Finance Bill 2006 introduced a range of measures which will have direct, and perhaps negative impact on our members both in industry and in practice. Members will be aware of our pre-Budget representations. We were in correspondence with the Minister in advance of the publication of the Finance Bill – our submission covering matters including the abolition of the remittance basis of taxation, pensions matters and work in progress is reproduced below at 2.01. The Bill has also given rise to practical issues, for example in terms of how the abolition of the remittance basis, and new PAYE and RCT rules are to operate. Our correspondence with Revenue on these matters is reproduced at 2.02.

The Finance Bill reached Committee Stage in the Dail on 21 February and a number of amendments were made. Many of these are technical or drafting in nature. The more substantial amendments include:

• A tightening of the rules under TCA97 s817 (concerning schemes to convert income to capital). Readers may remember that this section received attention in last year's Finance Act as well. A new subsection (2) is being inserted as follows:
• “(2) This section shall apply for the purposes of counteracting any scheme or arrangement undertaken or arranged by a close company, or to which the close company is a party, being a scheme or arrangement the purpose of which, or one of the purposes of which, is to secure that any shareholder in the close company avoids or reduces a charge or assessment to income tax under Schedule F by directly or indirectly extracting, or enabling such extracting of, either or both money and money's worth from the close company, for the benefit of the shareholder, without the close company paying a dividend, or (apart from subsection (4)) making a distribution, chargeable to tax under Schedule F.”
  which will have effect as respects any disposal of shares on or after 21 February 2006.
• Pensions – an amendment seems to suggest that a disbursement from the residue of excess value of a pension fund (i.e. over €5m) after payment of the new tax at 42% would again be taxable.
• CGT/CAT Offset – the two year restriction imposed by the Finance Bill as initiated is now to take effect from 21 February as a consequence of a Committee Stage amendment.

There were also some changes regarding tax relief on inter-group loans and leasing ring-fence provisions.

An eBrief, no. 9/2006 sets out Revenue responses to practical issues arising from the abolition of the remittance basis which had been highlighted in several quarters, not least through TALC by ICAI and other representative bodies. This is set out at 2.03 below. While the Revenue responses are quite comprehensive, it is understood that there are further points which will be clarified as appropriate.