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11 2007

Finance Act 2007

Chapter 4

Corporation Tax

Amendment of section 766 (tax credit for research and development expenditure) of Principal Act.

46 .— (1) Section 766 of the Principal Act is amended in subsection (1)—

(a) in paragraph (a), in paragraph (i) of the definition of “ threshold amount ” by substituting “1 January 2010” for “1 January 2007”, and

(b) in paragraph (b)—

(i) by substituting “activities;” for “activities.” in subparagraph (vii), and

(ii) by inserting the following after subparagraph (vii):

“(viii) where in any period a company—

(I) incurs expenditure on research and development, and

(II) pays a sum (not being a sum referred to in subparagraph (vii)(II)) to a person, other than to a person who is connected (within the meaning of section 10) with the company, in order for that person to carry on research and development activities, and that person does not claim relief under this section in respect of such expenditure on research and development,

so much of the sum so paid as does not exceed 10 per cent of that expenditure incurred by the company on research and development shall be treated as if it were expenditure incurred by the company on the carrying on by it of research and development activities.”.

(2) (a) Subject to paragraph (b), this section applies for accounting periods commencing on or after 1 January 2007.

(b) Subsection (1)(b) applies as respects accounting periods ending on or after 1 January 2007 in respect of expenditure incurred on or after 1 January 2007.

Amendment of section 958 (date for payment of tax) of Principal Act.

47 .— (1) Section 958 of the Principal Act is amended—

(a) in subsection (1)(a) in the definition of “relevant limit” by substituting “€150,000” for “€50,000”,

(b) in subsection (2B) by inserting the following after paragraph (b):

“(c) Where in relation to a chargeable period which is an accounting period of a company—

(i) the tax payable by a chargeable person (being a company) for the chargeable period does not exceed the relevant limit, and

(ii) the chargeable period commenced on the company coming within the charge to corporation tax,

then the preliminary tax appropriate to the chargeable period shall be taken to be nil and subsections (4C) and (4E) shall not apply.”,

(c) in subsection (4C)—

(i) by substituting “Subject to subsections (2B)(c), (4E) and (11)” for “Subject to subsection (4E)”, and

(ii) in paragraph (b)(ii) by inserting “or is not a company with a preliminary tax liability of nil by virtue of subsection (2B)(c),” after “accounting period,”,

and

(d) by inserting the following after subsection (10):

“(11) (a) In this subsection—

‘ balance ’ means the amount represented by the formula A — B, where—

A is the amount of preliminary tax paid in accordance with subsection (2B) by the surrendering company for the relevant period, and

B is 90 per cent of the tax payable by the surrendering company for that relevant period;

‘ relevant balance ’ means that part of a balance that is specified in a notice given in accordance with paragraph (c).

(b) This subsection applies where—

(i) a chargeable person being a company (in this subsection referred to as the ‘surrendering company’) which is a member of a group pays an amount of preliminary tax for a chargeable period (in this subsection referred to as the ‘relevant period’) in accordance with subsection (2B), being an amount which exceeds 90 per cent of the tax payable by that surrendering company for the relevant period,

(ii) another chargeable person being a company (in this subsection referred to as the ‘claimant company’) which is a member of the group pays an amount of preliminary tax for a chargeable period in accordance with subsection (2B), being an amount which is less than 90 per cent of the tax payable by that claimant company for the chargeable period,

(iii) the chargeable period referred to in subparagraph (ii) coincides with the relevant period, and

(iv) the claimant company is not a small company in relation to the relevant period.

(c) Where this subsection applies the 2 companies may, at any time on or before the specified return date for the chargeable period of the surrendering company, jointly give notice to the Collector-General in such form as the Revenue Commissioners may require that paragraph (d) is to have effect in relation to the relevant balance specified in the notice.

(d) Where this paragraph has effect in relation to any relevant balance—

(i) an additional amount of preliminary tax equal to the relevant balance shall be deemed for the purposes of subsection (4C)(b)(ii) to have been paid by the claimant company on the due date for the payment of preliminary tax of that company for the relevant period if 100 per cent of the tax payable by the claimant company for the relevant period, disregarding this subparagraph, is paid on or before the specified return date for the relevant period, and

(ii) the surrendering company shall for the purposes of this subsection be treated as having surrendered the relevant balance to the claimant company and that relevant balance shall not be available for use by any other company under this subsection.

