Finance Act 2011

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Income tax relief for investment in corporate trades — employment and investment incentive and seed capital scheme.

33.— (1) The Principal Act is amended—

(a) by substituting the following for Part 16:

“PART 16

Income Tax Relief for Investment in Corporate Trades — Employment and Investment Incentive and Seed Capital Scheme

Interpretation (Part 16).

488.— (1) In this Part—

‘associate’ has the same meaning in relation to a person as it has by virtue of subsection (3) of section 433 in relation to a participator, except that the reference in paragraph (b) of that subsection to any relative of a participator shall be excluded from such meaning;

‘average relevant amount’ means the total of the emoluments (other than non-pecuniary emoluments) paid by a qualifying company to the qualifying employees referred to in the definition of employment relevant number, in the year of assessment in which, in relation to a subscription for eligible shares, a relevant period ends, divided by the employment relevant number;

‘average threshold amount’ means the total of the emoluments (other than non-pecuniary emoluments) paid by the qualifying company to the qualifying employees referred to in the definition of employment threshold number, in the year of assessment preceding the year of assessment in which the subscription for eligible shares was made, divided by the employment threshold number;

‘basic pay rate’, in relation to a qualifying employee of a qualifying company, means the employee’s emoluments (other than non-pecuniary emoluments) per hour from the company in respect of an employment held with the company;

‘control’, except in sections 492(7) and 505(2)(b), shall be construed in accordance with subsections (2) to (6) of section 432;

‘debenture’ has the same meaning as in section 2 of the Companies Act 1963 ;

‘director’ shall be construed in accordance with section 433(4);

‘distribution system operator’ has the same meaning as in the Electricity Regulation Act 1999 ;

‘eligible shares’ means new ordinary shares which, throughout the period of 3 years beginning on the date on which they are issued, carry no present or future preferential right to dividends or to a company’s assets on its winding up and no present or future preferential right to be redeemed;

‘emoluments’ has the same meaning as in section 983;

‘employment relevant number’ means the total number of qualifying employees in receipt of emoluments from the qualifying company in the year of assessment in which, in relation to a subscription for eligible shares, a relevant period ends;

‘employment threshold number’ means the total number of qualifying employees in receipt of emoluments from the qualifying company in the year of assessment preceding the year of assessment in which the subscription for eligible shares was made;

‘energy from renewable sources’ means energy from renewable non-fossil sources, that is to say wind, solar, aerothermal, geothermal, hydrothermal and ocean energy, hydropower, biomass, landfill gas, sewage treatment plant gas and biogases and includes the development of any facilities for the storage of energy from renewable sources;

‘expenditure on research and development’ has the same meaning as in section 766;

‘financial activities’ means the provision of, and all matters relating to the provision of, financing or refinancing facilities by any means which involves, or has an effect equivalent to, the extension of credit;

‘financing or refinancing facilities’ includes—

(a) loans, mortgages, leasing, lease rental and hire-purchase, and all similar arrangements,

(b) equity or other investment,

(d) the underwriting of debt instruments and all other kinds of financial securities;

‘financial assets’ includes shares, gilts, bonds, foreign currencies and all kinds of futures, options and currency and interest rate swaps, and similar instruments, including commodity futures and commodity options, invoices and all types of receivables, obligations evidencing debt (including loans and deposits), leases and loan and lease portfolios, bills of exchange, acceptance credits and all other documents of title relating to the movement of goods, commercial paper, promissory notes and all other kinds of negotiable or transferable instruments;

‘full-time employee’ and ‘full-time director’ have the same meanings respectively as in section 250;

‘green energy activities’ means activities undertaken with a view to producing energy from renewable sources;

‘grid connection agreement’ means an agreement with the transmission system operator or distribution system operator, or an offer from the transmission system operator or distribution system operator to enter into an agreement for connection to, or use of, the transmission or distribution system;

‘market value’ shall be construed in accordance with section 548;

‘ordinary shares’ means shares forming part of a company’s ordinary share capital;

‘planning consent’ means any consent, permission or approval required under the Planning and Development Acts 2000 to 2010 before development can be lawfully carried out;

‘qualifying company’ has the meaning assigned to it by section 494;

‘qualifying employee’, in relation to a qualifying company, means an employee (within the meaning of section 983), other than a director, of that company who, throughout his or her period of employment with that company is employed by that company for not less than 4 week days, of each week;

‘qualifying new venture’ means a venture consisting of relevant trading activities which are set up and commenced by a new company other than—

(a) activities which were previously carried on by another person and to which the company has succeeded, or

(b) a venture, the activities of which were previously carried on as part of another person’s trade or profession;

‘relevant employment’, in relation to a specified individual, means employment throughout the relevant period by the company in which the specified individual makes a relevant investment (being that individual’s first such investment in that company) and where the specified individual is a full-time employee or full-time director of the company;

‘relevant investment’, in relation to a specified individual, means the amount or the aggregate of the amounts subscribed in a year of assessment by the specified individual for eligible shares in a qualifying company which carries on or intends to carry on relevant trading activities;

‘relevant period’, in relation to relief in respect of any eligible shares issued by a company, means—

(a) subject to paragraphs (b) and (c), the period beginning on the date on which the shares were issued and ending either 3 years after that date or, where the company was not at that date carrying on relevant trading activities, 3 years after the date on which it subsequently began to carry on such activities,

(b) as respects a relevant employment, the period beginning on the date on which the shares are issued or, if later, the date on which the employment commences and ending 12 months after that date, and

(c) as respects a specified individual, the period beginning on the date on which the shares are issued and ending either one year after that date or, where the company was not at that date carrying on relevant trading activities, one year after the date on which it subsequently began to carry on such activities;

‘relevant trading activities’ means activities carried on in the course of a trade the profits or gains of which are charged to tax under Case I of Schedule D, excluding activities related to—

(a) adventures or concerns in the nature of trade,

(b) dealing in commodities or futures or in shares, securities or other financial assets,

(d) the provision of services, which would result in a close company (within the meaning of section 430) that provides those services being treated as a service company for the purposes of section 441 if that close company had no other source of income,

(e) dealing in or developing land,

(f) the occupation of woodlands within the meaning of section 232,

(g) operating or managing hotels, guest houses, self catering accommodation or comparable establishments or managing property used as an hotel, guest house, self catering accommodation or comparable establishment,

(h) operating or managing nursing homes or residential care homes or managing property used as a nursing home or residential care home,

(i) operations carried on in the coal industry or in the steel and shipbuilding sectors, and

(j) the production of a film (within the meaning of section 481),

but including tourist traffic undertakings;

‘research and development activities’ has the same meaning as in section 766;

‘specified individual’ has the meaning assigned to it by section 495;

‘specified period’ means the period beginning on the incorporation of the company (or, if the company was incorporated more than 2 years before the date on which the shares were issued, beginning 2 years before that date) and ending 3 years after the issue of the shares;

‘specified relevant period’ has the meaning assigned in section 766 to relevant period;

‘relief’ means relief under section 489 and 493, as the case may be, and references to the amount of the relief shall be construed in accordance with subsection (2) of section 489 and subsections (2) and (3) of section 493, as the case may be;

‘tourist traffic undertakings’ means—

(a) the operation of tourist accommodation facilities for which the National Tourism Development Authority maintains a register in accordance with the Tourist Traffic Acts 1939 to 2003, other than hotels, guest houses and self catering accommodation,

(b) the operation of such other classes of facilities as may be approved of for the purpose of the relief by the Minister for Finance, in consultation with the Minister for Tourism, Culture and Sport, on the recommendation of the National Tourism Development Authority in accordance with specific codes of standards laid down by it, or

(i) one or more tourist accommodation facilities for which the National Tourism Development Authority maintains a register in accordance with the Tourist Traffic Acts 1939 to 2003, or

(ii) any of the facilities mentioned in paragraph (b);

‘transmission system operator’ has the same meaning as in the Electricity Regulation Act 1999 ;

‘unquoted company’ means a company none of whose shares, stocks or debentures are—

(a) listed in the official list of a stock exchange, or

(b) quoted on an unlisted securities market of a stock exchange other than—

(i) on the market known, and referred to in this definition, as the Enterprise Securities Market of the Irish Stock Exchange, or

(ii) on the Enterprise Securities Market of the Irish Stock Exchange and on any similar or corresponding market of the stock exchange of one or more Member States of the European Union; but this subparagraph shall not apply unless the shares, stocks or debentures are quoted on the Enterprise Securities Market of the Irish Stock Exchange before or at the same time as they are initially quoted on an unlisted securities market of a stock exchange of another Member State of the European Union.

(2) References in this Part to a disposal of shares include references to a disposal of an interest or right in or over the shares, and an individual shall be treated for the purposes of this Part as disposing of any shares which the individual is treated by virtue of section 587 as exchanging for other shares.

(3) References in this Part to the reduction of any amount include references to its reduction to nil.

The relief.

