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3 2003

Finance Act 2003

Chapter 5

Capital Gains Tax

Amendment of section 556 (adjustment of allowable expenditure by reference to consumer price index) of Principal Act.

65. —Section 556 of the Principal Act is amended—

(a)  in subsection (2)(a) by substituting “specified in subsection (5), determined under subsection (6) or specified in subsection (6A), as the case may be.” for “specified in subsection (5) or determined under subsection (6), as the case may be.”,

(b)  in subsection (6)(a) by substituting “in each subsequent year of assessment up to and including the year of assessment 2003.” for “each subsequent year of assessment.”,

(c)  in subsection (6)(b) by substituting “any subsequent year of assessment up to and including the year of assessment 2003,” for “any subsequent year of assessment,”, and

(d)  by inserting the following after subsection (6):

“(6A) In relation to the disposal of an asset made in the year 2004 or any subsequent year of assessment, the multiplier shall be the figure mentioned in column (2) of the Table to this subsection opposite the mention in column (1) of that Table of the year of assessment in which the deductible expenditure was incurred.

table

Year of assessment in which deductible expenditure incurred

Multiplier

(1)

(2)

1974-75

...

...

...

...

...

...

7.528

1975-76

...

...

...

...

...

...

6.080

1976-77

...

...

...

...

...

...

5.238

1977-78

...

...

...

...

...

...

4.490

1978-79

...

...

...

...

...

...

4.148

1979-80

...

...

...

...

...

...

3.742

1980-81

...

...

...

...

...

...

3.240

1981-82

...

...

...

...

...

...

2.678

1982-83

...

...

...

...

...

...

2.253

1983-84

...

...

...

...

...

...

2.003

1984-85

...

...

...

...

...

...

1.819

1985-86

...

...

...

...

...

...

1.713

1986-87

...

...

...

...

...

...

1.637

1987-88

...

...

...

...

...

...

1.583

1988-89

...

...

...

...

...

...

1.553

1989-90

...

...

...

...

...

...

1.503

1990-91

...

...

...

...

...

...

1.442

1991-92

...

...

...

...

...

...

1.406

1992-93

...

...

...

...

...

...

1.356

1993-94

...

...

...

...

...

...

1.331

1994-95

...

...

...

...

...

...

1.309

1995-96

...

...

...

...

...

...

1.277

1996-97

...

...

...

...

...

...

1.251

1997-98

...

...

...

...

...

...

1.232

1998-99

...

...

...

...

...

...

1.212

1999-00

...

...

...

...

...

...

1.193

2000-01

...

...

...

...

...

...

1.144

2001  ...

...

...

...

...

...

...

1.087

2002  ...

...

...

...

...

...

...

1.049

2003 and subsequent years

...

...

...

...

1.000

”.

Restriction of relief on issue of debentures etc.

66. —The Principal Act is amended in Chapter 4 of Part 19—

(a)  in section 584—

(i) in subsection (3) by substituting “Subject to subsections (4) to (9)” for “Subject to subsections (4) to (8)”, and

(ii) by inserting the following after subsection (8):

“(9) Subsection (3) shall not apply to the extent that the new holding comprises debentures, loan stock or other similar securities issued or allotted on or after 4 December 2002, unless—

(a)  they were so issued or allotted pursuant to a binding written agreement made before that date, or

(b) this section has application by virtue of section 586.”,

(b)  in section 585(1), in the definition of “conversion of securities”, by substituting the following for paragraph (b):

“(b) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash where the conversion takes place before 4 December 2002, or where the conversion takes place after that date pursuant to a binding written agreement made before that date, and”,

(c)  in section 586(3) by inserting the following after paragraph (b):

“(c) This section shall not apply where, on or after 4 December 2002, a company issues debentures, loan stock or other similar securities to a person in exchange for shares of another company unless—

(i) such issue is pursuant to a binding written agreement made before that date, or

(ii) the company issuing the debentures, loan stock or other similar securities and the person to whom they are issued are members of the same group (within the meaning of section 616) throughout the period commencing one year before and ending one year after the day the debentures, loan stock or other similar securities are issued, or

(iii) the other company is a company quoted on a recognised stock exchange and its board of directors had, before 4 December 2002, made a public announcement that they had agreed the terms of a recommended offer to be made for the company's entire issued, and to be issued, ordinary share capital.”,

and

(d)  in section 587(4) by inserting the following after paragraph (b):

