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39 1997

TAXES CONSOLIDATION ACT, 1997

PART 43

Partnerships and European Economic Interest Groupings (EEIG)

Interpretation ( Part 43 ).

[ITA67 s69; FA75 s33(2) and Sch1 PtII]

1007. —(1) In this Part—

annual payment” means any payment from which, apart from any insufficiency of profits or gains of the persons making it, income tax is deductible under section 237 ;

balancing charge” means a balancing charge under Part 9 or Chapter 1 of Part 29 , as the case may be;

basis period”, in relation to a year of assessment, means the period on the profits or gains of which income tax for that year is to be finally computed under Case I of Schedule D in respect of the trade in question or, where by virtue of the Income Tax Acts the profits or gains of any other period are to be taken to be the profits or gains of that period, that other period;

partnership trade” means a trade carried on by 2 or more persons in partnership;

precedent partner”, in relation to a partnership, means the partner who, being resident in the State—

(a) is first named in the partnership agreement,

(b) if there is no agreement, is named singly or with precedence over the other partners in the usual name of the firm, or

(c) is the precedent acting partner, if the person named with precedence is not an acting partner,

and any reference to precedent partner shall, in a case in which no partner is resident in the State, be construed as a reference to the agent, manager or factor of the firm resident in the State;

relevant period”, in relation to a partnership trade, means a continuous period the whole or part of which is after the 5th day of April, 1965—

(a) beginning at a time when either—

(i) the trade was not carried on immediately before that time by 2 or more persons in partnership, or

(ii) none of the persons then carrying on the trade in partnership was one of the persons who immediately before that time carried on the trade in partnership, and

(b) continuing only so long as there has not occurred a time when either—

(i) the trade is not carried on immediately after that time by 2 or more persons in partnership, or

(ii) none of the persons then carrying on the trade in partnership is one of the persons who immediately after that time carry on the trade in partnership,

subject to the condition that, in the case of any such period which apart from this condition would have begun before the 6th day of April, 1965, “the relevant period” shall be taken as having begun at the time, or at the last of 2 or more times, at which, a change having occurred in the partnership of persons then engaged in carrying on the trade, the persons so engaged immediately after the time were to be treated for the purposes of income tax as having set up or commenced the trade at that time.

(2) In relation to a case in which a partnership trade is from time to time during a relevant period carried on by 2 or more different partnerships of persons, any reference in this Part to the partnership shall, unless the context otherwise requires, be construed as including a reference to any partnership of persons by whom the trade has been carried on since the beginning of the relevant period and any reference to a partner shall be construed correspondingly.

(3) This Part shall, with any necessary modifications, apply in relation to professions as it applies in relation to trades.

Separate assessment of partners.

[ITA67 s71]

1008. —(1) In the case of a partnership trade, the Income Tax Acts shall, subject to this Part, apply in relation to any partner in the partnership as if for any relevant period—

(a) any profits or gains arising to that partner from the trade and any loss sustained by that partner in the trade were respectively profits or gains of, and loss sustained in, a trade (in this Part referred to as a “several trade”) carried on solely by that partner, being a trade—

(i) set up or commenced at the beginning of the relevant period, or if that partner commenced to be engaged in carrying on the partnership trade at some time in the relevant period other than the beginning of that period, at the time when that partner so commenced, and

(ii) when that partner ceases to be engaged in carrying on the partnership trade either during the relevant period or at the end of that period, permanently discontinued at the time when that partner so ceases, and

(b) that partner had paid the part that partner was liable to bear of any annual payment paid by the partnership.

(2) (a) For any year or period within the relevant period the amount of the profits or gains arising to any partner from that partner's several trade, or the amount of loss sustained by that partner in that trade, shall for the purposes of subsection (1) be taken to be so much of the full amount of the profits or gains of the partnership trade or, as the case may be, of the full amount of the loss sustained in the partnership trade as would fall to that partner's share on an apportionment of those profits or gains or, as the case may be, of that loss made in accordance with the terms of the partnership agreement as to the sharing of profits and losses.

