Finance Act, 1984
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Chapter VI Corporation Tax | ||
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Amendment of Part IX (Schedule F and Company Distributions) of Corporation Tax Act, 1976. |
41.—Part IX of the Corporation Tax Act, 1976 , is hereby amended by the insertion after section 84 of the following section: | |
“Limitation on meaning of ‘distribution’. | ||
84A.—(1) Any interest or other distribution which— | ||
(a) is paid on or after the 25th day of January, 1984, out of the assets of a company (hereafter in this section referred to as ‘the borrower’) to another company which is within the charge to corporation tax, and | ||
(b) is so paid in respect of a security of the borrower falling within subparagraph (ii), (iii) (I) or (v) of section 84 (2) (d), | ||
shall not be a distribution for the purposes of this Act unless the application of this subsection is excluded by subsection (2), (7) or (9). | ||
(2) Subsection (1) shall not apply to any interest which is paid by the borrower, in an accounting period of the borrower, to another company the ordinary trading activities of which include the lending of money, where— | ||
(a) in that accounting period, the borrower carries on in the State a specified trade, and | ||
(b) the interest, if it were not a distribution, would be treated as a trading expense of that trade for that accounting period. | ||
(3) Subject to subsection (4), in subsection (2) ‘specified trade’ means a trade which consists wholly or mainly of— | ||
(a) the manufacture of goods (including activities which would, if the borrower were to make a claim for relief in respect of the trade under Chapter VI of Part I of the Finance Act, 1980 , fall to be regarded for the purposes of that Chapter as the manufacture of goods), or | ||
(b) exempted trading operations within the meaning of Part V (Profits from Trading within Shannon Airport), or | ||
(c) the rendering of services in the course of a service undertaking in respect of which an employment grant was made by the Industrial Development Authority under section 2 of the Industrial Development (No. 2) Act, 1981 . | ||
(4) Where the borrower mentioned in subsection (2) is a 75 per cent. subsidiary of— | ||
(a) an agricultural society, or | ||
(b) a fishery society, | ||
‘specified trade’, in that subsection, means a trade of the borrower which consists wholly or mainly of either or both of— | ||
(i) the manufacture of goods within the meaning of subsection (3) (a), and | ||
(ii) the selling by wholesale of— | ||
(I) where paragraph (a) applies, agricultural products, or | ||
(II) where paragraph (b) applies, fish. | ||
(5) For the purposes of subsections (3) and (4), a trade shall be regarded, as respects an accounting period, as consisting wholly or mainly of particular activities if, but only if, the total amount receivable by the borrower from sales made or, as the case may be, in payment for services rendered in the course of those activities in the accounting period is not less than 75 per cent. of the total amount receivable by the borrower from all sales made or, as the case may be, in payment for all services rendered in the course of the trade in that period. | ||
(6) In subsection (4)— | ||
‘agricultural society’ and ‘fishery society’ have the meanings assigned to them by section 18 of the Finance Act, 1978 ; | ||
‘selling by wholesale’ means selling goods of any class to a person who carries on a business of selling goods of that class or who uses goods of that class for the purposes of a trade or undertaking carried on by him. | ||
(7) Subsection (1) shall not apply to any interest or other distribution which is payable on or before the relevant day either— | ||
(a) under an obligation which was entered into before the 25th day of January, 1984, or | ||
(b) under an obligation which was entered into before the 1st day of March, 1984, pursuant to negotiations which were in progress between the borrower and a lender before the 25th day of January, 1984: | ||
Provided that— | ||
(i) an obligation shall be treated for the purposes of paragraphs (a) and (b) as having been entered into before a particular date if, but only if, before that date, there was in existence a binding contract in writing (hereafter in this section referred to as a ‘loan contract’) under which that obligation arose, and | ||
(ii) negotiations pursuant to which an obligation was entered into shall not be regarded for the purposes of paragraph (b) as having been in progress before the 25th day of January, 1984, unless, on or before that date, preliminary commitments or agreements in relation to that obligation had been entered into between the lender referred to in that paragraph and the borrower. | ||
(8) (a) Subject to paragraphs (b) and (c), ‘the relevant day’, in subsection (7), means the 24th day of January, 1989, or, if it is earlier— | ||
(i) in the case of any principal which had been paid to the borrower on or before the 24th day of January, 1984, the last day of the period (hereafter in this subsection referred to as ‘the repayment period’) within which the borrower was, on the 24th day of January, 1984, under an obligation to repay the principal and interest, or | ||
(ii) in the case of any principal paid to the borrower after the 24th day of January, 1984, under a loan contract which was entered into on or before that date, the last day of the period (hereafter in this subsection referred to as ‘the repayment period’) within which the borrower was, on the date on which the principal was so paid, under an obligation to repay the principal and interest. | ||
(b) Paragraph (a) shall apply in the case of an obligation referred to in subsection (7) (b) as if— | ||
(i) the reference in the said paragraph (a) to the 24th day of January, 1989, were a reference to the 28th day of February, 1989, and | ||
(ii) each reference in the said paragraph (a) to the 24th day of January, 1984, were a reference to the date (being a date later than the 24th day of January, 1984, but earlier than the 1st day of March, 1984) on which the obligation was entered into. | ||
(c) (i) Where the repayment period referred to in either paragraph (a) (i) or (a) (ii) is extended after the 24th day of January, 1984 (whether or not the right to such an extension arose out of the terms of the loan contract), then, subject to subparagraph (ii) of this paragraph, paragraph (a) (i) or (a) (ii), as the case may be, shall apply as if that extension had not been made. | ||
(ii) Where the repayment period referred to in either paragraph (a) (i) or (a) (ii) is extended after the 24th day of January, 1984, but before the 1st day of March, 1984, pursuant to negotiations which were in progress between the borrower and a lender before the 25th day of January, 1984, then, notwithstanding subparagraph (i) of this paragraph, each of the said paragraphs (a) (i) and (a) (ii) shall apply as if the repayment period referred to therein were that repayment period as so extended (hereafter in this subparagraph referred to as ‘the extended period’) or, if the extended period ends after the 24th day of January, 1989, the part of the extended period which ends on that date. | ||
(iii) Paragraph (ii) of the proviso to subsection (7) shall apply, with any necessary modifications, for the purposes of subparagraph (ii) of this paragraph as it applies for the purposes of subsection (7) (b). | ||
(9) Subsection (1) shall not apply in a case where the consideration given by the borrower for the use of the principal secured represents more than a reasonable commercial return for the use of that principal: | ||
Provided that, where this subsection applies, nothing in subparagraph (ii), (iii) (I) or (v) of section 84 (2) (d) shall operate so as to treat as a distribution for the purposes of this Act so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal.”. |