489.— (1) This section applies for affording relief from income tax where—

(a) an individual who qualifies for the relief subscribes for eligible shares in a qualifying company,

(b) those shares are issued to the individual for the purpose of raising money by a qualifying company where that money was used, is being used or is intended to be used by the qualifying company—

(i) for the purposes of carrying on relevant trading activities, or

(ii) in the case of a company which has not commenced to trade, in incurring expenditure on research and development within the meaning of section 766,

and

(c) the use of the money as set out in paragraph (b) will contribute directly to the creation or maintenance of employment in the company.

(2) Subject to subsection (3), relief in respect of—

(a) thirty forty-firsts of the amount subscribed by an individual for any eligible shares shall be given as a deduction from his or her total income for the year of assessment in which the shares are issued, and

(b) subject to subsection (10), eleven forty-firsts of the amount subscribed by an individual for any eligible shares shall be given as a deduction from his or her total income for the year of assessment following the date on which the relevant period ends.

(3) Where—

(a) in accordance with section 506, relief is due in respect of an amount subscribed as nominee for a qualifying individual by the managers of a designated fund, and

(b) the eligible shares in respect of which the amount is subscribed are issued in the year of assessment following the year of assessment in which that amount was subscribed to the designated fund,

then the individual may elect by notice in writing to the inspector to have the relief due under subsection (2)(a) given as a deduction from his or her total income for the year of assessment in which the amount was subscribed to the designated fund, instead of (as provided for in subsection (2)(a)) as a deduction from his or her total income for the year of assessment in which the shares are issued.

(4) The relief under subsection (2)(a) shall be given on a claim and shall not be allowed—

(a) in the case of a company which had commenced relevant trading activities at the time the eligible shares were issued, unless and until the company has carried on those activities for 4 months, or

(b) in the case of a company which had not commenced relevant trading activities at the time the eligible shares were issued, unless the company—

(i) begins to carry on relevant trading activities within 2 years after that time, or

(ii) expends not less than 30 per cent of the money subscribed for the shares on research and development activities which are connected with and undertaken with a view to the carrying on of the relevant trading activities.

(5) Subject to subsections (4) and (10) a claim for relief may be allowed at any time if the conditions for the relief are then satisfied.

(6) In the case of a claim allowed before the end of the relevant period, the relief shall be withdrawn if by reason of any subsequent event it appears that the claimant was not entitled to the relief allowed.

(7) Where by reason of its being wound up, or dissolved without winding up, the company carries on relevant trading activities for a period shorter than 4 months, then subsection (4)(a) shall apply as if it referred to that shorter period but only if it is shown that the winding up or dissolution was for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

(8) Subject to section 504, no account shall be taken of the relief, in so far as it is not withdrawn, in determining whether any sums are excluded by virtue of section 554 from the sums allowable as a deduction in the computation of gains and losses for the purposes of the Capital Gains Tax Acts.

(9) (a) In this subsection ‘distribution’ has the same meaning as in the Corporation Tax Acts.

(b) For the purposes of this subsection, an amount specified or implied shall include an amount specified or implied in a foreign currency.

(c) This subsection applies to shares in a company where any agreement, arrangement or understanding exists which could reasonably be considered to eliminate the risk that the person beneficially owning those shares—

(i) might, at or after a time specified in or implied by that agreement, arrangement or understanding, be unable to realise directly or indirectly in money or money’s worth an amount so specified or implied, other than a distribution, in respect of those shares, or

(ii) might not receive an amount so specified or implied of distributions in respect of those shares.

(d) The reference in this subsection to the person beneficially owning shares shall be deemed to be a reference to both that person and any person connected with that person.

(e) Relief from income tax shall not be allowed under this Part in respect of the amount subscribed for any shares to which this subsection applies.

(10) An amount shall not be given as a deduction by virtue of subsection (2)(b) unless in relation to a qualifying company—

(a) (i) the employment relevant number exceeds the employment threshold number, and

(ii) the average relevant amount is not less than the average threshold amount except to the extent that such difference corresponds with a general reduction in the basic pay rate of qualifying employees in the same period,

(b) the amount of expenditure on research and development incurred by the qualifying company in the specified relevant period ending in the year of assessment preceding the year of assessment in which, in relation to the subscription for eligible shares, a relevant period ends, exceeds the amount of expenditure on research and development incurred by the qualifying company in the specified relevant period ending in the year of assessment preceding the year of assessment in which the subscription for eligible shares was made.

(11) A company carrying on green energy activities shall be deemed to have commenced relevant trading activities when it has made an application for a grid connection agreement.

(12) The Revenue Commissioners may require the qualifying company to provide to them such evidence as they consider necessary and may consult with such persons or body of persons as in their opinion may be of assistance to them, to enable them to verify that the conditions necessary for the claiming and granting of the relief have been satisfied.

(13) This section shall apply only where the eligible shares are issued on or before 31 December 2013.

Limits on the relief.

490.— (1) (a) Subject to section 506 and paragraph (b), the relief shall not be given in respect of any amount subscribed by an individual for eligible shares issued to the individual by a qualifying company in any year of assessment unless the amount or total amount subscribed by the individual for the eligible shares issued to the individual by the company in that year is €250 or more.

(b) In the case of an individual who is a married person assessed to tax for a year of assessment in accordance with section 1017, any amount subscribed by the individual’s spouse for eligible shares issued to that spouse in that year of assessment by the company shall be deemed to have been subscribed by the individual for eligible shares issued to the individual by the company.

(2) The relief shall not be given to the extent to which the amount or total amount subscribed by an individual for eligible shares issued to the individual in any year of assessment (whether or not by the same company) exceeds €100,000 in the case of a relevant investment, or €150,000 in any other case.

(3) (a) Where in any year of assessment a greater amount of relief would be given to an individual in respect of the amount or the total amount subscribed by the individual for eligible shares (in this subsection referred to as the ‘relevant subscription’) issued to the individual in that year or, where subsection (3) of section 489 applies, in the following year of assessment but for either or both of the following reasons—

(i) an insufficiency of total income, or

(ii) the operation of subsection (2),

then the amount of the relief which would be given but for those reasons less the amount or the aggregate amount of any relief in respect of the relevant subscription which is given in that year of assessment shall be carried forward to the next year of assessment, and shall be treated for the purposes of the relief as an amount of relief under section 489(2)(a) in respect of an amount subscribed directly by the individual for eligible shares issued to the individual in that next year.

(b) This subsection and subsection (4) shall not apply for any year of assessment subsequent to the year of assessment 2013.

(4) If and in so far as an amount once carried forward to a year of assessment under subsection (3) (and treated as an amount of relief under section 489(2)(a) in respect of an amount subscribed directly by an individual for eligible shares issued to the individual in that year of assessment) is not deducted from his or her total income for that year of assessment, it shall be carried forward again to the next year of assessment (and treated as an amount of relief under section 489(2)(a) in respect of an amount subscribed directly by the individual for eligible shares issued to the individual in that next year), and so on for succeeding years of assessment.

(5) The relief shall be given to an individual for any year of assessment in the following order—

(a) in the first instance, in respect of an amount carried forward from an earlier year of assessment in accordance with subsection (3) or (4) and, in respect of such an amount so carried forward, for an earlier year of assessment in priority to a later year of assessment, and

(b) only thereafter, in respect of any other amount for which relief is to be given in that year of assessment.

Restriction on relief where amounts raised exceed permitted maximum.

491.— (1) In this section ‘qualifying subsidiary’, in relation to a company, means a subsidiary of that company of a kind which a company may have by virtue of section 505.

(2) Subject to this section, where a company raises any amount through the issue of eligible shares (in this section referred to as the ‘relevant issue’), relief shall not be given in respect of the excess of the amount so raised over the amount determined by the formula—

A — B

where—

A is €10,000,000,

and

B is the lesser of—

(a) the amount represented by A in the formula, and

(b) an amount equal to the aggregate of all amounts raised by the company through the issue of eligible shares at any time on or after 6 April 1984 and before the relevant issue.

(3) Where, a company raises any amount through a relevant issue and that company is associated (within the meaning of this section) with one or more other companies, then, as respects that company, relief shall not be given in respect of the excess of the amount so raised over the amount determined by the formula—

A — B

where—

A is €10,000,000,

and

B is the lesser of—

(a) the amount represented by A in the formula, and

(b) the aggregate of all amounts raised through the issue of eligible shares, at any time before or on the date of the relevant issue, by all of the companies (including that company) which are associated within the meaning of this section.

(4) Notwithstanding anything in subsections (2) and (3), relief shall not be given in respect of a relevant issue to the extent that—

(a) the amount raised by the relevant issue, or

(b) the aggregate of—

(i) the amount to be raised through the relevant issue, and

(ii) the amount or amounts, if any, raised through the issue of eligible shares other than the relevant issue, within the period of 12 months ending with the date of that relevant issue, by the company or by all of the companies (including the company making the relevant issue) which are associated within the meaning of this section, as the case may be,

exceeds €2,500,000.

