Section 80 Reconstructions or amalgamations of companies

Summary

This section grants a relief from stamp duty in the case of certain company reconstructions and amalgamations.

The relief applies where one company either—

• acquires the undertaking, or part of the undertaking, of another company, or
• acquires at least 90% of the issued share capital of another company,

in exchange for the issue of new shares in the acquiring company.

A self-assessed stamp duty return must be filed under the e-stamping system in relation to instruments in respect of which relief is sought under this section. For instruments executed on or after 1 June 2005, an “acquiring company” or a “target company” shall be construed as including a society registered under the Industrial and Provident Societies Act 1893.

Details

(1) “shares” is self-explanatory. Rules of construction for references to “undertaking” and “acquiring company” are also laid down.

(2) Instruments to which the section applies are not liable to stamp duty under or by reference to the following heads of charge in Schedule 1:

• “CONVEYANCE or TRANSFER on sale of any stocks or marketable securities”,
• “CONVEYANCE or TRANSFER on sale of a policy of insurance or a policy of life insurance where the risk to which the policy relates is located in the State”, or
• “CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance”.

The conditions which must be satisfied before relief from stamp duty will be granted are as follows:

• (2) there must exist a scheme for reconstruction or for amalgamation;
• (2) the reconstruction or amalgamation must be bona fide;
• (4) the reconstruction or amalgamation must be undertaken for genuine commercial reasons and not for tax avoidance purposes;
• (1)(b) the acquiring company must be limited;
• (2)(a) the acquiring company must be—
  • incorporated¹, or
  • established by Act of the Oireachtas, or
  • a company the nominal share capital of which has been increased,
    (2)(b), (5) with a view to the acquisition of the undertaking, or part of the undertaking, or issued share capital of the target company. A company which has, in connection with a scheme of reconstruction or amalgamation, issued any unissued share capital will be treated as if it had increased its nominal share capital.
    (6) Where the acquiring company is being formed then its Memorandum of Association, or the Act establishing it, must provide that one of the objects of the acquiring company is the acquisition of the undertaking of, or shares in, the target company.
    (6) Where the acquiring company is already in existence it must be apparent (e.g. from the Resolution) that its capital is being increased for the same purpose;
• (2)(c) at least 90% of the consideration for the acquisition (except such part of that consideration as consists in the transfer to or discharge by the acquiring company of liabilities of the target company) must consist of the issue of shares in the acquiring company to—
  • either the target company or the shareholders in the target company, in cases where the undertaking or part of the undertaking is being acquired, or
  • to the shareholders in the target company in exchange for their shares, in cases where shares are being acquired.
    The balance of 10% may be paid in cash or other consideration;
• (2)(b) where shares are being acquired at least 90% of the issued share capital of the target company must be acquired;
• (2A) the target company must have obtained a conveyance of any property comprised in the undertaking, prior to the date of execution of the instrument in respect of which relief under this section is claimed. This condition is an anti-avoidance measure and applies to instruments executed on or after 20 February 2004.
  Where the undertaking of a target company comprises a leasehold interest in property, the target company will be treated by the Revenue Commissioners, for the purposes of this subsection, as having obtained a conveyance of the property where the leasehold interest has been directly acquired by the target company by virtue of the grant of a lease from the lessor and such lease has been duly stamped. In addition, relief under this section will not be denied in circumstances where an undertaking of a target company comprises goodwill which has been acquired by the target company by trading over a long number of years. This treatment will only be granted where the Revenue Commissioners are satisfied with the bona fides of the claim for relief under this section and that the reconstruction or amalgamation does not involve the avoidance of stamp duty or any other tax or duty.
• (3)(b) instruments relating to the transfer of the undertaking of or the shares in the target company—
  • must be executed within one year from the date—
    • of the incorporation (see footnote 1) of the acquiring company, or
    • date of the resolution for the increase of the nominal share capital of the acquiring company, or
  • must be made for the purpose of effecting a conveyance or transfer in pursuance of an agreement which has been (or particulars of which have been) filed with the Registrar of Companies within one year from the above dates;

(3)(a) Adjudication has been abolished for instruments executed on or after 7 July 2012 and a self-assessed stamp duty return is required to be filed under the eStamping system to claim this relief.

(8) The relief will be clawed back if—

• it is subsequently found that the exemption was not properly due,
• the conditions specified in subsection (2) are not actually satisfied,
• the target company ceases to be the beneficial owner of the shares issued to it within 2 years from the date of—
  • the incorporation (see footnote 1) or establishment of the acquiring company, or
  • the authority for the increase of the capital,
  otherwise than in consequence of reconstruction, amalgamation or liquidation;
• the acquiring company ceases to be the beneficial owner of the shares acquired in the target company within 2 years of the above dates otherwise than in consequence of reconstruction, amalgamation or liquidation.

Where the relief is clawed back because it was granted on the basis of false information interest at the rate of 0.0219 per cent per day (see section 159D) is chargeable from the date of the relevant instruments until the stamp duty is paid. In all other circumstances interest is payable from the date of the event giving rise to the clawback to the date the stamp duty is paid.

(9) The Revenue Commissioners may refund stamp duty already paid where the following conditions are satisfied:

• all the conditions for granting the relief were satisfied other than the condition that not less than 90% of the issued share capital of the target company would be acquired by the acquiring company, and
• 90% was in fact acquired within 6 months from the earlier of—
  • the last day of the period of one month after the first allotment of shares made for the purposes of the acquisition, or
  • the date on which the invitation was issued to the shareholders of the target company to accept shares in the acquiring company.

The claim for a refund should be accompanied by the original stamped instruments (where stock transfer forms were used). While this section does not specify a time limit for submitting claims for refund, a 4 year time limit is provided for by section 159A from the date the instrument is stamped, in respect of a valid claim for refund other than a valid claim made on or before 31 December 2004 in respect of a refund claim arising on or before 25 March 2003 (i.e. the date of passing of the Finance Act 2003). Interest may arise on the refund – see section 159B.

(10) The relief from stamp duty on the transfer of shares or an undertaking in connection with a scheme of reconstruction or amalgamation contained in subsection (2) is extended by enabling the acquiring company to acquire the shares or undertaking of a company incorporated outside the State without incurring a liability to stamp duty. To qualify for the relief, however, the acquiring company must be incorporated in another Member State of the European Union. The Isle of Man, Channel Islands and Gibraltar do not come within the definition of Member State.

Relevant Date: Finance Act 2014