Taxes Consolidation Act, 1997 (Number 39 of 1997)
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80A Taxation of certain short-term leases plant and machinery.
(1) In this section—
“asset” means machinery or plant;
“fair value”, in relation to a leased asset, means an amount equal to such consideration as might be expected to be paid for the asset at the inception of the lease on a sale negotiated on an arm’s length basis, less any grants receivable by the lessor towards the purchase of the asset;
[2]>
“group limit” means an amount determined by the formula—
A + (B × (C − D)/C)
where—
A is the threshold amount,
B is an aggregate amount computed in accordance with generally accepted accounting practice charged to the profit and loss account for all companies who are members of the group for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets,
C is the cost of specified assets owned by all companies who are members of the group at the end of the specified period, and
D is the lesser of the cost of specified assets owned by all companies who are members of the group at the end of the threshold period or C;
<[2]
“inception of the lease” means the date on which the leased asset is brought into use by the lessee or the date from which lease payments under the lease first accrue, whichever is the earlier;
“lease payments” means the lease payments over the term of the lease to be paid to the lessor in relation to the leased asset, and includes any residual amount to be paid to the lessor at or after the end of the term of the lease and guaranteed by the lessee or by a person connected with the lessee or under the terms of any scheme or arrangement between the lessee and any other person;
“lessee” and “lessor” have the same meanings, respectively, as in section 403;
“normal accounting practice” means normal accounting practice in relation to the accounts of companies incorporated in the State;
“predictable useful life”, in relation to an asset, means the useful life of the asset estimated at the inception of the lease, having regard to the purpose for which the asset was acquired and on the assumption that—
(a) its life will end when it ceases to be useful for the purpose for which it was acquired, and
(b) it will be used in the normal manner and to the normal extent throughout its life;
[3]>
“profit and loss account”, in relation to an accounting period of a company, has the meaning assigned to it by generally accepted accounting practice and includes an income and expenditure account where a company prepares accounts in accordance with international accounting standards;
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“relevant period” means the period—
(a) beginning at the inception of the lease, and
(b) ending at the earliest time at which the aggregate of amounts of the discounted present value at the inception of the lease of lease payments under the terms of the lease which are payable at or before that time amounts to 90 per cent or more of the fair value of the leased asset, and, for the purposes of this definition, relevant lease payments shall be discounted at a rate which, when applied at the inception of the lease to the amount of the relevant lease payments, produces discounted present values the aggregate of which equals the amount of the fair value of the leased asset at the inception of the lease;
“relevant short-term asset” in relation to a company means an asset—
(a) the predictable useful life of which does not exceed 8 years, and
(b) the expenditure on which is incurred by the company on or after the date referred to in subsection (3);
“relevant short-term lease” means a lease—
(a) of a relevant short-term asset, and
(b) the relevant period in relation to which does not exceed [4]>8 years.<[4][4]>8 years;<[4]
[5]>
“specified assets” means [8]>relevant short-term assets<[8][8]>assets the predictable useful life of which does not exceed 8 years and which are<[8] owned by a company which—
(a) in respect of those assets, is entitled to any allowance under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9, and
(b) leases those assets, other than by means of a relevant short-term lease, for a period which does not exceed 8 years;
“specified period” means—
(a) in the case of companies which are members of a group the respective ends of the accounting periods of which coincide, the period of 12 months throughout which one or more members of the group carries on a trade of leasing specified assets and ending at the end of the first accounting period which commences on or after 1 January 2010, and
(b) in the case of companies which are members of a group the respective ends of the accounting periods of which do not coincide, the period specified in a notice in writing made jointly by companies which are members of the group and given to the inspector on or before the specified return date for the chargeable period (within the meaning of [9]>section 950<[9][9]>section 959A<[9]) which is the same as the period so specified, being a period of 12 months throughout which one or more members of the group carries on a trade of leasing specified assets and ending at the end of the first accounting period of a company which is a member of the group which accounting period commences on or after 1 January 2010,
and each subsequent period of 12 months commencing immediately after the end of the relevant preceding specified period;
“threshold amount” in relation to a group of companies means the aggregate of allowances granted to all companies which are members of that group in respect of expenditure incurred on specified assets under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9 for the threshold period;
“threshold period” in relation to a group of companies means an accounting period of one year ending on a date immediately preceding the date on which the first specified period commencing on or after 1 January 2010 begins.
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(2) Where a company makes a claim [6]>under this section—<[6][6]>under this subsection—<[6]
(a) the amount to be included in the trading income of the company in respect of all relevant short-term leases is the amount of income from such leases computed in accordance with normal accounting practice,
(b) the company will not be entitled to any allowance in respect of expenditure incurred on assets which are the subject of relevant short-term leases under Part 9, section 670, Part 29 or any other provision of the Tax Acts relating to the making of allowances in accordance with Part 9, and
(c) the income from relevant short-term leases will be treated for the purposes of section 403 as if it were not income from a trade of leasing.