(e) A payment for a relevant balance shall not—

(i) be taken into account in computing profits or losses of either company for corporation tax purposes, and

(ii) be regarded as a distribution or a charge on income for any of the purposes of the Corporation Tax Acts,

and, in this paragraph, ‘payment for a relevant balance’ means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered in accordance with this subsection, being a payment not exceeding that amount.

(f) (i) This subsection shall not affect the liability to pay corporation tax of any company to which the subsection relates.

(ii) Where this subsection applies, the amount on which, but for this subsection, the claimant company is liable to pay interest in accordance with section 1080 shall be reduced by any relevant balance deemed to have been paid by that company in accordance with paragraph (d)(i).

(g) For the purposes of this subsection, 2 companies are members of the same group if and only if they would be such members for the purposes of section 411.”.

(2) (a) Paragraphs (a), (b) and (c) have effect as respects accounting periods in respect of which preliminary tax is payable after 6 December 2006.

(b) Paragraph (d) has effect for accounting periods ending on or after 1 February 2007.

Group relief for certain foreign losses.

48 .— (1) Chapter 5 of Part 12 of the Principal Act is amended—

(a) in section 411—

(i) by substituting the following for subsection (2):

“(2) Subject to subsection (2A), relief for—

(a) trading losses and other amounts eligible for relief from corporation tax, and

(b) trading losses incurred by non-resident companies and other amounts not otherwise eligible for relief from corporation tax,

may in accordance with this Chapter be surrendered by a company (in this Chapter referred to as the ‘surrendering company’) which is a member of a group of companies and, on the making of a claim by another company (in this Chapter referred to as the ‘claimant company’) which is a member of the same group, may be allowed to the claimant company by means of a relief from corporation tax (in this Chapter referred to as ‘group relief ’).”,

and

(ii) by inserting the following after subsection (2):

“(2A) Where the trading losses or other amounts are of the type referred to in paragraph (b) of subsection (2), group relief shall only be available in accordance with this Chapter where—

(a) the surrendering company is—

(i) resident in a relevant Member State, other than the State, and

(ii) a 75 per cent subsidiary of the claimant company,

and

(b) the claimant company is resident in the State.”,

and

(b) by inserting the following after section 420B:

“Group relief: relief for certain losses of non-resident companies.

420C.— (1) In this section—

‘ foreign loss ’ means a loss or other amount eligible for group relief in accordance with section 411(2A);

‘ relevant foreign loss ’ means the amount of a foreign loss that—

(a) corresponds to an amount of a kind that, for the purposes of section 420 or 420A, could be available for surrender by means of group relief by a company resident in the State,

(b) is calculated in accordance with the applicable rules under the law of the surrendering state for determining the amount of loss or other amount eligible for relief from tax in that state,

(c) is not attributable to a trade carried on in the State through a branch or agency,

(d) is not otherwise available for surrender, relief or offset in accordance with any provisions of the Tax Acts,

(e) is a trapped loss within the meaning of subsection (2), and

(f) is not available for surrender, relief or offset under the law of any relevant Member State, other than the State or the surrendering state;

‘ surrendering state ’ means the relevant Member State in which the surrendering company referred to in section 411(2A) is resident for the purposes of tax.

(2) For the purposes of this section a ‘ trapped loss ’, in relation to an accounting period of a company, means a foreign loss that under the law of the surrendering state cannot be (or, if a timely claim for such set off or relief had been made, could not have been) set off or otherwise relieved for the purposes of tax against profits (of whatever description) of—

(a) that accounting period of the company,

(b) any preceding accounting period of the company,

(c) any later accounting period of the company, and

(d) any period of any other company resident in the surrendering state.

(3) (a) Subject to subsection (4), where in any accounting period the surrendering company has incurred a relevant foreign loss, then the amount of the loss shall be treated (with any necessary modifications) for the purposes of sections 420A and 420B as a relevant trading loss incurred by the surrendering company in the accounting period.