(b) Where the year or period (in this paragraph referred to as “the period of computation”) for which the profits or gains of, or the loss sustained in, the several trade of a partner is to be computed under this subsection is or is part of a year or period for which an account of the partnership trade has been made up, sections 65 and 107 shall apply in relation to the partner as if an account of that partner's several trade had been made up for the period of computation.

(3) (a) For the purposes of subsection (2) and subject to paragraph (b), the full amount of the profits or gains of the partnership trade for any year or period, or the full amount of the loss sustained in such trade in any year or period, shall, subject to section 1012 , be determined by the inspector, and any such determination shall be made as it would have been made if the trade—

(i) had been set up or commenced at the beginning of the relevant period,

(ii) where the relevant period has come to an end, had been permanently discontinued at the end of that period, and

(iii) had at all times within the relevant period been carried on by one and the same person and everything done in the carrying on of the trade to or by the persons by whom it was in fact carried on had been done to or by that person.

(b) In a case in which the relevant period began at some time before the 6th day of April, 1965, and the trade was not treated for the purposes of income tax as having been set up or commenced at that time—

(i) the relevant period shall for the purposes of this subsection be deemed to have begun at the time at which the trade was treated for the purposes of income tax as having been set up or commenced, and

(ii) any profits or gains arising to any person from the trade, or any loss sustained by that person in the trade, for any year or period within the relevant period during which that person was engaged in the trade on that person's own account shall be deemed to be profits or gains arising to that person from, or, as the case may be, a loss sustained by that person in, a partnership trade in which that person was entitled during the year or period in question to the full amount of the profits or gains arising or was liable to bear the full amount of the loss.

(4) Where the shares to which the partners are entitled in the basis period for a year of assessment do not exhaust the profits of the trade carried on by the partnership for that period, an assessment shall be made under Case IV of Schedule D on the precedent partner in respect of the unexhausted portion of the profits and the precedent partner shall, if and when such balance is to be paid to a person entitled to such balance, be entitled to deduct from such balance any amounts of tax which have been assessed on and paid by him or her and he or she shall be acquitted and discharged of any such amounts.

(5) This section shall not cause any income which apart from this section is not earned income to become earned income.

Partnerships involving companies.

[CTA76 s32 (apart from proviso to (3) (c))]

1009. —(1) In this section, profits shall not be taken as including chargeable gains.

(2) Subject to this section, subsections (1),(2) (a) and (3) of section 1008 shall apply for the purposes of corporation tax as they apply for the purposes of income tax.

(3) Where the whole or part of an accounting period of a company is or is part of a period for which an account of a partnership trade has been made up, any necessary apportionment shall be made in computing the profits from or loss sustained in the company's several trade for the accounting period of the company.

(4) (a) In this subsection, “the relevant amount” means—

(i) where the year of assessment and the accounting period coincide, the whole amount of the appropriate share of the joint allowance or, as the case may be, the whole amount of the appropriate share of the joint charge, and

(ii) where part only of the year of assessment is within the accounting period, such portion of the appropriate share of the joint allowance or, as the case may be, such portion of the appropriate share of the joint charge as is apportioned to that part of the year of assessment which falls within the accounting period.

(b) Where a capital allowance equal to an appropriate share of a joint allowance would be made, if section 21 (2) had not been enacted, in charging to income tax the profits of a company's several trade for any year of assessment, the relevant amount shall for corporation tax purposes be treated as a trading expense of the company's several trade for any accounting period of the company any part of which falls within that year of assessment.

(c) Where a balancing charge equal to an appropriate share of a joint charge would be made, if section 21 (2) had not been enacted, in charging to income tax the profits of a company's several trade for any year of assessment, the relevant amount shall for corporation tax purposes be treated as a trading receipt of the company's several trade for any accounting period of the company any part of which falls within that year of assessment.

(d) Notwithstanding section 1010 (8), any reference in this subsection to a joint allowance for a year of assessment shall not include a reference to any capital allowance which is or could be brought forward from a previous year of assessment.

(5) Where under this section an amount is to be apportioned to—

(a) a part of an accounting period of a company,

(b) a part of a period for which an account of a partnership trade has been made up, or

(c) a part of a year of assessment,

the apportionment shall be made by reference to the number of months or fractions of months contained in that part and in the remainder of that accounting period, period or year, as the case may be.

