Schedule 32

[Section 1101]

Transitional Provisions

Overview

Schedule 32 provides various transitional provisions consequential on the enactment of the Taxes Consolidation Act, 1997. It also preserves the integrity of certain other provisions, which although not consolidated in the Taxes Consolidation Act, 1997 are still, or may be, extant to some degree.

Details

Stock of local authorities

par 1 Paragraph 1 provides that stock, issued on or after 13 July, 1955, under section 87 of the Local Government Act, 1946, is, or may be, deemed to be stock issued by the Minister for Finance, and may be issued with a condition that any interest the stock may be paid without deduction of tax. Furthermore, interest on such stock payable without deduction of tax may be subject to either or both of two conditions. The first condition is that neither the capital nor the interest is liable to tax, if it can be shown, in the manner directed by the Minister for Finance, that the stock is in the beneficial ownership of person’s who are neither domiciled nor ordinarily resident in the State. The second condition is that interest payable on such stock is not liable to tax if, it can be shown, in the manner directed by the Minister for Finance, that the security is in the beneficial ownership of person’s who, though domiciled in the State, are not ordinarily resident in the State.

Income tax: exemption from tax of income from certain scholarships

par 2 This paragraph provides that income paid before 6 April, 1998, in respect of a scholarship awarded before 26 March, 1997, is exempt from income tax and is not taken into account in computing the recipient’s income for the purpose of the Income Tax Acts.

Corporation tax: exemption from tax on profits of Custom House Docks Development Authority

par 3 Paragraph 3 provides for the continuation of the exemption from corporation tax of profits arising to the Custom House Docks Development Authority up to 1 May, 1997, at which stage this exemption stands repealed.

Meaning of “relevant distributions” for the purposes of section 147 in relation to distributions made before 6th April, 1989

par 4 This paragraph introduced, for the period 1 January, 1981 to 6 April, 1989 the concept of the “primary fund”. The primary fund was, broadly, a fund of income which consisted of a company’s profits taxed at the effective 10 per cent rate, less the tax on those profits, plus the dividends received by the company which carried a reduced tax credit of 1/18th. Distributions made out of the primary fund were known as “relevant distributions” and carried a reduced tax credit of 1/18th. The formula for calculating the fund is set out in the paragraph. Where distributions made by a company exceeded the company’s primary fund, the excess was treated as a separate distribution carrying the appropriate tax credit applicable at the time of payment.

The concept of the primary fund ceased to have effect for distributions made on or after 6 April, 1989 and the paragraph is repealed with effect from that date.

Distribution out of certain income of manufacturing companies – provisions relating to relief for certain losses and capital allowances carried forward from 1975–76

par 5 This paragraph contains technical provisions relating to the relief from corporation tax provided for under paragraph 16 in respect of unrelieved income tax trading losses and capital allowances carried forward from the year 1975–76. The relief under paragraph 16 for such losses is given in terms of tax, that is, it is given as a deduction from corporation tax payable rather than (as would be the case with corporation tax losses) as a deduction from income charged to corporation tax.

The paragraph deals with the calculation of the tax credit attaching to distributions where for an accounting period a company has “manufacturing income” chargeable at the effective 10 per cent corporation tax rate under Part 14 and also has unrelieved income tax trading losses and capital allowances carried forward from 1975–76. In such a case it is necessary, for the purposes of calculating the tax credit attaching to distributions made out of profits charged to corporation tax at the effective 10 per cent rate, to translate the relief given under paragraph 16 in terms of a deduction from corporation tax payable into an equivalent amount of relief from tax given by way of a deduction from income charged to corporation tax. The paragraph provides rules for the required translation.

The paragraph is repealed with effect from 6 April, 1999. There are no tax credits attaching to distributions made on or after 6 April, 1999 and, consequently, the paragraph is redundant from that date.

