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(1) (a) (i) In this section—

“specified loan”, in relation to a company, means—

(I) any loan or advance made to the company before 6 February 2003 (other than a loan referred to in paragraph (II)), or

(II) any loan or advance in respect of which any interest paid is, or if charged would be, deductible if the company were within the charge to Irish tax—

(A) in computing the company’s profits or gains for the purposes of Case I of Schedule D, or

(B) in computing the company’s profits or gains for the purposes of Case V of Schedule D;

“relevant period”, in relation to a loan to which section 247 applies, means the period beginning 2 years before the date of application of the proceeds of the loan and ending on the date of application of the proceeds of the loan.

(ii) Where at any time in the relevant period in relation to a loan to which section 247 applies the investing company recovered any amount of capital from the company concerned, other than a repayment in respect of a specified loan, the investing company shall immediately after the application of the loan to which section 247 applies be treated for the purposes of this section as if the investing company had repaid out of the loan an amount equal to the amount of capital recovered and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered, but this subparagraph shall not apply to so much of the capital so recovered as was applied by the investing company—

(I) before the application of the loan to which section 247 applies, in repayment of any other loan to which section 247 applies, or

(II) in accordance with paragraph (a) or (b) of section 247(2);

and, for the purposes of this section, the investing company shall not be treated as having repaid so much of an amount out of a loan as does not exceed the amount, if any, of capital so recovered which has been previously treated under this section as being in repayment of a loan.

(iii) Where at any time after the application of the proceeds of the loan to which section 247 applies the investing company—

(I) has recovered any amount of capital from the company concerned or from a connected company, or

(II) is deemed, under subsection (2)(aa)^[5]>or (2)(ac)^<[5], to have recovered any amount of capital from the company concerned,

without using the amount recovered or an amount equal to the amount deemed to have been recovered in repayment of the loan, the investing company shall be treated for the purposes of this section as if the investing company had at that time repaid out of the loan an amount equal to the amount of capital recovered or deemed to have been recovered and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered or so deemed to have been recovered.

(iv) Where, after the application of the proceeds of a loan to which section 248 applies, the individual has recovered any amount of capital from the company concerned or from a connected company without using that amount in repayment of the loan, the individual shall be treated for the purposes of this section as if the individual had repaid that amount out of the loan and so that out of the interest otherwise eligible for relief and payable for any period after that time there shall be deducted an amount equal to interest on the amount of capital so recovered.

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(2) (a) The investing company or the individual, as the case may be (in this paragraph referred to as the “borrower”) shall be treated as having recovered an amount of capital from the company concerned or from a connected company if—

(i) the borrower receives consideration of that amount or value for the sale of any part of the ordinary share capital of the company concerned or of a connected company or any consideration of that amount or value by means of repayment of any part of that ordinary share capital,

(ii) the company concerned or a connected company repays that amount of a loan or advance from the borrower,

(iii) the borrower receives consideration of that amount or value for assigning any debt due to the borrower from the company concerned or from a connected company.

(aa) (i) Where the company concerned is a company ^[6]>to which section 247(2)(a)(ii) applies^<[6][6]>referred to in section 247(2)(a)(iii), (iv) or (v)^<[6], the investing company shall be deemed to have recovered from the company concerned an amount equal to so much of any capital recovered by the company concerned from another company, being a company more than 50 per cent of the ordinary share capital of which was directly owned by the company concerned, as is not applied by the company concerned—

(I) in repayment of any loan or part of a loan made to it by the investing company,

(II) in redemption, repayment or purchase of any of its ordinary share capital acquired by the investing company,

(III) in accordance with paragraph (a) or (b) of section 247(2), or

(IV) in repayment of a loan to which section 247 applies.

(ii) The company concerned shall be treated as having recovered an amount of capital from another company if—

(I) the company concerned receives consideration of that amount or value for the sale of any part of the ordinary share capital of the other company or any consideration of that amount or value by means of repayment of any part of that ordinary share capital,

(II) the other company repays that amount of a loan or advance from the company concerned, other than a repayment in respect of a specified loan,

(III) the company concerned receives consideration of that amount or value for assigning any debt due to the company concerned from the other company.

(iii) Where subparagraph (i) applies and more than one investing company has either—

(I) made a loan to the company concerned, or

(II) acquired any part of its share capital,

the amount deemed to have been recovered under that subparagraph shall be apportioned between the investing companies in proportion to the aggregate amount of any loan made and any money applied in acquiring that share capital by each company, but if the companies concerned agree between them to such other apportionment of the amount as they may consider appropriate and jointly specify in writing to the inspector, then the amount deemed to have been so recovered shall be apportioned accordingly.

