Taxes Consolidation Act, 1997 (Number 39 of 1997)
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494 Specified individuals.
[FA84 s14A; FA95 s17(1)(d); FA97 s9(b)]
(1) An individual shall be a specified individual if he or she qualifies for relief in respect of a relevant investment and complies with this section.
(2) (a) Subject to paragraph (b), the individual, in each of the 3 years of assessment preceding the year of assessment which precedes the year of assessment in which that individual makes a relevant investment (being that individual’s first such investment), shall not have been in receipt of income chargeable to tax otherwise than under—
(i) Schedule E, or
(ii) Case III of Schedule D in respect of profits or gains from an office or employment held or exercised outside the State,
in excess of the lesser of—
(I) the aggregate of the amounts, if any, of that individual’s income chargeable to tax under Schedule E and under Case III of Schedule D in respect of the profits or gains referred to in subparagraph (ii), and
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(II) [1]>£15,000<[1][1]>€19,050<[1] [4]>or, in the case of the year of assessment 2001, £11,100<[4].
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(II) €25,000 or, in the case of the year of assessment 2001, €18,500.
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(b) Paragraph (a) shall not apply to an individual who makes a subscription for eligible shares in a qualifying company which carries on or intends to carry on qualifying trading operations referred to in [5]>section 496(2)(a)(iv)<[5][5]>sections 496(2)(a)(iv) and 496(2)(a)(xv)<[5].
(3) The individual shall throughout the relevant period possess at least 15 per cent of—
(a) as respects a subscription for eligible shares made before the 2nd day of June, 1995, the issued share capital, or
(b) as respects a subscription for eligible shares made on or after that date, the issued ordinary share capital,
of the company in which that individual makes a relevant investment.
(4) (a) For the purposes of paragraph (b) and subsections (5) and (6), “specified date”, in relation to a relevant investment in a company, means—
(i) where the investment consists of the subscription of only one amount for eligible shares, the date of that subscription, or
(ii) where that investment consists of the subscription of more than one amount for eligible shares, the date of the last such subscription.
(b) Subject to subsections (5) and (6), the individual at the specified date, in relation to that individual’s first relevant investment in a company, or within the period of 12 months immediately preceding that date, either directly or indirectly, shall not possess or have possessed, or shall not be or have been entitled to acquire, more than 15 per cent of—
(i) the issued ordinary share capital,
(ii) the loan capital (within the meaning of section 493(5)) and the issued share capital, or
(iii) the voting power,
of any company other than—
(I) the company in which that individual makes that relevant investment, or
(II) a company to which subsection (5) applies.
(5) This subsection shall apply to a company which during a period of 5 years ending on the specified date in relation to an individual’s first relevant investment in a company—
(a) was not entitled to any assets, other than cash on hands or a sum of money on deposit (within the meaning of section 895) not exceeding [2]>£100<[2][2]>€130<[2],
(b) did not carry on a trade, profession, business or other activity including the making of investments, and
(c) did not pay charges on income within the meaning of section 243.
(6) (a) For the purposes of paragraph (b)—
(i) “accounting period” means an accounting period determined in accordance with section 27, and
(ii) a company shall be regarded as a company which carries on wholly or mainly trading operations referred to in paragraph (b)(i) only if in each of the 3 accounting periods referred to in paragraph (b)(ii) the total amount receivable from sales made or services rendered in the course of such trading operations is not less than 75 per cent of the total amount receivable by the company from all sales made and services rendered in the course of the trade.
(b) An individual shall not be regarded as failing to satisfy the requirements of subsection (4) merely by reason of the fact that the individual does not satisfy those requirements in relation to only one company (other than the company in which the individual makes his or her first relevant investment or a company to which subsection (5) applies)—
(i) which exists wholly or mainly for the purpose of carrying on trading operations other than trading operations consisting of dealing in shares, securities, land, currencies, futures or traded options, and
(ii) where the total amount receivable by that company from sales made and services rendered in the course of that company’s trading operations did not exceed [3]>£100,000<[3][3]>€127,000<[3] in each of that company’s 3 accounting periods immediately preceding the accounting period of that company in which the specified date occurs in relation to that individual’s first relevant investment.
