Profit Sharing
Part 17
Profit Sharing Schemes and Employee Share Ownership Trusts (ss. 509-519D)
Chapter 1
Profit sharing schemes (ss. 509-518)
509.
Interpretation (Chapter 1).
(1)In this Chapter and in Schedule 11 –
“the appropriate percentage”, in relation to any shares, shall be construed in accordance with section 511(3);
“approved scheme” shall be construed in accordance with section 510(1);
“the company concerned” has the meaning assigned to it by paragraph 3(1) of Schedule 11;
“group scheme” and, in relation to such a scheme, “participating company” have the meanings respectively assigned to them by paragraph 3(2) of Schedule 11;
“initial market value”, in relation to any shares, shall be construed in accordance with section 510(2);
“locked-in value”, in relation to any shares, shall be construed in accordance with section 512(1);
“market value”, in relation to any shares, shall be construed in accordance with section 548;
“participant” shall be construed in accordance with section 510(1)(a);
“the period of retention” has the meaning assigned to it by section 511(1)(a);
“the release date” has the meaning assigned to it by section 511(2);
“shares” includes stock and specified securities;
“specified securities” means securities (within the meaning of Schedule 12), other than ordinary shares, which –
(a)were transferred to the trustees of an approved scheme by the trustees of an employee share ownership trust to which section 519 applies, and
(b)were –
(i)securities issued to the trustees of the employee share ownership trust referred to in paragraph (a) in an exchange to which section 586 applies,
(ii)securities (in this subparagraph referred to as ‘similar securities’) similar to the securities referred to in subparagraph (i) and which were acquired by those trustees using dividends received in respect of the securities so referred to or in respect of similar securities so acquired,
(iii)securities issued to those trustees as a result of a reorganisation or reduction of share capital (in accordance with section 584) which occurred subsequent to the exchange referred to in subparagraph (i) and which securities represent the securities issued in that exchange and the similar securities (if any) referred to in subparagraph (ii), or
(iv)securities (in this subparagraph referred to as ‘similar securities’) similar to the securities first-mentioned in subparagraph (iii) and which were acquired by those trustees using dividends received in respect of the securities so mentioned in subparagraph (iii) or in respect of similar securities so acquired,
but subject to the condition that, where the company which issued the securities in the exchange referred to in paragraph (b) is a company limited by shares (as referred to in section 17, 965 or 1004 of the Companies Act 2014), the trustees of the employee share ownership trust have, as a result of the exchange, acquired such percentage of the ordinary share capital of the company which issued the securities that is not less than the percentage of the ordinary share capital of the company which the trustees held immediately prior to the exchange;
“the trust instrument”, in relation to an approved scheme, means the instrument referred to in paragraph 3(3)(c) of Schedule 11;
“the trustees”, in relation to an approved scheme or a participant’s shares, means the body of persons for the establishment of which the scheme shall provide as mentioned in paragraph 3(3) of Schedule 11.
(2)Any provision of this Chapter with respect to –
(a)the order in which any of a participant’s shares are to be treated as disposed of for the purposes of this Chapter, or
(b)the shares in relation to which an event is to be treated as occurring for any such purpose,
shall apply notwithstanding any direction given to the trustees with respect to shares of a particular description or to shares appropriated to the participant at a particular time.
(3)For the purposes of capital gains tax –
(a)no deduction shall be made from the consideration for the disposal of any shares by reason only that an amount determined under this Chapter is chargeable to income tax,
(b)any charge to income tax by virtue of section 513 shall be disregarded in determining whether a distribution is a capital distribution within the meaning of section 583, and
(c)nothing in any provision referred to in subsection (2) shall affect the rules applicable to the computation of a gain accruing on a part disposal of a holding of shares or other securities which were acquired at different times.
(4)The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by this Chapter or by Schedule 11 to be performed or discharged by them.
510.
Approved profit sharing schemes: appropriated shares.