Distribution out of certain income of manufacturing companies – provisions relating to relief for certain corporation profits tax losses

par 6 This paragraph contains technical provisions relating to the relief from corporation tax provided for under paragraph 18 in respect of unrelieved corporation profits tax losses carried forward from the year 1975–76. The relief under paragraph 18 for such losses is given in terms of tax, that is, it is given as a deduction from corporation tax payable rather than (as would be the case with corporation tax losses) as a deduction from income charged to corporation tax.

The paragraph deals with the calculation of the tax credit attaching to distributions where for an accounting period a company has “manufacturing income” chargeable at the effective 10 per cent corporation tax rate under Part 14 and also has unrelieved corporation profits tax losses carried forward from 1975–76. In such a case it is necessary, for the purposes of calculating the tax credit attaching to distributions made out of profits charged to corporation tax at the effective 10 per cent rate, to translate the relief given under paragraph 18 in terms of a deduction from corporation tax payable into an equivalent amount of relief from tax given by way of a deduction from income charged to corporation tax. The paragraph provides rules for the required translation.

The paragraph is repealed with effect from 6 April, 1999. There are no tax credits attaching to distributions made on or after 6 April, 1999 and, consequently, the paragraph is redundant from that date.

Approved share option schemes

par 7 Paragraph 7 provides relief from income tax for employees and directors participating in Revenue Approved Share Option Schemes. The relief is only available in respect of such options granted in the period 6 April, 1986 to 28 January, 1992. Participants in such schemes do not suffer any income tax liability under Schedule E in respect of the grant or exercise of the option in respect of the shares. However, a capital gains tax liability may arise when the shares obtained by the exercise of the option are sold. The terms to be met in order for a scheme to be an approved scheme are set out in the Second Schedule to the Finance Act, 1986 (that Schedule has not been re-enacted in the Taxes Consolidation Act, 1997, however, it still applies for the purpose of this paragraph).

Interest on certain loans: relief from corporation tax

par 8 Before the introduction of corporation tax interest on permanent loans was not deductible in computing for the purposes of corporation profits tax the profits of the borrowing company, and, consequently, was not charged to corporation profits tax in the hands of the lending company. (The borrowing company had the right to deduct income tax when paying such interest, so that the lending company bore income tax thereon). Under the current corporation tax system such interest is an allowable deduction in computing the borrowing company’s profits. However, in relation to interest paid under loan agreements entered into before 27 November, 1975, the lending company’s liability to corporation tax on such interest, is, in effect, reduced to an amount equal to tax at the standard rate of income tax on the interest. The lending company’s former position is thus preserved in relation to loans which were in existence before 27 November, 1975.

Allowance for certain capital expenditure on construction of multi-storey car parks

par 9 Paragraph 9 provides that expenditure incurred in the period 29 January, 1981 to 31 March, 1991, on the construction of a multi-storey car park, for use by the general public, qualifies for the same capital allowances (apart from free deprecation) as are available to industrial buildings or structures (as defined in section 268(1)(a). This paragraph preserves entitlement to such allowances following enactment of the Taxes Consolidation Act, 1997.

Allowance for certain capital expenditure on roads, bridges, etc

par 10 An allowance is available for capital expenditure incurred by a person on the provision in the period 29 January, 1981 to 31 March, 1992 of a toll road by virtue of an agreement made between that person and a Road Authority under section 9 of the Local Government (Tolls Road) Act, 1979. The allowance was 50 per cent of qualifying expenditure where the agreement was entered into before 6 April, 1987, and 100 per cent where the agreement was entered into after 6 April, 1987. In addition, for post 6 April, 1987, agreements, interest incurred on borrowings to fund qualifying expenditure also qualifies for relief. The allowance may only be set off against taxable income arising under such an agreement to the person who incurred the capital expenditure. This paragraph preserves entitlement to such allowances following enactment of the Taxes Consolidation Act, 1997.

