Finance Act, 1997

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Amendment of Chapter IX (profit sharing schemes) of Part 1 of, and Third Schedule (profit sharing schemes) to, Finance Act, 1982 .

50.—The Finance Act, 1982 , is hereby amended—

(a) in section 52, as on and from the passing of this Act, by the substitution of the following for subsections (7) and (8):

“(7) In this Chapter ‘the release date’, in relation to any of a participant's shares, means the third anniversary of the date on which the shares were appropriated to the participant.

(8) Subject to section 56(4), for the purposes of provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of the individual's shares, any reference to ‘the appropriate percentage’ in relation to those shares shall be determined according to the time of that event, as follows—

(a) if the event occurs before the third anniversary of the date on which the shares were appropriated to the participant and paragraph (b) does not apply, the appropriate percentage is 100 per cent., and

(b) if, in a case where at the time of the event the participant—

(i) has ceased to be an employee or director of a relevant company as mentioned in subsection (5)(a), or

(ii) has reached pensionable age, as defined in section 2 of the Social Welfare (Consolidation) Act, 1993 ,

the event occurs before the third anniversary of the date on which the shares were appropriated to him, the appropriate percentage is 50 per cent.”,

(b) as respects sums expended on or after the passing of this Act, by the insertion of the following section after section 58:

“Costs of establishing profit sharing schemes.

58A.—(1) This section applies to a sum expended by a company in establishing a profit sharing scheme which the Revenue Commissioners approve of in accordance with Part I of the Third Schedule and under which the trustees acquire no shares before such approval is given.

(2) A sum to which this section applies shall be included—

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

(b) 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 the purposes of corporation tax.

(3) In a case where—

(a) subsection (2) applies, and

(b) the approval is given after the end of the period of nine months beginning with the day following the end of the accounting period in which the sum is expended,

then, for the purpose of subsection (2), the sum shall be treated as expended in the accounting period in which the approval is given and not the accounting period mentioned in paragraph (b).”,

and

(c) in the Third Schedule, as respects profit sharing schemes approved on or after the passing of this Act—

(i) by the substitution, in subparagraph (1) of paragraph 2, of the following for clause (a):

“(a) is then an employee or full-time director of the company concerned or, in the case of a group scheme, a participating company, and”,

and

(ii) by the substitution of the following paragraph for paragraph 7:

“7.—(1) The shares must be—

(a) fully paid up;

(b) not redeemable; and

(c) not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by subparagraph (2).

(2) Subject to subparagraphs (3) and (4), the shares may be subject to a restriction imposed by the company's articles of association—

(a) requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held; and

(b) requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.

(3) A restriction is not authorised by subparagraph (2) unless—

(a) any disposal required by the restriction will be by way of sale for a consideration in money on terms specified in the articles of association; and

(b) the articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in paragraph (a).

(4) Nothing in subparagraph (2) authorises a restriction which would require a person, before the release date, to dispose of his beneficial interest in shares the ownership of which has not been transferred to him.”.