(1)In this Chapter, references to an approved scheme are references to a scheme approved of as is mentioned in subsection (3) and, in relation to such a scheme –
(a)any reference to a participant is a reference to an individual to whom the trustees of the scheme have appropriated shares, and
(b)subject to section 514, any reference to a participant’s shares is a reference to the shares which have been appropriated to the participant by the trustees of an approved scheme.
(2)Any reference in this Chapter to the initial market value of any of a participant’s shares is a reference to the market value of those shares determined –
(a)except where paragraph (b) applies, on the date on which the shares were appropriated to the participant, and
(b)if the Revenue Commissioners and the trustees of the scheme agree in writing, on or by reference to such earlier date or dates as may be provided for in the agreement.
(3)This section shall apply where the trustees of a profit sharing scheme approved of in accordance with Part 2 of Schedule 11 appropriate shares –
(a)which have previously been acquired by the trustees, and
(b)as to which the conditions in Part 3 of that Schedule are fulfilled,
to an individual who participates in the scheme.
(4)Notwithstanding anything in the Income Tax Acts, a charge to tax shall not be made on any individual in respect of the receipt of a right to receive the beneficial interest in shares passing or to be passed to that individual by virtue of such an appropriation of shares as is mentioned in subsection (3).
(5)Notwithstanding anything in the approved scheme concerned or in the trust instrument or in section 511, for the purposes of capital gains tax a participant shall be treated as absolutely entitled to his or her shares as against the trustees.
(5A)
(a)This subsection shall apply where –
(i)the trustee of an approved profit sharing scheme make an appropriation of shares, to which section 510(3) applies, to a participant,
(ii)the shares concerned were transferred to the trustees of the approved scheme concerned by the trustee of an employee share ownership trust to which section 519 applies, and
(iii)the shares were transferred at a date later than that on which the shares could have first been transferred in accordance with the terms of the employee share ownership trust deed or any other document but, for whatever reason, were not transferred on that earlier date.
(b)Where this subsection applies, the appropriation to the participant concerned shall, for the purposes of capital gains tax, be deemed to have taken place on the day following the day on which those shares could have first been transferred by the trustee of the employee share ownership trust concerned, in accordance with the terms of the trust deed under which that trust was established or any other document.
(6)Where the trustees of an approved scheme acquire any shares as to which the conditions in Part 3 of Schedule 11 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme –
(a)section 805 shall not apply to income consisting of dividends on those shares received by the trustees, and
(b)any gain accruing to the trustees on the appropriation of those shares shall not be a chargeable gain,
and, for the purpose of determining whether any shares are appropriated within that period of 18 months, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.
(7)The Revenue Commissioners may by notice in writing require any person to furnish to them, within such time as they may direct (but not being less than 30 days), such information as they think necessary for the purposes of their functions under this Chapter, including in particular information to enable them –
(a)to determine whether to approve of a scheme or withdraw an approval already given, and
(b)to determine the liability to tax, including capital gains tax, of any participant in an approved scheme.
(8)Without prejudice to subsection (7) the trustees of an approved scheme shall as respects any year, prepare and deliver to the Revenue Commissioners on or before 31 March in the year following that year, a return in the prescribed form (within the meaning of Chapter 3 of Part 41A) of such particulars relating to the approved scheme for that year as may be required by the prescribed form and sections 1052 and 1054 shall apply to a failure by the trustees to deliver a return in accordance with this subsection as they apply to a failure to deliver a return referred to in section 1052.
511.
The period of retention, release date and appropriate percentage.
(1)
(a)In this Chapter, “the period of retention”, in relation to any of a participant’s shares, means the period beginning on the date on which those shares are appropriated to the participant and ending on the second anniversary of that date or, if it is earlier –
(i)the date on which the participant ceases to be an employee or director of a relevant company by reason of injury or disability or on account of his or her being dismissed by reason of redundancy (within the meaning of the Redundancy Payments Acts 1967 to 2003),
(ii)the date on which the participant reaches pensionable age (within the meaning of section 2 of the Social Welfare Consolidation Act 2005), or
(iii)the date of the participant’s death.
