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7 1976

CORPORATION TAX ACT, 1976

PART XI

Group Relief

Group payments.

105. —(1) Where on or after the 6th day of April, 1976, a company receives from another company (both being companies resident in the State) any such payments as are referred to in this subsection, and either—

(a) the company making the payment is—

(i) a 51 per cent. subsidiary of the other or of a company so resident of which the other is a 51 per cent. subsidiary; or

(ii) a trading or holding company owned by a consortium the members of which include the company receiving the payments; or

(b) the company receiving the payments is a 51 per cent. subsidiary of the company,

then, subject to the following provisions of this section, the company receiving the payments and the company paying them may jointly elect that this subsection shall apply to any such payments received from the latter by the former, and so long as the election is in force those payments may be made without deduction of income tax and neither section 434 of the Income Tax Act, 1967 (payments not payable out of taxed profits), nor section 31 of the Finance Act, 1974 (interest payments by companies), shall apply thereto.

The payments for which an election may be made under this subsection are any payments which are for corporation tax charges on income of the company making them or would be for that tax charges on income of the company making them if they were not deductible in computing profits or any description of profits or if section 10 (6) (restriction of allowance of charges on income) did not apply to them.

(2) Subsection (1) shall not apply to payments received by a company on any investments, if a profit on the sale of those investments would be treated as a trading receipt of that company.

(3) Where a company purports by virtue of an election under subsection (1) to make any payment without deduction of income tax and income tax ought to have been deducted, the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) of the company making and the company receiving the payment are, so far as possible, the same as they would have been if the income tax had been duly deducted.

(4) Where tax assessed under subsection (3) on the company which made the payment is not paid by that company before the expiry of three months from the date on which that tax is payable, that tax shall, without prejudice to the right to recover it from that company, be recoverable from the company which received the payment.

(5) In determining for the purposes of this section whether one company is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—

(a) of any share capital which it owns directly or indirectly in a company not resident in the State, or

(b) of any share capital which it owns indirectly, and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt.

(6) For the purposes of this section—

(a) “trading or holding company” means a trading company or a company whose business consists wholly or mainly in the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries,

(b) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades,

(c) a company is owned by a consortium if three-fourths or more of the ordinary share capital of the company is beneficially owned between them by five or fewer companies resident in the State of which none beneficially owns less than one-twentieth of that capital, and those companies are called the members of the consortium.

(7) References in this section to payments received by a company apply to any received by another person on behalf of or in trust for the company but not to any received by the company on behalf of or in trust for another person.

Election: group payments.

106. —(1) An election under section 105 (in this section referred to as an “election”) shall be made by notice in writing to the inspector, and the notice shall set out the facts necessary to show that the companies are entitled to make the election.

(2) An election shall not have effect in relation to payments made less than three months after the giving of the notice and before the inspector is satisfied that the election is validly made, and has so notified the companies concerned; but shall be of no effect if within those three months the inspector notifies the companies concerned that the validity of the election is not established to his satisfaction:

Provided that the companies shall have the like right of appeal against any decision that the validity of the election is not established as the company making the payments would have if it were an assessment made on that company, and Part XXVI of the Income Tax Act, 1967 , shall apply accordingly.

(3) An election shall cease to be in force if at any time the companies cease to be entitled to make the election, and on that happening each company shall forthwith notify the inspector.

(4) Either of the companies making an election may at any time give the inspector notice in writing revoking the election; and any such notice shall have effect from the time it is given.

Group relief.

107. —(1) Relief for trading losses and other amounts eligible for relief from corporation tax may in accordance with the following provisions of this Part be surrendered by a company (called the “surrendering company”) which is a member of a group of companies and, on the making of a claim by another company (called the “claimant company”) which is a member of the same group, may be allowed to the claimant company by way of a relief from corporation tax called “group relief”.

(2) Group relief shall also be available in accordance with the said provisions—

(a) where the surrendering company is a trading company which is owned by a consortium and which is not a 75 per cent. subsidiary of any company, and the claimant company is a member of the consortium, or

(b) where the surrendering company is a trading company—

(i) which is a 90 per cent. subsidiary of a holding company which is owned by a consortium, and

(ii) which is not a 75 per cent. subsidiary of a company other than the holding company,

and the claimant company is a member of the consortium, or

(c) where the surrendering company is a holding company which is owned by a consortium and which is not a 75 per cent. subsidiary of any company, and the claimant company is a member of the consortium:

Provided that no claim may be made by a member of a consortium if a profit on a sale of the share capital of the surrendering or holding company which that member owns would be treated as a trading receipt of that member nor if the member's share in the consortium in the relevant accounting period of the surrendering company or holding company is nil.