Urban Renewal Scheme, 1986 – capital allowances in relation to certain commercial premises in designated areas other than the Custom House Docks Area

par 11 This paragraph preserves the integrity of allowances and charges to be made to or on a person, in respect of capital expenditure incurred by that person, on the construction or refurbishment of certain commercial premises in designated areas other than the Custom House Docks Area, 1994.

Urban Renewal Scheme, 1986 – allowances to owner-occupiers in relation to certain residential premises in designated areas other than the Custom House Docks Area

par 12 This paragraph preserves the integrity of the deduction to be allowed owner-occupiers in respect of capital expenditure incurred by such individual’s, in the period 23 October, 1985 to 31 July, 1994, on the construction or refurbishment of a dwelling house situated in a designated area other than the Custom House Docks Area.

Urban Renewal Scheme, 1986 – double rent allowance in relation to certain premises in designated areas other than the Custom House Docks Area

par 13 This paragraph preserves the integrity of the availability of a double rent deduction as an expense in computing trading profits for tax purposes for rent paid under a bona fide commercial letting by a person carrying on a trade or profession in respect of a qualifying premises. The relief was available in respect of qualifying leases entered into in the period 23 October, 1985 to 31 July, 1994.

Rented residential accommodation – deduction for expenditure incurred on construction, conversion or refurbishment in areas other than the Custom House Docks Area

par 14 This paragraph preserves the integrity of the deduction available in respect of capital expenditure incurred by a person on the construction or refurbishment of a rental dwelling situated in a designated area other than the Custom House Docks Area. The relief is given as a deduction from the individual’s rental income.

Loss relief, etc

par 15 This paragraph preserves the integrity of losses available for carried forward under pre-consolidation enactments.

Relief in respect of unrelieved losses and capital allowances carried forward from the year 1975–76

par 16 This paragraph contains technical provisions allowing relief from corporation tax in respect of unrelieved income tax trading losses and capital allowances carried forward from years before the introduction of corporation tax (that is before 6 April, 1976). The relief is given by reducing the company’s corporation tax payable for the accounting period in respect of the company’s trade. The amount of losses and capital allowances which can be relieved for an accounting period is limited to the net chargeable profits of the trade for the accounting period. Any unrelieved amounts may be carried forward for relief in subsequent accounting periods.

The rate of relief for unused income tax trading losses and capital allowances is calculated as the difference between the standard rate of corporation tax and the 15 per cent rate used under paragraph 18 for relieving unused corporation profits tax losses. The paragraph specifies the differing rates of relief which apply up to accounting periods ending before 1 January, 2003. No relief is available from 1 January, 2003, as the standard rate of corporation tax from that date will be 12 per cent rate which is below the 15 per cent rate.

Relief in respect of losses or deficiencies within Case IV or V of Schedule D

par 17 Paragraph 17 contains technical provisions allowing relief for Case IV and V trading losses and capital allowances carried forward from years before the introduction of corporation tax (that is, losses incurred in the period before 6 April, 1976). The relief in respect of such losses and capital allowances is given as if they where trading losses of the company, and are relieved in tax terms, by apply the provisions of paragraph 16 (that is, by giving a credit against corporation tax payable, the credit being calculated by applying the standard credit rate to the amount of the loss or capital allowance). The relief is only available for set-off against the company’s Case IV or Case V income, as appropriate, any unrelieved amounts may be carried forward for relief to subsequent accounting periods.

Relief in respect of corporation profits tax losses

par 18 This paragraph contains technical provisions allowing relief for corporation profits tax losses carried forward from years before the introduction of corporation tax (that is, losses incurred in the period before 6 April, 1976). The relief is given by reducing the corporation tax payable for the first accounting period for which the company is within the charge to corporation tax and, in so far as it cannot be so allowed, is allowed against the tax payable for the next accounting period and so on. The relief is restricted, for any one accounting period, to an amount determined by the formula set out in the paragraph. The formula limits the relief to an amount equal to 15 per cent of the total profits of the company for the accounting period excluding chargeable gains. However, from 1 January, 2003 relief for unused corporation profits tax losses will be given at a rate equal to the 12 per cent standard rate of corporation tax.

