769E Application of Chapter 4 of Part 9

(1) This section applies to the Chapter the provisions of Chapter 4 of Part 9 which contains a number of general provisions supplementing the legislation on capital allowances. Thus, any references in the Tax Acts to capital allowances given by means of discharge or repayment and available against certain income only are to include references to allowances given under section 769D(2). The effect of this, for instance, is that section 308 is applied to ensure that, where there is insufficient income from capacity rights to absorb allowances in a year, any excess can be set against the company’s other income in that year and, where necessary, carried forward for offset against income from capacity rights in subsequent years.

(2) The section also applies a specific provision of Chapter 4 of Part 9 in a modified way to ensure a particular application in the case of capacity rights. Thus, in the application of section 312 (special provisions as to certain sales) to capacity rights, where the seller and buyer of capacity rights are under common control, the seller and buyer may make a joint election in writing to the inspector to have the sale of the rights treated as if it were made at the amount of the qualifying expenditure (on the acquisition of the rights) remaining unallowed instead of the open market price.

Such an election may only be made where the tax written-down value of the asset is less than the open market price and the sale is not a sale the sole or main benefit of which is to obtain a capital allowance. In any such case, the seller will not have a balancing charge and the buyer will effectively be granted capital allowances on a reduced amount over the remainder of the writing-down period of the capacity rights. However, in computing any future balancing charge to be made on the buyer in respect of the capacity rights, account will be taken not only of the capital allowances granted to the buyer but also of the capital allowances granted to the seller.

A joint election to have the sale of capacity rights treated as if it were made for the amount of the qualifying expenditure remaining unallowed may not be made if, at the time of the sale, any of the parties to the sale are not resident in the State. This rule will not apply, however, if the non-resident party or parties is or are entitled to a capital allowance, or subject to a balancing charge, as a result of the sale. This would arise where a non-resident company is carrying on a trade in the State through a branch or agency.

Relevant Date: Finance Act 2021