(b)In paragraph (a), “relevant company” means the company concerned or, if the scheme in question is a group scheme, a participating company and, in the application of paragraph (a) to a participant in a group scheme, the participant shall not be treated as ceasing to be an employee or director of a relevant company until such time as he or she is no longer an employee or director of any of the participating companies.
(2)In this Chapter, “the release date”, in relation to any of a participant’s shares, means –
(a)as on and from the 10th day of May, 1997, the third anniversary of the date on which the shares were appropriated to the participant, and
(b)before the 10th day of May, 1997, the fifth anniversary of the date on which the shares were appropriated to the participant.
(3)Subject to section 515(4), for the purposes of the provisions of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of the individual’s shares, any reference to the appropriate percentage in relation to those shares shall be determined according to the time of that event, as follows –
(a)as respects such an occurrence as on and from the 10th day of May, 1997 –
(i)if the event occurs before the third anniversary of the date on which the shares were appropriated to the participant and subparagraph (ii) does not apply, the appropriate percentage shall be 100 per cent, and
(ii)if, in a case where at the time of the event the participant –
(I)has ceased to be an employee or director of a relevant company as mentioned in subsection (1)(a)(i), or
(II)has reached pensionable age (within the meaning of section 2 of the Social Welfare Consolidation Act 2005),
the event occurs before the third anniversary of the date on which the shares were appropriated to the participant, the appropriate percentage shall be 50 per cent, and
(b)as respects such an occurrence before the 10th day of May, 1997 –
(i)if the event occurs before the fourth anniversary of the date on which the shares were appropriated to the participant and subparagraph (iii) does not apply, the appropriate percentage shall be 100 per cent,
(ii)if the event occurs on or after the fourth anniversary and before the fifth anniversary of the date on which the shares were appropriated to the participant and subparagraph (iii) does not apply, the appropriate percentage shall be 75 per cent, and
(iii)if, in a case where at the time of the event the participant –
(I)has ceased to be an employee or director of a relevant company as mentioned in subsection (1)(a)(i), or
(II)has reached pensionable age (within the meaning of section 2 of the Social Welfare Consolidation Act 2005),
the event occurs before the fifth anniversary of the date on which the shares were appropriated to the participant, the appropriate percentage shall be 50 per cent.
(4)No scheme shall be approved of as is mentioned in section 510(3) unless the Revenue Commissioners are satisfied that, whether under the terms of the scheme or otherwise, every participant in the scheme is bound in contract with the company concerned –
(a)to permit his or her shares to remain in the hands of the trustees throughout the period of retention,
(b)not to assign, charge or otherwise dispose of his or her beneficial interest in his or her shares during that period,
(c)if he or she directs the trustees to transfer the ownership of his or her shares to him or her at any time before the release date, to pay to the trustees before the transfer takes place a sum equal to income tax at the standard rate on the appropriate percentage of the locked-in value of the shares at the time of the direction, and
(d)not to direct the trustees to dispose of his or her shares at any time before the release date in any other way except by sale for the best consideration in money that can reasonably be obtained at the time of the sale.
(5)No obligation placed on the participant by virtue of subsection (4)(c) shall be construed as binding his or her personal representatives to pay any sum to the trustees.
(6)Any obligation imposed on a participant by virtue of subsection (4) shall not prevent the participant from –
(a)directing the trustees to accept an offer for any of his or her shares (in this paragraph referred to as “the original shares”) if the acceptance or agreement will result in a new holding (within the meaning of section 584) being equated with the original shares for the purposes of capital gains tax,
(b)directing the trustees to agree to a transaction affecting his or her shares or such of those shares as are of a particular class, if the transaction would be entered into pursuant to a compromise, arrangement or scheme applicable to or affecting –
(i)all the ordinary share capital of the company in question or, as the case may be, all the shares of the class in question, or
(ii)all the shares, or shares of the class in question, held by a class of shareholders identified otherwise than by reference to their employment or their participation in an approved scheme,
(c)directing the trustees to accept an offer of cash, with or without other assets, for his or her shares if the offer forms part of a general offer made to holders of shares of the same class as his or her shares or of shares in the same company and made in the first instance on a condition such that if it is satisfied the person making the offer will have control (within the meaning of section 11) of that company, or
(d)agreeing, after the expiry of the period of retention, to sell the beneficial interest in his or her shares to the trustees for the same consideration as in accordance with subsection (4)(d) would be required to be obtained for the shares themselves.
