Taxation
The purpose of this Part of the bill is to introduce legislative amendments for Taxation. Amendments are being proposed for Income Tax, Capital Tax, Corporation Tax and Stamp Duty legislation in order to ensure continuity for business and citizens in relation to their current access to certain taxation measures including, reliefs and allowances, and the retention of a number of antiavoidance provisions in the event that the UK is no longer a member of the EU/EEA.
Department of Finance
Income Tax
The purpose of these heads is to amend various sections of the Taxes Consolidation Act (TCA), 1997 to seek to ensure that income tax measures continue to apply to existing beneficiaries in the event that the UK is no longer an EU Member State or EEA State. The heads extend relevant legislative definitions to include the UK in order to maintain the status quo in the immediate future for Irish taxpayers.
Head 1 – Abatement from income tax – restricted shares
Explanatory note
This measure currently has restrictions related to entities established in EEA states and it is proposed to extend the relevant definitions to ensure that entities established in the UK remain included.
Head 2 – Key Employee Engagement Programme
To amend section 128F TCA 1997 as appropriate.
Explanatory note
This measure currently has restrictions related to entities established in EEA states and it is proposed to extend the relevant definitions to ensure that entities established in the UK remain included.
Head 3 – Taxation treatment of Hepatitis C compensation payments
Explanatory note
It is proposed to extend the relevant definitions to ensure that recurring compensation payments from Hepatitis C/HIV public compensation schemes in the UK remain exempt from Irish income tax.
Head 4 – Foster Care
Explanatory note
It is proposed to extend the relevant definitions to ensure that payments made by UK authorities in respect of the fostering of children remain exempt from Irish income tax. This issue is likely to relate to a small number of cross-border fosterings.
Head 5 – Artists’ Exemption
Explanatory note
This measure is currently restricted to residents of EEA states and it is proposed to extend the relevant definitions to ensure that UK residents remain included.
Head 6 & 7 – Income from property in the State for charities and donations to approved bodies
Explanatory note
These measures are currently restricted to entities established in EEA and EFTA states and it is proposed to extend the relevant definitions to ensure that those established in the UK remain included.
Head 8 – Mortgage Interest Relief
Explanatory note
This measure is currently restricted to properties situated in EEA states and it is proposed to extend the relevant definitions to ensure that properties situated in the UK remain included.
Head 9 – Relief for Insurance against expenses of illness
Explanatory note
This measure is currently restricted to taxpayers who are covered by authorised insurers as defined in an EU Directive and it is proposed to extend the relevant definitions to ensure that insurers established in the UK remain included.
Head 10 – Seafarers’ Allowance
Explanatory note
This measure is currently restricted to sea-going ships that are registered in EU Member States and it is proposed to extend the relevant definitions to ensure that those on UK registers remain included.
Head 11 – Fishers’ Allowance
Explanatory note
This measure is currently restricted to fishing vessels that are registered on the European Community Fishing Fleet Register and it is proposed to extend the relevant definitions to ensure that those on UK registers remain included.
Head 12 – Relief for fees paid for third level undergraduate education
Explanatory note
This measure is currently restricted to undergraduate courses (including distance learning) provided by EU Member State institutions and it is proposed to extend the relevant definitions to ensure that UK-based institutions remain included.
Head 13 – Pensions Taxation
Explanatory note
There are a number of relevant restrictions on income tax relief for certain pension schemes,
including conditions for approval of pension schemes, approved retirement funds, qualifying
overseas pension plans, and the exemption of cross border schemes.
These will be amended as appropriate to seek to ensure that Irish taxpayers may continue to avail of the various pension related reliefs.
Head 14 – Sportspersons Relief
Explanatory note
This measure is currently restricted to residents of EEA states and it is proposed to extend the
relevant definitions to ensure that the UK remain included.
Head 15 – Relief for Investment in Corporate Trade
Explanatory note
This measure currently has restrictions related to entities established in EEA states and it is proposed to extend the relevant definitions to ensure that entities established in the UK remain included.
Capital Taxes
Head 16 – Amendment to exemptions from tax for Government and other public securities
Explanatory Note:
At present, the legislation provides that an Irish taxpayer can get relief in respect of the interest in respect of any savings certificates issued by the Minister for Finance or savings certificates or similar securities issued by a relevant EU or EEA Member State.