“(c) This section shall not apply to any person to whom, under a scheme of reconstruction or amalgamation, a company issues debentures, loan stock or other similar securities on or after 4 December 2002, unless—

(i) they were issued pursuant to a binding written agreement made before that date, or

(ii) that person and the company are members of the same group (within the meaning of section 616) throughout the period commencing one year before and ending one year after the day the debentures, loan stock or other similar securities were issued, or

(iii) they were issued pursuant to a scheme or arrangement, the principal terms of which had been brought to the attention of the Revenue Commissioners and the Revenue Commissioners had acknowledged in writing before 4 December 2002, to the effect that the scheme or arrangement was a scheme of reconstruction and amalgamation.”.

Restriction of deferral of capital gains tax.

67. —(1) The Principal Act is amended in Part 19—

(a)  in section 591(2)(a) by substituting “obtains for any material disposal, before 4 December 2002, by” for “obtains for any material disposal by”,

(b)  in section 597(4)(a)(i) by substituting “obtains for the disposal, before 4 December 2002, of,” for “obtains for the disposal of,”,

(c)  in section 600A(2)(a) by substituting “for the disposal, before 4 December 2002, of” for “for the disposal of”, and

(d)  in section 605(1) by substituting “Where a person makes a disposal, before 4 December 2002, of” for “Where a person makes a disposal of”.

(2) Subsection (1) does not apply—

(a) as respects paragraph (b), to a disposal by a person, on or after 4 December 2002 and on or before 31 December 2003, of an asset used for the purposes of the person's trade (or any other activity of the person as is referred to in section 597(2) of the Principal Act), where the person claims that, but for the provisions of subsection (1)(b), the person would have been entitled to claim that the chargeable gain accruing on that disposal could not accrue to the person until assets, which were acquired by the person before 4 December 2002 or acquired under an unconditional contract entered into by the person before that date, ceased to be used for the purposes of that trade of the person, or, as the case may be, that other activity of the person,

(b) as respects paragraph (c), to a disposal by a person, on or after 4 December 2002 and on or before 31 December 2003, of a qualifying premises (within the meaning of section 600A of the Principal Act) where the person claims that, but for the provisions of subsection (1)(c), the person would have been entitled to claim that the chargeable gain accruing on that disposal could not accrue to the person until a replacement premises (within that meaning) which were acquired by the person before 4 December 2002, or acquired by the person under an unconditional contract entered into before that date—

(i) was disposed of by the person, or

(ii) ceased to be a replacement premises,

and

(c) as respects paragraph (d), to a disposal by a person, on or after 4 December 2002 and on or before 31 December 2003, of original assets (within the meaning of section 605 of the Principal Act), where the person claims and proves to the satisfaction of the Revenue Commissioners that, but for the provisions of subsection (1)(d), the person would have been entitled to claim that that disposal would not be treated as a disposal for the purposes of the Capital Gains Tax Acts by virtue of the person having, before 4 December 2002, acquired, or entered into an unconditional contract to acquire, new assets (within that meaning).

Amendment of section 598 (disposal of business or farm on “retirement”) of Principal Act.

68. —(1) Section 598 of the Principal Act is amended—

(a)  in subsection (1)(a), by substituting the following for the definition of “the Scheme”:

“ ‘the Scheme’ means the scheme known as—

(i) the Scheme of Early Retirement From Farming introduced by the Minister for Agriculture and Food for the purpose of implementing Council Regulation (EEC) No. 2079/92 of 30 June 19921 , or

(ii) the Scheme of Early Retirement From Farming introduced by the Minister for Agriculture, Food and Rural Development for the purpose of implementing Council Regulation (EC) No. 1257/1999 of 17 May 19992 ,”,

(b)  by substituting the following for subsection (1)(d)(i):

“(i) (I) the period of ownership of an asset by a spouse of an individual as if it were a period of ownership of the asset by the individual, and

(II) where a spouse of an individual has died, the period of use of an asset by the spouse as if it were a period of use of the asset by the individual,”,

(c)  by inserting the following after subsection (1)(d)(ii):

“(iia) the period for which an individual was a director or, as the case may be, a full-time working director of the following companies as if it were a period for which the individual was a director of a ‘relevant company’ (which, for the purposes of this subparagraph, means a company referred to in paragraph (ii) of the definition of qualifying assets in subsection (1)(a)):

(I) a company that was treated as being the same company as the relevant company for the purposes of section 586,

(II) a company involved in the same scheme of reconstruction or amalgamation under section 587 with the relevant company,”,

and

(d) by substituting “€500,000” for “€476,250” in each place where it occurs in subparagraphs (i) and (ii) of subsection (2)(a).