(5) For the purposes of this section, a company shall be associated with another company where—

(a) in the case of that company, or a company which is, or was at any time, its qualifying subsidiary, and

(b) that other company, or a company which is, or was at any time, its qualifying subsidiary,

it could reasonably be considered that—

(i) both companies act in pursuit of a common purpose,

(ii) any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading activities carried on or to be carried on by both companies, or

(iii) both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity;

but for the purposes of this section a company shall not be considered as associated with another company by reason only of the fact that a subscription for eligible shares in both companies is made by a person or persons having the management of an investment fund designated under section 506 as nominee for any person or group or groups of persons.

(6) In determining for the purposes of the formula in subsection (2) or (3), as the case may be, the amount to which paragraph (b) of the definition of ‘B’ in those formulas relates, account shall not be taken of any amount—

(a) which is subscribed by a person other than an individual who qualifies for relief, or

(b) in respect of which relief is precluded by virtue of section 490.

(7) Where as a consequence of subsection (2) or (3) the giving of relief would be precluded on claims in respect of shares issued to 2 or more individuals, the available relief shall be divided between them respectively in proportion to the amounts which have been subscribed by them for the shares to which their claims relate and which apart from this section would be eligible for relief.

Individuals qualifying for relief.

492.— (1) (a) An individual shall qualify for relief if he or she subscribes on his or her own behalf for eligible shares in a qualifying company and is not at any time in the specified period connected with the company.

(b) For the purposes of this section and paragraph 2 of Schedule 10, any question whether an individual is connected with a company shall be determined in accordance with this section.

(2) An individual shall be connected with a company if the individual or an associate of the individual is—

(a) a partner of the company, or

(b) subject to subsection (3), a director or employee of the company or of another company which is a partner of that company.

(3) An individual shall not be connected with a company by reason only that the individual or an associate of the individual is a director or employee of the company or of another company which is a partner of that company unless the individual or the individual’s associate (or a partnership of which the individual or the individual’s associate is a member) receives a payment from either company during the period of 3 years beginning on the date on which the shares are issued or is entitled to receive such a payment in respect of that period or any part of it; but for that purpose there shall be disregarded—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual or the individual’s associate in the performance of the duties of the individual or of the associate, as the case may be, as such director or employee,

(b) any interest which represents no more than a reasonable commercial return on money lent to either company,

(c) any dividend or other distribution paid or made by either company which does not exceed a normal return on the investment,

(d) any payment for the supply of goods to either company in the course of a trade or business, which does not exceed their market value, and

(e) any reasonable and necessary remuneration which—

(i) (I) is paid for services rendered to either company in the course of a trade or profession, not being secretarial or managerial services or services of a kind provided by the company itself, and

(II) is taken into account in computing the profits or gains of the trade or profession under Case I or II of Schedule D or would be so taken into account if it fell in a period on the basis of which those profits or gains are assessed under that Schedule,

(ii) in a case where the individual is a director or an employee of either company and is not otherwise connected with either company, is paid for service, rendered to the company of which the individual is a director or an employee, in the course of the directorship or the employment.

(4) An individual shall be connected with a company if he or she directly or indirectly possesses or is entitled to acquire more than 30 per cent of—

(a) the issued ordinary share capital of the company,

(b) the loan capital and issued share capital of the company, or

(5) For the purposes of subsection (4)(b), the loan capital of a company shall be treated as including any debt incurred by the company—

(a) for any money borrowed or capital assets acquired by the company,

(b) for any right to receive income created in favour of the company, or

(c) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on the debt).

(6) (a) Subject to paragraph (b) an individual is connected with a company if he or she directly or indirectly possesses or is entitled to acquire such rights as would, in the event of the winding up of the company or in other circumstances, entitle the individual to receive more than 30 per cent of the assets of the company which would at that time be available for distribution to equity holders of the company, and for the purposes of this subsection—

(i) the persons who are equity holders of the company, and

(ii) the percentage of the assets of the company to which the individual would be entitled,

shall be determined in accordance with sections 413 and 415, with references in section 415 to the first company being construed as references to an equity holder and references to a winding up being construed as including references to any other circumstances in which assets of the company are available for distribution to its equity holders.

(b) A determination in accordance with paragraph (a) shall be made without regard to section 411(1)(c) in so far as it relates to sections 413 and 415, with any necessary modifications, to such determination of the percentage of share capital or other amount which a shareholder beneficially owns or is beneficially entitled to, as they apply to the determination for the purposes of Chapter 5 of Part 12 of the percentage of any such amount which a company so owns or is so entitled to.

(7) An individual is connected with a company if he or she has control of it within the meaning of section 11.

(8) (a) An individual is not connected with a company by reason only of subsection (4), (6) or (7)—

(i) if throughout the specified period the aggregate of all amounts subscribed for the issued share capital and the loan capital (within the meaning of subsection (5)) of the company does not exceed €500,000, or

(ii) in the case of a specified individual, by virtue only of a relevant investment in respect of which he or she has been given relief in accordance with section 493(2) or (3).

(b) Notwithstanding paragraph (a), relief granted to an individual in respect of a subscription for eligible shares at a time when by virtue of this subsection the individual was not connected with the company shall not be withdrawn by reason only that the individual subsequently becomes connected with the company by virtue of subsection (4), (6) or (7).

(9) For the purposes of this section, an individual shall be treated as entitled to acquire anything which he or she is entitled to acquire at a future date or will at a future date be entitled to acquire, and there shall be attributed to any person any rights or powers of any other person who is an associate of that person.

(10) In determining for the purposes of this section whether an individual is connected with a company, a debt incurred by the company by overdrawing an account with a person carrying on a business of banking shall not be treated as loan capital of the company if the debt arose in the ordinary course of that business.

(11) Where an individual subscribes for shares in a company with which the individual is not connected (either within the meaning of this section or by virtue of paragraph 2(2)(b) of Schedule 10), then he or she shall nevertheless be treated as connected with it if he or she subscribes for the shares as part of any arrangement which provides for another person to subscribe for shares in another company with which the individual or any other individual who is a party to the arrangement is connected (within the meaning of this section or by virtue of that paragraph).

Seed capital relief.

493.— (1) Notwithstanding section 489, this section shall apply for affording relief from income tax where—

(a) a specified individual makes a relevant investment,

(b) the shares issued to the specified individual are issued for the purposes of raising money by a qualifying company for the benefit of its activities referred to in paragraph (d),

(d) the money was used, is being used or is intended to be used for the benefit of a qualifying new venture for the purposes of—

(i) carrying on of relevant trading activities, or

(ii) in the case of a company which has not commenced the carrying on of relevant trading activities, incurring expenditure on research and development within the meaning of section 766,

and

(e) the use of the money as set out in paragraph (d) will contribute directly to the creation or maintenance of employment in the company.

(2) Subject to subsection (3), relief in respect of a relevant investment made by a specified individual shall be given as a deduction of that amount from his or her total income for the year of assessment in which the shares are issued.

(3) (a) Subject to this subsection, a specified individual may, in relation to a relevant investment made by such individual (being that individual’s first such investment), elect by notice in writing to the inspector to have the relief due given as a deduction from such individual’s total income for any one of the 6 years of assessment immediately before the year of assessment in which the eligible shares in respect of that investment are issued which such individual nominates for the purpose, instead of (as provided for in subsection (2)) as a deduction from the specified individual’s total income for the year of assessment in which the shares are issued, and accordingly, subject to section 490 and paragraphs (c) and (d), for the purpose of granting such relief (but for no other purpose of this Part) the shares shall be deemed to have been issued in the year of assessment so nominated.

(b) Where the specified individual makes a subsequent relevant investment (being that individual’s second such investment)—

(i) in the same company as such individual’s first such investment, and

(ii) within either the year of assessment following the end of the year of assessment in which such individual’s first such investment was made or the year of assessment subsequent to that year,

then, the specified individual may, in relation to such individual’s second such investment, elect by notice in writing to the inspector to have the relief due given as a deduction from such individual’s total income for any one of the 6 years of assessment immediately before the year of assessment in which the eligible shares in respect of such individual’s first such investment were issued which such individual nominates for the purpose, instead of (as provided for in subsection (2)) as a deduction from such individual’s total income for the year of assessment in which the eligible shares in respect of such individual’s second such investment are issued and, accordingly, subject to section 490 and paragraphs (c) and (d), for the purpose of granting such relief (but for no other purpose of this Part) the shares issued in respect of the second such investment shall be deemed to have been issued in the year of assessment so nominated.

(c) Where any of the years of assessment following the year of assessment nominated under paragraph (a) or (b), as the case may be, precede the year of assessment in which the eligible shares in respect of the specified individual’s first relevant investment are in fact issued, subsections (3) to (5) of section 490 shall operate to give relief in such years of assessment as may be nominated by such individual for that purpose.

(d) To the extent that the amount of the relief which would be due in respect of the specified individual’s first relevant investment or second relevant investment, as the case may be, has not been given in accordance with paragraphs (a) to (c) it shall, subject to subsections (3) to (5) of section 490, be given for the year of assessment in which the eligible shares in respect of the first such investment or the second such investment, as the case may be, are in fact issued or, if appropriate, a subsequent year of assessment.

