Corporation Tax Act, 1976

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Matters to be treated as distributions.

84.—(1) The following provisions of this Part, together with section 96 (payments, etc., to participators and associates) and section 97 (interest paid to directors and directors' associates), shall, subject to any express exceptions, have effect with respect to the meaning in this Act of “distribution” and for determining the persons to whom certain distributions are to be treated as made; but references in this Act to distributions of a company shall not apply to distributions made in respect of share capital in a winding up.

(2) In relation to any company “distribution” means—

(a) any dividend paid by the company, including a capital dividend;

(b) any other distribution out of assets of the company (whether in cash or otherwise) in respect of shares in the company, except, subject to section 86, so much of the distribution, if any, as represents a repayment of capital on the shares or is, when it is made, equal in amount or value to any new consideration received by the company for the distribution;

(c) any amount met out of assets of the company (whether in cash or otherwise) in respect of the redemption of any security issued by the company in respect of shares in or securities of the company otherwise than wholly for new consideration, or in the redemption of such part of any such security so issued as is not properly referable to new consideration;

(d) any interest (excluding interest paid before the 6th day of April, 1976) or other distribution out of assets of the company in respect of securities of the company (except so much, if any, of any such distribution as represents the principal thereby secured, and, without prejudice to section 87 (9), for this purpose no amount shall be regarded as representing the principal secured by a security in so far as it exceeds any new consideration which has been received by the company for the issue of the security), where the securities are—

(i) securities issued as mentioned in paragraph (c), but excluding securities issued before the 27th day of November, 1975; or

(ii) securities convertible directly or indirectly into shares in the company or securities carrying any right to receive shares in or securities of the company, not being (in either case) securities quoted on a recognised stock exchange nor issued on terms which are reasonably comparable with the terms of issue of securities so quoted; or

(iii) securities under which—

(I) the consideration given by the company for the use of the principal secured is to any extent dependent on the results of the company's business or any part of it, or

(II) the consideration so given represents more than a reasonable commercial return for the use of that principal; provided that this shall not operate so as to treat as a distribution so much of the interest or other distribution as represents a reasonable commercial return for the use of that principal; or

(iv) securities issued by the company and held by a company not resident in the State, where—

(I) the company which issued the securities is a 75 per cent. subsidiary of the other company; or

(II) both are 75 per cent. subsidiaries of a third company which is not resident in the State; or

(III) except where 90 per cent. or more of the share capital of the company which issued the securities is directly owned by a company resident in the State both the company which issued the securities and the company not resident in the State are 75 per cent. subsidiaries of a third company which is resident in the State; or

(v) securities which are connected with shares in the company, where “connected with” means that in consequence of the nature of the rights attaching to the securities or shares, and in particular of any terms or conditions attaching to the right to transfer the shares or securities, it is necessary or advantageous for a person who has, or disposes of or acquires, any of the securities also to have, or to dispose of or acquire, a proportionate holding of the shares;

(e) any such amount as is required to be treated as a distribution by subsection (3) or by section 85.

(3) Where on a transfer of assets or liabilities by a company to its members or to a company by its members, the amount or value of the benefit received by a member (taken according to its market value) exceeds the amount or value (so taken) of any new consideration given by him, the company shall be treated as making a distribution to him of an amount equal to the difference:

Provided that, where the company and the member receiving the benefit are both resident in the State and either the former is a subsidiary of the latter or both are subsidiaries of a third company also so resident, the said amount shall not be treated as a distribution.

(4) The question whether one company is a subsidiary of another for the purpose of subsection (3) shall be determined as a question whether it is a 51 per cent. subsidiary of that other, except that that other shall be treated as not being the owner—

(a) of any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade; 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; or

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

(5) (a) No transfer of assets (other than cash) or of liabilities between one company and another shall constitute, or be treated as giving rise to, a distribution by virtue of subsection (2)(b) or (3) if they are companies—

(i) both of which are resident in the State and neither of which is a 51 per cent. subsidiary of a company not so resident; and

(ii) which neither at the time of the transfer nor as a result of it are under common control.

(b) For the purposes of this subsection two companies are under common control if they are under the control of the same person or persons, and for this purpose “control” shall have the meaning assigned to it by section 158.

(c) Any amount which would be a distribution by virtue of subsection (3) apart from the proviso to that subsection (groups of companies resident in the State), shall not constitute a distribution by virtue of subsection (2)(b).