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13 1986

FINANCE ACT, 1986

Chapter VII

Corporation Tax

Amendment of section 84A (limitation on meaning of “distribution”) of Corporation Tax Act, 1976.

54. Section 84A (inserted by the Finance Act, 1984 ) of the Corporation Tax Act, 1976 , is hereby amended by the insertion after subsection (9) of the following subsection:

“(10) (a) This subsection applies to any interest or other distribution which, apart from this subsection, would be a distribution for the purposes of this Act, other than any interest or other distribution which is paid by the borrower under an obligation entered into—

(i) before the 13th day of May, 1986, or

(ii) before the 1st day of September, 1986, pursuant to negotiations which were in progress between the borrower and a lender before the 13th day of May, 1986.

(b) Subsection (2) shall have effect as respects any interest or other distribution to which this subsection applies as if paragraph (c) of subsection (3) were omitted.

(c) For the purposes of paragraph (a)—

(i) an obligation shall be treated as having been entered into before a particular date if, but only if, before that date there was in existence a binding contract in writing under which that obligation arose, and

(ii) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress before the 13th day of May, 1986, unless, on or before that date, preliminary commitments or agreements in relation to that obligation had been entered into between the lender referred to in that paragraph and the borrower.”.

Amendment of certain time limits.

55. —(1) The Corporation Tax Act, 1976 , is hereby amended—

(a) in subsection (5) of section 25 and in subsection (4) of section 26 by the deletion of “and this assessment shall be made not later than two years from the end of the subsequent accounting period”, and

(b) by the insertion in subsection (4) of section 26 after “the said tax credit” of “and the time limit for a claim under this subsection shall be two years from the end of the subsequent accounting period”,

and the said subsection (5) (apart from the proviso) and the said subsection (4), as so amended, are set out in the Table to this subsection.

TABLE

(5) Where a company has obtained payment of a tax credit on a claim under this section or under section 15 (4) and apart from such a claim any amount could be set off against or deducted from profits of a subsequent accounting period, then the company may claim that the amount shall be so set off or deducted but in that case to the extent to which the amount was used to obtain payment of a tax credit, such tax credit shall be recoverable from the company by an assessment on it to income tax under Case IV of Schedule D for the year of assessment in which the subsequent accounting period ends on an amount the income tax on which at the standard rate for the said year of assessment is equal to the amount of the said tax credit:

(4) Where a company has obtained payment to it of a tax credit by virtue of this section on a claim under section 16 (1) and apart from such a claim a loss could be set off against or deducted from profits of a subsequent accounting period, then the company may claim that the loss shall be so set off or deducted but, in that case, to the extent to which the loss was used to obtain payment of a tax credit, such tax credit shall be recovered from the company by an assessment on it to income tax under Case IV of Schedule D for the year of assessment in which the subsequent accounting period ends on an amount the income tax on which at the standard rate for the said year of assessment is equal to the amount of the said tax credit and the time limit for a claim under this subsection shall be two years from the end of the subsequent accounting period.

(2) This section shall have effect—

(a) as respects subsection (1) (a), in relation to any assessment made under section 25 (5) or 26 (4) of the Corporation Tax Act, 1976 , for the purpose of recovering a tax credit from a company consequent on the making by the company, on or after the 4th day of April, 1986, of a claim under the said section 25 (5) or 26 (4), as the case may be, and

(b) as respects subsection (1) (b), in relation to any claim under the said section 26 (4) made on or after the date of the passing of this Act.

Shannon Airport: revocation of certain certificates.

56. —(1) Section 70 of the Corporation Tax Act, 1976 , is hereby amended—

(a) in subsection (2), by the insertion after “subsection (4)” of “or (4A)”, and

(b) by the insertion after subsection (4) of the following subsection:

“(4A) Where, in the case of a company in relation to which a certificate under subsection (2) has been given, the Minister is of opinion that any activity of the company has had, or may have, an adverse effect on the use or development of the airport or is otherwise inimical to the development of the airport, then—

(a) the Minister may, by notice in writing served by registered post on the company, require the company to desist from such activity with effect from such date as may be specified in the notice, and

(b) if the Minister is not satisfied that the company has complied with the requirements of the said notice, he may, by a further notice in writing served by registered post on the company, revoke the certificate with effect from such date as may be specified in the said further notice.”,

and the said subsection (2) (other than the proviso), as so amended, is set out in the Table to this subsection.