(e) This subsection applies in respect of not more than 2 relevant investments made by a specified individual on or after 2 June 1995.

(f) This subsection applies notwithstanding any limitation in section 865(4) on the time within which a claim for a repayment of tax is required to be made. Section 865(6) shall not prevent the Revenue Commissioners from repaying an amount of tax as a consequence of an election made under paragraph (a) or (b) where the specified individual has made a timely claim for relief in accordance with section 501 and a valid claim for a repayment of tax within the meaning of section 865(1)(b).

(4) Reference in this section to the amount of the relief are references to the amount of the deduction given under subsection (2) or (3), as may be appropriate.

(5) Relief shall be given on a claim and shall not be allowed in the case of a relevant investment unless and until the qualifying new venture commences to carry on relevant trading activities or in the case of a company referred to in section 493(1)(d)(ii), has expended not less than 30 per cent of the relevant investment on research and development activities which are connected with and undertaken with a view to the carrying on of the relevant trading activities.

(7) In the case of a claim allowed before a specified individual commences a relevant employment with the company in which that individual has made a relevant investment (being that individual’s first such investment), the relief shall be withdrawn if the specified individual fails to commence such employment—

(a) within the year of assessment in which the investment is made, or

(b) if later, within 6 months of the date of—

(i) where the investment consists of the subscription of only one amount for eligible shares, that subscription, or

(ii) where the investment consists of the subscription of more than one amount for eligible shares, the last such subscription.

(9) (a) In this subsection ‘distribution’ has the same meaning as in the Corporation Tax Acts.

(b) For the purposes of this subsection, an amount specified or implied shall include an amount specified or implied in a foreign currency.

(ii) might not receive an amount so specified or implied of distributions in respect of those shares.

(d) The reference in this subsection to the person beneficially owning shares shall be deemed to be a reference to both that person and any person connected with that person.

(e) Relief from income tax shall not be allowed under this Part in respect of the amount subscribed for any shares to which this subsection applies.

(10) Where a specified individual claims relief under this section, no relief shall be granted to that individual under section 489 in respect of the same qualifying company.

(11) The Revenue Commissioners may require the qualifying company to provide to them such evidence as they consider necessary and may consult with such persons or body of persons as in their opinion may be of assistance to them, to enable them to verify that the conditions necessary for the claiming and granting of the relief have been satisfied.

Qualifying companies.

494.— (1) In this section—

‘assisted area’ means an area specified in the National Regional State Aid Map for Ireland approved under Commission Decision No. N 374/2006 of 24 October 2006 ¹ ;

‘EEA Agreement’ means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement;

‘EEA State’ means a state which is a contracting party to the EEA Agreement;

‘qualifying subsidiary’, in relation to a company, means a subsidiary of that company of a kind which a company may have by virtue of section 505.

(2) A company shall be a qualifying company if it is incorporated in the State or in an EEA State other than the State and complies with this section.

(3) (a) The company shall throughout the relevant period be an unquoted company which is resident in the State, or is resident in an EEA State other than the State and carries on business in the State through a branch or agency, and be—

(i) a company which exists wholly for the purpose of carrying on relevant trading activities where those activities are principally carried on in the State, or

(ii) a company whose business consists wholly of—

(I) the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company, or

(II) both the holding of such shares or securities, or the making of such loans and the carrying on of relevant trading activities where those activities are principally carried on in the State.

(b) Where a company raises any amount through the issue of eligible shares for the purposes of raising money for relevant trading activities which are being carried on by a qualifying subsidiary or which such a qualifying subsidiary intends to carry on, the amount so raised shall be used for the purpose of acquiring eligible shares in the qualifying subsidiary and for no other purpose.

(c) In this section, relevant trading activities shall be regarded as carried on principally in the State only if not less than 75 per cent of the total amount expended in the course of such activities in the relevant period is expended in the State.

(4) The company shall be—

(a) a micro or small enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 2004 ² ,

(b) a medium-sized enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 2004 located in an assisted area, or

(c) where it is not located in an assisted area, a medium-sized enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 2004 which is at a stage of development not beyond start-up stage within the meaning of the Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-Sized Enterprises ³ .

(5) For the purposes of subsection (4), the location of a company shall be determined by reference to the location at which the company or, as the case may be, the qualifying subsidiary, carries on relevant trading activities or, in the case of a company which is resident in an EEA State other than the State that carries on business in the State through a branch or agency, the location at which that branch or agency carries on relevant trading activities.

(6) (a) A company whose relevant trading activities includes one or more tourist traffic undertakings shall not be a qualifying company unless and until it has shown to the satisfaction of the Revenue Commissioners that it has submitted to, and has had approved of by, the National Tourism Development Authority a 3 year development and marketing plan in respect of that undertaking or those undertakings, as the case may be, being a plan primarily designed and formulated to increase tourist traffic and revenue from outside the State.

(b) In considering whether to approve of such a plan, the National Tourism Development Authority shall have regard only to such guidelines in relation to such approval as may from time to time be agreed, with the consent of the Minister for Finance, between it and the Minister for Tourism, Culture and Sport, and those guidelines may, without prejudice to the generality of the foregoing, set out—

(i) the extent to which the company’s interests in land and buildings may form part of its total assets,

(ii) specific requirements which have to be met in order to comply with the objective mentioned in paragraph (a), and

(iii) the extent to which the money raised through the issue of eligible shares should be used in promoting outside the State the undertaking or undertakings, as the case may be.

(7) A company whose relevant trading activities includes green energy activities shall cease to be a qualifying company unless it has expended all of the money subscribed for eligible shares on such activities, within a period ending 1 month before the end of the relevant period.

(8) A company referred to in section 489(1)(b)(ii) ceases to be a qualifying company unless it has—

(a) expended all of the money subscribed for eligible shares on research and development activities, within a period ending 1 month before the end of the relevant period and disposed of a specified intangible asset within the meaning of section 291A, which is connected with and arises directly from those research and development activities, to a person for the purposes of a trade carried on by that person, or

(b) commenced relevant trading activities within 2 years after the eligible shares were issued and expended all of the money subscribed for eligible shares on either of those activities or research and development activities before the end of the relevant period.

(9) Without prejudice to the generality of subsection (3) but subject to subsection (10), a company ceases to comply with subsection (3) if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the Companies Act 1963 , any other act is done for the like purpose) or the company is dissolved without winding up.

(10) A company shall not be regarded as ceasing to comply with subsection (3) by reason only of the fact that it is wound up or dissolved without winding up if—

(a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

(b) the company’s net assets, if any, are distributed to its members before the end of the relevant period or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up.

(11) The company’s share capital shall not at any time in the relevant period include any issued shares not fully paid up.

(12) Subject to section 505, the company shall not at any time in the relevant period—

(a) control (or together with any person connected with it control) another company or be under the control of another company (or of another company and any person connected with that other company), unless such control is exercised by the National Asset Management Agency, or by a company referred to in section 616(1)(g), or

(b) be a 51 per cent subsidiary of any company other than the National Asset Management Agency or a company referred to in section 616(1)(g), or itself have a 51 per cent subsidiary,

and no arrangements shall be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b).

(13) A company shall not be a qualifying company if, in the case of a company in which a relevant investment is made by a specified individual (being that individual’s first such investment in that company), any transaction in the relevant period between the company and another company (being the immediate former employer of the individual), or a company which controls or is under the control of that other company, is otherwise than by means of a transaction at arm’s length, or if—

(a) (i) an individual has acquired a controlling interest in the company’s trade after 5 April 1984, and

(ii) at any time in the period mentioned in subsection (16) the individual has or has had a controlling interest in another trade,

and

(b) the trade carried on by the company or a substantial part of that trade—

(i) is concerned with the same or similar types of property or parts of property or provides the same or similar services or facilities as the other trade, or

(ii) serves substantially the same or similar outlets or markets as the other trade.

(14) For the purposes of this section, a person has a controlling interest in a trade—

(a) in the case of a trade carried on by a company, if—

(i) such person controls the company,

(ii) the company is a close company for the purposes of the Corporation Tax Acts and such person or an associate of such person is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent of the ordinary share capital of the company, or

(iii) not less than 50 per cent of the trade could, in accordance with section 400(2), be regarded as belonging to such person,

(b) in any other case, if such person is entitled to not less than 50 per cent of the assets used for, or the income arising from, the trade.

(15) For the purposes of subsection (14), there shall be attributed to any person any rights or powers of any other person who is an associate of that person.

(16) The period referred to in subsection (13)(a)(ii) is the period beginning 2 years before and ending 3 years after—

(a) the date on which the shares were issued, or

(b) if later, the date on which the company began to carry on the trade.

(17) In subsections (13) and (16), references to a company’s trade includes references to the trade of any of its subsidiaries.

(18) Notwithstanding subsections (1) to (17), a company shall not be a qualifying company while the company is regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for rescuing and restructuring firms in difficulty ⁴ .

Specified individuals.

