807C Supplementary provisions in relation to section 806 – apportionment in certain cases

Summary

The purpose of this section is to protect individuals from a tax charge under section 806 in certain circumstances. It broadly provides that, where the chargeable income is attributable partly to earlier commercial transactions that qualified for exemption, and partly to later transactions that do not qualify for exemption, tax is only charged on the income attributable to the later transactions involving tax avoidance. Where the section applies, the section 806 charge is reduced so that it effectively applies only to the amount of income that Revenue Commissioners consider to be attributable to associated operations not meeting the relevant exemption test. The income attributable to the transactions not involving avoidance is not charged.

Details

(1) Definitions used in the section are as follows:

“appropriate exemption” means an exemption from the transfer of assets provisions arising from the fact that the transfer and associated operations passed the “commercial test” (under the old or the new rules).

“exempt year of assessment” means one of the exempt years since the transfer [see subsection (2) below] where:

• there is no earlier year where the individual is liable under section 806, or
• there is no earlier year where the individual would have been liable under section 806 if he/she had any deemed income under section 806.

“relevant transactions” means the transfer and associated operations

(2) The section applies where an individual is liable under section 806 and

• he or she is liable because the “new” commercial test is failed,
• since the transfer of assets, there have been one or more years where the individual,
• was not liable under section 806 because he or she was exempt, or
• would not have been liable under section 806 if he/she had any deemed income in the year.

In other words, the individual is exempt because of an exemption, not because of a lack of income in that year.

The income that gives rise to the liability is attributable partly to transactions that were exempt (because they passed the commercial test) in the last exempt year of assessment and partly to associated operations that were taxable.

(3) Where the conditions in subsection (2) are met, Revenue can apportion so that the charge will only apply to the associated operations that did not meet the exemption criteria.

(4) An indicative list of matters that Revenue may take into account in arriving at a just and reasonable apportionment is provided.

Relevant Date: Finance Act 2021