Capital allowances and balancing charges in partnership cases.

[ITA67 s72; FA80 s17(2)]

1010. —(1) The provisions of the Income Tax Acts relating to the making of capital allowances and balancing charges in charging the profits or gains of a trade shall, in relation to the several trade of a partner in a partnership, apply subject to this section.

(2) Where for any year of assessment a claim has been made as provided by subsection (9) by the precedent partner for the time being of any partnership, there shall be made to any partner in the partnership in charging the profits or gains of that partner's several trade a capital allowance in respect of any expenditure or property equal to that partner's appropriate share of any capital allowance for that year, excluding any amount carried forward from an earlier year, (in this section referred to as a “joint allowance”) which, apart from any insufficiency of profits or gains, might have been made in respect of that expenditure or property in charging the profits or gains of the partnership trade if the Income Tax Acts had provided that those profits should be charged by joint assessment on the persons carrying on the trade in the year of assessment as if—

(a) those persons had at all times been carrying on the trade and everything done to or by their predecessors in, or in relation to, the carrying on of the trade had been done to or by them, and

(b) the trade had been set up or commenced at the beginning of the relevant period and, where the relevant period has come to an end, had been permanently discontinued at the end of that period.

(3) There shall be made for any year of assessment on any partner in a partnership in charging the profits or gains of that partner's several trade a balancing charge equal to that partner's appropriate share of any balancing charge (in this section referred to as a “joint charge”) which would have been made for that year in charging the profits or gains of the partnership trade if the Income Tax Acts had provided that those profits should be charged as specified in subsection (2).

(4) Where at the end of the relevant period a person or a partnership of persons succeeds to a partnership trade and any property which immediately before the succession takes place was in use for the purposes of the partnership trade and, without being sold, is immediately after the succession takes place in use for the purposes of the trade carried on by the successor or successors, section 313 (1) shall apply as it applies where by virtue of section 69 a trade is to be treated as discontinued.

(5) Where for a partnership trade the relevant period began at some time before the 6th day of April, 1965, and the trade was not treated for the purposes of income tax as having been set up or commenced at that time, the relevant period shall for the purposes of subsections (2) and (3) be deemed to have begun at the time at which the trade was treated for the purposes of income tax as having been set up or commenced.

(6) (a) In relation to any partnership trade, the total amount of all joint allowances for any year of assessment and the total amount of all joint charges for that year shall, subject to section 1012 , be determined by the inspector.

(b) Where after a determination has been made under paragraph (a) the inspector becomes aware of any facts or events by reference to which the determination is in his or her opinion incorrect, the inspector may from time to time and as often as appears to him or her to be necessary make a revised determination, and any such revised determination shall supersede any earlier determination and any such additional assessments or repayments of tax shall be made as may be necessary.

(7) (a) In this subsection, “trading period” means, where the relevant period begins or ends during the year of assessment for which the joint allowance or joint charge is computed, the part of that year of assessment which falls within the relevant period or, in any other case, that year of assessment.

(b) Subject to paragraph (c), for any year of assessment the partners' appropriate shares of a joint allowance or of a joint charge shall be determined by apportioning the full amount of that allowance or charge between the partners on the same basis as a like amount of profits arising in the trading period from the partnership trade, and accruing from day to day over that period, would be apportioned in accordance with the terms of the partnership if any salary, interest on capital or other sum to which any partner was entitled without regard to the amount of the profits arising from the partnership trade had already been provided for.

(c) Where for any year of assessment all the partners (any deceased partner being represented by his or her legal representatives) allege, by notice in writing signed by them and sent to the inspector within 24 months after the end of the year of assessment, that hardship is caused to one or more partners by the apportionment of a joint allowance or joint charge on the basis set out in paragraph (b), the Revenue Commissioners may, on being satisfied that hardship has been caused, give such relief as in their opinion is just by making a new apportionment of the joint allowance or joint charge, and any such new apportionment shall for the purposes of the Income Tax Acts apply as if it were an apportionment made under paragraph (b), and such additional assessments or repayments of tax shall be made as may be necessary.