495.— (1) An individual shall be a specified individual if he or she qualifies for relief in respect of a relevant investment and complies with this section.

(2) The individual, in each of the 3 years of assessment preceding the year of assessment which precedes the year of assessment in which that individual makes a relevant investment (being that individual’s first such investment), shall not have been in receipt of income chargeable to tax otherwise than under—

(a) Schedule E, or

(b) Case III of Schedule D in respect of profits or gains from an office or employment held or exercised outside the State,

in excess of the lesser of—

(i) the aggregate of the amounts, if any, of that individual’s income chargeable to tax under Schedule E and under Case III of Schedule D in respect of the profits or gains referred to in subparagraph (ii), and

(ii) €50,000.

(3) The individual shall throughout the relevant period possess at least 15 per cent of the issued ordinary share capital of the company in which that individual makes a relevant investment.

(4) (a) For the purposes of paragraph (b) and subsections (5) and (6), ‘specified date’, in relation to a relevant investment in a company, means—

(i) where the investment consists of the subscription of only one amount for eligible shares, the date of that subscription, or

(ii) where that investment consists of the subscription of more than one amount for eligible shares, the date of the last such subscription.

(b) Subject to subsections (5) and (6), the individual at the specified date, in relation to that individual’s first relevant investment in a company, or within the period of 12 months immediately preceding that date, either directly or indirectly, shall not possess or have possessed, or shall not be or have been entitled to acquire, more than 15 per cent of—

(i) the issued ordinary share capital,

(ii) the loan capital (within the meaning of section 492(5)) and the issued share capital, or

(iii) the voting power,

of any company other than—

(I) the company in which that individual makes that relevant investment, or

(II) a company to which subsection (5) applies.

(5) This subsection applies to a company which during a period of 3 years ending on the specified date in relation to an individual’s first relevant investment in a company—

(a) was not entitled to any assets, other than cash on hands or a sum of money on deposit (within the meaning of section 895) not exceeding €130,

(b) did not carry on a trade, profession, business or other activity including the making of investments, and

(6) (a) For the purposes of paragraph (b) ‘accounting period’ means an accounting period determined in accordance with section 27.

(b) A company shall be regarded as a company which carries on wholly or mainly relevant trading activities referred to in paragraph (c)(i) only if in each of the 3 accounting periods referred to in paragraph (c)(ii) the total amount receivable from sales made or services rendered in the course of such activities is not less than 75 per cent of the total amount receivable by the company from all sales made and services rendered in the course of tourist traffic undertakings and 90 per cent of the total amount receivable by the company from all sales made and services rendered in the course of other relevant trading activities.

(c) An individual shall not be regarded as failing to satisfy the requirements of subsection (4) merely by reason of the fact that the individual does not satisfy those requirements in relation to only one company (other than the company in which the individual makes his or her first relevant investment or a company to which subsection (5) applies)—

(i) which exists wholly or mainly for the purpose of carrying on relevant trading activities, and

(ii) where the total amount receivable by that company from sales made and services rendered in the course of that company’s relevant trading activities did not exceed €127,000 in each of that company’s 3 accounting periods immediately preceding the accounting period of that company in which the specified date occurs in relation to that individual’s first relevant investment.

(7) An individual shall not be regarded as ceasing to comply with subsection (3) merely by reason of the fact that the company in which the individual makes a relevant investment is wound up, or dissolved without winding up, before the end of the relevant period but only if it is shown that the winding up or dissolution is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.

Disposals of shares.

496.— (1) Where an individual disposes of any eligible shares before the end of the specified period, then—

(a) in a case where the disposal is otherwise than by means of a bargain made at arm’s length, the individual shall not be entitled to any relief in respect of those shares, and

(b) in any other case, the amount of relief to which the individual is entitled in respect of those shares shall be reduced by the amount or value of the consideration which the individual receives for those shares.

(2) Subsection (1) shall not apply to a disposal made by a married person to his or her spouse at a time when he or she is treated as living with his or her spouse for income tax purposes in accordance with section 1015; but where shares issued to one of them have been transferred to the other by a transaction inter vivos—

(a) that subsection shall apply on the disposal of the shares by the transferee to a third person, and

(b) if at any time the married person ceases to be treated as living with his or her spouse for income tax purposes in accordance with section 1015 and any of those shares have not been disposed of by the transferee before that time, any assessment for withdrawing relief in respect of those shares shall be made on the transferee.

(3) (a) For the purposes of this subsection, references to an option or an agreement includes references to a right or obligation to acquire or grant an option or enter into an agreement, and references to the exercise of an option includes references to the exercise of an option which may be acquired or granted by the exercise of such a right or under such an obligation.

(b) Where in the specified period an individual, either directly or indirectly—

(i) (I) acquires an option where the exercise of the option, either under the terms of the option or under the terms of any arrangement or undertaking subject to which or otherwise in connection with which the option is acquired, would—

(A) bind the person from whom the option was acquired or any other person, or

(B) cause that person or such other person,

to purchase or otherwise acquire any eligible shares for a price which, having regard to the terms of the option or the terms of such arrangement or undertaking and the net effect of those terms considered as a whole, is other than the market value of the eligible shares at the time the purchase or acquisition is made, or

(A) bind the person with whom the agreement is made or any other person, or

(B) cause that person or such other person,

to purchase or otherwise acquire any eligible shares in the manner described in clause (I),

(ii) (I) grants to any person an option where the exercise of the option, either under the terms of the option or under the terms of any arrangement or understanding subject to which or otherwise in connection with which the option is granted, would bind the individual to dispose, or cause the individual to dispose, of any eligible shares to the person to whom the individual granted the option or any other person for a price which, having regard to the terms of the option or the terms of such arrangement or understanding and the net effect of those terms considered as a whole, is other than the market value of the eligible shares at the time the disposal is made, or

(II) enters into an agreement where, either under the terms of the agreement or under the terms of any arrangement or understanding subject to which or otherwise in connection with which the agreement is made, it would bind the individual to dispose, or cause the individual to dispose, of any eligible shares to the person with whom the agreement is made or any other person in the manner described in clause (I),

then the individual is not entitled to any relief in respect of the shares to which the option or the agreement relates.

(4) Where an individual holds ordinary shares of any class in a company and the relief has been given in respect of some shares of that class but not others, then any disposal by the individual of ordinary shares of that class in the company, not being a disposal to which section 512(2) applies, shall be treated for the purposes of this section as relating to those in respect of which relief has been given under this Part rather than to others.

(5) Where the relief has been given to an individual in respect of shares of any class in a company which have been issued to the individual at different times, then any disposal by the individual of shares of that class shall be treated for the purposes of this section as relating to those issued earlier rather than to those issued later.

(6) Where shares in respect of which the relief was given have by virtue of any such allotment mentioned in subsection (1) of section 584 (not being an allotment for payment) been treated under subsection (3) of that section as the same asset as a new holding, then—

(a) the new holding shall be treated for the purposes of subsection (4) as shares in respect of which the relief has been given, and

(b) a disposal of the whole or part of the new holding shall be treated for the purposes of this section as a disposal of the whole or a corresponding part of those shares.

(7) Shares in a company shall not be treated for the purposes of this section as being of the same class unless they would be so treated if dealt in on a stock exchange in the State.

Value received from company.

497.— (1) In this section ‘ordinary trade debt’ means any debt for goods or services supplied in the ordinary course of a trade or business where the credit period given does not exceed 6 months and is not longer than that normally given to the customers of the person carrying on the trade or business.

(2) In this section—

(a) any reference to a payment or transfer to an individual includes a reference to a payment or transfer made to the individual indirectly or to his or her order or for his or her benefit, and

(b) any reference to an individual includes a reference to an associate of the individual and any reference to the company includes a reference to any person connected with the company.

(3) For the purposes of this section, an individual receives value from a company where the company—

(a) repays, redeems or repurchases any of its share capital or securities which belong to the individual or makes any payment to the individual for giving up his or her right to any of the company’s share capital or any security on its cancellation or extinguishment,

(b) repays any debt owed to the individual other than—

(i) an ordinary trade debt incurred by the company, or

(ii) any other debt incurred by the company—

(I) on or after the earliest date on which the individual subscribed for the shares in respect of which the relief is claimed, and

(II) otherwise than in consideration of the extinguishment of a debt incurred before that date,

(i) a debt in respect of a payment of the kind mentioned in paragraph (d) or (e) of section 492(3), or

(ii) a debt of the kind mentioned in subparagraph (i) or (ii) of paragraph (b),

(d) releases or waives any liability of the individual to the company or discharges, or undertakes to discharge, any liability of the individual to a third person,

(e) makes a loan or advance to the individual,

(f) provides a benefit or facility for the individual,

(g) transfers an asset to the individual for no consideration or for consideration less than its market value or acquires an asset from the individual for consideration exceeding its market value, or

(h) makes to the individual any other payment except a payment of the kind mentioned in paragraph (a), (b), (c), (d) or (e) of section 492(3) or a payment in discharge of an ordinary trade debt.