It is proposed to continue the current treatment for UK in the event that the UK is no longer an EU Member State or within the EEA, by adding the UK to the territorial requirement of the legislation. This would allow continuity of current tax treatment for Irish investors in such securities.
Capital Gains Tax
Head 17 – Amendment to tax treatment of certain venture fund managers
Explanatory Note:
This section provides relief from the full rate of Capital Gains Tax (CGT) for fund managers in respect of total investments of a venture capital fund. The relief only applies to investments made in an EEA State. In the absence of a change, investments made in the UK could not be taken into account in the calculation of the amount of the relief – relevant investments made in the UK would no longer qualify for the relief. This would be to the disadvantage of fund managers operating in Ireland.
Head 18 and 19 – Amendment to provisions dealing with Non-Resident Persons and Trusts
Explanatory Note:
Section 806 is designed to counter individuals who are resident or ordinarily resident in the State
avoiding income tax by means of a transfer of assets as a result of which income becomes payable to a person who is resident or domiciled outside this country. The income arising abroad is chargeable to income tax on the Irish-resident or ordinarily resident individual where he or she has power to enjoy any of the income or where the individual receives any capital sum which is in any way connected with the transfer or with any associated operation.
Sections 579 and 579A are designed to prevent the avoidance of CGT by a person who is either
resident or ordinarily resident in the State on gains made by non-resident trusts.
Section 590 is designed to prevent the avoidance of CGT by transferring property to controlled
companies abroad. It enables Revenue to look though a non-resident controlled company to its
resident participators and, subject to certain exemptions, to assess them to CGT on their share of
the chargeable gains made by the non-resident company.
None of the above anti-avoidance provisions apply where it is shown to the satisfaction of the
Revenue Commissioners that at the time when the tax charge arises, the relevant non-resident
person (or settlement in the case of sections 579 and 579A) is carrying on genuine economic
activities in a relevant Member State (either EU or EEA).
In the absence of a change in the legislation, it would not be possible to make the case that the
relevant person or settlement was carrying on a genuine economic activity in the UK.
Head 20 – Relief for certain disposals of land and property
Explanatory Note:
This section gives relief from CGT on property purchased in any State in the EEA between 7
December, 2011 and 31 December, 2014 on a disposal of such property where that property is held for more than seven years. Finance Act 2017 amended this section to provide that where the property is held for at least four years and less than seven years any gain is not liable to CGT where the disposal is made after 1 January 2018.
In the absence of any change to the legislation, CGT would apply on a disposal of land or buildings in the United Kingdom to which this section was intended to apply. This would be to the disadvantage of Irish investors who had purchased property in the UK with the expectation of obtaining the relief.
Capital Acquisitions Tax
Head 21 – Agricultural Relief
Explanatory Note:
This section is the main provision with respect to the provision of Capital Acquisitions Tax (CAT)
Agricultural Relief. This reliefs allows for the value of inherited agricultural assets (including
farmland, buildings, stock) to be reduced to some 90 per cent of its value in the calculation of any
CAT liability where certain conditions are met. This would allow agricultural property in the UK to be included as agricultural property for the purpose of claiming agricultural relief and will see
agricultural property in the UK being included in the market value of agricultural property for the
purpose of the farmer test. Continuing this relief to include the UK will take account of the position of farmers in the State who may have holdings on either side of the border.
Corporation Tax
Head 22 – Charges on income for corporation tax purposes
Explanatory Note:
Section 243 provides for relief from corporation tax in the form of charges on income in respect of annuities and other annual payments, patent royalties, rents and other similar payments, and, to a limited extent, interest, paid in connection with a trade. Charges on income paid by a company are deductible against its total profits.
Section 243(4) allows relief in form of a charge on income in respect of non-yearly interest paid by a company to recognised EU banks or EU stock exchange members and discount houses carrying on business in the EU, against its total profits. The charges must be paid in the accounting period out of the profits brought into the charge to Irish corporation tax for that accounting period.
If the UK ceases to belong to the EU, post-Brexit, then a company would not be able to avail of relief from corporation tax under section 243 in respect of non-yearly interest paid to recognised banks, stock exchange members or discount houses carrying on business in the UK.
It is proposed to extend the references to include the UK to maintain the status quo in the
immediate future.
