Revenue Note for Guidance

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Revenue Note for Guidance

749 Dealers in securities

Summary

This section provides that where the first buyer is a dealer in securities, the purchase price of any securities acquired by the first buyer is reduced by the interest element contained within that price. This element is calculated in accordance with Schedule 21. The section contains a number of exceptions to this rule and also provides that a transaction is not caught by both the anti-bondwashing provisions of this Chapter and the anti-dividend stripping provisions in Chapter 2 of this Part.

Details

General rule

(1) Subject to the other provisions of this section, where the first buyer is a dealer in securities, the purchase price of any securities acquired by the first buyer is reduced by an appropriate amount of the interest element contained within that price when computing the profits arising from, or loss sustained in, the trade. This appropriate amount in respect of the interest is calculated in accordance with Schedule 21.

Irish Stock exchange members

(2) If in the opinion of the Revenue Commissioners, the first buyer is a genuine discount house or a member of the Irish Stock exchange as a dealer the reduction in the acquisition price of any securities acquired by the first buyer provided for by subsection (1) is not to apply.

Overseas securities

(2A)(a) The general rule in subsection (1) will not apply for a chargeable period in relation to short-term purchases of overseas securities (purchased on or after 1 January 2003) if:

  • those securities are purchased by a dealer in securities in the ordinary course of the dealer trade,
  • the interest payable in respect of all such overseas securities to which this Chapter applies is brought in as a trading receipt in computing the dealer’s profits for the chargeable period, and
  • the dealer elects in writing, by the specified return date for the chargeable period in question, that credit for any foreign tax on that interest which might otherwise be due by virtue of Part 14 or 35 or Schedule 24 is not to be allowed.

(2A)(b) “overseas securities” is defined as securities issued by a government of a territory outside the State, by a foreign local authority, foreign local government, foreign public authority, or any other body of persons not resident in the State.

“specified return date for the chargeable period”: this is the return filing date and has the same meaning as in section 959A.

Effect of election under subsection (2A)

(2B) Where an election is made in accordance with subsection (2A)(a)(ii) then:

  • credit for foreign tax shall not be allowed, notwithstanding the provisions of Parts 14 and 35 and Schedule 24 which provide for such a credit,
  • the election is to be included in the return which the dealer makes for self-assessment purposes under Chapter 3 of Part 41A,, and
  • the election is to have effect only for the chargeable period for which it is made. Therefore, an annual election is required with the annual self-assessment return.

Irish Government securities

(2C) The provisions of subsection (1) will also not apply for a chargeable period in relation to short-term purchases of Irish Government securities (which are not chargeable assets for the purposes of the Capital Gains Tax Acts by virtue of section 607) if those securities are purchased by a dealer in securities in the ordinary course of the dealer’s trade and the interest payable in respect of all such securities to which this Chapter applies is brought in as a trading receipt in computing the dealer’s profits for the chargeable period. This provision also applies as respects securities purchased on or after 1 January 2003.

Interaction with Chapter 2

(3) The section ensures that a transaction is not caught by both the anti-bondwashing provisions of this Chapter and the anti-dividend stripping provisions in Chapter 2 of this Part.

Relevant Date: Finance Act 2020