(7)If in breach of his or her obligation under subsection (4)(b) a participant assigns, charges or otherwise disposes of the beneficial interest in any of his or her shares, the participant shall as respects those shares be treated for the purposes of this Chapter as if, at the time they were appropriated to him or her, he or she was ineligible to participate in the scheme, and section 515 shall apply accordingly.
511A.
Shares acquired from an employee share ownership trust.
(1)This section applies where, on or after the passing of the Finance Act, 1998-
(a)the trustees of an approved scheme make an appropriation of shares to which section 510(3) applies to a participant,
(b)the shares concerned had been transferred to the trustees of the approved scheme by the trustees of an employee share ownership trust to which section 519 applies, and
(c)the participant concerned was a beneficiary (within the meaning of paragraph 11 or paragraph 11A, as the case may be, of Schedule 12) under the employee share ownership trust concerned at all times (other than any period which forms part of the 30 day period referred to in paragraph 12A(b) of Schedule 11) during the period (in this section referred to as the ‘holding period’)-
(i)beginning on-
(I)the day the shares concerned were acquired by that employee share ownership trust, or
(II)if later, the day that participant last became such a beneficiary,
and
(ii)ending on the day those shares were appropriated to that participant.
(2)Where this section applies, then, notwithstanding section 511-
(a)the period of retention, in relation to the participant and the shares concerned, ends –
(i)in the case where the holding period is 2 years or more, on the day following the end of the holding period, and
(ii)in any other case, on the day following the end of a period which, when added to the holding period, forms a period of 2 years, or, if it is earlier, on the date referred to in subparagraph (i), (ii) or (iii), as the case may be, of section 511(1)(a),
and
(b)the release date, in relation to the participant and the shares concerned, means –
(i)in the case where the holding period is 3 years or more, the day following the end of the holding period, and
(ii)in any other case, the day following the end of a period which, when added to the holding period, forms a period of 3 years.
512.
Disposals of scheme shares.
(1)Subject to sections 514 and 515(6), any reference in this Chapter to the locked-in value of any of a participant’s shares at any time shall be construed as follows:
(a)if before that time the participant has become chargeable to income tax by virtue of section 513 on a percentage of the amount or value of any capital receipt (within the meaning of that section) which is referable to those shares, the locked-in value of the shares shall be the amount by which their initial market value exceeds the amount or value of that capital receipt or, if there has been more than one such receipt, the aggregate of those receipts, and
(b)in any other case, the locked-in value of the shares shall be their initial market value.
(2)Where the trustees dispose of any of a participant’s shares at any time before the release date or, if it is earlier, the date of the participant’s death, the participant shall, subject to subsections (3) and (4), be chargeable to income tax under Schedule E for the year of assessment in which the disposal takes place on the appropriate percentage of the locked-in value of the shares at the time of the disposal.
(3)Subject to subsection (4), if on a disposal of shares within subsection (2) the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (2) shall apply as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.
(4)Where at any time before the disposal of any of a participant’s shares a payment was made to the trustees to enable them to exercise rights arising under a rights issue, subsections (2) and (3) shall, subject to subsection (5)(b), apply as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one such payment, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant’s shares held by the trustees at that time.
(5)
(a)In this subsection, “shares”, in relation to shares allotted or to be allotted on a rights issue, includes securities and rights of any description.
(b)For the purposes of subsection (4) –
(i)no account shall be taken of any payment to the trustees if or to the extent that it consists of the proceeds of a disposal of rights arising under a rights issue, and
(ii)in relation to a particular disposal, the amount of the payment or, as the case may be, of the aggregate of the payments referred to in that subsection shall be taken to be reduced by an amount equal to the total of the reduction (if any) previously made under that subsection in relation to earlier disposals,
and any reference in subsection (4) or subparagraph (i) to the rights arising under a rights issue is a reference to rights conferred in respect of a participant’s shares, being rights to be allotted, on payment, other shares in the same company.