(8) (a) In this subsection, “capital allowance brought forward” means—

(i) any capital allowance or part of a capital allowance due to be made to the partnership for the year 1964-75 or any earlier year of assessment which might, if Part VIII of the Finance Act, 1965, had not been enacted, have been carried forward and made as a deduction in charging the profits or gains of the partnership trade for the year 1965-76, and

(ii) any capital allowance or part of a capital allowance due to be made to a partner for the year 1965-76 or a later year of assessment which but for this subsection might have been carried forward and made as a deduction in charging the profits or gains of the several trade of the partner for a year of assessment subsequent to that for which the capital allowance was computed.

(b) For any year of assessment the aggregate amount of all capital allowances brought forward shall for the purposes of making the assessments on the partners be deemed to be a joint allowance for that year, and subsection (7) shall apply accordingly.

(9) In relation to a partnership trade—

(a) any claim for a joint allowance for any year of assessment shall be made by the precedent partner as if it were a claim for a capital allowance to be made to that partner and shall be included in the return delivered by that partner under section 880 in relation to that year of assessment, and

(b) any claim for a joint allowance shall be deemed to be a claim by every partner for a capital allowance to be made to such partner, being a capital allowance equal to such partner's appropriate share of that/joint allowance.

Provision as to charges under section 757 .

[ITA67 s74]

1011. —(1) Where for any year of assessment a charge under section 757 (in this section referred to as a “joint charge”) would have been made in charging the profits or gains of a partnership trade if the Income Tax Acts had provided that those profits or gains should be charged as specified in section 1010 (2), there shall be made on any partner in the partnership in charging the profits or gains of that partner's several trade a charge under section 757 equal to that partner's appropriate share of the joint charge.

(2) A partner's appropriate share of a joint charge for the purposes of subsection (1) shall be determined in the same way as the partner's appropriate share of a joint charge within the meaning of section 1010 is to be determined by virtue of subsection (7) of that section.

Modification of provisions as to appeals.

[ITA67 s73; F(MP) A68 s3(2) and Sch PtI]

1012. —(1) The inspector may give notice to the partnership concerned of any determination made by him or her under section 1008 (3) or 1010 (6) by delivering a statement in writing of that determination to the precedent partner for the time being of the partnership, and the provisions of the Income Tax Acts relating to appeals against assessments to income tax shall, with any necessary modifications, apply in relation to any determination and any notice of a determination as if they were respectively such an assessment and notice of such an assessment.

(2) Where a determination has become final and conclusive or, in the case of a determination under subsection (6) of section 1010 has become final and conclusive subject to paragraph (b) of that subsection, no question as to its correctness shall be raised on the hearing or on the rehearing of an appeal by any partner either against an assessment in respect of the profits or gains of that partner's several trade or against a determination by the inspector on a claim under section 381 .

(3) Where on any appeal mentioned in subsection (2) any question arises as to an apportionment to be made under section 1008 (2) or 1010 (7) and it appears that the question is material as respects the liability to income tax (for whatever year of assessment) of 2 or more persons, all those persons shall be notified of the time and place of the hearing and shall be entitled to appear and be heard by the Appeal Commissioners or to make representations to them in writing.

Limited partnerships.

[FA86 s46(1) to (3) and (6), FA92 s23; FA94 s29]

1013. —(1) In this section—

the aggregate amount”, in relation to a trade, means—

(a) in the case of an individual, the aggregate of amounts given or allowed to the individual at any time under any of the specified provisions—

(i) in respect of a loss sustained by him or her in the trade, or of interest paid by him or her by reason of his or her participation in the trade, in any relevant year of assessment, or

(ii) as an allowance to be made to him or her for any relevant year of assessment either in taxing the trade or by means of discharge or repayment of tax to which he or she is entitled by reason of his or her participation in the trade,

and

(b) in the case of a company, the aggregate of amounts given or allowed to the company (in this section referred to as “the partner company”) or to another company at any time under any of the specified provisions—

(i) in respect of a loss incurred by the partner company in the trade, or of charges paid by it or another company by reason of its participation in the trade, in any relevant accounting period, or