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(2A) Where a company makes a claim under this subsection in respect of specified assets—
(a) subject to paragraph (c), subsection (2) of section 284 shall be construed as if a reference in that section to an amount of wear and tear allowance to be made was a reference to an amount, computed in accordance with generally accepted accounting practice, charged to the profit and loss account of the company for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets,
(b) the income from specified assets will be treated for the purposes of section 403 as if it were not income from a trade of leasing,
(c) [11]>for specified periods ending on or before 31 December 2014, <[11]the amount of the wear and tear allowance to be made to the company in accordance with paragraph (a) for any accounting period shall not exceed an amount to be determined by the formula—
E × F/G
where—
E is the group limit,
F is the cost of specified assets owned by the company at the end of the accounting period, and
G is the cost of specified assets owned by all companies who are members of the group, at the end of the accounting period,
(d) where the amount of wear and tear allowance, computed in accordance with generally accepted accounting practice, charged to the profit and loss account of the company for the period of account which is the same as the specified period in respect of the amortisation or impairment of the cost of specified assets, exceeds the amount of wear and tear to be made in accordance with paragraph (c), the amount of the excess shall be added to the amount of wear and tear due, in accordance with paragraph (a), for the following specified period, and deemed to be part of the amount so computed,
(e) the amount of the wear and tear allowance to be made to the company in accordance with paragraph (a), attributable to each specified asset for any accounting period shall be such portion of the amount of the allowance to be made in accordance with paragraph (a) as bears to that amount the same proportion as the cost of the asset bears to the cost of all specified assets which belong to the company and are in use for the purposes of the trade at the end of that accounting period,
(f) where in respect of a company, which is a member of a group of companies no accounting period coincides with the threshold period, there shall be made in relation to allowances granted to that company, in the calculation of the threshold amount, such apportionment as is just and [12]>reasonable, and<[12][12]>reasonable,<[12]
(g) where, in respect of a group of companies, no specified period commences before 1 January 2011, the threshold amount shall be [13]>nil.<[13][13]>nil, and<[13]
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(h) for any specified period ending on or after 1 January 2015, the amount of the wear and tear allowance to be made to the company in accordance with paragraph (a) shall not exceed the amount of amortisation or impairment charged to the profit and loss account in that specified period.
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(2B) For the purposes of a claim under subsection (2A)—
(a) 2 companies shall be deemed to be members of a group if one company is a 51 per cent subsidiary of the other company or both companies are 51 per cent subsidiaries of a third company: but in determining whether one company is a 51 per cent subsidiary of another company, the other company shall be treated as not being the owner of—
(i) any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade, or
(ii) any share capital which it owns indirectly and which is owned directly by a company for which a profit on a sale of the shares would be a trading receipt;
(b) sections 412 to 418 shall apply for the purposes of this subsection as they would apply for the purposes of Chapter 5 of Part 12 if—
(i) “51 per cent subsidiary” were substituted for “75 per cent subsidiary” in each place where it occurs in that Chapter, and
(ii) paragraph (c) of section 411(1) were deleted;
(c) a company and all its 51 per cent subsidiaries shall form a group and, where that company is a member of a group as being itself a 51 per cent subsidiary, that group shall comprise all its 51 per cent subsidiaries and the first-mentioned group shall be deemed not to be a group: but a company which is not a member of a group shall be treated as if it were a member of a group which consists of that company;
(d) in determining whether a company is a member of a group of companies (in this paragraph referred to as the “threshold group”) for the purposes of determining the threshold amount in relation to a specified period of a group of companies (in this paragraph referred to as the “relevant group”), the threshold group shall be treated as the same group as the relevant group notwithstanding that one or more of the companies in the threshold group is not in the relevant group, or vice versa, where any person or group of persons which controlled the threshold group is the same as, or has a reasonable commonality of identity with, the person or group of persons which controls the relevant group.
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(3) A claim by a company under this section shall be made by the time by which a return under [10]>section 951<[10][10]>Chapter 3 of Part 41A<[10] falls to be made for an accounting period of the company and shall apply as respects expenditure incurred on or after the date on which the accounting period begins.
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[1]
Inserted by FA04 s35(1). This section applies as respects accounting periods ending on or after 4 February, 2004.
[2]
Inserted by FA10 s52(1)(a). Applies as respects accounting periods commencing on or after 1 January 2010.
[3]
Inserted by FA10 s52(1)(b). Applies as respects accounting periods commencing on or after 1 January 2010.
[4]
Substituted by FA10 s52(1)(c). Applies as respects accounting periods commencing on or after 1 January 2010.
[5]
Inserted by FA10 s52(1)(d). Applies as respects accounting periods commencing on or after 1 January 2010.
[6]
Substituted by FA10 s52(1)(e). Applies as respects accounting periods commencing on or after 1 January 2010.
[7]
Inserted by FA10 s52(1)(f). Applies as respects accounting periods commencing on or after 1 January 2010.
[8]
Substituted by FA12 s40(1). Applies as respects accounting periods commencing on or after 1 January 2012.