(3) Subject to the following sections of this Part, two or more claimant companies may make claims relating to the same surrendering company, and to the same accounting period of that surrendering company.

(4) A payment for group relief—

(a) shall not be taken into account in computing profits or losses of either company for corporation tax purposes, and

(b) shall not for any of the purposes of the Corporation Tax Acts be regarded as a distribution or a charge on income,

and in this subsection “payment for group relief” means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered by way of group relief, being a payment not exceeding that amount.

(5) For the purposes of this section and the following sections of this Part—

(a) two companies shall be deemed to be members of a group of companies if one is the 75 per cent. subsidiary of the other or both are 75 per cent. subsidiaries of a third company,

(b) “holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent. subsidiaries, and which are trading companies,

(c) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades.

(6) In applying for the said purposes the definition of “75 per cent. subsidiary” in section 156 (subsidiaries) any share capital of a registered industrial and provident society shall be treated as ordinary share capital.

(7) References in this and the following sections of this Part to a company apply only to companies resident in the State; and in determining for the purposes of this and the following sections of this Part whether one company is a 75 per cent. subsidiary of another, the other company shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade, or

(b) of any share capital which it owns indirectly, and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

(c) of any share capital which it owns directly or indirectly in a company not resident in the State.

(8) For the said purposes a company is owned by a consortium if all of the ordinary share capital of that company is directly and beneficially owned between them by five or fewer companies and those companies are called the members of the consortium.

Group relief: qualifications for entitlement.

108. —(1) Notwithstanding that at any time a company (in this subsection referred to as “the subsidiary company”) is a 75 per cent. subsidiary or a 90 per cent. subsidiary, within the meaning of section 156, of another company (in this section referred to as “the parent company”) it shall not be treated at that time as such a subsidiary for the purposes of group relief unless, additionally, at that time—

(a) the parent company is beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any profits available for distribution to equity holders of the subsidiary company; and

(b) the parent company would be beneficially entitled to not less than 75 per cent. or, as the case may be, 90 per cent. of any assets of the subsidiary company available for distribution to its equity holders on a winding up.

(2) Subject to subsection (3), for the purposes of group relief a member's share in a consortium, in relation to an accounting period of the surrendering company, shall be whichever is the lowest in that period of the following percentages, namely—

(a) the percentage of the ordinary share capital of the surrendering company which is beneficially owned by that member;

(b) the percentage to which that member is beneficially entitled of any profits available for distribution to equity holders of the surrendering company; and

(c) the percentage to which that member would be beneficially entitled of any assets of the surrendering company available for distribution to its equity holders on a winding up;

and if any of those percentages have fluctuated in that accounting period, the average percentage over the period shall be taken for the purposes of this subsection.

(3) In any case where the surrendering company is a subsidiary of a holding company which is owned by a consortium, for references in subsection (2) to the surrendering company there shall be substituted references to the holding company.

Group relief: profits or assets available for distribution.

109. —(1) For the purposes of this Part, an equity holder of a company is any person who—

(a) holds ordinary shares in the company, or

(b) is a loan creditor of the company in respect of a loan which is not a normal commercial loan,

and any reference in that section to profits or assets available for distribution to a company's equity holders does not include a reference to any profits or assets available for distribution to any equity holder otherwise than as an equity holder.

(2) For the purposes of subsection (1) (a) “ordinary shares” means all shares other than fixed-rate preference shares.

(3) In this Part “fixed-rate preference shares” means shares which—

(a) are issued for consideration which is or includes new consideration; and

(b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities; and

(c) do not carry any right to dividends other than dividends which—

(i) are of a fixed amount or at a fixed rate per cent. of the nominal value of the shares, and

(ii) represent no more than a reasonable commercial return on the new consideration received by the company in respect of the issue of the shares; and

(d) on repayment do not carry any rights to an amount exceeding that new consideration except in so far as those rights are reasonably comparable with those general for fixed dividend shares quoted on a stock exchange in the State.

(4) Section 103 (7) (definition of “loan creditor” for purposes of provisions relating to close companies) shall apply for the purposes of subsection (1) (b) as it applies for the purposes of Part X, except that the proviso shall be omitted.

(5) In subsection (1) (b) “normal commercial loan” means a loan of or including new consideration and—

(a) which does not carry any right either to conversion into shares or securities of any other description or to the acquisition of additional shares or securities; and

(b) which does not entitle the loan creditor to any amount by way of interest which depends to any extent on the results of the company's business or any part of it or on the value of any of the company's assets or which exceeds a reasonable commercial return on the new consideration lent; and

(c) in respect of which the loan creditor is entitled, on repayment, to an amount which either does not exceed the new consideration lent or is reasonably comparable with the amount generally repayable (in respect of an equal amount of new consideration) under the terms of issue of securities quoted on a stock exchange in the State.

