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Chapter 5
Corporation Tax
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Relief from tax for certain start-up companies.
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31.— (1) The Principal Act is amended by inserting the following after section 486B—
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“486C.— (1) (a) In this section—
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‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;
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‘ EEA state ’ means a State, other than the State, which is a Contracting Party to the EEA Agreement;
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‘ excepted trade ’ has the same meaning as in section 21A;
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‘ net chargeable gains ’ means chargeable gains less allowable losses;
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‘ new company ’ means a company incorporated in the State or in an EEA State other than the State on or after 14 October 2008;
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‘qualifying assets’, in relation to a qualifying trade, means relevant assets of the qualifying trade which are disposed of in the relevant period in relation to that trade;
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‘qualifying trade’ has the meaning assigned to it in subsection (2);
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‘relevant asset’, in relation to a qualifying trade means, an asset (including goodwill but not including shares or securities or other assets held as investments) which is, or is an interest in, an asset used for the purposes of that trade other than an asset on the disposal of which no gain accruing would be a chargeable gain or an asset the consideration for the acquisition of which is determined by section 617 or section 631;
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‘ relevant corporation tax ’, in relation to an accounting period, means the corporation tax which, apart from this section, sections 239, 241, 440, 441, 644B and 827 and paragraph 18 of Schedule 32, would be chargeable for the accounting period exclusive of—
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(i) the corporation tax chargeable on the profits of the company attributable to chargeable gains for that period, and
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(ii) the corporation tax chargeable on the part of the company’s profits which are charged to tax at the rate specified in section 21A;
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‘ relevant period ’, in relation to a qualifying trade, means the period beginning on the day the company commences to carry on the qualifying trade and ending 3 years after that date;
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‘ total corporation tax ’, in relation to an accounting period, means the corporation tax which, apart from this section, sections 239 and 241 would be chargeable for the accounting period;
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‘ trade ’ means a trade the profits or gains of which are charged to tax under Case I of Schedule D.
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(b) For the purposes of this section, the profits of a company attributable to chargeable gains for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne exclusive of the part of the profits attributable to income. That part shall be taken to be the amount brought into the company’s profits for that period for the purposes of corporation tax in respect of income after any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description.
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(2) (a) In this section ‘ qualifying trade ’ means a trade which is set up and commenced by a new company in 2009 other than a trade—
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(i) which was previously carried on by another person and to which the company has succeeded,
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(ii) the activities of which were previously carried on as part of another person’s trade or profession,
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(iii) which is an excepted trade, or
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(iv) the activities of which if carried on by a close company with no other source of income, would result in that company being a service company for the purposes of section 441.
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(b) Where a trade consists partly of excepted operations and partly of other operations or activities, then section 21A(2) shall apply for the purposes of this section as it applies for the purposes of section 21A.
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(3) Where a company carries on a qualifying trade in an accounting period falling partly within the relevant period in relation to that qualifying trade, then the income from the qualifying trade for that accounting period shall, for the purpose of this section, be the amount of the income of the qualifying trade for that part of the accounting period and the amount of the income of the qualifying trade for that part shall be determined as if that part were a separate accounting period.
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(4) (a) Where an accounting period of a company falls wholly or partly within a relevant period in relation to a qualifying trade and the total corporation tax payable by the company for that accounting period does not exceed the lower relevant maximum amount, then—
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(i) corporation tax payable by the company for that accounting period, so far as it is referable to income from the qualifying trade for that accounting period, and
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(ii) corporation tax payable by the company so far as it is referable to chargeable gains on the disposal of qualifying assets in relation to the trade,
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shall be reduced to nil.
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(b) Where an accounting period of a company falls wholly or partly within a relevant period in relation to a qualifying trade and the total corporation tax payable by the company for that accounting period exceeds the lower relevant maximum amount but does not exceed the upper relevant maximum amount, then the aggregate of corporation tax payable by the company for that accounting period so far as it is referable to income from the qualifying trade for that accounting period and corporation tax payable by the company for that accounting period so far as it is referable to chargeable gains on the disposal of qualifying assets in relation to the trade, shall be reduced to an amount determined by the following formula:
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3 × (T — M) × A + B
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T
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where—
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T is the total corporation tax payable by the company for that accounting period,
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M is the lower relevant maximum amount,
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A is the corporation tax payable by the company for the accounting period so far as is referable to income from the qualifying trade for that accounting period, and
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B is the corporation tax payable by the company for that accounting period so far as is referable to chargeable gains on the disposal of qualifying assets of the qualifying trade.
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(c) For the purposes of this subsection, the corporation tax referable to income from a qualifying trade in an accounting period is such an amount as bears to the relevant corporation tax the same proportion as the income from the qualifying trade bears to the total income brought into charge to corporation tax for that accounting period.
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(d) For the purposes of this subsection, the corporation tax referable to chargeable gains on the disposal of qualifying assets is such amount as bears to the corporation tax payable on the profits of the company attributable to the chargeable gains for the accounting period the same proportion as the net chargeable gains on qualifying assets disposed of in the accounting period bears to net chargeable gains on all chargeable assets disposed of in the accounting period.
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(5) Subject to subsection (6), the lower relevant maximum amount and the upper relevant maximum amount mentioned in subsection (4) are €40,000 and €60,000 respectively.
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(6) For an accounting period of less than 12 months the relevant maximum amounts determined in accordance with subsection (5) shall be proportionately reduced.
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(7) The aggregate of all reductions in corporation tax to which a company is entitled under subsection (4) in respect of a qualifying trade, the activities of which consist wholly or mainly of the conveyance by road of persons or goods or the haulage by road of other vehicles, shall not exceed €100,000.
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(8) (a) Where, on a person ceasing to carry on a trade or part of a trade, a company (in this subsection referred to as the ‘successor’) begins—
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(i) to carry on the activities of the trade as part of its trade, or
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(ii) to carry on the activities of that part as part of its trade,
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then that part of the trade carried on by the successor shall for the purposes of this section be treated as a separate trade.
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(b) Where under paragraph (a) any activities of a company’s trade are to be treated as a separate trade, then any necessary apportionment shall be made of receipts or expenses.
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(9) Notwithstanding section 4(4)(b), the income of a company, referred to in the expression ‘total income brought into charge to corporation tax’, for the accounting period for the purposes of subsection (2) is the sum determined by section 4(4)(b) for that period reduced by an amount equal to so much of the profits of the company for the accounting period as are charged to tax in accordance with section 21A.
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(10) Where in an accounting period a company transfers to a connected person part of a qualifying trade, then the company shall not be entitled to relief under this section in respect of that trade for that or any subsequent accounting periods.
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(11) Where a company is entitled to relief under this section in respect of any accounting period, then it shall specify the amount of relief due in its return required under section 951 for that accounting period.”.
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(2) This section comes into operation on such day as the Minister for Finance may appoint by order.
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