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6 2006

FINANCE ACT 2006

PART 5

Capital Acquisitions Tax

Interpretation (Part 5).

112 .— In this Part “Principal Act” means the Capital Acquisitions Tax Consolidation Act 2003 .

Amendment of section 6 (taxable gift) of Principal Act.

113 .— (1) Section 6 of the Principal Act is amended in subsection (5) by substituting the following for paragraph (b):

“(b) For the purposes of subsection (2)(d), so much of the market value of any share in a private company incorporated outside the State (which after taking the gift is a company controlled by the donee) as is attributable, directly or indirectly, to property situate in the State at the date of the gift shall be deemed to be a sum situate in the State.”.

(2) This section shall apply to gifts taken on or after 2 February 2006.

Amendment of section 11 (taxable inheritance) of Principal Act.

114 .— (1) Section 11 of the Principal Act is amended in subsection (5) by substituting the following for paragraph (b):

“(b) For the purposes of subsection (2)(c), so much of the market value of any share in a private company incorporated outside the State (which after taking the inheritance is a company controlled by the successor) as is attributable, directly or indirectly, to property situate in the State at the date of the inheritance shall be deemed to be a sum situate in the State.”.

(2) This section shall apply to inheritances taken on or after 2 February 2006.

Amendment of section 77 (exemption of heritage property) of Principal Act.

115 .— Section 77 of the Principal Act is amended in subsection (3) by inserting “the Trust (within the meaning of section 1003A of the Taxes Consolidation Act 1997 ),” after “the Commissioners of Public Works in Ireland,”.

Amendment of Chapter 3 (annual levy on discretionary trusts) of Part 3 of Principal Act.

116 .— (1) Chapter 3 of Part 3 of the Principal Act is amended—

(a) in section 19 by substituting the following for the definition of “chargeable date”:

“ ‘chargeable date’, in relation to any year, means—

(a) in respect of the year 2006, 5 April and 31 December in that year, and

(b) in respect of the year 2007 and subsequent years, 31 December in the year concerned;”,

(b) by substituting the following for section 23:

“Computation of tax.

23.— (1) Subject to subsection (2), the tax chargeable on the taxable value of a taxable inheritance which is charged to tax by reason of section 20 is computed at the rate of one per cent of that taxable value.

(2) The tax chargeable on the chargeable date that is 31 December 2006 shall be an amount equal to 73.97 per cent of the tax chargeable by virtue of subsection (1).”,

and

(c) in section 24 by inserting the following after subsection (1):

“(1A) Where the market value of property is on a valuation date determined in accordance with subsection (1) and that valuation date is 5 April 2006, then that market value as so determined shall be treated as the market value of the property on the valuation date that is 31 December 2006.”.

(2) This section shall apply as respects the year 2006 and subsequent years.

Discretionary trusts: returns.

117 .— (1) The Principal Act is amended—

(a) in section 21—

(i) by deleting paragraph (e), and

(ii) in paragraph (f) by substituting “section 50 and section 81 and Schedule 2” for “section 46(2), (3), (4) and (5) and sections 50, 54, 56 and 81 and Schedule 2”,

(b) in section 46(2) by substituting “Any person who is primarily accountable for the payment of tax by virtue of paragraph (c) of section 16, paragraph (c) of section 21, or section 45(1),” for “Subject to paragraph (e) of section 21, any person who is primarily accountable for the payment of tax by virtue of section 45(1), or by virtue of paragraph (c) of section 16”,

(c) in section 46(3) by substituting “Subsection (2)(c) (other than in respect of tax arising by reason of section 20)” for “Subsection (2)(c)”,

(d) in section 46(4) by substituting “section 15 or 20” for “section 15”,

(e) in section 46(15) by substituting “a person who is resident or ordinarily resident in the State” for “a person who is living and domiciled in the State”,

(f) in section 46 by inserting the following after subsection (15):

“(16) For the purposes of subsection (15), a person who is not domiciled in the State at the date of the disposition is treated as not resident and not ordinarily resident in the State on that date unless—

(a) that person has been resident in the State for the 5 consecutive years of assessment immediately preceding the year of assessment in which that date falls, and

(b) that person is either resident or ordinarily resident in the State on that date.”,

(g) in section 54(1) by substituting “the tax due and payable (other than tax arising by reason of section 20)” for “the tax due and payable”, and

(h) in section 56 by substituting “inheritance tax (other than tax arising by reason of section 20)” for “inheritance tax”.

