Revenue Note for Guidance

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Revenue Note for Guidance

PART 20

COMPANIES’ CHARGEABLE GAINS

CHAPTER 1

General

Overview

This Chapter contains the general rules relating to companies’s chargeable gains. It is mainly concerned with the treatment of chargeable gains in special situations involving groups of companies (section 615 to 626). The Chapter also sets out the rules for the recovery of unpaid tax from a shareholder where a company fails to pay the tax due in certain circumstances (section 614).

614 Capital distribution derived from chargeable gain of company: recovery of tax from shareholder

Summary

This section provides for the recovery of corporation tax from a person connected with a resident company where corporation tax due from the company is not paid within 6 months of the date it becomes payable. The section applies where the company makes a capital distribution (other than one representing a reduction in share capital) derived from, or consisting of, assets on which a chargeable gain accrues to the company. It also provides for the further recovery of this payment from the company by the connected person.

Section 977 provides for a similar provision to this in the case of a company chargeable to capital gains tax in respect of a chargeable gain.

Details

Definition

(1) “capital distribution” has the meaning set out in section 583.

Application

(2) This section applies where a person connected with an Irish resident company receives or is entitled to receive a capital distribution deriving from, or consisting of, a disposal on which a chargeable gain arises to a company. The section does not apply where the capital distribution represents a reduction in share capital.

Recovery of tax

Where the corporation tax due by the company on a chargeable gain is not paid within 6 months of it becoming due, the connected person may be assessed, in the name of the company, within 2 years of that date to an amount of corporation tax not exceeding —

  • the capital distribution which that person has received or became entitled to receive, and
  • that person’s proportionate share of the tax on the gain, at the rate in force when the gain accrued.

Shareholder’s subsequent recovery of tax and own liability to tax

(4) The connected person assessed to tax under this section may recover the tax paid from the company.

(5) This section does not affect the connected person’s own liability to tax in respect of the capital distribution (section 583), in so far as it represents a disposal of shares.

Relevant Date: Finance Act 2019