(7) An individual shall not be regarded as ceasing to comply with subsection (3) merely by reason of the fact that the company in which the individual makes a relevant investment is wound up, or dissolved without winding up, before the end of the relevant period but only if it is shown that the winding up or dissolution is for bona fide commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.
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494 Qualifying companies.
(1) In this section—
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“assisted area” means an area specified in the National Regional State Aid Map for Ireland approved under Commission Decision No. N 374/2006 of 24 October 20061;
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“EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement;
“EEA State” means a state which is a contracting party to the EEA Agreement;
“qualifying subsidiary”, in relation to a company, means a subsidiary of that company of a kind which a company may have by virtue of section 505.
(2) A company shall be a qualifying company if it is incorporated in the State or in an EEA State other than the State and complies with this section.
(3) (a) The company shall throughout the relevant period be an unquoted company which is resident in the State, or is resident in an EEA State other than the State and carries on business in the State through a branch or agency, and be—
(i) a company which exists wholly for the purpose of carrying on relevant trading activities [8]>where those activities are principally carried on in the State, or<[8][8]>and which carries on relevant trading activities from a fixed place of business in the State, or<[8]
(ii) a company whose business consists wholly of—
(I) the holding of shares or securities of, or the making of loans to, one or more qualifying subsidiaries of the company, or
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(II) both the holding of such shares or securities, or the making of such loans and the carrying on of relevant trading activities where those activities are principally carried on in the State.
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(II) both the holding of such shares or securities or the making of such loans and the carrying on of relevant trading activities where relevant trading activities are carried on from a fixed place of business in the State.
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(b) Where a company raises any amount through the issue of eligible shares for the purposes of raising money for relevant trading activities which are being carried on by a qualifying subsidiary or which such a qualifying subsidiary intends to carry on, the amount so raised shall be used for the purpose of acquiring eligible shares in the qualifying subsidiary and for no other purpose.
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(c) In this section, relevant trading activities shall be regarded as carried on principally in the State only if not less than 75 per cent of the total amount expended in the course of such activities in the relevant period is expended in the State.
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(4) The company shall be—
(a) a micro or small enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 20042,
(b) a medium-sized enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 2004 located in an assisted area, or
(c) where it is not located in an assisted area, a medium-sized enterprise within the meaning of Annex 1 to Commission Regulation (EC) No. 364/2004 of 25 February 2004 which is at a stage of development not beyond start-up stage within the meaning of the Community Guidelines on State Aid to Promote Risk Capital Investments in Small and Medium-Sized Enterprises3.
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(4) The company shall be a micro, small or medium-sized enterprise within the meaning of Annex 1 to Commission Regulation (EU) No. 651/2014 of 17 June 20141.
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(4A) A company that does not meet the requirements of paragraphs 5 and 6 of Article 21 of Commission Regulation (EU) No. 651/2014 of 17 June 20142 shall not be a qualifying company.
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(5) For the purposes of subsection (4), the location of a company shall be determined by reference to the location at which the company or, as the case may be, the qualifying subsidiary, carries on relevant trading activities or, in the case of a company which is resident in an EEA State other than the State that carries on business in the State through a branch or agency, the location at which that branch or agency carries on relevant trading activities.
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(5) A company whose relevant trading activities includes internationally traded financial services shall not be a qualifying company unless it is in receipt of a certificate from Enterprise Ireland to the effect that its activities are of a kind specified in the schedule to the Industrial Development (Service Industries) Order 2010 (S.I. No. 81 of 2010).
