Finance Act 2017

Charges on income for corporation tax purposes

24. (1) Part 8 of the Principal Act is amended—

(a) in section 243(8), by substituting “subsections (2A), (2B)” for “subsections (2A)”,

(b) in section 247(1)(a) by inserting the following definition after the definition of “control”:

“ ‘intermediate holding company’ means a company whose business consists wholly or mainly of the holding of stocks, shares or securities and is, in relation to an investee company referred to in subsection (2)(a)(iv), a company through which the investee company holds stocks, shares or securities in a company referred to in subsection (2)(a)(i);”,

(c) in section 247(2)—

(i) by substituting the following for paragraph (a):

“(a) in acquiring any part of the ordinary share capital of—

(i) a company which exists wholly or mainly for the purpose of carrying on a trade or trades,

(ii) a company whose income consists wholly or mainly of profits or gains chargeable under Case V of Schedule D,

(iii) a company whose business consists wholly or mainly of the holding of stocks, shares or securities directly in a company referred to in subparagraph (i),

(iv) a company whose business consists wholly or mainly of the holding of stocks, shares or securities of a company referred to in subparagraph (i) indirectly through an intermediate holding company or companies, or

(v) a company whose business consists wholly or mainly of the holding of stocks, shares or securities directly in a company referred to in subparagraph (ii),”,

(ii) in paragraph (b)—

(I) in subparagraph (ii), by substituting “relate,” for “relate, or”,

(II) in subparagraph (iii), by substituting “directly in a company” for “of a company”, and

(III) by inserting the following after subparagraph (iii):

“(iv) where the company is a company whose business consists wholly or mainly of the holding of stocks, shares or securities of a company referred to in paragraph (a)(i) indirectly through an intermediate holding company or companies, for the purposes of acquiring and holding such stocks, shares or securities, or

(v) where the company is a company whose business consists wholly or mainly of the holding of stocks, shares or securities directly in a company referred to in paragraph (a)(ii), for the purposes of holding such stocks, shares or securities,”,

(iii) in paragraph (ba)—

(I) by substituting “in paragraph (a) (other than a company referred to in paragraph (a)(iv))” for “in paragraph (a)”,

(II) in subparagraph (ii), by substituting “relate,” for “relate, or”,

(III) in subparagraph (iii), by substituting “directly in a company” for “of a company”, and

(IV) by inserting the following subparagraph after subparagraph (iii):

“(iv) where the connected company is a company whose business consists wholly or mainly of the holding of stocks, shares or securities directly in a company referred to in paragraph (a)(ii), for the purposes of holding such stocks, shares or securities,”,

and

(iv) by inserting the following after paragraph (ba):

“(bb) in lending to a company referred to in paragraph (a)(iv) money which is on-lent by that company to a connected company and is used wholly and exclusively by that connected company—

(i) where the connected company is a company referred to in paragraph (a)(iii), for the purposes of acquiring and holding any part of the ordinary share capital of a company referred to in paragraph (a)(i), or

(ii) where the connected company is a company referred to in paragraph (a)(iv), for the purposes of acquiring and holding any part of the ordinary share capital of a company referred to in paragraph (a)(iii), or”,

(d) in section 247(2A)—

(i) in subparagraph (c), by substituting “directly or indirectly in a company” for “of a company” and by substituting “securities, or” for “securities.”,

(ii) by inserting the following after subparagraph (c):

“(d) where the company which uses the capital is a company whose business consists wholly or mainly of the holding of stocks, shares or securities directly in a company referred to in paragraph (a)(ii) of subsection (2), for the purposes of holding such stocks, shares or securities.”,

(e) in section 247, by inserting the following after subsection (2A):

“(2B) Subsection (2)(a)(iv), (b)(iv) and (bb) shall apply only to a company, being a company whose business consists wholly or mainly of the holding of stocks, shares or securities of a company referred to in subsection (2)(a)(i) indirectly through an intermediate holding company or companies, where the company and each intermediate holding company exists for bona fide commercial reasons and not as part of a scheme or arrangement the purpose of which or one of the purposes of which is the avoidance of tax.”,

(f) in section 247(3)(a), by inserting “or (2)(bb)” after “subsection (2)(ba)”,

(g) in section 249(1)(a)(iii)(II), by inserting “or (2)(ac)” after “subsection (2)(aa)”,

(h) in section 249(2)(aa)(i), by substituting “referred to in section 247(2)(a)(iii), (iv) or (v)” for “to which section 247(2)(a)(ii) applies”, and

(i) in section 249(2), by inserting the following paragraph after paragraph (ab):

“(ac) (i) Where the company concerned is a company referred to in section 247(2)(a)(iv), the investing company shall be deemed, subject to subparagraph (iii), to have recovered from the company concerned an amount equal to so much of any capital recovered by an intermediate holding company from another company where—

(I) the company concerned owns directly or indirectly more than 50 per cent of the ordinary share capital of the intermediate holding company or both companies are under the control of the same person or persons, and

(II) the intermediate holding company owns directly more than 50 per cent of the ordinary share capital of the other company or both companies are under the control of the same person or persons.

(ii) Subparagraph (aa)(ii) shall apply with any necessary modifications for the purposes of determining whether an intermediate holding company has recovered capital from another company, as if in that provision ‘intermediate holding company’ were substituted for the ‘company concerned’.

(iii) An investing company shall not be deemed by subparagraph (i) to have recovered capital where—

(I) and to the extent that, any capital recovered by the intermediate holding company from another company is applied by the intermediate holding company in repaying any loan or advance made to it by the company concerned,

(II) the amount of capital recovered by the intermediate holding company is applied in accordance with paragraph (a) or (b) of section 247(2),

(III) the amount of capital recovered by the intermediate holding company is applied in the repayment of a loan to which section 247 applies, or

(IV) an intermediate holding company (that is not a company to which subparagraph (i) or (ii) of section 247(2)(bb) applies) transfers all of its assets and liabilities to another intermediate holding company and—

(A) the transfer is made in the course of the intermediate holding company being dissolved with or without going into liquidation,

(B) the company concerned, being a company referred to in section 247(2)(a)(iv), continues to hold the same beneficial percentage of stocks, shares or securities of a company referred to in section 247(2)(a)(i) indirectly through one or more intermediate holding companies, and

(C) the transfer is for bona fide commercial reasons and is not part of any scheme or arrangement the purpose of which, or one of the purposes of which, is the avoidance of tax.

(iv) Paragraph (ab) shall apply with any necessary modifications to this paragraph as if references in that paragraph to the ‘company concerned’ were to ‘intermediate holding company’ and references to paragraph (aa) were to paragraph (ac).

(v) (I) This clause and clauses (II) and (III) shall apply where an investing company is deemed to have recovered an amount of capital under this paragraph or under paragraph (aa) and included within that capital is an amount or value which was, within a reasonable period of time previously and by reference to related transactions or events, an amount of capital deemed to have been recovered by the investing company under this paragraph (in clause (II) referred to as ‘capital previously recovered’).

(II) An investing company may, upon giving notice in writing to the Revenue Commissioners, exclude capital previously recovered from an amount of capital it is deemed to have recovered under this paragraph or paragraph (aa).

(III) An investing company is required to maintain and have available such records as may reasonably be required for the purposes of determining whether it meets the requirements of clause (I).

(vi) Subparagraph (aa)(iii) shall apply with any necessary modifications for the purposes of subparagraph (i) as it applies in relation to subparagraph (aa)(i) as if the reference in that subparagraph to subparagraph (i) were a reference to subparagraph (i) of this paragraph.”.

(2) This section applies in respect of a loan made on or after 19 October 2017.