(4) (a) A specified individual shall not have received value from a company by virtue of subsection (3)(b) where—

(i) the specified individual has made an investment in the company by way of a loan,

(ii) the loan is converted into eligible shares within one year of the making of the loan, and

(iii) the specified individual provides a statement by the auditor of the company certifying that, in his or her opinion, the money raised by the company by way of the loan was used, and only used, by it in accordance with the provisions of section 493(1)(d).

(b) Where paragraph (a) applies, conversion of the loan into eligible shares shall, notwithstanding any other provision of this Part, be treated as the making of a relevant investment by the specified individual on the date of the making of the loan.

(c) For the purposes of this subsection ‘auditor’, in relation to a company, means the person or persons appointed as auditor of the company for all the purposes of the Companies Acts.

(5) For the purposes of this section, an individual shall also receive value from the company where the individual receives in respect of ordinary shares held by the individual any payment or asset in a winding up or in connection with a dissolution of the company, being a winding up or dissolution within section 494(10).

(6) For the purposes of this section, an individual shall also receive value from the company where any person who for the purposes of section 492 would be treated as connected with the company—

(a) purchases any of its share capital or securities which belong to the individual, or

(b) makes any payment to the individual for giving up any right in relation to any of the company’s share capital or securities.

(7) The value received by an individual shall be—

(a) in a case within paragraph (a), (b) or (c) of subsection (3), the amount receivable by the individual or, if greater, the market value of the shares, securities or debt in question,

(b) in a case within subsection (3)(d), the amount of the liability,

(d) in a case within subsection (3)(f), the cost to the company of providing the benefit or facility less any consideration given for it by the individual,

(e) in a case within subsection (3)(g), the difference between the market value of the asset and the consideration (if any) given for it,

(f) in a case within subsection (3)(h), the amount of the payment,

(g) in a case within subsection (4), the amount of the payment or, as the case may be, the market value of the asset, and

(h) in a case within subsection (5), the amount receivable by the individual or, if greater, the market value of the shares or securities in question.

(8) For the purposes of subsection (3)(d), a company shall be treated as having released or waived a liability where the liability is not discharged by payment within 12 months of the time when it ought to have been discharged by payment.

(9) For the purposes of subsection (3)(e), there shall be treated as if it were a loan made by the company to the individual—

(a) the amount of any debt (other than an ordinary trade debt) incurred by the individual to the company, and

(b) the amount of any debt due from the individual to a third person which has been assigned to the company.

(10) Where an individual who subscribes for eligible shares in a company—

(a) has, before the issue of the shares but within the specified period, received any value from the company, or

(b) on or after their issue but before the end of the specified period, receives any such value,

then, the amount of the relief to which the individual is entitled in respect of the shares shall be reduced by the value so received.

(11) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in a company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

Replacement capital.

498.— (1) In this section—

‘subsidiary’ means a subsidiary of a kind which a qualifying company may have by virtue of section 505;

‘trade’ includes any business, profession or vocation, and references to a trade previously carried on include references to part of such a trade.

(2) An individual to whom subsection (3) applies is not entitled to relief in respect of any shares in a company where at any time in the specified period the company or any of its subsidiaries—

(a) begins to carry on, as its trade or as a part of its trade, a trade previously carried on at any time in that period otherwise than by the company or any of its subsidiaries, or

(b) acquires the whole or greater part of the assets used for the purposes of a trade previously so carried on.

(3) This subsection applies to an individual where—

(a) any person or group of persons to whom an interest amounting in the aggregate to more than a 50 per cent share in the trade (as previously carried on) belonged at any time in the specified period is a person or a group of persons to whom such an interest in the trade carried on by the company, or any of its subsidiaries, belongs or has at any such time belonged, or

(b) any person or group of persons who controls or at any such time has controlled the company is a person or a group of persons who at any such time controlled another company which previously carried on the trade,

and the individual is that person or one of those persons.

(4) An individual is not entitled to relief in respect of any shares in a company where—

(a) the company comes to acquire all of the issued share capital of another company at any time in the specified period, and

(b) any person or group of persons who controls or has at any such time controlled the company is a person or a group of persons who at any such time controlled that other company,

and the individual is that person or one of those persons.

(5) For the purposes of subsection (3)—

(a) the person or persons to whom a trade belongs and, where a trade belongs to 2 or more persons, their respective shares in that trade shall be determined in accordance with paragraphs (a) and (b) of subsection (1), and subsections (2) and (3), of section 400, and

(b) any interest, rights or powers of a person who is an associate of another person shall be treated as those of that other person.

Value received by persons other than claimants.

499.— (1) The relief to which an individual is entitled in respect of any shares in a company shall be reduced in accordance with subsection (4) if at any time in the specified period the company repays, redeems or repurchases any of its share capital which belongs to any member other than—

(a) that individual, or

(b) another individual whose relief is thereby reduced by virtue of section 497(3),

or makes any payment to any such member for giving up such member’s right to any of the company’s share capital on its cancellation or extinguishment.

(2) Subsection (1) does not apply in relation to the redemption of any share capital for which the redemption date was fixed before 26 January 1984.

(3) Where—

(a) after 5 April 1984, a company issues share capital (in this subsection referred to as the ‘original shares’) of nominal value equal to the authorised minimum (within the meaning of the Companies (Amendment) Act 1983 ) for the purposes of complying with the requirements of section 6 of that Act, and

(b) after the registrar of companies has issued the company with a certificate under section 6 of that Act the company issues eligible shares,

then subsection (1) does not apply in relation to any redemption of any of the original shares within 12 months of the date on which those shares were issued.

(4) Where subsection (1) applies, the amount of relief to which an individual is entitled shall be reduced by the amount receivable by the member or, if greater, the nominal value of the share capital in question and, where apart from this subsection, 2 or more individuals would be entitled to relief, the reduction shall be made in proportion to the amounts of relief to which those individuals would have been entitled apart from this subsection.

(5) Where at any time in the specified period a member of a company receives or is entitled to receive any value from the company within the meaning of this subsection, then, for the purposes of section 492(4) in its application to any subsequent time—

(a) the amount of the company’s issued ordinary share capital, and

(b) the amount of the part of that capital which consists of the shares relevant to section 492(4) and the amount of the part consisting of the remainder,

shall each be treated as reduced in accordance with subsection (6).

(6) The amount of each of the parts mentioned in subsection (5)(b) shall be treated as equal to such proportion of that amount as the amount subscribed for that part less the relevant value bears to the amount subscribed, and the amount of the issued share capital shall be treated as equal to the sum of the amounts treated under this subsection as the amount of those parts respectively.

(7) In subsection (5)(b), the reference to the part of the capital which consists of the shares relevant to section 492(4) is a reference to the part consisting of shares which (within the meaning of that section) the individual directly or indirectly possesses or is entitled to acquire, and in subsection (6) the ‘relevant value’, in relation to each of the parts mentioned in that subsection, means the value received by the member or members entitled to the shares of which that part consists.

(8) For the purposes of subsection (5), a member of a company receives or is entitled to receive value from the company within the meaning of that subsection in any case in which an individual would receive value from the company by virtue of paragraph (d), (e), (f), (g) or (h) of section 497(3) (but treating as excepted from paragraph (h) all payments made for full consideration), and the value received shall be determined as for the purposes of that section.

(9) For the purposes of subsection (8), a person shall be treated as entitled to receive anything which the person is entitled to receive at a future date or will at a future date be entitled to receive.

(10) Where by virtue of this section any relief is withheld or withdrawn in the case of an individual to whom ordinary shares in the company have been issued at different times, the relief shall be withheld or withdrawn in respect of shares issued earlier rather than in respect of shares issued later.

Prevention of misuse.

500.— An individual shall not be entitled to relief in respect of any shares unless the shares are subscribed and issued for bona fide commercial purposes and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.

Claims.

501.— (1) A claim for the relief in respect of eligible shares issued by a company in any year of assessment shall be made—

(a) not earlier than—

(i) in the case of a claim under section 493, the date on which the company commences to carry on the relevant trading activities or in the case of a company referred to in section 493(1)(d)(ii), has expended not less than 30 per cent of the relevant investment on research and development activities which are connected with and undertaken with a view to the carrying on of the relevant trading activities,

(ii) in the case of a relief under section 489(2)(a)—

(I) where the company is a company referred to in section 489(4)(b), which does not begin to carry on relevant trading activities, the time of the disposal, and

(II) in any other case, the end of the period of 4 months mentioned in section 489(4)(a),

and

(iii) in the case of a relief under section 489(2)(b), the date on which the relevant period ends,

and

(b) not later than—

(i) the period of 2 years after the end of that year of assessment or, if the period of 4 months mentioned in section 489(4)(a) ended after the end of that year, the period of 2 years after the end of that 4 month period, whichever last occurs, or

(ii) the period of 3 months after the date the statement referred to in subsection (3) is furnished, where such statement is furnished within the 3 months prior to the expiry of the time specified in subparagraph (i).