Capital gains tax losses accruing before 6th April, 1976

par 19 Paragraph 19 provides relief for capital gains tax losses incurred in the years 1974–75 or 1975–76. It provides that allowable losses incurred in those periods which would have been set off against chargeable gains but for the insufficiency of such gains, may be carried forward and set against the company’s profits chargeable to corporation tax.

Income tax: relief for expenditure on certain buildings in certain areas

par 20 This paragraph preserves the integrity of the relief (provided for in section 4 of the Finance Act, 1989) for expenditure on certain buildings in designated areas. The relief was designed to encourage individuals to come and live in designated inner city areas and to renovate certain buildings there. Qualifying buildings are buildings the site of which is wholly within a designated area and which were determined by the Commissioners’ of Public Works in Ireland to be of significant scientific, historical, architectural, or aesthetic interest. The relief was available for the period 24 May, 1989 to 31 July, 1994, and consisted of an income tax deduction from an individual’s total income equal to 25 per cent of relevant expenditure incurred by an individual in a year of assessment, with a further deduction of 5 per cent allowable in each of the following 5 years (that is, a total deduction of 50 per cent). The expenditure must have been in respect of the repair, restoration or maintenance in the nature of repair or restoration of a house which was used by the individual as his/her sole or main residence.

Income tax: relief for income accumulated under trusts

par 21 This paragraph preserves the relief which may be claimed by a beneficiary for whom, under any will or settlement, income arising from any fund is accumulated for, contingent on that individual attaining a specified age or marrying. The relief must be claimed by the beneficiary within 6 years of the contingent materialising (that is, within 6 years of date of marriage or the date of attainment of the required age), and is given by repayment of any tax previously paid by the trustees. However, no claim can be made for repayment of tax paid by the trustees for any year of assessment after the year 1972- 1973.

Relief for investment in films in respect of certain sums

par 22 This paragraph provided certain transitional arrangements, consequent on the amendments to the relief for investment in films, introduced, with effect from 23 January, 1996, by section 31 of the Finance Act, 1996.

The transitional arrangements applied to funds invested on or after 23 January, 1996, but before 31 March, 1996, in respect of shares in a qualifying company, which funds enabled that company to produce a film in respect of which the Minister for Arts Culture and the Gaeltacht (now Minister for Arts, Sport and Tourism) had received an application for certification before 23 January, 1996, and the certification given by the Minister in respect of the film contained a statement to the effect that the Minister had received the application before that date.

Furthermore, if a sum of money to which the previous paragraph applies or which was paid on or after 6 April, 1995, and was used to enable the production of a film in respect of which an application for certification was not received by the Minister on or before 23 January, 1996, relief available before that date was restricted to 80 per cent of what it otherwise would have been.

The Finance Act, 1997, further increased, with effect from 26 March, 1997, the limit for corporate investment by a corporate group in any one film from €2,539,476.16 (£2 million) to €3,809,214.24 (£3 million). Furthermore to assist low budget films, it provided, with effect for any 12 month period starting after 22 January, 1997, that where a group invests more than €3,809,214.24 (£3 million)., in any such period, the excess over this amount must be targeted at films with a production cost below €5,080,000 (£4 million).

