Direct Tax Acts, Finance Act 2018

434 Distributions to be taken into account and meaning of “distributable income”, “investment income”, “estate income”, etc
CTA76 s100; FA89 s27(1); FA01 s91; FA02 s138 & Sch6; FA03 s163 & Sch6; FA04 s36; FA06 s127 and Sch2; FA08 s44(1)(a); FA12 s54 and Sch1(19), s129 and Sch4 Pt2(g)

(1) In this section –

[…]1

estate income” means income (other than yearly or other interest) chargeable to tax under Case III, IV or V of Schedule D, and arising from the ownership of land (including any interest in or right over land) or from the letting furnished of any building or part of a building;

[“franked investment income” excludes—

(a) a distribution made out of exempt profits within the meaning of section 140,

(b) a distribution made out of disregarded income within the meaning of section 141 and to which subsection (3)(a) of that section applies, and

(c) a distribution made out of exempted income within the meaning of section 142;

income” of a company for an accounting period means the income as computed in accordance with subsection (4);]2

[“investment income” of a company means income other than estate income which, if the company were an individual, would not be earned income within the meaning of section 3, but, without prejudice to the meaning of “franked investment income” in this section, does not include –

(a) any interest or dividends on investments which, having regard to the nature of the company’s trade, would be taken into account as trading receipts in computing trading income but for the fact that they have been subjected to tax otherwise than as trading receipts, or but for the fact that by virtue of section 129 they are not to be taken into account in computing income for corporation tax, and

(b) any dividends or other distributions received by the company in respect of shares at a time when any gain on a disposal of the shares would not have been a chargeable gain by virtue of section 626B or would not have been a chargeable gain by virtue of section 626B if paragraphs (a) and (b) of subsection (3) of that section were deleted.]3

[“relevant charges”, in relation to an accounting period of a company, means charges on income paid in the accounting period by the company and which are allowed as deductions under section 243, other than so much of those charges as is paid for the purposes of an excepted trade within the meaning of section 21A;]4

[…]5

trading company” means any company which exists wholly or mainly for the purpose of carrying on a trade and any other company whose income does not consist wholly or mainly of investment or estate income.

(2) For the purposes of section 440, [and subject to subsection (3A) the distributions of a company]6 for an accounting period shall be taken to be the aggregate of –

(a) any dividends which are declared for or in respect of the accounting period and are paid or payable during the accounting period or within 18 months after the end of the accounting period, and

(b) all distributions, other than dividends, made in the accounting period.

(3) Where –

(a) a period of account for or in respect of which a company declares a dividend is not an accounting period,

(b) the dividend is paid or payable during the period of account or within 18 months after the end of the period of account, and

(c) part of the period of account falls within an accounting period,

then, the proportion of the amount of the dividend to be treated for the purposes of subsection (2) as being for or in respect of the accounting period shall be the same as the proportion which that part of the period of account bears to the whole of that period.

[(3A) (a) Where a close company pays a dividend, or makes a distribution, to another close company, the companies may jointly elect, by giving notice to the Collector-General in such manner as the Revenue Commissioners may require, that the dividend, or as the case may be the distribution, is to be treated for the purposes of section 440 as not being a distribution.

(b) Where notice is given in accordance with paragraph (a), the dividend, or as the case may be the distribution, shall be treated –

(i) for the purposes of section 440 as not being a distribution, and

(ii) for the purposes of subsection (5) as not being franked investment income.

(c) An election by a company under paragraph (a) as respects an accounting period shall be included with the return under [Chapter 3 of Part 41A]14 which falls to be made by the company for the accounting period.]7

(4) [The income]8 of a company for an accounting period shall be the income for the accounting period, computed in accordance with the Corporation Tax Acts, exclusive of franked investment income, before deducting –

(a) any loss incurred in any trade or profession carried on by the company which is carried forward from an earlier, or carried back from a later, accounting period,

(b) any loss which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D and which is carried forward from an earlier accounting period or any expenses of management or any charges on income which are so carried forward, and

(c) any excess of deficiencies over surpluses which if such excess were an excess of surpluses over deficiencies would be chargeable to corporation tax on the company under Case V of Schedule D and which is carried forward from an earlier, or carried back from a later, accounting period,

and after deducting –

(d) any loss incurred in the accounting period in any trade or profession carried on by the company,

(e) any loss incurred in the accounting period which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D,

(f) any excess of deficiencies over surpluses which if such excess were an excess of surpluses over deficiencies would be chargeable to corporation tax on the company for the accounting period under Case V of Schedule D,

[(g) any amount which is an allowable deduction against relevant trading income by virtue of section 243A.]9

[(5) (a) The estate and investment income of a company for an accounting period shall be the amount by which the sum of –