(2) Paragraph (a) of subsection (1) is deemed to have applied as respects a disposal of an asset on or after 27 November 2000 and paragraphs (b), (c) and (d) of that subsection apply as respects a disposal of an asset on or after 6 February 2003.

Amendment of Chapter 3 (capital gains tax) of Part 2 of Principal Act.

69. —(1) Chapter 3 of Part 2 of the Principal Act is amended by inserting the following after section 29:

“Temporary non-residents.

29A.—(1) (a) In this section—

‘intervening year’, in relation to an individual, means any year of assessment falling within the period commencing with the first day of the year of assessment immediately following the year of his or her departure and ending with the last day of the year of assessment immediately preceding the year of his or her return;

‘relevant assets’, in relation to an individual, means shares in a company, or rights to acquire shares in a company, being shares or rights which he or she beneficially owned on the last day of the year of his or her departure and the market value of which on that day—

(i) is equal to, or exceeds, 5 per cent of the value of the issued share capital of the company, or

(ii) exceeds €500,000;

‘year of departure’, in relation to an individual, means the last year of assessment before the year of return, for which the individual is resident in the State, and references to year of his or her departure shall be construed accordingly;

‘year of return’, in relation to an individual, has the meaning assigned to it by subsection (2), and references to year of his or her return shall be construed accordingly.

(b) References in this section to an individual being resident in the State for a year of assessment shall be construed as references to an individual—

(i) who is resident in the State for the year of assessment, and

(ii) who could be taxed in the State for that year in respect of gains on a disposal, on each day of that year, of his or her relevant assets, if such a disposal were made by the individual on that day and gains accrued on the disposal.

(c) References in this section to an individual being not resident in the State for a year of assessment shall be construed as references to an individual who could not be taxed in the State for that year in respect of gains on a disposal in that year, or part of that year, of his or her relevant assets, or part of those assets, if the individual had made such a disposal in that year, or, as the case may be, that part of that year, and gains accrued on the disposal.

(2) This section applies to an individual where—

(a)  the individual has relevant assets,

(b)  the individual is resident in the State for a year of assessment (in this section referred to as the ‘year of return’),

(c)  the individual was not resident in the State for one or more years of assessment immediately preceding the year of his or her return; but there is a year of assessment before the year of return for which the individual was resident in the State and, at any time during that year, the individual was domiciled in the State, and

(d)  there are not more than 5 years of assessment falling between the year of his or her departure and the year of his or her return.

(3) Where an individual to whom this section applies, disposes of his or her relevant assets or any part of them (as the case may be) in one or more intervening years, the individual shall, for the purposes of the Capital Gains Tax Acts, be deemed to have disposed of and immediately reacquired, the relevant assets or that part of them (as the case may be), on the last day of the year of his or her departure, for a consideration equal to their market value on that day.

(4) Where by virtue of subsection (3), an individual is chargeable to capital gains tax in respect of a deemed disposal of his or her relevant assets or any part of them (as the case may be), credit shall be allowed against such tax in respect of tax (in this section referred to as ‘foreign tax’) payable on the subsequent disposal by the individual of those relevant assets or that part of them (as the case may be) under the law of any territory outside the State, the government of which has entered into arrangements having the force of law by virtue of section 826, and the amount of such credit—

(a) shall be calculated having regard to the provisions of Schedule 24, and

(b) notwithstanding those provisions, shall not exceed the amount by which capital gains tax payable by the individual would be reduced if the individual had not been deemed to have disposed of relevant assets or that part of them (as the case may be).

(5) Where by virtue of subsection (3) a chargeable gain accrues to an individual, the provisions of Part 41 shall apply in relation to the chargeable gain, as if the year of his or her departure were the year of his or her return.”.