Farming: application of section 658 in relation to expenditure incurred before 27th January, 1994

par 23 With effect from the 27 January, 1994, capital allowances, in respect of qualifying capital expenditure incurred on farm buildings or farm works, are given over a writing down period of 7 years, at a rate of 15 per cent per year and 10 per cent in the final year. This paragraph preserves the capital allowance regime which applied in the period before 27 January, 1994. That regime provided —

• for capital expenditure incurred before 1 April, 1989 – free deprecation up to 30 per cent in a chargeable period, subject to an overall limit of 100 per cent,
• for capital expenditure incurred between 1 April, 1989 and 31 March, 1991 – free deprecation up to a maximum of 50 per cent, the balance being written off by annual allowances of 10 per cent for 5 years,
• for capital expenditure incurred between 1 April, 1991 and 31 March, 1992 – free deprecation up to a maximum of 25 per cent, the balance being written off by annual allowances of 10 per cent for 7 years and 5 per cent for the final year,
• for capital expenditure incurred between 1 April, 1992 and 26 January, 1994 – annual allowance of 10 per cent for 10 years.

However, in the case of qualifying pollution control expenditure free deprecation up to a maximum of 50 per cent was available for capital expenditure incurred between 1 April, 1991 and 31 March, 1993.

Transitional provisions arising from amendments made to the system of life assurance companies by Finance Act, 1993

par 24 The basis of taxation of life assurance companies was amended with effect from 1 January, 1993. The amendments, inter alia, widened the basis of charge to tax (that is, both realised and unrealised income and gains are charged to tax) of such companies and reduced the rate of tax of such companies from, 35 per cent in respect of income and 40 per cent in respect of capital gains to a rate equal to the standard rate of income tax. It also provided that accounting periods straddling 1 January, 1993, were deemed to be made up of 2 accounting periods one ending 31 December, 1992, and another beginning on 1 January, 1993. As a transitional measure, assets of life assurance companies, excluding gilts, were deemed to be sold and reacquired on 31 December, 1992, any resulting gains or losses were spread over the following 7 years, with gains being charged at a 40 per cent rate rather than 27 per cent rate.

Disposals in the year 1993–1994 of units in certain unit trusts

par 25 This paragraph preserves, for the year of assessment 1993–94, the exemption from capital gains tax, of gains arising from investments by certain unit trusts who invested wholly in government securities.

Application of section 774(6) in certain circumstances

par 26 This paragraph provides that contributions made by employers to approved occupational pension schemes are allowed as a deduction for tax purposes, to the extent that the sums are actually paid into an approved pension scheme.

Settlements: application of section 792 for the year of assessment 1997–98 in relation to certain dispositions to certain individuals residing with, and sharing normal household expenses with, the disponer

par 27 With effect from 6 April, 1996, the recognition for tax purposes of covenants made by individuals was generally abolished. However, this paragraph mitigates, the tax consequences of the abolition of covenants, to the extent that the covenantee is not a child of the covenantor and is resident with, and sharing normal household expenses with, the covenantor and a dependant child of either the covenantor or the covenantee or both of them, is resident with them and is jointly maintained by them. The mitigation only applies up to 5 April, 2000, and is in respect of covenants made before 6 April, 1993, or made after 6 April, 1993, but only to the extent that it immediately replaced a covenant made before that date. Furthermore, the Revenue Commissioners must also be satisfied that the imposition of the restrictions imposed after 6 April, 1996, would give rise to hardship.

Construction of certain references to Ministers of the Government

par 28 This paragraph sets out the various current Ministerial titles, the corresponding former titles, and the effective date from which the current titles took effect.

Construction of certain references to Government Departments

par 29 This paragraph sets out two new Government Department titles, the corresponding former titles, and the effective date from which the current titles took effect.

Construction of references to Secretary General of Department of Finance

par 30 This paragraph provides that any reference in the Taxes Consolidation Act, 1997, to the Secretary General of the Department of Finance, is, for the period 6 April, 1997, to 31 August, 1997, to be construed as a reference to the Secretary of the Department of Finance.

Construction of certain references to educational institutions

par 31 This paragraph provides that any reference in the Taxes Consolidation Act, 1997, to either National University of Ireland, Dublin or National University of Ireland, Cork, is, for the period 6 April, 1997, to 15 June, 1997, to be construed as a reference to University College, Dublin or University College, Cork, respectively.

Relevant Date: Finance Act 2021