(6) Notwithstanding anything in subsections (1) to (5) but subject to subsection (7), where—

(a) any person has, directly or indirectly, provided new consideration for any shares or securities in the company, and

(b) that person, or any person connected with him, uses for the purposes of his trade assets which belong to the company and in respect of which there is made to the company any of the allowances specified in Part XIII or XIV, Chapter I of Part XV, Chapter II of Part XVI of the Income Tax Act, 1967 , section 22 of the Finance Act, 1971 , or section 2 , 3 , 6 or 8 of the Finance (Taxation of Profits of Certain Mines) Act, 1974 ,

then, for the purposes of this Part, that person, and no other, shall be treated as being an equity holder in respect of those shares or securities and as being beneficially entitled to any distribution of profits or assets attributable to those shares or securities.

(7) In any case where subsection (6) applies in relation to a bank in such circumstances that—

(a) the only new consideration provided by the bank as mentioned in subsection (6) (a) is provided in the normal course of its banking business by way of a normal commercial loan as defined in subsection (5); and

(b) the cost to the company concerned of the assets falling within subsection (6) (b) which are used as mentioned in that subsection by the bank or a person connected with the bank is less than the amount of that new consideration,

references in subsection (6), other than the reference in paragraph (a) thereof, to shares or securities in the company shall be construed as a reference to so much only of the loan referred to in paragraph (a) of this subsection as is equal to the cost referred to in paragraph (b) of this subsection.

(8) In this section “new consideration” has the same meaning as in Part IX and any question whether one person is connected with another shall be determined in accordance with section 157 (connected persons).

Group relief: “the profit distribution”.

110. —(1) Subject to the following provisions of this Part, for the purposes of section 108, the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company means the percentage to which the first company would be so entitled in the relevant accounting period on a distribution in money to those equity holders of—

(a) an amount of profits equal to the total profits of the other company which arise in that accounting period (whether or not any of those profits are in fact distributed), or

(b) if there are no profits of the other company in that accounting period, profits of £100,

and in the following provisions of this Part, that distribution is referred to as “the profit distribution”.

(2) For the purposes of the profit distribution, it shall be assumed that no payment is made by way of repayment of share capital or of the principal secured by any loan unless that payment is a distribution.

(3) Subject to subsection (2), where an equity holder is entitled as such to a payment of any description which, apart from this subsection, would not be treated as a distribution, it shall nevertheless be treated as an amount to which he is entitled on the profit distribution.

Group relief: “the notional winding up”.

111. —(1) Subject to the following provisions of this Part, for the purposes of section 108 the percentage to which one company would be beneficially entitled of any assets of another company available for distribution to its equity holders on a winding up means the percentage to which the first company would be so entitled if the other company were to be wound up and on that winding up the value of the assets available for distribution to its equity holders (that is to say, after deducting any liabilities to other persons) were equal to—

(a) the excess, if any, of the total amount of the assets of the company, as shown in the balance sheet relating to its affairs as at the end of the relevant accounting period, over the total amount of those of its liabilities as so shown which are not liabilities to equity holders as such, or

(b) if there is no such excess or if the company's balance sheet is prepared to a date other than the end of the relevant accounting period, £100.

(2) In the following provisions of this Part, a winding up on the basis specified in subsection (1) is referred to as “the notional winding up”.

(3) If, on the notional winding up, an equity holder would be entitled as such to an amount of assets of any description which, apart from this subsection, would not be treated as a distribution of assets, it shall nevertheless be treated, subject to subsection (4), as an amount to which the equity holder is entitled on the distribution of assets on the notional winding up.

(4) If an amount (in this subsection referred to as “the returned amount”) which corresponds to the whole or any part of the new consideration provided by an equity holder of a company for any shares or securities in respect of which he is an equity holder is applied by the company, directly or indirectly, in the making of a loan to, or in the acquisition of any shares or securities in, the equity holder or any person connected with him, then, for the purposes of this Part,—

(a) the total amount of the assets referred to in subsection (1) (a) shall be taken to be reduced by a sum equal to the returned amount; and

(b) the amount of assets to which the equity holder is beneficially entitled on the notional winding up shall be taken to be reduced by a sum equal to the returned amount.

(5) In subsection (4) “new consideration” has the same meaning as in Part IX and any question whether one person is connected with another shall be determined in accordance with section 157.

Group relief: limited rights to profits or assets.