Head 23 – Group loss relief provisions
Explanatory Note:
Recognising that groups of companies usually comprise a single economic entity, legislation provides for the allowance of trading losses of a group member against the profits of other group members provided both the company surrendering the losses and the company claiming them satisfy certain relationship requirements and they are both resident in an EU Member State/EEA and are within the charge to Irish tax. In addition, the legislation provides that certain payments (primarily interest) between group members resident in Member States, which would normally be paid subject to deduction of withholding tax, may be made without such deductions, where certain minimum relationship requirements exist between the companies.
The companies must form part of a 75% group, and only shareholdings in companies resident or
quoted in EU/EEA/tax treaty States are considered for this purpose.
S410 – Section 410 deals with companies and their 51% subsidiaries. It provides that where a
company which is resident in a “relevant Member State” makes a payment (primarily interest) to
another qualifying group company resident in a relevant Member State that payment may be made
without deduction of tax. “Relevant Member State” for this purpose includes EU Member States
and EEA States with whom a tax treaty has been agreed.
Post Brexit, intra-group payments – relief from withholding tax will no longer be available under
s.410 in respect of payments to UK resident companies. Other reliefs from withholding tax may continue to apply, subject to the relevant conditions. It is proposed to extend the relevant definition to include the UK, to maintain the status quo in the immediate future.
S411 – The purpose of group relief provisions is to enable groups of companies to offset losses
incurred by one or more of its members against profits of one or more of its other members. In
order to claim such relief both the surrendering company and the claimant company must be
resident in the EU/EEA and within the charge to Irish corporation tax. This will be the case in relation to Irish resident companies and EU/EEA resident companies that carry on a trade in the
State through a branch or agency. In addition, the relevant companies must form a group. For these purposes, the relevant companies will form a group where one is a 75% subsidiary of the other or both companies are 75% subsidiaries of a third company. In determining whether the requisite relationship exists, only shareholdings held through companies resident in the EU/EEA and double tax treaty partner jurisdictions (or quoted in those territories) are considered. For the purposes of this section;
Post Brexit
(i) for the purpose of determining whether a group relationship exists, shareholdings held through UK resident companies will continue to be factored in because the UK is a tax treaty partner jurisdiction. Therefore a no deal Brexit would not give rise to a degrouping of existing group relationships formed via UK companies, and future group loss relief claims can be made in respect of companies whose group relationship is formed or partly formed via a UK resident company.
(ii) However, UK resident companies trading in Ireland through a branch or agency will no
longer be able to surrender or claim group relief under s.411.
It is proposed to extend the relevant definition to include the UK, to maintain the status quo in the immediate future.
Head 24 – Equalisation reserves for credit insurance and reinsurance business for
companies
Explanatory Note:
This section allows certain insurance companies to take a tax deduction for transfers into a specific
EU statutory equalisation reserve when calculating their profits or losses for tax purposes. The
provisions apply from 15 July 2006. Credit insurance companies are required by Article 14(8) of the
European Communities (Non-Life Insurance) Regulations 1976 (S.I. No. 115 of 1976) to set up an
equalisation reserve. Similarly, Regulation 24 of the European Communities (Reinsurance)
Regulations 2006, requires a reinsurance undertaking writing certain credit insurance to create, and maintain, an equalisation reserve. Section 81B provides for a tax deduction for the transfer of any amounts into this equalisation reserve. It also provides that transfers out of this reserve will be
treated as income for tax purposes, thereby recouping the tax relief provided as the reserves are reduced. The section also contains a provision to claw back the tax relief in full where a company ceases to trade.
Post Brexit, insurance companies would no longer receive a deduction for payments made to an
equalisation reserve in the U.K. It is proposed to extend the relevant definition to include the UK, to maintain the status quo in the immediate future pending further clarity on this matter.
Head 25 – Loans to participators
Explanatory Note:
Section 438 is a provision applying to close companies, designed to prevent the avoidance of tax
through the withdrawal of profits in the form of a loan. A close company is a company which is
under the control of five or fewer participators or of participators who are directors. Section 438
provides for a charge to income tax on loans or advances provided by a close company to a
participator in that close company.
In this section, the references to a “participator” may apply to an individual, a company receiving the loan or advance in a fiduciary or representative capacity, and to a company not resident in a
Member State of the European Communities [EU].
Post Brexit, a company resident in the UK could potentially become a ‘participator’ for the purposes of this anti-avoidance provision, and loans/advances to a UK company that is a participator in the
close company could become subject to a charge under s.438.