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(6) (a) A company whose relevant trading activities includes one or more tourist traffic undertakings shall not be a qualifying company unless and until it has shown to the satisfaction of the Revenue Commissioners that it has submitted to, and has had approved of by, the National Tourism Development Authority a 3 year development and marketing plan in respect of that undertaking or those undertakings, as the case may be, being a plan primarily designed and formulated to increase tourist traffic and revenue from outside the State.
(b) In considering whether to approve of such a plan, the National Tourism Development Authority shall have regard only to such guidelines in relation to such approval as may from time to time be agreed, with the consent of the Minister for Finance, between it and the Minister for Tourism, Culture and Sport, and those guidelines may, without prejudice to the generality of the foregoing, set out—
(i) the extent to which the company’s interests in land and buildings may form part of its total assets,
(ii) specific requirements which have to be met in order to comply with the objective mentioned in paragraph (a), and
(iii) the extent to which the money raised through the issue of eligible shares should be used in promoting outside the State the undertaking or undertakings, as the case may be.
(7) A company whose relevant trading activities includes green energy activities shall cease to be a qualifying company unless it has expended all of the money subscribed for eligible shares on such activities, within a period ending 1 month before the end of the relevant period.
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(7A) A company whose relevant trading activities includes operating a qualifying nursing home and is engaged in enlarging its capacity pursuant to section 489(1)(b)(iii) shall cease to be a qualifying company unless it has expended all of the money subscribed for eligible shares on such activities, within a period ending 30 days before the end of the relevant period.
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(8) A company referred to in section 489(1)(b)(ii) ceases to be a qualifying company unless it has—
(a) expended all of the money subscribed for eligible shares on research and development activities, within a period ending 1 month before the end of the relevant period and disposed of a specified intangible asset within the meaning of section 291A, which is connected with and arises directly from those research and development activities, to a person for the purposes of a trade carried on by that person, or
(b) commenced relevant trading activities within 2 years after the eligible shares were issued and expended all of the money subscribed for eligible shares on either of those activities or research and development activities before the end of the relevant period.
(9) Without prejudice to the generality of subsection (3) but subject to subsection (10), a company ceases to comply with subsection (3) if before the end of the relevant period a resolution is passed, or an order is made, for the winding up of the company (or, in the case of a winding up otherwise than under the [16]>Companies Act 1963<[16][16]>Companies Act 2014<[16], any other act is done for the like purpose) or the company is dissolved without winding up.
(10) A company shall not be regarded as ceasing to comply with subsection (3) by reason only of the fact that it is wound up or dissolved without winding up if—
(a) it is shown that the winding up or dissolution is for bona fide commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and
(b) the company’s net assets, if any, are distributed to its members before the end of the relevant period or, in the case of a winding up, the end (if later) of 3 years from the commencement of the winding up.
(11) The company’s share capital shall not at any time in the relevant period include any issued shares not fully paid up.
(12) Subject to section 505, the company shall not at any time in the relevant period—
(a) control (or together with any person connected with it control) another company or be under the control of another company (or of another company and any person connected with that other company), unless such control is exercised by the National Asset Management Agency, or by a company referred to in section 616(1)(g), or
(b) be a 51 per cent subsidiary of any company other than the National Asset Management Agency or a company referred to in section 616(1)(g), or itself have a 51 per cent subsidiary,
and no arrangements shall be in existence at any time in that period by virtue of which the company could fall within paragraph (a) or (b).
(13) A company shall not be a qualifying company if, in the case of a company in which a relevant investment is made by a specified individual (being that individual’s first such investment in that company), any transaction in the relevant period between the company and another company (being the immediate former employer of the individual), or a company which controls or is under the control of that other company, is otherwise than by means of a transaction at arm’s length, or if—
(a) (i) an individual has acquired a controlling interest in the company’s trade after 5 April 1984, and
(ii) at any time in the period mentioned in subsection (16) the individual has or has had a controlling interest in another trade,
and
(b) the trade carried on by the company or a substantial part of that trade—
(i) is concerned with the same or similar types of property or parts of property or provides the same or similar services or facilities as the other trade, or
(ii) serves substantially the same or similar outlets or markets as the other trade.
