Corporation Tax Act, 1976
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Restriction of relief for losses in farming or market gardening. |
17.—(1) In this section— | |
“prior three years” in relation to a loss incurred in an accounting period, means the last three years before the beginning of the accounting period; | ||
“prior period of loss” means the prior three years, or, if losses were incurred in successive accounting periods amounting in all to a period longer than three years (and ending when the prior three years end), that longer period; | ||
“farming” has the same meaning as in subsection (1) (inserted by the Finance Act, 1975 ) of section 13 of the Finance Act, 1974 (taxation of farming profits); | ||
“market gardening” has the same meaning as in section 54 of the Income Tax Act, 1967 (market gardening). | ||
(2) (a) Any loss incurred in a trade of farming or market gardening shall not be available for relief under section 16 (2) unless it is shown that, for the accounting period in which the loss is claimed to have been incurred, the trade was being carried on on a commercial basis and with a view to the realisation of profits in the trade. | ||
(b) Without prejudice to paragraph (a), any loss incurred in any accounting period in a trade of farming or market gardening shall not be available for relief under section 16 (2), if a loss, computed without regard to capital allowances, was incurred in carrying on that trade in that accounting period, and in each of the accounting periods wholly or partly comprised in the prior three years; and for the purpose of this paragraph “loss computed without regard to capital allowances” means a loss ascertained in accordance with the rules of Case I of Schedule D, but so that, notwithstanding section 14, no account shall be taken of any allowance or charge which otherwise would be taken into account under that section. | ||
(c) For the purposes of this section, the fact that a trade of farming or market gardening was being carried on at any time so as to afford a reasonable expectation of profit shall be conclusive evidence that it was then being carried on with a view to the realisation of profits. | ||
(d) This subsection shall not restrict relief for any loss if it is shown by the claimant company that the whole of its farming or market gardening activities in the year next following the prior three years are of such a nature, and carried on in such a way, as would have justified a reasonable expectation of the realisation of profits in the future if they had been undertaken by a competent farmer or market gardener, but that, if that farmer or market gardener had undertaken those activities at the beginning of the prior period of loss, he could not reasonably have expected the activities to become profitable until after the end of the year next following the prior period of loss. | ||
(e) This subsection shall not restrict relief where the carrying on of the trade forms part of and is ancillary to a larger trading undertaking. | ||
(3) Subsection (2) shall not restrict relief for any loss if the trade was set up and commenced within the prior three years, and, for the purposes of this subsection, a trade shall be treated as discontinued, and a new trade set up, in any event which under any of the provisions of the Tax Acts is to be treated as equivalent to the permanent discontinuance or setting up of a trade: | ||
Provided that a trade shall not be treated as discontinued if under section 20 (2) it is not to be treated as discontinued for the purpose of capital allowances and charges. | ||
(4) Where a trade of farming or market gardening is or falls to be treated as being carried on for a part only of an accounting period by reason of its being set up and commenced, or discontinued, or both, in that accounting period, subsection (2) shall have effect in relation to that trade as regards that part of that accounting period. | ||
(5) Where at any time there has been a change in the persons engaged in carrying on a trade of farming or market gardening, this section shall, notwithstanding subsection (3), apply to any person who was engaged in carrying on the trade immediately before and immediately after the change as if the trade were the same before and after without any discontinuance, and as if a person and another person with whom he is connected were the same person. | ||
In this subsection any question as to whether persons are connected shall be determined in accordance with the provisions of section 157 and accordingly relief from corporation tax may be restricted under this section by reference to losses some of which are incurred in years of assessment and some, computed without regard to capital allowances, are incurred in a company's accounting periods. |