It is proposed to extend the definition in order to maintain the status quo in the short term, to allow time to examine any potential impact on bona-fide business transactions.
Head 26 – Relief from tax for certain start-up companies
Explanatory Note:
Section 486C allows for relief from corporation tax for certain start-up companies in the first three years of trading, with the value of the relief being subject to an overall cap and linked to the amount of employers’ PRSI paid by a company.
A ‘new company’ for the purposes of this section includes a company incorporated in an EEA State.
Post Brexit, if the UK ceases to belong to the European Economic Area post-Brexit, then a company
incorporated in the UK will not be a “new company” for the purposes of this section and therefore will not qualify for the relief. It is proposed to extend the relevant definition to include the UK, to maintain the status quo in the immediate future, in view of potential relevance to small cross-border businesses.
Head 27 – Tax credit for R&D expenditure
Explanatory Note:
Qualifying R&D must be carried out in a relevant Member State – this is defined in section 766 as a
Member State of the European Communities [the EU] or, if not a Member State, a State which is a
contracting party of the European Economic Area (EEA) Agreement. Furthermore, the credit is only available if no tax deduction is claimed for the cost of R&D in that other State.
Post Brexit, if the UK ceases to belong to the EEA then research carried out in the UK will no longer
qualify for the purpose of the relief. It is proposed to extend the relevant definitions to include the
UK, to maintain the status quo in the immediate future, pending further research on the potential
consequences for established R&D activities in the State.
Stamp Duty
Head 28 – Relief for Intermediaries
Explanatory Note:
This section provides a relief from stamp duty for brokers purchasing stocks or marketable securities of Irish incorporated companies on behalf of clients. Without this relief such transactions would be subject to a 1% stamp duty.
Subsection 2A of this section provides that transfers of shares meeting the reporting requirements
of the EU Markets in Financial Instruments Directive (MIFID) are deemed to satisfy the “effected on exchange” requirements for such transfers contained in subsection 2, subject to all other conditions of the “Relief for Intermediaries” being satisfied, and as such are able to avail of this relief.
Post Brexit, if the UK introduces its own domestic UK specific law which does not meet equivalence
requirements under MIFID, UK based intermediaries may not be able to avail of the exemption as
currently worded. It is seen as appropriate to include an amendment continuing the relief for UK based brokers.
Head 29 – Relief for clearing houses
Explanatory Note:
This section provides counterparty relief for share transfers. This is in effect a stamp duty exemption for each transferee so long as that transferee transfers title to the securities concerned to another person under a matching contract. A ‘clearing house’ is a body or association which provides services related to the clearing and settlement of transactions and payments and the management of risks associated with the resulting contracts and which is regulated or supervised in the provision of those services by a regulatory body, or an agency of the government of a Member State.
This facilitates the process of shares moving between the seller and the purchaser in which clearing
houses act as buffers between the two ends of each transaction.
Post Brexit, the UK clearing houses may not be deemed to be covered by an appropriate regulatory
or supervisory agency for the purposes of the exemption. It is seen as appropriate to include an amendment continuing the relief for UK based counterparties.
Head 30 – Reconstructions or amalgamations of companies
To amend the Stamp Duties Consolidation Act (1999) Section 80 to include UK based companies where they merge with or acquire Irish based companies.
Explanatory Note:
For various commercial reasons, a company may rearrange its business activities by:
· merging with another company;
· acquiring another company, or
· reorganising its corporate structure.
These transactions generally involve transfers of either shares or property. When shares are issued
as consideration for the shares or property transferred the transaction may be classed as a
“reconstruction” or “amalgamation”.
Section 80 of the SDCA 1999 provides a full relief from stamp duty where a conveyance or transfer of stocks or marketable securities, insurance policies (where the risk is situate in the State), and
property takes place as a result of such transactions.
An acquiring company that is not itself situate in the state can avail of this relief if it is incorporated
in the EU/EEA.
Post Brexit as things stand, UK based acquiring companies will not be able to avail of the relief.
In order to comply with the overall imperative of seeking where possible to keep the status quo in
place, an amendment to this section will be required to include UK based companies in the list of
those that qualify for it.
Head 31 – Demutualisation of assurance companies
Explanatory Note:
This section of the SDCA 1999 provides a stamp duty exemption on certain instruments (shares,
stock, etc.) issued to the members of an assurance company when it goes public or is taken over by a public company (de-mutualises).