(2) A claim for relief in respect of eligible shares in a company shall not be allowed unless it is accompanied by a certificate issued by the company in such form as the Revenue Commissioners may direct and certifying that the conditions for the relief, in so far as they apply to the company and the trade, are satisfied in relation to those shares.

(3) Before issuing a certificate under subsection (2), a company shall furnish the inspector with a statement to the effect that it satisfies the conditions for the relief, in so far as they apply in relation to the company and the trade, and has done so at all times since the beginning of the relevant period.

(4) No certificate to which subsection (3) relates shall be issued without the authority of the inspector or where the company or a person connected with the company has given notice to the inspector under section 503(2).

(5) Any statement under subsection (3) shall—

(a) contain such information as the Revenue Commissioners may reasonably require,

(b) be in such form as the Revenue Commissioners may direct, and

(6) Where a company has issued a certificate under subsection (2) or furnished a statement under subsection (3), and—

(a) the certificate or statement is false or misleading, or

(b) the certificate was issued in contravention of subsection (4),

then the company shall be liable to a penalty of €4,000.

(7) For the purpose of regulations made under section 986, no regard shall be had to the relief unless a claim for it has been duly made and admitted.

(8) For the purposes of section 1080, income tax—

(a) shall be regarded as due and payable notwithstanding that relief from the tax (whether by discharge or repayment) is subsequently given on a claim for the relief, but

(b) shall, unless paid earlier or due and payable later, be regarded as paid, to the extent that relief from tax is due under this Part, on the date of the making of the claim on which the relief is given,

and section 1081 shall not apply in consequence of any discharge or repayment for giving effect to the relief.

Assessments for withdrawing relief.

502.— (1) Where any relief has been given which is subsequently found not to have been due, that relief shall be withdrawn by the making of an assessment to income tax under Case IV of Schedule D for the year of assessment for which the relief was given.

(2) Where any relief given in respect of shares for which either a married person or his or her spouse has subscribed, and which were issued while the married person was assessed in accordance with section 1017, is to be withdrawn by virtue of a subsequent disposal of those shares by the person who subscribed for them and at the time of the disposal the married person is not so assessable, any assessment for withdrawing that relief shall be made on the person making the disposal and shall be made by reference to the reduction of tax flowing from the amount of the relief regardless of any allocation of that reduction under subsections (2) and (3) of section 1024 or of any allocation of a repayment of income tax under section 1020.

(3) Subject to this section, any assessment for withdrawing relief which is made by reason of an event occurring after the date of the claim may be made within 4 years after the end of the year of assessment in which that event occurs.

(4) No assessment for withdrawing relief in respect of shares issued to any person shall be made by reason of any event occurring after his or her death.

(5) Where a person has, by a disposal or disposals to which section 496(1)(b) applies, disposed of all the ordinary shares issued to the person by a company, no assessment for withdrawing relief in respect of any of those shares shall be made by reason of any subsequent event unless it occurs at a time when the person is connected with the company within the meaning of section 492.

(6) Subsection (3) is without prejudice to section 924(2)(c).

(7) In its application to an assessment made by virtue of this section, section 1080 applies as if the date on which the income tax charged by the assessment becomes due and payable were—

(a) in the case of relief withdrawn by virtue of section 492, 494, 495, 498(2) or 499(1) in consequence of any event after the grant of the relief, the date of that event;

(b) in the case of relief withdrawn by virtue of section 496(1) in consequence of a disposal after the grant of the relief, the date of the disposal;

(c) in the case of relief withdrawn by virtue of section 497 in consequence of a receipt of value after the grant of the relief, the date of the receipt;

(d) in the case of relief withdrawn by virtue of section 500—

(i) in so far as effect has been given to the relief in accordance with regulations under section 986, the 5th day of April in the year of assessment in which effect was so given, and

(ii) in so far as effect has not been so given, the date on which the relief was granted;

(e) in the case of relief withdrawn by virtue of—

(i) a specified individual failing or ceasing to hold a relevant employment, or

(ii) an individual ceasing to be a specified individual,

the date of the failure or the cessation, as the case may be.

(8) For the purposes of subsection (7), the date on which the relief shall be granted is the date on which a repayment of tax for giving effect to the relief was made or, if there was no such repayment, the date on which the inspector issued a notice to the claimant showing the amount of tax payable after giving effect to the relief.

Information.

503.— (1) Where an event occurs by reason of which any relief given to an individual is to be withdrawn by virtue of section 492, 496 or 497, the individual shall within 60 days of coming to know of the event give a notice in writing to the inspector containing particulars of the event.

(2) Where an event occurs by reason of which any relief in respect of any shares in a company is to be withdrawn by virtue of section 494, 495, 497, 498, 499 or 500—

(a) the company, and

(b) any person connected with the company who has knowledge of that matter,

shall within 60 days of the event or, in the case of a person within paragraph (b), of that person coming to know of it, give a notice in writing to the inspector containing particulars of the event.

(3) Where the inspector has reason to believe that a person has not given a notice which the person is required to give under subsection (1) or (2) in respect of any event, the inspector may by notice in writing require that person to furnish him or her within such time (not being less than 60 days) as may be specified in the notice with such information relating to the event as the inspector may reasonably require for the purposes of this Part.

(4) Where relief is claimed in respect of shares in a company and the inspector has reason to believe that it may not be due by reason of any arrangement or scheme mentioned in section 492(11), 494(9) or 500, the inspector may by notice in writing require any person concerned to furnish him or her within such time (not being less than 60 days) as may be specified in the notice with—

(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangement or scheme exists or has existed, and

(b) such other information as the inspector may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.

(5) References in subsection (4) to the person concerned are, in relation to sections 492(11) and 500, references to the claimant and, in relation to sections 494(9) and 500, references to the company and any person controlling the company.

(6) Where relief has been given in respect of shares in a company—

(a) any person who receives from the company any payment or asset which may constitute value received (by that person or another) for the purposes of section 497 or 499(5), and

(b) any person on whose behalf such a payment or asset is received,

shall, if so required by the inspector, state whether the payment or asset received by that person or on that person’s behalf is received on behalf of any person other than that person and, if so, the name and address of that other person.

(7) Where relief has been claimed in respect of shares in a company, any person who holds or has held shares in the company and any person on whose behalf any such shares are or were held shall, if so required by the inspector, state whether the shares which are or were held by that person or on that person’s behalf are or were held on behalf of any person other than that person and, if so, the name and address of that other person.

(8) No obligation as to secrecy imposed by statute or otherwise shall preclude the inspector from disclosing to a company that relief has been given or claimed in respect of a particular number or proportion of its shares.

Capital gains tax.

504.— (1) The sums allowable as deductions from the consideration in the computation for the purposes of capital gains tax of the gain or loss accruing to an individual on the disposal of shares in respect of which any relief has been given and not withdrawn shall be determined without regard to that relief, except that where those sums exceed the consideration they shall be reduced by an amount equal to the lesser of—

(a) the amount of that relief, and

(b) the excess,

but this subsection does not apply to a disposal to which section 1028(5) relates.

(2) In relation to shares in respect of which relief has been given and not withdrawn, any question—

(a) as to which of any such shares issued to a person at different times a disposal relates, or

(b) whether a disposal relates to such shares or to other shares,

shall for the purposes of capital gains tax be determined as for the purposes of section 496.

(3) Where an individual holds ordinary shares in a company and the relief has been given in respect of some of the shares but not others, then, if there is a reorganisation (within the meaning of section 584) affecting those shares, section 584(3) shall apply separately to the shares in respect of which the relief has been given and to the other shares (so that the shares of each kind shall be treated as a separate holding of original shares and identified with a separate new holding).

(4) There shall be made all such adjustments of capital gains tax, whether by means of assessment or by means of discharge or repayment of tax, as may be required in consequence of the relief being given or withdrawn.

Application to subsidiaries.

505.— (1) A qualifying company may in the relevant period have one or more subsidiaries if—

(a) the conditions set out in subsection (2) are satisfied in respect of the subsidiary or each subsidiary and, except where provided in subsection (3), continue to be so satisfied until the end of the relevant period, and

(b) the subsidiary or each subsidiary is a company—

(i) to which section 494(3)(a)(i) relates, or

(ii) which exists solely for the purpose of carrying on any trade which consists solely of any one or more of the following relevant trading activities—

(I) the purchase of goods or materials for use by the qualifying company or its subsidiaries,

(II) the sale of goods or materials produced by the qualifying company or its subsidiaries, or

(III) the rendering of services to or on behalf of the qualifying company or its subsidiaries.

(2) The conditions referred to in subsection (1)(a) are—

(a) that the subsidiary is a 51 per cent subsidiary of the qualifying company,

(b) that no other person has control of the subsidiary within the meaning of section 11, and

(c) that no arrangements are in existence by virtue of which the conditions in paragraphs (a) and (b) could cease to be satisfied.

(3) The conditions referred to in subsection (1)(a) shall not be regarded as ceasing to be satisfied by reason only of the fact that the subsidiary or the qualifying company is wound up or dissolved without winding up if—

(b) the net assets, if any, of the subsidiary or, as the case may be, the qualifying company are distributed to its members before the end of the relevant period or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up.

