Finance Act, 1997

• Permanent Page URL

Employee share ownership trusts.

51.—(1) (a) This section applies to an employee share ownership trust which the Revenue Commissioners have approved of as a qualifying employee share ownership trust in accordance with the provisions of the Third Schedule and which approval has not been withdrawn.

(b) This section shall be construed together with the Third Schedule .

(2) Where, in an accounting period of a company, the company expends a sum—

(a) in establishing a trust to which this section applies, or

(b) (i) in making a payment by way of contribution to the trustees of a trust which at the time the sum is expended is a trust to which this section applies, and

(ii) at that time, the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed, and

(iii) before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes,

then, the sum shall be included—

(I) in the sums to be deducted in computing for the purposes of Schedule D the profits or gains for that accounting period of a trade carried on by that company, or

(II) if the company is an investment company within the meaning of section 15 of the Corporation Tax Act, 1976 , or a company in the case of which that section applies by virtue of section 33 of that Act, in the sums to be deducted under section 15(1) of that Act as expenses of management in computing the profits of the company for that accounting period for the purposes of corporation tax.

(3) In a case where—

(a) paragraph (a) of subsection (2) applies, and

(b) the trust is established after the end of the period of 9 months beginning with the day following the end of the accounting period in which the sum is expended by the company,

then, for the purposes of subsection (2), the sum shall be treated as expended in the accounting period in which the trust is established and not the accounting period mentioned in paragraph (b).

(4) For the purposes of paragraph (b) (ii) of subsection (2), the question whether one company is controlled by another shall be construed in accordance with section 102 of the Corporation Tax Act, 1976 .

(5) For the purposes of paragraph (b) (iii) of subsection (2)—

(a) each of the following is a qualifying purpose—

(i) the acquisition of shares in the company which established the trust;

(ii) the repayment of sums borrowed;

(iii) the payment of interest on sums borrowed;

(iv) the payment of any sum to a person who is a beneficiary under the terms of the trust deed; and

(v) the meeting of expenses;

and

(b) the expenditure period is the period of 9 months beginning with the day following the end of the accounting period in which the sum is expended by the company, or such longer period as the Revenue Commissioners may allow by notice given to the company.

(6) For the purposes of this section the trustees of an employee share ownership trust shall be taken to expend sums paid to them in the order in which the sums are received by them, irrespective of the number of companies making payments.

(7) Section 13 of the Finance Act, 1976 , shall not apply to income consisting of dividends in respect of securities held by a trust to which this section applies.

(8) Where the trustees of a trust to which this section applies transfer securities to the trustees of a profit sharing scheme approved under Part I of the Third Schedule to the Finance Act, 1982 , any gain accruing to those first-mentioned trustees on that transfer shall not be a chargeable gain.

(9) Notwithstanding anything in the foregoing provisions of this section, where the Revenue Commissioners in accordance with the provisions of the Third Schedule withdraw approval of an employee share ownership trust as a qualifying employee share ownership trust, this section shall not apply or have effect, on or after the date from which that withdrawal has effect, in relation to—

(a) any sum expended by a company in making a payment to that trust,

(b) income consisting of dividends in respect of securities held by that trust, or

(c) the transfer of securities to a profit sharing scheme approved under Part I of the Third Schedule to the Finance Act, 1982 .