(ii) as an allowance to be made to the partner company for any relevant accounting period either in taxing the trade or by means of discharge or repayment of tax to which it is entitled by reason of its participation in the trade;

limited partner”, in relation to a trade, means—

(a) a person carrying on the trade as a limited partner in a limited partnership registered under the Limited Partnerships Act, 1907,

(b) a person carrying on the trade as a general partner in a partnership who is not entitled to take part in the management of the trade but is entitled to have the person's liabilities, or those liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade, discharged or reimbursed by some other person, or

(c) a person who carries on the trade jointly with others and, under the law of any territory outside the State, is not entitled to take part in the management of the trade and is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;

relevant accounting period” means an accounting period of the partner company which ends on or after the specified date and at any time during which it carried on the trade as a limited partner;

the relevant time” means—

(a) in the case of an individual, the end of the relevant year of assessment in which the loss is sustained or the interest is paid, or for which the allowance is to be made (except that where the individual ceased to carry on the trade during that year of assessment it is the time when he or she so ceased), and

(b) in the case of a partner company, the end of the relevant accounting period in which the loss is incurred or the charges are paid, or for which the allowance is to be made (except that where the partner company ceases to carry on the trade during that accounting period it is the time when the partner company so ceased);

relevant year of assessment” means a year of assessment which ends after the specified date and at any time during which the individual carried on the trade as a limited partner;

the specified date” means the 22nd day of May, 1985;

the specified provisions” means—

(a) in the case of an individual, sections 245 to 255 , 305 and 381 , and

(b) in the case of a company, sections 243 , 308 (4) and 396 (2) and subsections (1), (2) and (6) of section 420 .

(2) (a) Where, in the case of an individual who is a limited partner in relation to a trade, an amount may apart from this section be given or allowed under any of the specified provisions—

(i) in respect of a loss sustained by the individual in the trade, or of interest paid by him or her by reason of his or her participation in the trade, in a relevant year of assessment, or

(ii) as an allowance to be made to the individual for a relevant year of assessment either in taxing the trade or by means of discharge or repayment of tax to which he or she is entitled by reason of his or her participation in the trade,

such an amount may be given or allowed—

(I) as respects a contribution by a limited partner to the trade of the limited partnership made before the 24th day of April, 1992, otherwise than against income consisting of profits or gains arising from the trade, or

(II) as respects such a contribution made on or after the 24th day of April, 1992, only against income consisting of profits or gains arising from the trade,

and only to the extent that the amount given or allowed or, as the case may be, the aggregate amount in relation to that trade does not exceed the amount of his or her contribution to the trade at the relevant time.

(b) Where, in the case of a partner company which is a limited partner in relation to a trade, an amount may apart from this section be given or allowed under any of the specified provisions—

(i) in respect of a loss sustained by the partner company in the trade, or of charges paid by the partner company or another company by reason of its participation in the trade, in a relevant accounting period, or

(ii) as an allowance to be made to the partner company for a relevant accounting period either in taxing the trade or by means of discharge or repayment of tax to which it is entitled by reason of its participation in the trade,

such an amount may be given or allowed to the partner company—

(I) as respects a contribution by a limited partner to the trade of the limited partnership made before the 24th day of April, 1992, otherwise than against profits or gains arising from the trade, or to another company, or

(II) as respects such a contribution made on or after the 24th day of April, 1992, only against profits or gains arising from the trade,

and only to the extent that the amount given or allowed or, as the case may be, the aggregate amount in relation to that trade does not exceed the partner company's contribution to the trade at the relevant time.

(3) (a) A person's contribution to a trade at any time shall be the aggregate of—

(i) the amount which the person has contributed to the trade as capital and has not subsequently, either directly or indirectly, drawn out or received back from the partnership or from a person connected with the partnership (other than anything, in relation to expenditure which the person has incurred on behalf of the partnership trade or in providing facilities for the partnership trade, which the person is or may be entitled so to draw out or receive back at any time when the person carries on the trade as a limited partner or which the person is or may be entitled to require another person to reimburse the person), and

(ii) the amount of any profits or gains of the trade to which the person is entitled but which the person has not received in money or money's worth.