TABLE

(2) Subject to subsections (5) and (6), the Minister may give a certificate certifying that such trading operations of a qualified company as are specified in the certificate are, with effect as from their commencement, exempted trading operations for the purposes of this Part, and any certificate so given shall, unless it is revoked under subsection (4) or (4A), remain in force until the 5th day of April, 1990:

(2) Section 39A (inserted by the Finance Act, 1981 ) of the Finance Act, 1980 , is hereby amended—

(a) in subsection (2), by the insertion after “subsection (4)” of “or (4A)”, and

(b) by the insertion after subsection (4) of the following subsection:

“(4A) Where, in the case of a company in relation to which a certificate under subsection (2) has been given, the Minister is of opinion that any activity of the company has had, or may have, an adverse effect on the use or development of the airport or is otherwise inimical to the development of the airport, then—

(a) the Minister may, by notice in writing served by registered post on the company, require the company to desist from such activity with effect from such date as may be specified in the notice, and

(b) if the Minister is not satisfied that the company has complied with the requirements of the said notice, he may, by a further notice in writing served by registered post on the company, revoke the certificate with effect from such date as may be specified in the said further notice.”,

and the said subsection (2) (other than the proviso), as so amended, is set out in the Table to this subsection.

TABLE

(2) Subject to subsections (5) and (6), the Minister may give a certificate certifying that such trading operations of a qualified company as are specified in the certificate are, with effect from a date to be specified in the certificate, relevant trading operations for the purpose of this section, and any certificate so given shall, unless it is revoked under subsection (4) or (4A), remain in force until the 31st day of December, 2000:

Amendment of section 155 (interpretation) of Corporation Tax Act, 1976.

57. —(1) Section 155 of the Corporation Tax Act, 1976 , is hereby amended by the substitution of the following subsection for subsection (10):

“(10) References in the Corporation Tax Acts to—

(a) profits brought into charge to corporation tax are references to the amount of those profits chargeable to corporation tax before any deduction therefrom for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description,

(b) total income brought into charge to corporation tax are references to the amount, calculated before any such deduction as is mentioned in paragraph (a), of the total income from all sources included in any profits brought into charge to corporation tax, and

(c) an amount of profits on which corporation tax falls finally to be borne are references to the amount of those profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given from or against those profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.”.

(2) This section shall have effect as respects—

(a) accounting periods ending on or after the 4th day of April, 1986, and

(b) any other accounting period in relation only to any claim for relief from corporation tax under section 58 of the Corporation Tax Act, 1976 , or section 41 of the Finance Act, 1980 , which is made on or after that date.

Reduction of corporation tax in relation to interest on certain loans to farmers.

58. —(1) In this section—

the participating bank” means Allied Irish Banks, p.l.c.;

qualifying farmer” means a farmer who has been accepted as eligible for inclusion in the 1985 scheme;

relevant accounting period” means an accounting period or part of an accounting period falling within the period from the 1st day of April, 1985, to the 31st day of March, 1986;

relief from interest”, in relation to a relevant accounting period of the participating bank, means the amount by which B exceeds A where—

A is the amount of interest paid by qualifying farmers to the bank during that period in respect of loans the rate of interest on which falls to be reduced under the 1985 scheme, and

B is the amount of interest which would have fallen to be paid by those farmers to the bank during the said period in respect of the said loans if that interest had not been reduced under the 1985 scheme;

the 1985 scheme” means the scheme known as the Reduced Interest Scheme for Farmers in Severe Financial Difficulty, 1985.

(2) Subject to subsection (3), where the participating bank claims and proves that relief from interest was allowed by it during a relevant accounting period, the corporation tax payable by the bank for the accounting period which coincides with or includes the relevant accounting period shall be reduced by an amount determined by the formula

C − D

_____

5

where—

C is the amount of the relief from interest allowed by the participating bank during the relevant accounting period, and

D is the amount of corporation tax which, under sections 1 (1) and 6 (3) of the Corporation Tax Act, 1976 , would be chargeable for the accounting period which coincides with or includes the relevant accounting period on an amount of profits equal to C.

(3) (a) A reduction, under subsection (2), of corporation tax payable by the participating bank shall be made in respect only of relief from interest which has been certified by the Minister for Agriculture to be relief from interest allowed in accordance with the conditions and regulations of the 1985 scheme.