(b) Relief for a relevant foreign loss shall be given after relief for any losses (including relief for losses under section 397) which are not relevant foreign losses.

(4) This section does not apply where the relevant foreign loss arose as the result of any arrangements whatsoever the main purpose, or one of the main purposes, of which was to secure that the loss would qualify for group relief.

(5) Subject to subsection (6), a claim under subsection (3) shall be made within 2 years from the end of the accounting period in which the loss is incurred.

(6) Where—

(a) at any time relief under subsection (3) may not be given in respect of a loss by virtue only of paragraph (c) of subsection (2), and

(b) at any later time the claimant company proves to the satisfaction of the Revenue Commissioners that the condition in subsection (2)(c) is satisfied in relation to the loss at that time,

the claimant company may make a claim for relief under subsection (3) in respect of the loss and any such claim shall be made within 2 years from the time at which the condition in subsection (2)(c) is first met.

(7) For the purpose of giving effect to this section ‘accounting period’, in relation to a surrendering company, means a period which would be an accounting period of the company if the company became resident in the State, and accordingly within the charge to corporation tax, at the time when it became a 75 per cent subsidiary referred to in section 411(2A)(a)(ii).

(8) The inspector may by notice in writing require a company claiming relief from tax by virtue of this section to furnish him or her with such information or particulars as may be necessary for the purpose of giving effect to this section.”.

(2) (a) Subject to paragraph (b), subsection (1) is deemed to have applied as respects an accounting period ending on or after 1 January 2006.

(b) For the purposes of this subsection, where an accounting period of a company begins before 1 January 2006 and ends on or after that date, it shall be divided into two parts, one beginning on the date on which the accounting period begins and ending on 31 December 2005 and the other beginning on 1 January 2006 and ending on the date on which the accounting period ends, and both parts shall be treated as if they were separate accounting periods of the company.

Amendment of section 79B (matching of foreign currency assets with certain foreign currency share capital) of Principal Act.

49 .— (1) Section 79B of the Principal Act is amended—

(a) in subsection (1)(a)—

(i) in the definition of “foreign currency asset” by substituting “functional currency of the company” for “currency of the State”,

(ii) by inserting the following after the definition of “foreign currency asset”:

“ ‘ functional currency’ has the same meaning as in section 402;”,

and

(iii) in the definition of “relevant foreign currency liability” by substituting “functional currency of the company” for “currency of the State”,

(b) in subsection (2) by substituting “functional currency of the company” for “currency of the State”, and

(c) in subsection (3)—

(i) by substituting “Where, in relation to an accounting period of a company, a foreign currency asset” for “Where in an accounting period a company disposes of a foreign currency asset which”, and

(ii) by inserting “for that accounting period” after “income of the company”.

(2) This section is deemed to have applied as on and from 1 January 2006.

Amendment of section 452 (application of section 130 to certain interest) of Principal Act.

50 .— (1) Section 452 of the Principal Act is amended—

(a) by inserting the following after subsection (3):

“(3A) (a) This paragraph shall apply to so much of any yearly interest as—

(i) is a distribution by virtue only of section 130(2)(d)(iv),

(ii) is payable by a company in the ordinary course of a trade carried on by that company and would, but for section 130(2)(d)(iv), be deductible as a trading expense in computing the amount of the company’s income from the trade, and

(iii) is not interest to which subsection (2)(a) applies.

(b) Where a company proves that paragraph (a) applies to any interest payable by it for an accounting period and elects to have that interest treated as not being a distribution for the purposes of section 130(2)(d)(iv), then section 130(2)(d)(iv) shall not apply to that interest.”,

and

(b) in subsection (4), by substituting “subsection (2)(b), (3)(b) or (3A)(b)” for “subsection (2)(b) or (3)(b)”.

(2) This section applies as respects interest paid on or after 1 February 2007.

Amendment of section 486B (relief for investment in renewable energy generation) of Principal Act.

51 .— (1) Section 486B of the Principal Act is amended in subsection (1) by substituting “31 December 2011” for “31 December 2006” in the definition of “qualifying period”.

(2) Subsection (1) comes into operation on the making of an order to that effect by the Minister for Finance.