Finance Bill 2017 - Seanad debate

Dec 04, 2017

Finance Bill 2017 was debated in the Seanad last week.  During the debate, Senator Kieran O’Donnell raised the amendment relating to the tax treatment of certain share disposals involving two companies, and noted the potential impact of this “amendment intended as an anti-avoidance measure” for bona fide MBOs.   Minister Michael D’Arcy responded that “bona fide management buy-out transactions will not be affected but there is a tax avoidance scheme in operation and we want to deal with that”.

Section 23 of Finance Bill amends section 135 Taxes Consolidation Act 1997 and the tax treatment of certain share disposals involving two companies. Responding to Senator O’Donnell’s comments, Minister D’Arcy said:

“Sections 23 and 30 together form a package of anti-avoidance measures being introduced in order to deal with a number of specific tax avoidance schemes which have been uncovered by Revenue. Essentially, the schemes involve converting what should be taxable income payments into capital payments in order to avail of the lower capital gains tax, CGT, rates.”

Section 30 of the Bill amends the CGT reliefs – Revised Entrepreneurs Relief (section 597AA TCA 1997) and Retirement Relief (section 598 TCA 1997). 

The Minister goes on to say that:

“The potential charge to capital gains tax is then often avoided by the use of CGT reliefs such as retirement relief and entrepreneurial relief, resulting in funds being extracted by shareholders entirely tax free or at a significantly reduced tax liability.”…” The Minister is therefore taking steps to counter these avoidance schemes.”

As we reported last week, “Comprehensive guidance” is expected from Revenue on these anti-avoidance measures. 

Section 16 of the Bill, an amendment the Minister for Finance introduced at Committee Stage in the Dáil in respect of the Employment and Investment Incentive (EII scheme) in Part 16 TCA 1997, was also debated. Minister D’Arcy said that the purpose of the amendment “is to ensure that it is consistent with EU general block exemption rules on eligible investors so as to ensure that private investors in the scheme are independent of the management of the company.” 

We will be discussing members’ concerns on these amendments and others, with Revenue at a Main TALC meeting this week. 

The Finance Bill is scheduled for Committee Stage in the Seanad tomorrow, 5 December, and is expected to be passed by all Houses of the Oireachtas by mid-month and pass to the President for signing into law.