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39 1997

TAXES CONSOLIDATION ACT, 1997

PART 25

Industrial and Provident Societies, Building Societies, and Trustee Savings Banks

CHAPTER 1

Industrial and provident societies

Interpretation ( Chapter 1 ).

[ITA67 s218; FA75 s33(2) and Sch1 PtII]

698. — In this Chapter, except where the context otherwise requires—

loan interest”, in relation to a society, means any interest payable by the society in respect of any mortgage, loan, loan stock or deposit;

share interest”, in relation to a society, means any interest, dividend, bonus or other sum payable to a shareholder of the society by reference to the amount of the shareholder's holding in the share capital of the society;

society” means a society registered under the Industrial and Provident Societies Acts, 1893 to 1978;

references to the payment of share interest or loan interest include references to the crediting of such interest.

Deduction as expenses of certain sums, etc.

[ITA67 s219(1) and (4)(b) and (c); FA74 s47; CTA76 s30(5)(a)]

699. —(1) In computing for the purposes of Case I of Schedule D the profits or gains of a society, there shall be deducted as expenses any sums which—

(a) represent a discount, rebate, dividend or bonus granted by the society to members of the society or other persons in respect of amounts paid or payable by or to them on account of their transactions with the society, being transactions taken into account in that computation and calculated by reference to those amounts or to the magnitude of those transactions and not by reference to the amount of any share or interest in the capital of the society;

(b) are share interest or loan interest paid by the society, being interest wholly and exclusively laid out or expended for the purposes of the trade.

(2) (a) Where for the year 1962-73 or any previous year of assessment an annual allowance, balancing allowance or balancing charge in respect of capital expenditure on the construction of a building or structure might have been made to or on a society under Part V of the Finance Act, 1959, but for the circumstance that the society was exempt from tax under Schedule D, any writing down allowance, balancing allowance or balancing charge to be made in respect of the expenditure under Part 9 for any chargeable period shall be computed as if every annual allowance, balancing allowance and balancing charge which might have been so made had been made; but nothing in this paragraph shall affect section 274 (8).

(b) Where for the year 1962-73 or any previous year of assessment an annual allowance in respect of capital expenditure on the purchase of patent rights might have been made to or on a society under Part V of the Finance Act, 1959, but for the circumstance that the society was exempt from tax under Schedule D, the amount of the expenditure remaining unallowed (within the meaning of section 756 ) shall, in relation to any balancing allowance or balancing charge under Chapter 1 of Part 29 to be made to or on the society in respect of the expenditure for any chargeable period, be computed as if every annual allowance which might have been so made had been made.

Special computational provisions.

[CTA76 s30(2) to (4); FA78 s19]

700. —(1) Notwithstanding anything in the Tax Acts, any share or loan interest paid by a society—

(a) shall be paid without deduction of income tax and shall be charged under Case III of Schedule D, and

(b) shall not be treated as a distribution;

but paragraph (a) shall not apply to any share interest or loan interest payable to a person whose usual place of abode is not in the State.

(2) In computing the corporation tax payable for any accounting period of a society, section 243 shall apply subject to the deletion of “yearly” in subsection (4)(a) of that section.

(3) On or before the 1st day of May in each year, every society shall deliver to the inspector a return in such form as the Revenue Commissioners may prescribe specifying—

(a) the name and place of residence of every person to whom share interest or loan interest amounting to the sum of £70 or more has been paid by the society in the year of assessment which ended before that date, and

(b) the amount of such share interest or loan interest paid in that year to each of those persons,

and, if such a return is not fully made as respects any year of assessment, the society shall not be entitled to any deduction under section 97 (2)(e), 243 or 699 (1) in respect of any payments of share interest or loan interest which it was required to include in the return, and all such assessments and additional assessments shall be made as may be necessary to give effect to this subsection.

Transfer of shares held by certain societies to members of society.

[FA93 s 35(1)(a) and (2) to (6); FA97 s146(1) and Sch9 PtI par17(2)]

701. —(1) In this section—

company” has the meaning assigned to it by section 5 (1);

consideration” means consideration in money or money's worth;

control”, in relation to a company, shall be construed in accordance with section 432 ;

society” means a society registered under the Industrial and Provident Societies Acts, 1893 to 1978, which is an agricultural society or a fishery society within the meaning of section 443 (16).

(2) (a) In this subsection and in subsection (4), “the appropriate number”, in relation to a member's original shares, means such portion (or as near as may be to such portion) of the total number of the referable shares owned by the member at the time of the transfer as bears to that number the same proportion as the total number of shares in the company which are subject to the transfer bears to the total number of shares in the company owned by the society immediately before the transfer, and the number of the referable shares owned by a member shall be an amount determined by the formula—

A × B

______

C

×

D

___

B

where—

A is the market value of the shares in the company owned by the society immediately before the transfer,

B is the total number of the shares in the society in issue immediately before the transfer,

C is the market value of the total assets (including the shares in the company) of the society immediately before the transfer, and

D is the number of shares in the society owned by the member immediately before the transfer.

(b) Where on or after the 6th day of April, 1993, a society, being a society which at any time on or after that date controls or has had control of a company, transfers to the members of the society shares owned by it in the company (in this section referred to as “the transfer”) and—

(i) the transfer, in so far as it relates to any member, is in respect of and in proportion to, or as nearly as may be in proportion to, that member's holding of shares (in this section referred to as “the original shares”) in the society immediately before the transfer,

(ii) no consideration (apart from the consideration given by the members represented by the cancellation of the original shares referred to in subparagraph (iii)) for, or in connection with, the transfer is given to or received from any member (or any person connected with that member) by the society (or any person connected with the society), and

(iii) on the transfer or as soon as possible after the transfer, the original shares (or the appropriate number of those shares) of each member are cancelled without any consideration (apart from the consideration given to the members represented by the transfer to the members of the shares in the company) for or in connection with such cancellation being given to or received from any member (or any person connected with that member) by the society (or any person connected with the society) and, where the original shares (or the appropriate number of those shares) have been issued to a member at different times, any cancellation of such shares shall involve those issued earlier rather than those issued later,

then, subject to subsection (5), subsections (3) and (4) shall apply.

(3) For the purposes of the Corporation Tax Acts, the transfer shall be treated as—

(a) not being a distribution within the meaning of Part 6 , and

(b) being for a consideration of such amount as would secure that, for the purposes of charging the gain on the disposal by the society of the shares owned by it in the company, neither a gain nor a loss would accrue to the society.

(4) For the purposes of the Capital Gains Tax Acts—

(a) the cancellation of the original shares (or the appropriate number of those shares) shall not be treated as involving any disposal of those shares, and

(b) each member shall be treated as if the shares transferred to that member in the course of the transfer were acquired by that member at the same time and for the same consideration at which the original shares (or the appropriate number of those shares) were acquired by that member and, for the purposes of giving effect to this paragraph, where the original shares (or the appropriate number of those shares) have been issued to a member at different times, there shall be made all such apportionments as are in the circumstances just and reasonable.

(5) This section shall not apply unless it is shown that the transfer is effected for bona fide commercial reasons and does not form part of any arrangement or scheme of which the main purpose or one of the main purposes is avoidance of liability to corporation tax or capital gains tax.

(6) In a case where this section applies, the society concerned shall include in the return required to be made by it under section 884 a statement of the total number of shares cancelled in accordance with subsection (2)(b)(iii).