411 Surrender of relief between members of groups and consortia.

[CTA76 s107]

(1) (a) For the purposes of this section and the following sections of this Chapter—

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“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by the Protocol signed at Brussels on 17 March 1993;

“EEA State” means a state which is a contracting party to the EEA Agreement;

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“holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent subsidiaries and are trading companies;

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“relevant Member State” means—

(i) a Member State of the European Communities, or

(ii) not being such a Member State, an EEA State which is a territory with the government of which arrangements having the force of law by virtue of ^[9]>section 826^{<[9][12]>[9]>}section 826(1)(a)^{<[9]<[12][12]>}section 826(1)^<[12] have been ^[13]>made.^<[13][13]>made;^<[13]

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“relevant territory” means—

(i) a relevant Member State,

(ii) not being such a Member State, a territory with the government of which arrangements having the force of law by virtue of section 826(1) have been made, or

(iii) not being a territory referred to in subparagraph (i) or (ii), a territory with the government of which arrangements have been made which on completion of the procedures set out in section 826(1) will have the force of law;

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“tax”, in relation to a ^[8]>Member State of the European Communities^<[8][8]>relevant Member State^<[8] other than the State, means any tax imposed in the Member State which corresponds to corporation tax in the State;

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“trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades;

^[4]>a company shall be owned by a consortium if all of the ordinary share capital^<[4][4]>a company shall be owned by a consortium if 75 per cent or more of the ordinary share capital^<[4] of the company is directly and beneficially owned between them by 5 or fewer companies, and those companies shall be called the members of the consortium;

2 companies shall be deemed to be members of a group of companies if one company is the 75 per cent subsidiary of the other company or both companies are 75 per cent subsidiaries of a third company.

(b) In applying for the purposes of this section and the following sections of this Chapter the definition of “75 per cent subsidiary” in section 9, any share capital of a registered industrial and provident society shall be treated as ordinary share capital.

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(c) References in this section and in the following sections of this Chapter to a company shall apply only to ^[2]>companies resident in the State^<[2][2]>a company which, by virtue of the law of a ^[5]>Member State of the European Communities^<[5][5]>relevant Member State^<[5], is resident for the purposes of tax in such a Member State^<[2], and in determining for the purposes of this section and the following sections of this Chapter whether one company is a 75 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,

(ii) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

(iii) any share capital which it owns directly or indirectly in a ^[3]>company not resident in the State^<[3][3]>company, not being a company which, by virtue of the law of a Member State of the European Communities, is resident for the purposes of tax in such a Member State^<[3].

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(c) In determining for the purposes of this section and the following sections of this Chapter whether one company is a 75 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,

(ii) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

(iii) any share capital which it owns directly in a company, not being a company—

(I) which by virtue of the law of a relevant territory, is resident for the purposes of tax in such a relevant territory, or

(II) the principal class of shares of which or, where the company is a 75 per cent subsidiary of another company, the principal class of shares of that other company, is substantially and regularly traded on a stock exchange in the State, on one or more than one recognised stock exchange in a relevant territory or territories or on such other stock exchange as may be approved of by the Minister for Finance for the purposes of Chapter 8A of Part 6.

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(c) In determining for the purposes of this section and the following provisions of this Chapter whether one company (in this paragraph referred to as the “firstmentioned company”) is a 75 per cent subsidiary of another company—

(i) 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,

(II) any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or

(III) any share capital which it owns directly or indirectly in a company that is not a company which, by virtue of the law of a relevant territory, is resident for the purposes of tax in such a relevant territory,

and

(ii) the first-mentioned company shall not be treated as a 75 per cent subsidiary of the other company unless—

(I) that other company, by virtue of the law of a relevant territory, is resident for the purposes of tax in such a relevant territory, or

(II) the principal class of shares of that other company ^[17]>or, where the company is a 75 per cent subsidiary of another company, the principal class of shares of that other company,^<[17]is substantially and regularly traded on a stock exchange in the State, on one or more than one recognised stock exchange in a relevant territory or territories or on such other stock exchange as may be approved of by the Minister for Finance for the purposes of Chapter 8A of Part 6.

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(d) References in this Chapter to a company which is a surrendering company or a claimant company shall apply only to a company which, by virtue of the law of a relevant Member State, is resident for the purposes of tax in such a Member State.

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(2) Relief for trading losses and other amounts eligible for relief from corporation tax may in accordance with this Chapter be surrendered by a company (called the “surrendering company”) which is a member of a group of companies and, on the making of a claim by another company (called the “claimant company”) which is a member of the same group, may be allowed to the claimant company by means of a relief from corporation tax called “group relief”.

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(2) Subject to subsection (2A), relief for—

(a) trading losses and other amounts eligible for relief from corporation tax, and

(b) trading losses incurred by non-resident companies and other amounts not otherwise eligible for relief from corporation tax,

may in accordance with this Chapter be surrendered by a company (in this Chapter referred to as the “surrendering company”) which is a member of a group of companies and, on the making of a claim by another company (in this Chapter referred to as the “claimant company”) which is a member of the same group, may be allowed to the claimant company by means of a relief from corporation tax (in this Chapter referred to as “group relief”).

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(2A) Where the trading losses or other amounts are of the type referred to in paragraph (b) of subsection (2), group relief shall only be available in accordance with this Chapter where—

(a) the surrendering company is—

(i) resident in a relevant Member State, other than the State, and

(ii) a 75 per cent subsidiary of the claimant company,

and

(b) the claimant company is resident in the State.

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(3) Group relief shall also be available in accordance with the following provisions of this Chapter—

(a) where the surrendering company is a trading company owned by a consortium and is not a 75 per cent subsidiary of any company, and the claimant company is a member of the consortium,

(b) where the surrendering company is a trading company which —

(i) is a 90 per cent subsidiary of a holding company owned by a consortium, and

(ii) is not a 75 per cent subsidiary of a company other than the holding company,

and the claimant company is a member of the consortium, or

(c) where the surrendering company is a holding company owned by a consortium and is not a 75 per cent subsidiary of any company, and the claimant company is a member of the consortium;

but no claim may be made by a member of a consortium if a profit on a sale of the share capital of the surrendering company or holding company which that member owns would be treated as a trading receipt of that member nor if the member’s share in the consortium in the relevant accounting period of the surrendering company or holding company is nil.

(4) Subject to the following provisions of this Chapter, 2 or more claimant companies may make claims relating to the same surrendering company and to the same accounting period of that surrendering company.

(5) A payment for group relief shall not—

(a) be taken into account in computing profits or losses of either company for corporation tax purposes, and

(b) be regarded as a distribution or a charge on income for any of the purposes of the Corporation Tax Acts,

and, in this subsection, “payment for group relief” means a payment made by the claimant company to the surrendering company in pursuance of an agreement between them as respects an amount surrendered by means of group relief, being a payment not exceeding that amount.