(b) A person shall for the purposes of paragraph (a) be treated as having received back an amount contributed by the person to the partnership if—

(i) the person received consideration of that amount or value for the sale of the person's interest, or any part of the person's interest, in the partnership,

(ii) the partnership or any person connected with the partnership repays that amount of a loan or an advance from the person, or

(iii) the person receives that amount or value for assigning any debt due to the person from the partnership or from any person connected with the partnership.

(4) (a) This subsection shall apply, in relation to an amount given or allowed under any of the specified provisions, as respects a contribution by a partner to the trade of the partnership made on or after the 11th day of April, 1994.

(b) For the purposes of this section, where in connection with the making of a contribution to a partnership trade by a general partner in the partnership—

(i) there exists any agreement, arrangement, scheme or understanding under which the partner is required to cease to be a partner in the partnership at any time before the partner is entitled to receive back from the partnership the full amount of the partner's contribution to the trade, or

(ii) by virtue of any agreement, arrangement, scheme or understanding—

(I) any asset owned by the partner is exempt from execution on goods or from a process or mode of enforcement of a debt of the partner or the partnership, or

(II) any other limit or restriction is placed on the creditor's entitlement to recover any such debt from the partner,

the partner shall be treated as a person who is not entitled to take part in the management of the trade but is entitled to have the person's liabilities, or the person's liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade, discharged or reimbursed by some other person.

(c) In determining whether an amount is given or allowed under any of the specified provisions as respects a contribution to a trade on or after the 11th day of April, 1994, any amount which would not otherwise have been given or allowed by virtue of this section but for a contribution to a trade on or after that date and on the basis that paragraph (a) had not been enacted shall be treated as given or allowed as respects such a contribution.

(5) (a) In determining whether an amount is given or allowed under any of the specified provisions as respects a contribution to a trade on or after the 24th day of April, 1992, any amount which would not otherwise have been given or allowed by virtue of this section but for a contribution to a trade on or after that date and on the basis that paragraphs (a) (II) and (b) (II) of subsection (2) had not been enacted shall be treated as given or allowed as respects such a contribution.

(b) Notwithstanding paragraph (a) and paragraphs (a) (II) and (b) (II) of subsection (2), this section shall apply in so far as the trade of a limited partnership consists of the management and letting of holiday cottages within the meaning of section 268 , where—

(i) a written contract for the construction of the holiday cottages was signed and construction work had commenced before the 24th day of April, 1992, and

(ii) the construction work is completed before the 6th day of April, 1993,

as if references to on or after the 24th day of April, 1992, were references to on or after the 1st day of September, 1992.

Tax treatment of profits, losses and capital gains arising from activities of a European Economic Interest Grouping (EEIG).

[FA90 s29(1), (2), (5) and (6)]

1014. —(1) In this section, “grouping” means a European Economic Interest Grouping formed on the terms, in the manner and with the effects laid down in—

(a) Council Regulation (EEC) No 2137/85 of 25 July 19851 on the European Economic Interest Grouping (EEIG), and

(b) the European Communities (European Economic Interest Groupings) Regulations, 1989 (S.I. No. 191 of 1989),

and references to members of a grouping shall be construed accordingly.

(2) Notwithstanding anything in the Tax Acts or in the Capital Gains Tax Acts, a grouping shall be neither—

(a) charged to income tax, corporation tax or capital gains tax, as the case may be, in respect of profits or gains or chargeable gains arising to it, nor

(b) entitled to relief for a loss sustained by it,

and any assessment required to be made on such profits or gains or chargeable gains, and any relief for a loss, shall as appropriate be made on and allowed to the members of a grouping in accordance with this section.

(3) This Part (other than sections 1009 , 1010 (8) and 1013 ) and sections 30 and 913(7) shall apply with any necessary modifications to the activities of a grouping in the same manner as they apply to a trade or profession carried on by 2 or more persons in partnership.

(4) In particular but without prejudice to the generality of subsection (3), the provisions mentioned in that subsection shall in their application for the purposes of this section apply as if—

(a) references to a partnership agreement were references to the contract forming or providing for the formation of a grouping,

(b) references to a partner were references to a member of a grouping, and

(c) anything done or required to be done by the precedent acting partner was done or required to be done by the grouping.

1O.J. L 119, 31.07.1985 p.1.