(2) This section shall apply as respects the year 2006 and subsequent years.

Amendment of Part 10 (reliefs) of Principal Act.

118 .— (1) Part 10 of the Principal Act is amended—

(a) in section 89(1)—

(i) by substituting the following for the definition of “agricultural property”:

“ ‘agricultural property’ means—

(a) agricultural land, pasture and woodland situate in the State and crops, trees and underwood growing on such land and also includes such farm buildings, farm houses and mansion houses (together with the lands occupied with such farm buildings, farm houses and mansion houses) as are of a character appropriate to the property, and farm machinery, livestock and bloodstock on such property, and

(b) a payment entitlement (within the meaning of Council Regulation (EC) No. 1782/2003 of 29 September 2003 23 );”,

and

(ii) in the definition of “farmer” by deleting “who is domiciled in the State and”,

and

(b) by inserting the following Chapter after Chapter 2:

“CHAPTER 2A

Clawback of agricultural relief or business relief: development land

Agricultural and business property: development land.

102A.— (1) In this section—

‘agricultural property’ has the meaning assigned to it by section 89;

‘current use value’—

(a) in relation to land at any particular time, means the amount which would be the market value of the land at that time if the market value were calculated on the assumption that it was at that time and would remain unlawful to carry out any development (within the meaning of section 3 of the Planning and Development Act 2000 ) in relation to the land other than development of a minor nature, and

(b) in relation to shares in a company at any particular time, means the amount which would be the value of the shares at that time if the market value were calculated on the same assumption, in relation to the land from which the shares derive all or part of their value, as is mentioned in paragraph (a);

‘development land’ means land in the State, the market value of which at the date of a gift or inheritance exceeds the current use value of that land at that date, and includes shares deriving their value in whole or in part from such land;

‘development of a minor nature’ means development (not being development by a local authority or statutory undertaker within the meaning of section 2 of the Planning and Development Act 2000 ) which, under or by virtue of section 4 of that Act, is exempted development for the purposes of that Act;

‘relevant business property’ shall be construed in accordance with section 93;

‘valuation date’ shall be construed in accordance with section 30.

(2) Where—

(a) relief has been granted by virtue of section 89(2) or section 92 in respect of a gift or inheritance of agricultural property or, as the case may be, relevant business property,

(b) the property is comprised, in whole or in part, of development land, and

(c) the development land is disposed of in whole or in part by the donee or successor at any time in the period commencing 6 years after the date of the gift or inheritance and ending 10 years after that date,

then tax shall be re-computed at the valuation date of the gift or inheritance as if the amount by which the market value of the land disposed of exceeds its current use value at that date was the value of property which was not—

(i) agricultural property, or

(ii) relevant business property,

as the case may be, and tax shall be payable accordingly.”.

(2) (a) Subsection (1)(a)(i) is deemed to have applied as regards gifts and inheritances of agricultural property taken on or after 1 January 2005.

(b) Subsections (1)(a)(ii) and (1)(b) shall apply to gifts and inheritances taken on or after 2 February 2006.

Amendment of section 104 (allowance for capital gains tax on the same event) of Principal Act.

119 .— (1) Section 104 of the Principal Act is amended by inserting the following after subsection (2):

“(3) The deduction by virtue of subsection (1) of capital gains tax chargeable on the disposal of an asset against gift tax or inheritance tax shall cease to apply to the extent that the asset is disposed of within 2 years after the date of the gift or, as the case may be, the date of the inheritance.”.

(2) This section shall apply to gifts and inheritances taken on or after 21 February 2006.

23OJ No. L270 of 21.10.2003, p.1