(4) Where a qualifying company has one or more subsidiaries in the relevant period, this Part shall apply subject to Schedule 10.

Nominees and designated funds.

506.— (1) Shares subscribed for, issued to, held by or disposed of for an individual by a nominee shall be treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by that individual.

(2) (a) Relief shall be given, and section 490(1)(a) does not apply, in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund designated by the Revenue Commissioners for the purposes of this section (in this Part referred to as the ‘managers of a designated fund’) where the amount so subscribed forms part of the fund.

(b) Except where provided by paragraph (a), relief shall not be given in respect of an amount subscribed as nominee for an individual by a person or persons having the management of an investment fund where the amount so subscribed forms part of the fund.

(3) The Revenue Commissioners may, if they think fit, having regard to the facts of the particular case and after such consultation, if any, as may seem to them to be necessary with such person or body of persons as in their opinion may be of assistance to them, and subject to such conditions, if any, as they think proper to attach to the designation, designate an investment fund for the purposes of this Part.

(4) (a) The Revenue Commissioners may, by notice in writing given to the managers of a designated investment fund, withdraw the designation given for the purposes of this section to the fund in accordance with subsection (3) and, on the giving of the notice, the fund ceases to be a designated fund as respects any subscriptions made after the date of the notice referred to in paragraph (b).

(b) Where the Revenue Commissioners withdraw the designation of any fund for the purposes of this section, notice of the withdrawal shall be published as soon as may be in Iris Oifigiúil.

(5) Where an individual claims relief in respect of eligible shares in a company which have been issued to the managers of a designated fund as nominee for the individual, then section 501(2) applies as if it required—

(a) the certificate referred to in that section to be issued by the company to the managers, and

(b) the claim for relief to be accompanied by a certificate issued by the managers, in such form as the Revenue Commissioners may authorise, furnishing such information as the Revenue Commissioners may require and certifying that the managers hold certificates issued to them by the companies concerned, for the purposes of section 501(2) in respect of the holdings of eligible shares shown on the managers’ certificate.

(6) The managers of a designated fund may be required by a notice given to them by an inspector or other officer of the Revenue Commissioners to deliver to the officer within the time limited by the notice a return of the holdings of eligible shares shown on certificates issued by them in accordance with subsection (5) in the year of assessment to which the return relates.

(7) Section 501(6) does not apply in relation to any certificate issued by the managers of a designated fund for the purposes of subsection (5).

(8) Without prejudice to the generality of subsection (3), the Revenue Commissioners shall designate a fund for the purposes of this Part only if they are satisfied that—

(a) the fund is established under irrevocable trusts for the sole purpose of enabling individuals who qualify for the relief (in this subsection referred to as ‘qualifying individuals’) to invest in eligible shares of a qualifying company, and

(b) under the terms of the trusts it is provided that—

(i) the entire fund is to be invested without undue delay in eligible shares,

(ii) the fund is to subscribe only for shares which, subject to the circumstances of the qualifying individuals participating in the fund (in this subsection referred to as ‘participants’), qualify those participants for relief,

(iii) pending investment in eligible shares, any moneys subscribed for the purchase of shares are to be placed on deposit in a separate account with a bank licensed to transact business in the State,

(iv) any amounts received by means of dividends or interest are, subject to a commission in respect of management expenses at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund has been established, to be paid without undue delay to the participants,

(v) any charges to be made by means of management or other expenses in connection with the establishment, the running, the winding down or the termination of the fund shall be at a rate not exceeding a rate which shall be specified in the deed of trust under which the fund is established,

(vi) audited accounts of the fund are submitted annually to the Revenue Commissioners as soon as may be after the end of each period for which accounts of the fund are made up,

(vii) the managers, the trustees of the fund and any of their associates are not for the time being connected either directly or indirectly with any company whose shares comprise part of the fund,

(viii) any discounts on eligible shares received by the trustees or managers of the fund are accepted solely for the benefit of the participants,

(ix) the fund is a closed fund and the closing date for participation precedes the making of the first investment,

(x) if a limit is placed on the size of the fund or a minimum amount for investment is stipulated, any subscriptions not accepted are to be returned without undue delay, and

(xi) no participant is allowed to have any shares in any company in which the fund has invested transferred into his or her name until 3 years have elapsed from the date of the issue of the shares to the fund.

(9) The Revenue Commissioners may nominate in writing an inspector or other officer to perform any acts and discharge any functions authorised by this Part to be performed or discharged by the Revenue Commissioners.

Reporting of relief.

507.— (1) A person (being a qualifying company or the managers of a designated fund) shall, when required to do so by notice in writing by the Revenue Commissioners, furnish the Revenue Commissioners within such time as may be specified in the notice (not being less than 30 days) with such information, in relation to the relief provided for in this Part, as the Revenue Commissioners may reasonably require from that person for the purpose of the annual reports required in accordance with section 7.1 of the Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-Sized Enterprises ⁵ .

(2) Notwithstanding any obligation as to secrecy imposed on them by the Tax Acts or the Official Secrets Act 1963 , the Revenue Commissioners may furnish the information obtained in accordance with subsection (1) to the person submitting the annual reports referred to in that subsection.

(3) The Revenue Commissioners may nominate any of their officers to discharge any function authorised by this section to be discharged by the Revenue Commissioners.

(4) No obligation as to secrecy imposed by statute or otherwise shall preclude the Revenue Commissioners from publishing information obtained by them in accordance with subsection (1).

(5) Where any person fails to comply with a requirement to furnish the information in accordance with subsection (1), that person shall be liable to a penalty of €2,000 and, if that failure continues after the period of 30 days referred to in that subsection, a further penalty of €50 for each day on which the failure so continues.”,

(b) by the substitution of the following for Schedule 10:

“SCHEDULE 10

Relief for Investment in Corporate Trades: Subsidiaries

Section 505

Finance for Trade of Subsidiary

1. The shares issued by the qualifying company may, instead of or as well as being issued for the purpose mentioned in section 489(1)(b), be issued for the purpose of raising money for a qualifying new venture being carried on by a subsidiary or which such a subsidiary intends to carry on and, where shares are so issued, paragraph (a) of the definition of ‘relevant period’ in section 488(1) and subsections (1)(c), (5), (6) and (8) of section 489 shall apply as if references to the company were or, as the case may be, included references to the subsidiary.

Individuals Qualifying for Relief

2. (1) In subsections (2), (4) and (6) of section 492, references to a company (except in each subsection the first such reference) include references to a company which is during the relevant period a subsidiary of that company, whether it becomes a subsidiary before, during or after the year of assessment in respect of which the individual concerned claims relief and whether or not it is such a subsidiary while he or she is a partner, director or employee mentioned in subsection (2) of section 492 or while he or she has or is entitled to acquire such capital or voting power or rights as are mentioned in subsections (4) and (6) of that section.

(2) Without prejudice to section 492 as it applies in accordance with subparagraph (1), an individual shall be treated as connected with a company if—

(a) he or she has at any time in the relevant period had control (within the meaning of section 11) of another company which has since that time and before the end of the relevant period become a subsidiary of the company, or

(b) he or she directly or indirectly possesses or is entitled to acquire any loan capital of a subsidiary of that company.

(3) Subsections (5) and (9) of section 492 shall apply for the purposes of this paragraph.

Value Received

3. (1) In sections 497(10) and 499(5), references to the receipt of value from the company shall include references to the receipt of value from any company which during the relevant period is a subsidiary of the company, whether it becomes a subsidiary before or after the individual concerned receives any value from it, and references to the company in the other provisions of section 497 and in section 499(8) shall be construed accordingly.

(2) In section 499(1), references to the company (except the first such reference) shall include references to a company which during the relevant period is a subsidiary of the company, whether it becomes a subsidiary before or after the repayment, redemption, repurchase or payment referred to in that subsection.

Information

4. Subsections (4) and (5) of section 503 apply in relation to any arrangements mentioned in section 505(2)(c) as they apply in relation to any arrangement mentioned in section 500.”,

and

“47A.

Section 489(2)(a) (Employment and Investment Incentive Scheme).

The total amount deducted from the individual’s total income for the tax year under section 489(2)(a) (as inserted by the Finance Act 2011) in respect of any amount subscribed for eligible shares by the individual in the tax year, including any amount deducted from the individual’s total income for that year by virtue of any amount of relief carried forward to that year under subsection (3) or (4) of section 490.”.

(2) This section comes into operation on such day or days as the Minister for Finance may by order or orders appoint and different days may be appointed for different purposes or different provisions.

¹ OJ No. C292 of 1.12.2006, p. 11

² OJ No. L63 of 28.2.2004, p. 22

³ OJ No. C194 of 18.8.2006, p. 2

⁴ OJ No. C288 of 9.10.1999, p. 2, and OJ No. C244 of 1.10.2004, p. 2

⁵ OJ No. C194 of 18.8.2006, p. 20

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