81A Restriction of deductions for employee benefit contributions.

(1) (a) In this section—

“accident benefit scheme” means an employee benefit scheme under which benefits may be provided only by reason of a person’s disablement, or death, caused by an accident occuring during the person’s service as an employee of the employer;

“chargeable period” has the same meaning as in section 321;

“employee benefit scheme” means a trust, scheme or other arrangement for the benefit of persons who are employees of an employer;

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“qualifying expenses”, in relation to a third party and an employee benefit scheme, does not include expenses that, if incurred by the employer, would not be allowed as a deduction in calculating the profits or gains of the employer to be charged to tax under Case I or II of Schedule D but, subject to the foregoing, includes any expenses of the third party (apart from the provision of benefits to employees of the employer) incurred in the operation of the employee benefit scheme.

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“qualifying expenses”, in relation to a scheme manager and an employee benefit scheme, does not include expenses that, if incurred by the employer, would not be allowed as a deduction in calculating the profits or gains of the employer to be charged to tax under Case I or II of Schedule D but, subject to the foregoing, includes any expenses of a scheme manager (apart from the provision of benefits to employees of the employer) incurred in the operation of the employee benefit scheme;

“scheme manager” means a person who administers an employee benefit scheme or any person to whom an employer pays money or transfers an asset and such person is entitled or required, under the provisions of an employee benefit scheme to retain or use the money or asset for or in connection with the provision of benefits to employees of the employer.

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(b) For the purposes of this section—

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(i) an employer makes an employee benefit contribution if—

(I) the employer pays money or transfers an asset to another person (referred to in this section as the “third party”), and

(II) the third party is entitled or required, under the provisions of an employee benefit scheme, to retain or use the money or asset for or in connection with the provision of benefits to employees of the employer,

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(i) an employee benefit contribution is made if, as a result of any act or omission—

(I) any assets are held, or may be used, under an employee benefit scheme, or

(II) there is an increase in the total value of assets that are so held or may be so used (or a reduction in any liabilities under an employee benefit scheme),

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(ii) qualifying benefits are provided where there is a payment of money or a transfer of assets, otherwise than by way of a loan, and the recipient or a person other than the recipient is or would, if resident, ordinarily resident and domiciled in the State, be chargeable to income tax in respect of the provision of such benefits, and

(iii) a reference to a person’s employee includes a reference to the holder of an office under that person.

(2) (a) This section applies where—

(i) a calculation is made of the amount of a person’s profits or gains to be charged to tax under Case I or II of Schedule D for a chargeable period beginning on or after 3 February 2005, and

(ii) a deduction would, but for this section, be allowed by the Tax Acts for that period in respect of employee benefit contributions made, or to be made, by that person (referred to in this section as the “employer”).

(b) Notwithstanding paragraph (a), this section does not apply in respect of a deduction referred to in subsection (7).

(3) (a) A deduction in respect of employee benefit contributions referred to in subsection (2)(a) shall be allowed only to the extent that, during the chargeable period in question or within 9 months from the end of it—

(i) qualifying benefits are provided out of the contributions, or

(ii) qualifying expenses are paid out of the contributions.

(b) (i) For the purposes of paragraph (a), any qualifying benefits provided or qualifying expenses paid by ^[4]>the third party^<[4][4]>a scheme manager^<[4] after the receipt by ^[4]>the third party^<[4][4]>the scheme manager^<[4] of employee benefit contributions shall be regarded as being provided or paid out of those contributions, up to the total amount of the contributions as reduced by the amount of any benefits or expenses previously provided or paid as referred to in paragraph (a).

(ii) In the application of this paragraph, no account shall be taken of any other amount received or paid by ^[5]>the third party^<[5][5]>the scheme manager^<[5].

(4) (a) An amount which is disallowed under subsection (3) shall be allowed as a deduction for a subsequent chargeable period to the extent that qualifying benefits are provided out of the employee benefit contributions in question before the end of that subsequent chargeable period.

(b) (i) For the purposes of paragraph (a), any qualifying benefits provided by ^[6]>the third party^<[6][6]>a scheme manager^<[6] after the receipt by ^[6]>the third party^<[6][6]>the scheme manager^<[6] of employee benefit contributions shall be regarded as being provided out of those contributions, up to the total amount of the contributions as reduced by the amount of any benefits or expenses previously provided or paid as referred to in subsection (3)(a) or paragraph (a) of this subsection.

(ii) In the application of this paragraph, no account shall be taken of any other amount received or paid by ^[7]>the third party^<[7][7]>the scheme manager^<[7].

(5) (a) This subsection applies where the provision of a qualifying benefit takes the form of the transfer of an asset.

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(b) The amount provided shall be taken for the purposes of this section to be the total of—

(i) (I) the amount, if any, expended on the asset by the third party, or

(II) where the asset consists of new shares in the third party, or rights in respect of such shares, issued by the third party, the market value of those shares or rights, as the case may be, at the time of the transfer,

and

(ii) in a case in which the asset was transferred to the third party by the employer, the amount of the deduction that would be allowed as referred to in subsection (2) in respect of the transfer.

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(b) The amount provided shall be taken for the purposes of this section to be the total of—

(i) (I) the amount, if any, expended on the asset by a scheme manager, or

(II) where the asset consists of new shares in a company connected (within the meaning of section 10) with the employer, or rights in respect of such shares, issued by the connected company, the market value of those shares or rights, as the case may be, at the time of the transfer,

and

(ii) in a case in which the asset was transferred to a scheme manager by the employer, the amount of the deduction that would be allowed as referred to in subsection (2) in respect of the transfer.

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(c) Where the amount calculated in accordance with paragraph (b) is greater than the amount (referred to in this paragraph as the “second-mentioned amount”) in respect of which an employee is chargeable to income tax in respect of the transfer, the deduction to be allowed in accordance with subsection (3) or (4) shall not exceed the second-mentioned amount.

(6) In any case where the calculation referred to in subsection (2)(a) is made before the end of the 9 month period mentioned in subsection (3)—

(a) for the purposes of making the calculation, subsection (3) shall be construed as if the reference to that 9 month period were a reference to the period ending at the time when the calculation is made, and

(b) after the end of the 9 month period the calculation shall if necessary be adjusted to take account of any benefits provided, expenses paid or contributions made within that period but after the time of the calculation.

(7) This section does not apply in relation to any deduction that is allowable—

(a) in respect of anything given as consideration for goods or services provided in the course of a trade or profession,

(b) in respect of contributions under an accident benefit scheme,

(c) under Part 17, or

(d) under Part 30.