Finance Act, 1986

Application of section 40 (capital allowances for certain leased assets) of Finance Act, 1984.

53.Section 40 of the Finance Act, 1984 , is hereby amended, as respects machinery or plant provided for leasing on or after the 13th day of May, 1986—

(a) in subsection (1), by the insertion after the definition of “chargeable period or its basis period” of the following definition:

“‘lessee’ and ‘lessor’, in relation to machinery or plant provided for leasing, mean, respectively, the person to whom the machinery or plant is or is to be leased and the person providing the machinery or plant for leasing and ‘lessee’ and ‘lessor’ include, respectively, the successors in title of a lessee or a lessor;”,

(b) in subsection (1), in the definition of “the specified capital allowances”, by the insertion after “subsection (6)” of “, (7) or (8)”, and the said definition, as so amended, is set out in the Table to this section,

(c) in subsection (5), by the insertion after “subsection (6)” of “or (7)”, and the said subsection, as so amended, is set out in the Table to this section, and

(d) by the deletion of subsection (6) and the substitution therefor of the following subsections:

“(6) References in this section to machinery or plant to which this subsection applies are references to machinery or plant provided on or after the 25th day of January, 1984, for leasing where the expenditure incurred on the provision of the machinery or plant was incurred under an obligation entered into by the lessor and the lessee—

(a) before the 25th day of January, 1984, or

(b) before the 1st day of March, 1984, pursuant to negotiations which were in progress between the lessor and the lessee before the 25th day of January, 1984.

(7) References in this section to machinery or plant to which this subsection applies are references to machinery or plant provided on or after the 25th day of January, 1984, for leasing where the expenditure incurred on the provision of the machinery or plant (or, in the case of a film to which section 6 or 7 of the Irish Film Board Act, 1980 , applies, the cost of the making of the film) has been or is to be met directly or indirectly, wholly or partly, by the Industrial Development Authority, the Irish Film Board, the Shannon Free Airport Development Company Limited, or Údarás na Gaeltachta:

Provided that this subsection shall not apply to machinery or plant provided for leasing on or after the 13th day of May, 1986, unless—

(a) the machinery or plant is a film to which section 6 or 7 of the Irish Film Board Act, 1980 , applies, or

(b) the expenditure incurred on the provision of the machinery or plant (not being a film of the kind mentioned in paragraph (a)) was incurred under an obligation entered into by the lessor and the lessee before—

(i) the 13th day of May, 1986, or

(ii) the 1st day of September, 1986, pursuant to negotiations which were in progress between the lessor and the lessee before the 13th day of May, 1986.

(8) (a) The reference in the definition of ‘the specified capital allowances’ in subsection (1) to machinery or plant to which this subsection applies is a reference to machinery or plant (not being a film of the kind mentioned in paragraph (a) of the proviso to subsection (7)) provided on or after the 13th day of May, 1986, for leasing by a lessor to a lessee (who is not a person connected with the lessor) under a lease the terms of which include an undertaking given by the lessee that, during a period (hereafter in this section referred to as ‘the relevant period’) which is not less than three years and which commences on the day on which the machinery or plant is first brought into use by the lessee, the machinery or plant so provided will be used by the lessee for the purposes only of a specified trade carried on in the State by the lessee:

Provided that any machinery or plant in respect of which such an undertaking has been given by a lessee, and which at any time has been treated as machinery or plant to which this subsection applies, shall at any later time cease to be machinery or plant to which this subsection applies if, at that later time, it appears to the inspector (or, on appeal, to the Appeal Commissioners) that the undertaking has not been fulfilled by the lessee; and, where any machinery or plant so ceases to be machinery or plant to which this subsection applies, such assessments or adjustments of assessments shall be made to recover from the lessor any relief from tax given to the lessor because the machinery or plant was treated as machinery or plant to which this subsection applies.

(b) This subsection shall not apply to machinery or plant provided for leasing on or after the 13th day of May, 1986, if the expenditure incurred on the provision of the machinery or plant was incurred under an obligation entered into by the lessor and the lessee before—

(i) the 13th day of May, 1986, or

(ii) the 1st day of September, 1986, pursuant to negotiations which were in progress between the lessor and the lessee before the 13th day of May, 1986.

(9) For the purposes of subsections (6), (7) and (8)—

(a) an obligation shall be treated as having been entered into before a particular date, if, but only if, before that date, there was in existence a binding contract in writing under which that obligation arose, and

(b) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress between a lessor and a lessee before a particular date unless, on or before that date, preliminary commitments or agreements in relation to that obligation had been entered into between the lessor and the lessee.

(10) In subsection (8) (a), ‘specified trade’, in relation to a lessee, means a trade which, throughout the relevant period, consists wholly or mainly of—

(a) the manufacture of goods (including activities which would, if the borrower were to make a claim for relief in respect of the trade under Chapter VI of Part I of the Finance Act, 1980 , fall to be regarded for the purposes of that Chapter as the manufacture of goods), or

(b) exempted trading operations within the meaning of Part V (Profits from Trading within Shannon Airport) of the Corporation Tax Act, 1976 :

Provided that a trade shall be regarded, as respects the relevant period, as consisting wholly or mainly of particular activities if, but only if, the total amount receivable by the lessee from sales made or, as the case may be, in payment for services rendered in the course of those activities in the relevant period is not less than 75 per cent. of the total amount receivable by the lessee from all sales made or, as the case may be, in payment for all services rendered in the course of the trade in the relevant period.

(11) Section 157 of the Corporation Tax Act, 1976 , shall apply for the purposes of subsection (8) (a), save that, for the purposes of determining whether a person is connected with another person whose profits or gains are chargeable to income tax, the provisions of section 16 (3) of the Finance (Miscellaneous Provisions) Act, 1968 , shall apply.”.

TABLE

“the specified capital allowances” means capital allowances in respect of—

(i) expenditure incurred on machinery or plant provided on or after the 25th day of January, 1984, for leasing in the course of a trade of leasing, or

(ii) the diminished value of such machinery or plant by reason of wear and tear,

other than capital allowances in respect of machinery or plant to which subsection (6), (7) or (8) applies;

(5) The proviso to subsection (1) of section 296 of the Income Tax Act, 1967 , and sections 14 (6) and 116 (2) of the Corporation Tax Act, 1976 , shall not have effect in relation to capital allowances—

(a) in respect of expenditure incurred on or after the 25th day of January, 1984, on the provision of machinery or plant, or

(b) in respect of the diminished value of machinery or plant by reason of wear and tear if that machinery or plant was first acquired on or after the 25th day of January, 1984, by the person to whom the capital allowances are to be or have been made,

other than capital allowances in respect of machinery or plant to which subsection (6) or (7) applies.