This relief applies where an acquiring company is incorporated in the State or in the EU/EEA.
Post Brexit, where UK incorporated assurance companies demutualise and issue shares to their Irish “members” or a non-mutual UK assurance company takes over an Irish mutual and issues shares to its “members”, Revenue will have to charge those members with stamp duty on any instruments they receive as part of the demutualisation.
This section will be amended to allow that instruments issued by acquiring companies incorporated
in the UK are covered by the exemption.
Head 32 – Merger of companies
To amend the Stamp Duties Consolidation Act (1999) Section 87B so that UK based companies
acquiring Irish property (in its various forms) as part of a merger between that company and an Irish based one can avail of this relief.
Explanatory Note:
This section allows an exemption from stamp duty arising on instruments made for the purposes of
the transfer of assets pursuant to a merger of an EEA company and an Irish company. The EEA
encompasses the EU member states and certain other states.
Post Brexit, if the UK were no longer an EU/EEA member, UK companies acquiring Irish property (in its various forms) on merging with an Irish company, will no longer be able to avail of this
exemption. This will in turn make such mergers more expensive and so less attractive.
An amendment to this section will be made to allow UK based companies to continue to be able to
avail of this exemption.
Head 33 – Certain premiums of life assurance
To amend the Stamp Duties Consolidation Act (1999) Section 124B so that UK based assurers will be liable to the 1% levy on life assurance premiums on their Irish business.
Explanatory Note:
Section 124B of the SDCA provides for a levy/stamp duty of 1% on life assurance premiums. The levy applies to assurers which are:
· licensed in Ireland,
· holders of an authorisation within the meaning of the European Communities (Life Assurance) Framework Regulations 1994 (S.I. No. 360 of 1994), or
· holders of an official authorisation to undertake insurance in Iceland, Liechtenstein or Norway, pursuant to an agreement with the EEA.
Post Brexit, following a no deal Brexit, UK insurers with Irish business will fall outside these three
categories, and therefore it will not be possible to collect the levy.
This section will be amended to include UK based insurers amongst those required to collect the levy and transfer it to Revenue/the Exchequer.
Head 34 – Certain premiums of insurance
To amend the Stamp Duties Consolidation Act (1999) Section 125 so that UK based insurers will be
liable to the 3% levy on certain non-life assurance premiums on their Irish business as described in
the section.
Explanatory Note:
Section 125 of the SDCA imposes a stamp duty/levy of 3% on the gross amount received by an
insurer in respect of certain non-life insurance premiums. The exceptions are re-insurance, voluntaryhealth insurance, marine, aviation and transit insurance, export credit insurance and certain dental insurance contracts.
The definition of “insurer” set out in the section covers those licenced to provide insurance under
Irish law or under EU regulations (S.I. 359 of 1994 – European Communities (Non-Life Insurance)
Framework Regulations, 1994). Thus, UK-based insurers are currently within the charge to duty to
the extent that they receive premiums in respect of risks located in the State.
Post Brexit, following a no deal Brexit however, and in the absence of amending legislation, such UKbased insurers may fall outside the charge to this stamp duty. This section should be amended to include UK based insurers amongst those required to collect the levy and transfer it to Revenue/the Exchequer.
Head 35 – Levy on authorised insurers (Health Insurance Levy)
To amend the Stamp Duties Consolidation Act (1999) Section 125A to ensure that UK based
providers of health insurance will be liable for the health insurance levy on premiums on their Irish business.
Explanatory Note:
This section provides for the collection of a levy on health insurance companies based on the
number of persons covered by policies underwritten by them. The levy is a given amount (rather
than a percentage of the value of the policy or premium) which depends on the cover and age of the person covered.
Insurers subject to the levy are those listed in The Register of Health Benefits Undertakings or
(where a contract was effected when the insured was resident outside the State but in the EU) those covered by the relevant EU Directive.
Post Brexit, following a no deal Brexit, and in the absence of appropriate legislative amendment, UK insurers may fall outside the charge to stamp duty. This section will be amended to include UK based insurers amongst those required to collect the levy
and transfer it to Revenue/the Exchequer.
Head 36 – Commencement
Provide for the commencement of the Part on the lines of the following –
This Part shall come into operation on such day or days as the Minister for Finance may by order or orders appoint either generally or with reference to any particular purpose or provision and
different days may be so appointed for different purposes or provisions.
