Taxes Consolidation Act, 1997 (Number 39 of 1997)
CHAPTER 3
Know-how and certain training
768 Allowance for know-how.
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(1) In this section—
“control” has the same meaning as in section 312;
“know-how” means industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the carrying out of any agricultural, forestry, fishing, mining or other extractive operations;
references to a body of persons include references to a partnership.
(2)(a) For the purposes of this subsection, a person incurring expenditure on know-how before the setting up and commencement of the trade in which it is used shall be treated as incurring it on that setting up and commencement.
(b) Where a person incurs expenditure on know-how for use in a trade carried on by the person or, having incurred expenditure on know-how, sets up and commences a trade in which it is used, there shall, subject to this section, be allowed to be deducted as expenses, in computing for the purposes of Case I of Schedule D the profits or gains of the trade, such part of the expenditure as would but for this section not be allowed to be so deducted.
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(3) Where a person acquires a trade or part of a trade and, together with the trade or the part of the trade, know-how used in the trade or part of the trade, no amount shall be allowed to be deducted under this section in respect of expenditure incurred on the acquisition of the know-how.
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(3) Where—
(a) a person acquires a trade or part of a trade and, together with the trade or the part of the trade, know-how used in the trade or part of the trade, or
(b) (i) a person acquires a trade or part of a trade, and
(ii) a person connected (within the meaning of section 10) with the person acquires know-how used in the trade or the part of the trade,
then no amount shall be allowed to be deducted under this section in respect of expenditure incurred on the acquisition of the know-how.
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(3) (a) Where a person acquires a trade or part of a trade and, together with the trade or the part of the trade, know-how used in the trade or part of the trade, then no amount shall be allowed to be deducted under this section in respect of expenditure incurred on the acquisition of the know-how.
(b) Subject to paragraph (c), where—
(i) a person acquires a trade or part of a trade, and
(ii) a person connected (within the meaning of section 10) with the person acquires knowhow used in the trade or the part of the trade,
then—
(I) the amount of expenditure incurred on the know-how by the person referred to in subparagraph (ii) shall be allowed as a deduction against profits of the trade, carried on by that person, in which the know-how is used (in this subsection referred to as a “relevant trade”) but not against any other income or profits of whatever description,
(II) no amount of any royalty or other sum paid by the person referred to in subparagraph (i), or by any person connected (within the meaning of section 10) with that person, for the know-how acquired by the person referred to in subparagraph (ii) shall be allowed to be deducted in computing the profits of any description, or to be treated as a charge on income, of the person making such payment, and
(III) no amount shall be allowed to be deducted under this section where, at any time, the trade or part of the trade referred to in subparagraph (i) is transferred to the person referred to in subparagraph (ii).
(c) Where as respects any chargeable period of a person carrying on a relevant trade, the amount by which a deduction available to be made under paragraph (b)(I) exceeds the profits of the relevant trade but for that deduction, the excess shall be carried forward and treated as an amount deductible under paragraph (b)(I) for succeeding chargeable periods and (so long as the person continues to carry on the trade) its profits from the trade in any succeeding chargeable period shall then be treated as reduced by the amount of the excess, or by so much of that excess as cannot be relieved against profits of the trade of an earlier chargeable period.
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(3A) The amount which shall be allowed to be deducted under this section in respect of expenditure incurred by a person on know-how shall be limited to the amount which has been incurred wholly and exclusively on the acquisition of know-how for bona fide commercial reasons and was not incurred as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
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(4) Subsection (2) shall not apply on any sale of know-how where the buyer is a body of persons over whom the seller has control, or the seller is a body of persons over whom the buyer has control, or both the seller and the buyer are bodies of persons and some other person has control over both of them.
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(5) (a) The Revenue Commissioners may, in relation to a claim by a person that expenditure is allowed to be deducted in accordance with subsection (2)—
(i) consult with any person (in this subsection referred to as an “expert”) who in their opinion may be of assistance in ascertaining the extent to which such expenditure is incurred on know-how, and
(ii) notwithstanding any obligation as to secrecy or other restriction on the disclosure of information imposed by, or under, the Tax Acts or any other statute or otherwise, but subject to paragraph (b), disclose any detail in the person’s claim under this section which they consider necessary for such consultation.
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(b) (i) Before disclosing information to any expert under paragraph (a), the Revenue Commissioners shall make known to the person—
(I) the identity of the expert who they intend to consult, and
(II) the information they intend to disclose to the expert.
(ii) Where the person shows to the satisfaction of the Revenue Commissioners (or on appeal to the Appeal Commissioners) that disclosure of such information to that expert could prejudice the person’s trade, then the Revenue Commissioners shall not make such disclosure.
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(b) Before disclosing information to any expert under paragraph (a), the Revenue Commissioners shall give notice in writing to the person of—
(i)their intention to disclose information to the expert,
(ii)the information that they intend to disclose, and
(iii)the identity of the expert whom they intend to consult,
and shall give the person a period of 30 days after the date of the notice to show to their satisfaction that disclosure of such information to that expert could prejudice the person's trade.
(c) Where, on the expiry of the period referred to in paragraph (b), it is not shown to the satisfaction of the Revenue Commissioners that disclosure of such information to that expert could prejudice the person's trade, they may disclose the information where they—
(i) give the person notice in writing of their decision to so disclose, and
(ii) allow that person a period of 30 days after the date of the notice to appeal their decision to the Appeal Commissioners before disclosing the information.
(d) A person aggrieved by a decision made under paragraph (c) in respect of that person may appeal the decision to the Appeal Commissioners, in accordance with section 949I, within the period of 30 days after the date of the notice of that decision.
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(6) Where any relief has been claimed under this section which is subsequently found not to have been due, that relief shall be withdrawn by making an assessment to tax, under Case IV of Schedule D, for the chargeable period or chargeable periods in which relief was claimed and, notwithstanding anything in the Tax Acts, such an assessment may be made at any time.
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(7) Subject to subsection (8), this section shall not apply to a company within the charge to corporation tax.
(8) (a) Subject to paragraph (b), where a company elects in writing, this section shall apply to expenditure, specified in the election, incurred by it on know-how after 7 May 2009 and before 7 May 2011.
(b) An election under paragraph (a) shall be made in the return required to be made under section 951 for the accounting period of the company in which the expenditure is incurred and shall not be made later than 12 months from the end of the accounting period in which the capital expenditure, giving rise to the claim, is incurred.
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Substituted by FA08 s40(1)(a). This section applies as respects any chargeable period (within the meaning of section 321(2)) ending on or after 31 January 2008.
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Inserted by FA08 s40(1)(b). This section applies as respects any chargeable period (within the meaning of section 321(2)) ending on or after 31 January 2008.
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Substituted by F(No.2)A08 s30(1)(a). Applies as respects any chargeable period (within the meaning of section 321(2)) ending on or after 31 December 2008.
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Inserted by F(No.2)A08 s30(1)(b). Applies as respects any chargeable period (within the meaning of section 321(2)) ending on or after 31 December 2008.