(b) If any relief from interest (hereafter in this paragraph referred to as “disallowed relief”) allowed by the participating bank has been certified by the Minister for Agriculture to be relief from interest allowed in accordance with the conditions and regulations of the 1985 scheme and is subsequently certified by the Minister for Agriculture to be relief from interest which did not fall to be allowed in accordance with those conditions and regulations, the participating bank shall not be entitled in respect of the disallowed relief to any reduction under subsection (2) of corporation tax payable by it and, if any such reduction has been made in respect of any such disallowed relief, there shall be made such additional assessments or adjustments of assessments as may be required to recover that reduction.

Amendment of provisions relating to taxation of assurance companies.

59. —The Corporation Tax Act, 1976 , is hereby amended—

(a) in section 33 , as respects accounting periods ending after the date of the passing of this Act, by the insertion after subsection (1) of the following subsections:

“(1A) Where the life assurance business of an assurance company includes more than one of the following classes of business, that is to say:

(a) pension business,

(b) general annuity business, and

(c) life assurance business (excluding such pension business and general annuity business),

then, for the purposes of this Act, the business of each such class shall be treated as though it were a separate business and subsection (1) shall apply separately to each such class of business:

Provided that any amount of such an excess as is referred to in section 15 (2) and which is carried forward from an accounting period ending before the date of the passing of the Finance Act, 1986, may, for the purposes of section 15 (1), be deducted in computing the profits of the company for a later accounting period in respect of such of the said classes of business as the company may elect; but any amount so deducted in computing the profits from one of the said classes of business shall not be deducted in computing the profits of the company from another of the said classes of business.

(1B) Relief under subsection (1) shall not be given for any amount of stamp duty (except any part of such amount as is referable to pension business) charged under paragraph (c) of subsection (8) (inserted by the Finance Act, 1984 ) of section 92 of the Finance Act, 1982 , on any statement delivered by a company in pursuance of paragraph (b) of the said subsection (8) in respect of any quarter commencing after the date of the passing of the Finance Act, 1986.”,

(b) in section 39, by the insertion after subsection (4) of the following subsection:

“(4A) Notwithstanding any other provision of the Corporation Tax Acts, any annuity which is paid by a company and is referable to its excluded annuity business—

(a) shall not be treated as a charge on income for the purposes of the Corporation Tax Acts;

(b) shall be deductible in computing for the purposes of Case I of Schedule D the profits of the company in respect of its life assurance business.”,

(c) in section 40, as respects accounting periods ending after the date of the passing of this Act, by the insertion after subsection (1) of the following subsection:

“(1A) Notwithstanding any other provision of the Corporation Tax Acts, any annuities which under subsection (1) are treated as charges on income of a company (hereafter in this subsection referred to as ‘the first-mentioned company’) for an accounting period shall not be allowed as deductions against any profits (whether of the first-mentioned company or of any other company) other than against that part of the total profits (including, where a claim is made under section 25 for the purposes mentioned in subsection (2) (b) of that section, any franked investment income) arising in that accounting period to the first-mentioned company from its general annuity business.”,

and

(d) in section 50, as respects accounting periods ending after the date of the passing of this Act—

(i) in subsection (2), by the deletion of the definition of “general annuity business” and the substitution therefor of the following definitions:

“‘excluded annuity business’, in relation to an assurance company, means annuity business which—

(a) is not pension business, or the liability of the company in respect of which is not taken into account in determining the foreign life assurance fund (within the meaning of section 42 (5)) of the company, and

(b) arises out of a contract for the granting of an annuity on human life being a contract which was effected, extended or varied on or after the 6th day of May, 1986, and which fails to satisfy any one or more of the following conditions, that is to say:

(i) the annuity shall be payable (whether or not its commencement is deferred for any period) until the end of a human life or for a period ascertainable only by reference to the end of a human life (whether or not continuing after the end of a human life),

(ii) the amount of the annuity shall be reduced only on the death of a person who is an annuitant under the contract or by reference to a bona fide index of prices or investment values, and

(iii) the policy document evidencing the contract shall expressly and irrevocably prohibit the company from agreeing to commutation, in whole or in part, of any annuity arising under the contract;

general annuity business’ means any annuity business which is not—

(a) excluded annuity business, or

(b) pension business,

and ‘pension business’ shall be construed in accordance with subsections (3) and (4);”,

and

(ii) in subsection (3), by the deletion of paragraph (b) and the substitution therefor of the following paragraph:

“(b) allocating to general annuity business all other annuity business except excluded annuity business,”.