(i) the amount of franked investment income for the accounting period, and

[(ii) an amount determined by applying to the amount of the income of the company for the accounting period the fraction –

where –

A is the aggregate of the amounts of estate income and investment income taken into account in computing the income of the company for the accounting period, and

B is the amount of the company’s income before taking account of any amount specified in paragraphs (d) to (g) of subsection (4),]11

exceeds the aggregate of –

(I) The amount of relevant charges, and

(II) The amount which is an allowable deduction in computing the total profits for the accounting period in respect of expenses of management by virtue of section 83(2)

(b) The trading income of a company for an accounting period shall be the income of the company for the accounting period after deducting—

[(i) an amount equal to the amount specified in subparagraph (ii) of paragraph (a),]12

(ii) where the aggregate of the amounts specified in clauses (I) and (II) of paragraph (a) exceeds the sum of the amounts specified in subparagraphs (i) and (ii) of that paragraph, the amount of the excess, and

(iii) charges on income paid for the purposes of an excepted trade within the meaning of section 21A.

(5A) (a) For the purposes of sections 440 and 441, but subject to paragraph (b)

distributable estate and investment income” of a company for an accounting period means the estate and investment income of the company for the accounting period after deducting the amount of corporation tax which would be payable by the company for the accounting period if the tax were computed on the basis of that income;

[“distributable trading income” of a company for an accounting period means the trading income of the company for the accounting period after deducting the amount of corporation tax which would be payable by the company for the accounting period if the tax were computed on the basis of that income;]13

(b) In the case of a trading company, the distributable estate and investment income for an accounting period shall be the amount determined in accordance with paragraph (a) reduced by 7.5 per cent.]10

(6) The amount for part of an accounting period of any description of income referred to in this section shall be a proportionate part of the amount for the whole period.

(7) Where a company is subject to any restriction imposed by law as regards the making of distributions, regard shall be had to this restriction in determining the amount of income on which a surcharge shall be imposed under section 440.

Go to Revenue Guidance Notes on TCA

Amendments

1,5 Deleted by FA03 s163 and Sch6 and deemed to apply to accounting periods ending on or after 14 March 2001

2 Substituted by FA01 s91 as respects accounting periods ending on or after 14 March 2001

3 Substituted by FA04 s36

4,8,9,10 Substituted by FA01 s91 as respects accounting periods ending on or after 14 March 2001

6 Substituted by FA08 44(1)(a) and applying as respects a dividend paid, or distribution made, on or after 31 January 2008

7 Inserted by FA08 s44(1)(a) and applying as respects a dividend paid, or distribution made, on or after 31 January 2008

11 Substituted by FA03 s163 and Sch6 and deemed to apply to accounting periods ending on or after 14 March 2001

12 Substituted by FA06 s127 and Sch2 and applying to accounting periods ending on or after 2 February 2006

13 Substituted by FA12 s54 and Sch 1(19) and is deemed to have come into force and takes effect on and from 1 January 2012

14 Substituted by FA12 s129 and Sch4 Pt2(g) – see note below Previously “section 951”.

Note to FA12 Amendment 14

The amendment is subject to 14 s129(3)–(5) which cannot be consolidated:

(3) Subject to subsections (4) and (5), this section takes effect on and from 1 January 2013.

(4) This section applies—

(a) in the case of a chargeable period (within the meaning of section 321(2) of the Taxes Consolidation Act 1997) which is an accounting period of a company, as respects chargeable periods that start on or after 1 January 2013, and

(b) in a case other than that referred to in paragraph (a), as respects the year of assessment 2013 and subsequent years of assessment.

(5) This section does not affect the application of the provisions of the Taxes Consolidation Act 1997, which are amended or deleted by this section, as respects chargeable periods prior to those referred to in subsection (4).

Corresponding UK Tax Provision

Formerly Schedule 19, Income and Corporation Taxes Act 1988. Repealed in 1989.

Sections referred to in text

section 3 [Interpretation of Income Tax Acts]

section 21A [Higher rate of corporation tax]

section 83 [Expenses of management of investment companies]

section 129 [Irish resident company distributions not generally chargeable to corporation tax]

section 140 [Distributions out of profits or gains from stallion fees, stud, greyhound services fees and occupation of certain woodlands]

section 141 [Distributions out of income from patent royalties]

section 142 [Distributions out of profits of certain mines]

section 243 [Allowance of charges on income]

section 243A [Restriction of relevant charges on income]

section 440 [Surcharge on undistributed investment and estate income]

section 441 [Surcharge on undistributed income of service companies]

section 626B [Exemption from tax in the case of gains on certain disposals of shares]

Chapter 3 of Part 41A [chargeable Persons: Returns]

Cross references

441 Surcharge on undistributed income of service companies

705B Conditions for notice under section 705E