112. —(1) This section applies if any of the equity holders—

(a) to whom the profit distribution is made, or

(b) who is entitled to participate in the notional winding up,

holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding up which are wholly or partly limited by reference to a specified amount or amounts (whether the limitation takes the form of the capital by reference to which a distribution is calculated or operates by reference to an amount of profits or assets or otherwise).

(2) Where this section applies, there shall be determined—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled, and

(b) the percentage of assets to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled,

if, to the extent that they are limited as mentioned in subsection (1), the rights of every equity holder falling within that subsection (including the first company concerned if it is such an equity holder) had been waived.

(3) If, on the profit distribution, the percentage of profits determined as mentioned in subsection (2) (a) is less than the percentage of profits determined under section 110 (1) without regard to that subsection, the lesser percentage shall be taken for the purposes of section 108 to be the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled as mentioned in that section.

(4) If, on the notional winding up, the percentage of assets determined as mentioned in subsection (2) (b) is less than the percentage of assets determined under section 111 (1) without regard to that subsection, the lesser percentage shall be taken for the purposes of section 108 to be the percentage to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled of any assets of the other company available for distribution to its equity holders on a winding up.

Group relief: diminishing share of profits or assets.

113. —(1) This section applies if, at any time in the relevant accounting period, any of the equity holders—

(a) to whom the profit distribution is made, or

(b) who is entitled to participate in the notional winding up,

holds, as such an equity holder, any shares or securities which carry rights in respect of dividend or interest or assets on a winding up which are of such a nature (as, for example, if any shares will cease to carry a right to a dividend at a future time) that if the profit distribution or the notional winding up were to take place in a different accounting period the percentage to which, in accordance with the preceding provisions of this Part, that equity holder would be entitled of profits on the profit distribution or of assets on the notional winding up would be different from the percentage determined in the relevant accounting period.

(2) Where this section applies, there shall be determined—

(a) the percentage of profits to which, on the profit distribution, the first company referred to in section 110 (1) would be entitled, and

(b) the percentage of assets to which, on the notional winding up, the first company referred to in section 111 (1) would be entitled,

if the rights of the equity holders in the relevant accounting period were the same as they would be in the different accounting period referred to in subsection (1).

(3) If in the relevant accounting period an equity holder holds, as such, any shares or securities in respect of which arrangements exist by virtue of which, in that or any subsequent accounting period, the equity holder's entitlement to profits on the profit distribution or to assets on the notional winding up could be different as compared with his entitlement if effect were not given to the arrangements, then for the purposes of this section—

(a) it shall be assumed that effect would be given to those arrangements in a later accounting period, and

(b) those shares or securities shall be treated as though any variation in the equity holder's entitlement to profits or assets resulting from giving effect to the arrangements were the result of the operation of such rights attaching to the shares or securities as are referred to in subsection (1).

(4) Section 112 (3) (4) shall apply for the purposes of this section as they apply for the purposes of that section and, accordingly, references therein to subsection (2) (a) (b) of that section shall be construed as references to subsection (2) (a) (b) of this section.

(5) In any case where section 112 applies as well as this section, section 112 shall be applied separately (in relation to the profit distribution and the notional winding up)—

(a) on the basis specified in subsection (2), and

(b) without regard to that subsection,

and section 112 (3) (4) shall apply accordingly in relation to the percentages so determined as if for the word “lesser” there were substituted the word “lowest”.

Group relief: beneficial percentage.

114. —For the purposes of sections 108 and 110 to 113—

(a) the percentage to which one company is beneficially entitled of any profits available for distribution to the equity holders of another company, and

(b) the percentage to which one company would be beneficially entitled of any assets of another company on a winding up,

means the percentage to which the first company is, or would be, so entitled either directly or through another company or other companies or partly directly and partly through another company or other companies.

Group relief: “the relevant accounting period”, etc.

115. —(1) In this Part “the relevant accounting period” means—

(a) in a case falling within section 108 (1), the accounting period current at the time in question; and

(b) in a case falling within section 108 (2), the accounting period in relation to which the share in the consortium falls to be determined.

(2) For the purposes of sections 109 to 114 a loan to a company shall be treated as a security, whether or not it is a secured loan, and, if it is a secured loan, regardless of the nature of the security.

Kinds of group relief.

116. —(1) If in any accounting period the surrendering company has incurred a loss, computed as for the purposes of section 16 (2) (relief for trading losses other than terminal losses), in carrying on a trade, the amount of the loss may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period:

Provided that this subsection shall not apply to so much of a loss as is excluded from section 16 (2) by section 16 (4) or section 17 (restriction of relief for losses in farming or market gardening).