(2) (a) Subject to paragraph (b), subsection (1) applies as respects an individual who ceases to be resident in the State for the year of assessment 2003, or a subsequent year of assessment.

(b) Subsection (1) does not apply as respects an individual who before 24 February 2003 ceases to be resident in the State for the year of assessment 2003, but who would not have so ceased, if paragraph (c) (ii) had not been enacted.

(c) For the purposes of paragraphs (a) and (b), an individual is resident in the State for a year of assessment so long as he or she—

(i) is resident in the State for the year of assessment, and

(ii) could be taxed in the State for that year in respect of gains on a disposal, on each day of that year, of his or her relevant assets, if such a disposal were made by the individual on that day and gains accrued on the disposal.

Amendment of Chapter 1 (assets and acquisition and disposal of assets) of Part 19 of Principal Act.

70. —(1) The Principal Act is amended in Chapter 1 of Part 19 by inserting after section 541A the following section:

“Restrictive covenants.

541B.—(1) Where—

(a) a person gives an undertaking (whether absolute or qualified and whether legally valid or not), the tenor or effect of which is to restrict the person as to the person's conduct or activities,

(b) in respect of the giving of that undertaking by the person, or of the total or partial fulfilment of that undertaking by the person, any sum is paid either to the person or to any other person, and

(c) that sum is neither—

(i) treated, for the purposes of the Tax Acts, as profits or gains chargeable to tax under Schedule D or Schedule E, nor

(ii) treated as consideration for the disposal of an asset for the purposes of the Capital Gains Tax Acts,

the amount of the sum shall be deemed for the purposes of the Capital Gains Tax Acts to be the amount of a chargeable gain accruing to the person to whom it is paid (for the year of assessment in which it is paid) on the disposal of a chargeable asset.

(2) Where valuable consideration otherwise than in the form of money is given in respect of the giving of, or the total or partial fulfilment of, any undertaking, subsection (1) applies as if a sum had instead been paid equal to the value of that consideration.”.

(2) This section applies as respects the giving of an undertaking by a person on or after 6 February 2003, the tenor or effect of which is to restrict the person as to the person's conduct or activities.

Amendment of section 980 (deduction from consideration on disposal of certain assets) of Principal Act.

71. —(1) Section 980 of the Principal Act is amended by substituting the following for subsection (8):

“(8) (a) A person chargeable to capital gains tax on the disposal of an asset to which this section applies, or another person (in this section referred to as an ‘agent’) acting under the authority of such person, may apply to the inspector for a certificate that tax should not be deducted from the consideration for the disposal of the asset and that the person acquiring the asset should not be required to give notice to the Revenue Commissioners in accordance with subsection (9)(a).

(b) If the inspector is satisfied that the person making the application is either the person making the disposal, or an agent, and that—

(i) the person making the disposal is resident in the State,

(ii) no amount of capital gains tax is payable in respect of the disposal, or

(iii) the capital gains tax chargeable for the year of assessment for which the person making the disposal is chargeable in respect of the disposal of the asset and the tax chargeable on any gain accruing in any earlier year of assessment (not being a year ending earlier than the 6th day of April, 1974) on a previous disposal of the asset has been paid,

the inspector shall issue the certificate to the person making the disposal or, as the case may be, the agent, and shall issue a copy of the certificate to the person acquiring the asset.

(c) Where an application is made under this subsection by an agent, it must include the name and address of the person making the disposal and where such person is resident in the State, that person's tax reference number (within the meaning of section 885).”.

(2) This section applies as respects applications made on or after the date of the passing of this Act.

Amendment of Schedule 15 (list of bodies for the purposes of section 610) to Principal Act.

72. —Schedule 15 to the Principal Act is amended in Part 1—

(a) in paragraph 3 by substituting “section 213 or where the gain is applied solely for the purposes of its registered trade union activities.” for “section 213.”, and

(b) by adding the following after paragraph 34:

“35. National Development Finance Agency.

36. Tourism Ireland Limited.

37. An approved body (within the meaning of section 235(1)) to the extent that its income is exempt from income tax or, as the case may be, corporation tax.

38. Any body established by statute for the principal purpose of promoting games or sports and any company wholly owned by such a body, where the gain is applied solely for that purpose.”.

1OJ No. L.215, of 30.7.92, p.91.

2OJ No. L.160, of 26.6.99, p.80.