(6)Where the disposal referred to in subsection (2) is made from a holding of shares appropriated to the participant at different times, then, in determining for the purposes of this Chapter –
(a)the initial market value and the locked-in value of each of those shares, and
(b)the percentage which is the appropriate percentage in relation to each of those shares,
the disposal shall be treated as being of shares appropriated earlier before those appropriated later.
(7)Where at any time the participant’s beneficial interest in any of his or her shares is disposed of, the shares in question shall be treated for the purposes of this Chapter as having been disposed of at that time by the trustees for (subject to subsection (8)) the like consideration as was obtained for the disposal of the beneficial interest, and for the purpose of this subsection there shall be no disposal of the participant’s beneficial interest if and at the time when that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of the law of the State.
(8)Where –
(a)a disposal of shares within subsection (2) is a transfer to which section 511(4)(c) applies,
(b)the Revenue Commissioners are of the opinion that any other disposal within that subsection is not at arm’s length and accordingly direct that this subsection shall apply, or
(c)a disposal of shares within that subsection is one which is treated as taking place by virtue of subsection (7) and takes place within the period of retention,
the proceeds of the disposal for the purposes of this Chapter shall be taken to be equal to the market value of the shares at the time of the disposal.
513.
Capital receipts in respect of scheme shares.
(1)Subject to this section, where, in respect of or by reference to any of a participant’s shares, the trustees become or the participant becomes entitled, before the release date, to receive any money or money’s worth (in this section referred to as a “capital receipt”), the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the entitlement arises on the appropriate percentage (determined as at the time when the trustees become or the participant becomes so entitled) of the amount or value of the receipt.
(2)Money or money’s worth shall not be a capital receipt for the purposes of this section if or, as the case may be, to the extent that –
(a)it constitutes income in the hands of the recipient for the purposes of income tax,
(b)it consists of the proceeds of a disposal within section 512, or
(c)it consists of new shares within the meaning of section 514.
(3)Where, pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in the participant’s shares is for the time being vested, the trustees –
(a)dispose of some of the rights arising under a rights issue within the meaning of section 512 (5) (b), and
(b)use the proceeds of that disposal to exercise other such rights,
the money or money’s worth which constitutes the proceeds of that disposal shall not be a capital receipt for the purposes of this section.
(4)Where apart from this subsection the amount or value of a capital receipt would exceed the sum which, immediately before the entitlement to the receipt arose, was the locked-in value of the shares to which the receipt is referable, subsection (1) shall apply as if the amount or value of the receipt were equal to that locked-in value.
(5)Subsection (1) shall not apply in relation to a receipt if the entitlement to it arises after the death of the participant to whose shares it is referable.
(6)Subsection (1) shall not apply in relation to any receipt the amount or value of which (after any reduction under subsection (4)) does not exceed €13.
514.
Company reconstructions, amalgamations, etc.
(1)In this section –
“new shares” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding;
“the corresponding shares”, in relation to any new shares, means those shares in respect of which the new shares were issued or which the new shares otherwise represent.
(2)This section shall apply where there occurs in relation to any of a participant’s shares (in this section referred to as “the original holding”) a transaction (in this section referred to as a “company reconstruction”) which results in a new holding (within the meaning of section 584) being equated with the original holding for the purposes of capital gains tax.
(3)
(a)Where shares are issued as part of a company reconstruction in circumstances such that section 131(2) applies, those shares shall be treated for the purposes of this section as not forming part of the new holding.
(b)Nothing in this Chapter shall affect the application of section 130(2)(c) or 132(2).
(4)Subject to this section, references in this Chapter to a participant’s shares shall be construed, after the time of the company reconstruction, as being or, as the case may be, as including, references to any new shares, and for the purposes of this Chapter –
(a)a company reconstruction shall be treated as not involving a disposal of shares comprised in the original holding,
(b)the date on which any new shares are to be treated as having been appropriated to the participant shall be the date on which the corresponding shares were appropriated, and
(c)the conditions in Part 3 of Schedule 11 shall be treated as fulfilled with respect to any new shares if those conditions were (or were treated as) fulfilled with respect to the corresponding shares.