(2) If for any accounting period any capital allowances fall to be made to the surrendering company which are to be given by discharge or repayment of tax or in charging its income under Case V of Schedule D and are to be available primarily against a specified class of income, so much of the amount of those capital allowances (exclusive of any carried forward from an earlier period) as exceeds its income of the relevant class arising in that accounting period (before deduction of any losses of any other period or of any capital allowances) may be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(3) If for any accounting period the surrendering company (being an investment company) may under section 15 (1) deduct any amount as expenses of management disbursed for that accounting period, so much of that amount (exclusive of any amount deductible only by virtue of section 15 (2)) as exceeds the company's profits of that accounting period may be set off for purposes of corporation tax against the total profits of the claimant company (whether an investment company or not) for its corresponding accounting period.

(4) The surrendering company's profits of the period shall be determined for the purposes of subsection (3) without any deduction under section 15 and without regard to any deduction falling to be made in respect of losses or allowances of any other period.

(5) References in subsections (3) and (4) to section 15 do not include references to that section as applied by section 33 to companies carrying on life business.

(6) If in any accounting period the surrendering company has paid any amount by way of charges on income, so much of that amount as exceeds its profits of the period may be set off for purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.

(7) The surrendering company's profits of the period shall be determined for the purposes of subsection (6) without regard to any deduction falling to be made in respect of losses or allowances of any other period, or to expenses of management deductible only by virtue of section 15 (2).

(8) In applying any of the preceding subsections in the case of a claim made by a company as a member of a consortium only a fraction of the loss referred to in subsection (1), or of the excess referred to in subsection (2) or (3) or (6), as the case may be, may be set off under the subsection in question, and that fraction shall be equal to that member's share in the consortium, subject to any further reduction under section 118 (2).

(9) This section shall apply to any accounting period beginning on or after the 6th day of April, 1976.

Relation of group relief to other relief.

117. —(1) Group relief for an accounting period shall be allowed as a deduction against the claimant company's total profits for the period before reduction by any relief derived from a subsequent accounting period, but as reduced by any other relief from tax (including relief in respect of charges on income under section 10 (1)).

(2) The said other relief shall be determined on the assumption that the company makes all relevant claims under section 16 (2) or 14 (6).

(3) For the purposes of this section “relief derived from a subsequent accounting period” means—

(a) relief under section 16 (2) in respect of a loss incurred in an accounting period after the accounting period the profits of which are being computed, and

(b) relief under section 14 (6) in respect of capital allowances falling to be made for an accounting period after the accounting period the profits of which are being computed, and

(c) relief under section 176 (transitional relief on cessation of trade, etc.) where the company ceases to possess the source of income in question at a time after the end of the accounting period the profits of which are being computed, and

(d) relief under section 18 (terminal loss in trade) in respect of a loss incurred in an accounting period after the end of the accounting period the profits of which are being computed.

(4) The reductions to be made in total profits of an accounting period against which any relief derived from a subsequent accounting period is to be set off shall include any group relief for that first-mentioned accounting period, and this subsection shall have effect notwithstanding that under section 176 (3) relief under that section is to be given in priority to any other relief.

Corresponding accounting periods.

118. —(1) For the purposes of group relief any accounting period of the claimant company which falls wholly or partly within an accounting period of the surrendering company corresponds to that accounting period.

(2) If an accounting period of the surrendering company and a corresponding accounting period of the claimant company do not coincide—

(a) the amount which may be set off against the total profits of the claimant company for the corresponding accounting period shall be reduced by applying the fraction /images/en.act.1976.0007.sec118.1.png (if that fraction is less than unity), and

(b) the said profits against which the amount mentioned in paragraph (a) (as reduced where so required) may be set off shall be reduced by applying the fraction /images/en.act.1976.0007.sec118.2.png (if that fraction is less than unity),

where—

A is the length of the period common to the two accounting periods,

B is the length of the accounting period of the surrendering company, and

C is the length of the corresponding accounting period of the claimant company.

Companies joining or leaving group or consortium.

119. —(1) Subject to the following provisions of this section, group relief shall be given if, and only if, the surrendering company and the claimant company are members of the same group, or fulfil the conditions for relief for a consortium, throughout the whole of the surrendering company's accounting period to which the claim relates, and throughout the whole of the corresponding accounting period of the claimant company.

(2) Where on any occasion two companies become or cease to be members of the same group, then for the purposes specified in subsection (3) it shall be assumed as respects each company that on that occasion (unless a true accounting period of the company begins or ends then) an accounting period of the company ends, and a new one begins, the new accounting period to end with the end of the true accounting period (unless before then there is a further break under this subsection) and—

(a) that the losses or other amounts of the true accounting period are apportioned to the component accounting periods on a time basis according to their lengths, and

(b) that the amount of total profits for the true accounting period of the company against which group relief may be allowed in accordance with section 117 (1) is also so apportioned to the component accounting periods.

