Revenue Note for Guidance

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Revenue Note for Guidance

Schedule 17

[Section 705]

Reorganisation into Companies of Trustee Savings Banks

Overview

The provisions of this Schedule, which are applied by section 705, ensure neutral tax consequences where under the Trustee Savings Banks Act, 1989 trustee savings banks reorganise into companies.

Interpretation

par 1 “bank” is a trustee savings bank or a company controlled by the Minister for Finance or both, depending on the context.

“successor” is the company to which any property, rights, liabilities and obligations are transferred in the course of the transfer.

“transfer” means the transfer of all or part of a trustee savings bank’s property and rights and all of its liabilities under an order made by the Minister for Finance, whether for —

  • the reorganisation of a trustee savings bank into a “controlled” company (that is, controlled by the Minister for Finance),
  • the reorganisation of a trustee savings bank into a “non-controlled” company, or
  • the reorganisation of a “controlled” company into a “non-controlled” company.

Capital allowances

par 2 The transfer by a trustee savings bank of its assets to a successor company does not of itself give rise to any capital allowance or charge. The successor company is entitled to the capital allowances to which the bank would have been entitled if there had been no transfer. It is not, however, entitled to unused capital allowances which were carried forward. In the case of a trustee savings bank, these unused allowances would be carried forward separately as capital allowances (a trustee savings bank is not a body corporate and is liable to income tax not corporation tax). If they arose to a company they would become part of the companies trading losses for corporation tax purposes. That situation is dealt with in paragraph 3.

Trading losses

par 3 The trading losses of the trustee savings bank may not be carried forward. A loss incurred by a trustee savings bank would not be available for set-off against trading income of a successor under the general rules of section 396(1) (relief for trading losses other than terminal losses). Paragraph 3 ensures that a company which is not controlled by the Minister for Finance will not entitled to relief in respect of —

  • losses incurred by it at a time when it was controlled by the Minister, and
  • losses incurred by any other company which was controlled by the Minister.

It is possible under the Trustee Savings Banks Act, 1989 for the reorganisation of a “controlled” company to take the form of either the sale of shares by the Minister or the creation of a new company and the transfer of assets and liabilities to that company. These possibilities give rise to the need for the separate subparagraphs (a) and (b).

Financial assets

par 4 On a reorganisation the financial trading stock (financial assets bought for re-sale) of the bank is valued at its cost to the bank being reorganised. Furthermore, the transfer of financial assets in the course of a reorganisation is not treated as a disposal by the bank to the successor. However, when the successor disposes of those assets, its profit or loss on disposal will be determined by comparing the sale proceeds with the original cost of those assets.

Capital gains

par 5 Neither a gain nor a loss crystallises on the transfer of any assets in the course of a reorganisation. However, when the successor company subsequently disposes of any such asset, the gain is calculated as if the company had acquired the asset at the time and cost at which it was acquired by the trustee savings bank or the bank controlled by the Minister for Finance, as appropriate.

Unrelieved capital losses may be carried forward and set off against gains accruing to the successor company. Gains deferred under the replacement of business assets scheme (rollover relief) do not crystallise on a reorganisation. The bank and the successor are, for that purpose, treated as the same person. Finally, a debt owed to a bank, which is not a chargeable asset, does not become a chargeable asset by reason only of a reorganisation of a trustee savings bank into a company.

Relevant Date: Finance Act 2021