Corporation Tax Act, 1976

PART XI

Group Relief

Group payments.

105.—(1) Where on or after the 6th day of April, 1976, a company receives from another company (both being companies resident in the State) any such payments as are referred to in this subsection, and either—

(a) the company making the payment is—

(i) a 51 per cent. subsidiary of the other or of a company so resident of which the other is a 51 per cent. subsidiary; or

(ii) a trading or holding company owned by a consortium the members of which include the company receiving the payments; or

(b) the company receiving the payments is a 51 per cent. subsidiary of the company,

then, subject to the following provisions of this section, the company receiving the payments and the company paying them may jointly elect that this subsection shall apply to any such payments received from the latter by the former, and so long as the election is in force those payments may be made without deduction of income tax and neither section 434 of the Income Tax Act, 1967 (payments not payable out of taxed profits), nor section 31 of the Finance Act, 1974 (interest payments by companies), shall apply thereto.

The payments for which an election may be made under this subsection are any payments which are for corporation tax charges on income of the company making them or would be for that tax charges on income of the company making them if they were not deductible in computing profits or any description of profits or if section 10 (6) (restriction of allowance of charges on income) did not apply to them.

(2) Subsection (1) shall not apply to payments received by a company on any investments, if a profit on the sale of those investments would be treated as a trading receipt of that company.

(3) Where a company purports by virtue of an election under subsection (1) to make any payment without deduction of income tax and income tax ought to have been deducted, the inspector may make such assessments, adjustments or set-offs as may be required for securing that the resulting liabilities to tax (including interest on unpaid tax) of the company making and the company receiving the payment are, so far as possible, the same as they would have been if the income tax had been duly deducted.

(4) Where tax assessed under subsection (3) on the company which made the payment is not paid by that company before the expiry of three months from the date on which that tax is payable, that tax shall, without prejudice to the right to recover it from that company, be recoverable from the company which received the payment.

(5) In determining for the purposes of this section whether one company is a 51 per cent. subsidiary of another, that other shall be treated as not being the owner—

(a) of any share capital which it owns directly or indirectly in a company not resident in the State, or

(b) of any share capital which it owns indirectly, and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt.

(6) For the purposes of this section—

(a) “trading or holding company” means a trading company or a company whose business consists wholly or mainly in the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries,

(b) “trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades,

(c) a company is owned by a consortium if three-fourths or more of the ordinary share capital of the company is beneficially owned between them by five or fewer companies resident in the State of which none beneficially owns less than one-twentieth of that capital, and those companies are called the members of the consortium.

(7) References in this section to payments received by a company apply to any received by another person on behalf of or in trust for the company but not to any received by the company on behalf of or in trust for another person.