(3) Where the one company is the surrendering company and the other company is the claimant company—

(a) references to accounting periods, to profits, and to losses, allowances, expenses of management or charges on income of the surrendering company, in section 116 shall be construed in accordance with subsection (2),

(b) references to accounting periods in section 118 and subsection (1) of this section shall be so construed (so that if the two companies are members of the same group in the surrendering company's accounting period they must under section 118 also be members of the same group in any corresponding accounting period of the claimant company),

(c) references to profits, and amounts to be set off against the profits, in section 118 shall be so construed (so that an amount apportioned under subsection (2) to a component accounting period may fall to be reduced under section 118 (2)).

(4) Subsections (2) and (3) shall apply with the necessary modifications where a company begins or ceases to fulfil the conditions for relief for a consortium, either as a surrendering company or as a claimant company, as it applies where two companies become or cease to be members of the same group.

Group relief: effect of arrangements for transfer of company to another group, etc.

120. —(1) If, apart from this section, two companies (in this subsection referred to as “the first company” and “the second company”) would be treated as members of the same group of companies and—

(a) in an accounting period which begins on or after the 6th day of April, 1976, one of the two companies has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period,—

(i) the first company or any successor of it could cease to be a member of the same group of companies as the second company and could become a member of the same group of companies as a third company, or

(ii) any person has or could obtain, or any persons together have or could obtain, control of the first company but not of the second, or

(iii) a third company could begin to carry on the whole or any part of a trade which, at any time in that accounting period, is carried on by the first company and could do so either as a successor of the first company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the first company shall be treated as not being a member of the same group of companies as the second company.

(2) If a trading company is owned by a consortium or is a 90 per cent. subsidiary of a holding company which is owned by a consortium and—

(a) in any accounting period which begins on or after the 6th day of April, 1976, the trading company has trading losses or other amounts eligible for relief from corporation tax which it would, apart from this section, be entitled to surrender as mentioned in section 107 (1), and

(b) arrangements are in existence by virtue of which—

(i) the trading company or any successor of it could, at some time during or after the expiry of that accounting period, become a 75 per cent. subsidiary of a third company, or

(ii) any person who owns, or any persons who together own, less than 50 per cent. of the ordinary share capital of the trading company has or together have, or could at some time during or after the expiry of that accounting period obtain, control of the trading company, or

(iii) any person, other than a holding company of which the trading company is a 90 per cent. subsidiary, either alone or together with connected persons, holds or could obtain, or controls or could control the exercise of not less than 75 per cent. of the votes which may be cast on a poll taken at a general meeting of the trading company in that accounting period or in any subsequent accounting period, or

(iv) a third company could begin to carry on, at some time during or after the expiry of that accounting period, the whole or any part of a trade which, at any time in that accounting period, is carried on by the trading company and could do so either as a successor of the trading company or as a successor of another company which is not a third company but which, at some time during or after the expiry of that accounting period, has begun to carry on the whole or any part of that trade,

then, for the purposes of this Part, the trading company shall be treated as though it did not (as the surrendering company) fall within section 107 (2) (a) (b) (c).

(3) In any case where a trading company is a 90 per cent. subsidiary of a holding company which is owned by a consortium, any reference in subsection (2) to the trading company, other than a reference in paragraph (b) (iv) thereof, shall be construed as including a reference to the holding company.

(4) In this section “third company” means a company which, apart from any provision made by or under any such arrangements as are specified in either subsection (1) (b) or (2), is not a member of the same group of companies as the first company, within the meaning of subsection (1), or, as the case may be, the trading company or holding company to which subsection (2) applies.

(5) In subsections (1) and (2)—

connected persons” shall be construed in accordance with section 157, and “control” has the meaning assigned to it by section 158.

(6) For the purposes of subsections (1) and (2) a company is a successor of another if it carries on a trade which, in whole or in part, the other company has ceased to carry on and the circumstances are such that—

(a) section 20 (company reconstructions without change of ownership) applies in relation to the two companies as the predecessor and the successor within the meaning of that section, or

(b) the two companies are connected with each other within the terms of section 157.

Leasing contracts: effect on claims for losses of company reconstructions.