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(ab) (i) Where—

(I) a company (in this paragraph referred to as the “first-mentioned company”) issues shares to the company concerned in exchange for shares (in this paragraph referred to as the “original shares”) in another company,

(II) section 584 is applied or, but for section 626B, would be applied to the exchange by section 586, and

(III) the investing company, in the absence of an election under this subsection, would be deemed by paragraph (aa) to have, by virtue of the exchange, recovered an amount of capital from the company concerned,

then the investing company may elect that paragraph (aa) shall not so apply.

(ii) Where the investing company makes an election in accordance with subparagraph (i), then the first-mentioned company shall be treated for the purposes of paragraph (aa) as if it were the company concerned if the effect of so treating it is that the investing company is deemed by paragraph (aa)(i) to have recovered an amount of capital equal to the amount of capital treated by paragraph (aa)(ii)(I) as recovered in respect of the original shares by that company.

(iii) An election under this paragraph shall be included by the investing company with the return required under ^[4]>section 951^<[4][4]>Chapter 3 of Part 41A^<[4] for the accounting period in which the original shares are exchanged.

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(ac) (i) Where the company concerned is a company referred to in section 247(2)(a)(iv), the investing company shall be deemed, subject to subparagraph (iii), to have recovered from the company concerned an amount equal to so much of any capital recovered by an intermediate holding company from another company where—

(I) the company concerned owns directly or indirectly more than 50 per cent of the ordinary share capital of the intermediate holding company or both companies are under the control of the same person or persons, and

(II) the intermediate holding company owns directly more than 50 per cent of the ordinary share capital of the other company or both companies are under the control of the same person or persons.

(ii) Subparagraph (aa)(ii) shall apply with any necessary modifications for the purposes of determining whether an intermediate holding company has recovered capital from another company, as if in that provision ‘intermediate holding company’ were substituted for the ‘company concerned’.

(iii) An investing company shall not be deemed by subparagraph (i) to have recovered capital where—

(I) and to the extent that, any capital recovered by the intermediate holding company from another company is applied by the intermediate holding company in repaying any loan or advance made to it by the company concerned,

(II) the amount of capital recovered by the intermediate holding company is applied in accordance with paragraph (a) or (b) of section 247(2),

(III) the amount of capital recovered by the intermediate holding company is applied in the repayment of a loan to which section 247 applies, or

(IV) an intermediate holding company (that is not a company to which subparagraph (i) or (ii) of section 247(2)(bb) applies) transfers all of its assets and liabilities to another intermediate holding company and—

(A) the transfer is made in the course of the intermediate holding company being dissolved with or without going into liquidation,

(B) the company concerned, being a company referred to in section 247(2)(a)(iv), continues to hold the same beneficial percentage of stocks, shares or securities of a company referred to in section 247(2)(a)(i) indirectly through one or more intermediate holding companies, and

(C) the transfer is for bona fide commercial reasons and is not part of any scheme or arrangement the purpose of which, or one of the purposes of which, is the avoidance of tax.

(iv) Paragraph (ab) shall apply with any necessary modifications to this paragraph as if references in that paragraph to the ‘company concerned’ were to ‘intermediate holding company’ and references to paragraph (aa) were to paragraph (ac).

(v) (I) This clause and clauses (II) and (III) shall apply where an investing company is deemed to have recovered an amount of capital under this paragraph or under paragraph (aa) and included within that capital is an amount or value which was, within a reasonable period of time previously and by reference to related transactions or events, an amount of capital deemed to have been recovered by the investing company under this paragraph (in clause (II) referred to as ‘capital previously recovered’).

(II) An investing company may, upon giving notice in writing to the Revenue Commissioners, exclude capital previously recovered from an amount of capital it is deemed to have recovered under this paragraph or paragraph (aa).

(III) An investing company is required to maintain and have available such records as may reasonably be required for the purposes of determining whether it meets the requirements of clause (I).

(vi) Subparagraph (aa)(iii) shall apply with any necessary modifications for the purposes of subparagraph (i) as it applies in relation to subparagraph (aa)(i) as if the reference in that subparagraph to subparagraph (i) were a reference to subparagraph (i) of this paragraph.

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