregate of the amounts which, under the provisions of this section, were treated as trading receipts of the person's trade for accounting periods which end in the relevant period.”,

and the said subsection (3), as so amended, is set out in the Table to this subsection.

TABLE

(3) Any deduction allowed by virtue of this section in computing a person's trading profits for an accounting period shall not have effect for any purpose of the Income Tax Acts for any year of assessment prior to the year 1974-75 or later than the year 1984-85.

(4) Section 13 of the Finance Act, 1982 , is hereby amended by the substitution of the following proviso for the proviso to subsection (3):

“Provided that the amount by which a decrease in stock value for an accounting period (hereafter in this proviso referred to as ‘the first-mentioned period’) is to be increased under this subsection shall not exceed the amount determined by the formula—

(A−B)−(C−D)

where—

A is the aggregate amount of the deductions, in respect of which either subsection (1) (c) or (2), as may be appropriate, had effect and as increased under that subsection, which were made in computing the profits of the trade of farming for accounting periods which end in the period (hereafter in this proviso referred to as ‘the relevant period’) beginning 10 years before the commencement of the first-mentioned period or, if later and in a case in which subsection (1) (c) had effect, the 6th day of April, 1975, and ending on the day immediately preceding such commencement,

B is the aggregate amount of the deductions included in A before they were increased under the provisions of either subsection (1) (c) or (2),

C is the aggregate amount of the decreases in trading stock, in respect of which this subsection has had effect and as increased under this subsection, which were treated as trading receipts of the trade of farming for accounting periods which end in the relevant period, and

D is the aggregate amount of the decreases included in C before they were increased under the provisions of this subsection.”.

(5) (a) Where a trade of farming (hereafter in this subsection referred to as “the relevant trade”) is carried on by a person, or by the personal representative of a person who has died and who carried on the relevant trade prior to his death, (hereafter in this subsection referred to as “the predecessor”) and that relevant trade ceases to be carried on by the predecessor and immediately thereafter commences to be carried on by a person (hereafter in this subsection referred to as “the successor”) who in relation to the predecessor is a qualifying person, the predecessor, or the personal representative of the predecessor where the predecessor is a person who has died, and the successor may jointly or, where the successor is the personal representative of a person who has died, the successor alone may, by notice in writing given to the inspector within two years of the end of the year of assessment in which the successor commenced to carry on the relevant trade, elect that the following provisions shall have effect:—

(i) section 62 of the Income Tax Act, 1967 , shall not apply, and

(ii) notwithstanding anything in the Income Tax Acts—

(I) the successor shall be allowed such deductions under section 31 of the Finance Act, 1975 , in computing the profits of the relevant trade carried on by him, and

(II) there shall be treated, under the provisions of subsections (5) and (6) of section 12 of the Finance Act, 1976 and section 13 of the Finance Act, 1982 , as trading receipts of the relevant trade carried on by the successor such amounts,

as would have been so allowed or would have been so treated, as the case may be, if the predecessor had continued to carry on the relevant trade and had done all such things and been allowed all such allowances in connection therewith as were done by or allowed to the successor.

(b) For the purposes of paragraph (a), a person (hereafter in this paragraph referred to as “the first-mentioned person”) is a qualifying person in relation to the predecessor if—

(i) in the case where the predecessor is not the personal representative of a person who has died and who carried on the trade of farming prior to his death, the first-mentioned person—

(I) is resident in the State in the year of assessment in which he commences to carry on the relevant trade and is not resident elsewhere, and

(II) is—

(A) the personal representative of the predecessor, or

(B) the spouse or child of the predecessor,

and, if he is such spouse or child as aforesaid, does not, at the time he commences to carry on the relevant trade, have any trading stock of a trade of farming other than the trading stock of the relevant trade,

(ii) in the case where the predecessor is the personal representative of a person who has died and who carried on the relevant trade prior to his death, the first-mentioned person—

(I) is resident in the State in the year of assessment in which he commences to carry on the relevant trade and is not resident elsewhere, and

(II) is the spouse or child of the person who has died,

and, if he is such spouse or child as aforesaid, does not, at the time he commences to carry on the relevant trade, have any trading stock of a trade of farming other than the trading stock of the relevant trade.

(c) This subsection shall apply only where the relevant trade and the trading stock thereof pass in their entirety to the successor.

(d) This subsection shall, with any necessary modifications, apply in a case where the relevant trade ceases to be carried on by a predecessor and immediately thereafter commences to be carried on by two or more persons who, in relation to the predecessor, are qualifying persons and are carrying on the relevant trade in partnership.

(e) In this subsection—

“child” has the same meaning as in section 27 (inserted by the Capital Gains Tax (Amendment) Act, 1978 ) of the Capital Gains Tax Act, 1975 ;

“personal representative” has the meaning corresponding to that assigned to personal representatives in Part XXIX of the Income Tax Act, 1967 .