121. —(1) Subject to the provisions of this section, if—

(a) under a contract entered into after the 27th day of November, 1975, a company (in this section referred to as “the first company”) incurs capital expenditure on the provision of machinery or plant which the first company lets to another person by another contract (in this section referred to as a “leasing contract”), and

(b) apart from this subsection, the first company would be entitled to claim relief under section 16 (1) or (2) (relief for trading losses other than terminal losses) in respect of losses incurred on the leasing contract, and

(c) in the accounting period for which an allowance under section 251 of the Income Tax Act, 1967 (machinery and plant: initial allowance), section 11 of the Finance Act, 1967 (wear and tear allowances for certain machinery and plant in undeveloped areas), or section 22 (investment allowance for machinery and plant in designated areas) or 26 (increase of wear and tear allowances for certain machinery and plant) of the Finance Act, 1971 , in respect of the expenditure referred to in paragraph (a) is made to the first company, arrangements are in existence by virtue of which, at some time during or after the expiry of that accounting period, a successor company will be able to carry on any part of the first company's trade which consists of or includes the performance of all or any of the obligations which, apart from the arrangements, would be the first company's obligations under the leasing contract,

then, in the accounting period specified in paragraph (c) and in any subsequent accounting period, the first company shall not be entitled to claim relief as mentioned in paragraph (b) except in computing its profits (if any) arising under the leasing contract.

(2) For the purposes of this section a company is a successor of the first company if the circumstances are such that—

(a) section 20 applies in relation to the first company and the other company as the predecessor and the successor within the meaning of that section, or

(b) the two companies are connected with each other within the terms of section 157.

(3) For the purposes of this section losses incurred on a leasing contract and profits arising under such a contract shall be computed as if the performance of the leasing contract were a trade begun to be carried on by the first company, separately from any other trade which it may carry on, at the commencement of the letting under the leasing contract.

(4) In determining whether the first company would be entitled to claim relief as mentioned in subsection (1) (b), any losses incurred on the leasing contract shall be treated as incurred in a trade carried on by that company separately from any other trade which it may carry on.

Partnerships involving companies: effect of arrangements for transferring relief.

122. —(1) The provisions of subsection (2) shall apply in relation to a company (in this section referred to as “the partner company”) which is a member of a partnership carrying on a trade if arrangements are in existence (whether as part of the terms of the partnership or otherwise) whereby—

(a) in respect of the whole or any part of the value of, or of any portion of, the partner company's share in the profits or loss of any accounting period of the partnership, another member of the partnership or any person connected with another member of the partnership receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money's worth; or

(b) in respect of the whole or any part of the cost of, or of any portion of, the partner company's share in the loss of any accounting period of the partnership, the partner company, or any person connected with that company, receives any payment or acquires or enjoys, directly or indirectly, any other benefit in money's worth, other than a payment in respect of group relief to the partner company by a company which is a member of the same group as the partner company for the purposes of group relief.

(2) In any case where the provisions of this subsection apply in relation to the partner company—

(a) the company's share in the loss of the relevant accounting period of the partnership and its share in any charges on income, within the meaning of section 10, paid by the partnership in that accounting period shall not be available for set-off for the purposes of corporation tax except against its profits of the several trade; and

(b) except in accordance with paragraph (a), no trading losses shall be available for set-off for the purposes of corporation tax against the profits of the company's several trade for the relevant accounting period of the partnership; and

(c) except in accordance with paragraphs (a) and (b), no amount which, apart from this subsection, would be available for relief against profits shall be available for set-off for the purposes of corporation tax against so much of the company's total profits as consists of profits of its several trade for the relevant accounting period of the partnership.

(3) In subsection (2) “relevant accounting period of the partnership” means any accounting period of the partnership beginning on or after the 6th day of April, 1976, in which any such arrangements as are specified in subsection (1) are in existence or to which any such arrangements apply.

(4) If a company is a member of a partnership and tax in respect of any profits of the partnership is chargeable under Case IV or V of Schedule D, this section shall apply in relation to the company's share in the profits or loss of the partnership as if—

(a) the profits or loss to which the company's share is attributable were the profits of, or the loss incurred in, a several trade carried on by the company, and

(b) any allowance which falls to be made by discharge or repayment of tax or in charging income under Case V were an allowance made in taxing that trade.

(5) For the purposes of this section, the amount of a company's share in the profits or loss of any accounting period of a partnership shall be such amount as is determined in accordance with the provisions of section 32 (partnerships involving companies).

(6) In this section “group relief” has the same meaning as in section 107 and any question whether one person is connected with another shall be determined in accordance with section 157.

Information as to arrangements for transferring relief, etc.

123. —(1) If a company—

(a) makes a claim for group relief, or

(b) being a party to a leasing contract, as defined in section 121, claims relief as mentioned in subsection (1) (b) of that section, or

(c) being a member of a partnership, claims any relief which, if section 122 (2) applied in relation to it, it would not be entitled to claim,

and the inspector has reason to believe that any relevant arrangements may exist, or may have existed at any time material to the claim, then at any time after the claim is made he may serve notice in writing on the company requiring it to furnish him, within such time being not less than thirty days from the giving of the notice as he may direct, with—

(i) a declaration in writing stating whether or not any such arrangements exist or existed at any material time, or

(ii) such information as he may reasonably require for the purpose of satisfying himself whether or not any such arrangements exist or existed at any material time, or

(iii) both such a declaration and such information.