(14) For the purposes of this section, a person has a controlling interest in a trade—
(a) in the case of a trade carried on by a company, if—
(i) such person controls the company,
(ii) the company is a close company for the purposes of the Corporation Tax Acts and such person or an associate of such person is a director of the company and the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 30 per cent of the ordinary share capital of the company, or
(iii) not less than 50 per cent of the trade could, in accordance with section 400(2), be regarded as belonging to such person,
or
(b) in any other case, if such person is entitled to not less than 50 per cent of the assets used for, or the income arising from, the trade.
(15) For the purposes of subsection (14), there shall be attributed to any person any rights or powers of any other person who is an associate of that person.
(16) The period referred to in subsection (13)(a)(ii) is the period beginning 2 years before and ending 3 years after—
(a) the date on which the shares were issued, or
(b) if later, the date on which the company began to carry on the trade.
(17) In subsections (13) and (16), references to a company’s trade includes references to the trade of any of its subsidiaries.
(18) Notwithstanding subsections (1) to (17), a company shall not be a qualifying company while the company is regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for rescuing and restructuring firms in difficulty3.
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Footnotes
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1 OJ No. C292 of 1.12.2006, p. 11
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2 OJ No. L63 of 28.2.2004, p. 22
3 OJ No. C194 of 18.8.2006, p. 2
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1 OJ No. L187, 26.6.2014, p.1
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2OJ No. L187, 26.6.2014, p.43
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3 OJ No. C288 of 9.10.1999, p. 2, and OJ No. C244 of 1.10.2004, p. 2
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494. Eligible shares
(1) In this Part “‘eligible shares”’ means new shares forming part of a company’s share capital and which comply with this section.
(2) Shares subscribed for, issued to, held by or disposed of for an individual by a nominee, shall be treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by that individual where the nominee has complied with the requirements of sections 892 and 894 in respect of those shares.
(3) The shares, other than where relief under section 507 is claimed, may—
(a) carry a right to preferential rights to a dividend or to repayment of capital on a winding up, and
(b) be redeemable.
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Substituted by FA04 s18(2)(c). Applies in relation to relevant investments made on or after 5 February 2004.
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Substituted by FA11 s33(1)(a). Has effect in respect of shares issued on or after 25 November 2011. Note: FA 12 s26 (2) amends FA 11 s33 and provides: (b) This section does not have effect in respect of shares issued before 25 November 2011 and, for all the purposes of Part 16 in connection with those shares, the Principal Act has effect as if this section had not been enacted. (c) This section does not have effect in respect of shares issued on or after 25 November 2011 and on or before 31 December 2011 where— (i) the company issuing the shares, or (ii) where the shares are acquired by an investment fund, the fund acquiring the shares, elects by notice in writing to the Revenue Commissioners on or before 31 December 2011 that, for all the purposes of Part 16 in connection with those shares, the Principal Act has effect as if this section had not been enacted.
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Substituted by FA12 s26(1)(a). Deemed to have come into force and takes effect on and from 1 January 2012.
[9]
Substituted by FA12 s26(1)(b). Deemed to have come into force and takes effect on and from 1 January 2012.
[10]
Deleted by FA12 s26(1)(c). Deemed to have come into force and takes effect on and from 1 January 2012.
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Deleted by FA14 s27(1)(e)(i). Applies to shares issued on or after 13 October 2015 as per FA15 s18(1)(c).
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Substituted by FA14 s27(1)(e)(ii). Applies to shares issued on or after 13 October 2015 as per FA15 s18(1)(c).
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Substituted by FA14 s27(1)(e)(iii). Applies to shares issued on or after 13 October 2015 as per FA15 s18(1)(c).