(2) In this section “relevant arrangements”, in relation to a claim falling within any of paragraphs (a) to (c) of subsection (1), means such arrangements as are referred to in the enactment which is specified in the corresponding paragraph below, that is to say—

(a) section 120 (1) or (2) or section 113 (3),

(b) section 121 (1) (c), or

(c) section 122 (1).

(3) In a case falling within paragraph (a) of subsection (1), a notice under that subsection may be served on the surrendering company, within the meaning of section 107, instead of or as well as on the company claiming relief.

(4) In a case falling within paragraph (c) of subsection (1), a notice under that subsection may be served on the partners instead of or as well as on the company, and accordingly may require them, instead of or as well as the company, to furnish the declaration, information or declaration and information concerned.

(5) In this section, section 113 (3) and sections 120 to 122 “arrangements” means arrangements of any kind, whether in writing or not.

Exclusion of double allowances, etc.

124. —(1) Relief shall not be given more than once in respect of the same amount, whether by giving group relief and by giving some other relief (in any accounting period) to the surrendering company or by giving group relief more than once.

(2) In accordance with subsection (1), two or more claimant companies cannot, in respect of any one loss or other amount for which group relief may be given, and whatever their accounting periods corresponding to that of the surrendering company, obtain in all more relief than could be obtained by a single claimant company whose corresponding accounting period coincided with the accounting period of the surrendering company.

(3) If claims for group relief are made by more than one claimant company which relate to the same accounting period of the same surrendering company, and—

(a) all the claims so made are admissible only by virtue of section 119 (2) (3), and

(b) there is a part of the surrendering company's accounting period during which none of those claimant companies is a member of the same group as the surrendering company,

those claimant companies shall not obtain in all more relief than could be obtained by a single claimant company which was not a member of the same group as the surrendering company during that part of the surrendering company's accounting period (but was a member during the remainder of that accounting period).

(4) If claims for group relief are made by a claimant company as respects more than one surrendering company for group relief to be set off against its total profits for any one accounting period, and—

(a) all the claims so made are admissible only by virtue of section 119 (2) (3), and

(b) there is a part of the claimant company's accounting period during which none of the surrendering companies by reference to which the claims are made is a member of the same group as the claimant company,

the claimant company shall not obtain in all more relief to be set off against its profits for the accounting period than it could obtain on a claim as respects a single surrendering company (with unlimited losses and other amounts eligible for relief) which was not a member of the same group as the claimant company during that part of the claimant company's accounting period (but was a member during the remainder of that accounting period).

(5) The provisions of this subsection have effect as respects a claim for group relief made by a company as a member of a consortium, in this subsection referred to as a “consortium claim”—

(a) a consortium claim, and a claim other than a consortium claim, shall not both have effect as respects the loss or other amount of the same accounting period of the same surrendering company, unless each of the two claims is as respects a loss or other amount apportioned under section 119 (2) (a) to a component of that accounting period, and the two components do not overlap,

(b) in subsections (3) and (4) consortium claims shall be disregarded,

and paragraph (a) shall take effect according to the order in which claims are made.

(6) Without prejudice to the provisions of section 304 (6) of the Income Tax Act, 1967 (interpretation), any reference in Part XVI (Annual Allowances for Certain Capital Expenditure) of that Act to an allowance made includes a reference to an allowance which would be made but for the granting of group relief or but for that and but for an insufficiency of profits or other income against which to make it.

Claims and adjustments.

125. —(1) A claim for group relief—

(a) need not be for the full amount available,

(b) shall require the consent of the surrendering company notified to the inspector in such form as the Revenue Commissioners may require, and

(c) must be made within two years from the end of the surrendering company's accounting period to which the claim relates.

(2) A claim for group relief by a company as a member of a consortium shall require the consent of each other member of the consortium, notified to the inspector in such form as the Revenue Commissioners may require, in addition to the consent of the surrendering company.

(3) If the inspector discovers that any group relief which has been given is or has become excessive he may make an assessment to corporation tax under Case IV of Schedule D in the amount which ought in his opinion to be charged.

(4) Subsection (3) is without prejudice to the making of an assessment under section 144 (5) (a) (iii) (additional assessments) and to the making of all such other adjustments by way of discharge or repayment of tax or otherwise as may be required where a claimant company has obtained too much relief, or a surrendering company has foregone relief in respect of a corresponding amount.