(5)In relation to shares comprised in the new holding, section 512(1) shall apply as if the references in that section to the initial market value of the shares were references to their locked-in value immediately after the company reconstruction, which shall be determined by –
(a)ascertaining the aggregate amount of locked-in value immediately before the reconstruction of those shares comprised in the original holding which had at that time the same locked-in value, and
(b)distributing that amount proportionately among –
(i)such of those shares as remain in the new holding, and
(ii)any new shares in relation to which those shares are the corresponding shares,
according to their market value immediately after the date of the reconstruction, and section 512(1)(a) shall apply only to capital receipts after the date of the reconstruction.
(6)For the purposes of this Chapter, where as part of a company reconstruction the trustees become entitled to a capital receipt (within the meaning of section 513), their entitlement to the capital receipt shall be taken to arise before the new holding comes into being and, for the purposes of subsection (5), before the date on which the locked-in value of any shares comprised in the original holding falls to be ascertained.
(7)In relation to a new holding, any reference in this section to shares includes securities and rights of any description which form part of the new holding for the purposes of section 584.
515.
Excess or unauthorised shares.
(1)Subject to subsection (2B), where the total of the initial market values of all the shares appropriated to an individual in any one year of assessment (whether under a single approved scheme or under 2 or more such schemes) exceeds –
(a)€12,700, or
(b)€38,100 where the conditions in subsection (2A) are satisfied,
subsections (4) to (7) shall apply to any excess shares, that is, any share which caused the applicable limit to be exceeded and any share appropriated after the applicable limit was exceeded.
(2)For the purposes of subsection (1), where a number of shares is appropriated to an individual at the same time under 2 or more approved schemes, the same proportion of the shares appropriated at that time under each scheme shall be regarded as being appropriated before the limit of €12,700 or the limit of €38,100, as the case may be, is exceeded.
(2A)The conditions referred to in paragraph (b) of subsection (1) are –
(a)the shares appropriated to such individual have been transferred to the trustees of the approved scheme concerned by the trustees of an employee share ownership trust to which section 519 applies,
(b)at each given time in the period of 5 years, or such lesser period as the Minister for Finance may be order prescribe, commencing with the date of the establishment of the employee share ownership trust 50 per cent, or such lesser percentage as the Minister for Finance may be order prescribe, of the securities retained by the trustees at the time were pledged by them as security for borrowings,
(c)at the time of transfer referred to in paragraph (a) a period of at least 10 years, or such lesser period (not being less than the period referred to in paragraph (b)) as the Revenue Commissioners may allow, commencing on the date the employee share ownership trust was established and ending at the time when all the shares pledged as security for borrowings by the trustees of the employee share ownership trust became unpledged (hereafter in this section referred to as the ‘encumbered period’) has elapsed, and
(d)no shares which were pledged, at any time since the trust was established, as security for borrowings by the trustees of the employee share ownership trust were previously transferred to the trustees of the approved scheme because they remained so pledged during the encumbered period.
(2B)The limit of €38,100 in paragraph (b) of subsection (1) may only be applied in the first year of assessment during which the encumbered period has elapsed and then only in respect of shares appropriated after that period has so elapsed.
(3)Where the trustees of an approved scheme appropriate shares to an individual at a time when the individual is ineligible to participate in the scheme by virtue of Part 4 of Schedule 11, subsections (4) to (7) shall apply in relation to those shares, and in those subsections those shares are referred to as “unauthorised shares”.
(4)For the purposes of any provision of this Chapter charging an individual to income tax under Schedule E by reason of the occurrence of an event relating to any of the individual’s shares –
(a)the appropriate percentage in relation to excess shares or unauthorised shares shall in every case be 100 per cent, and
(b)without prejudice to section 512(6), the event shall be treated as relating to shares which are not excess shares or unauthorised shares before shares which are.
(5)Excess shares or unauthorised shares which have not been disposed of before the release date, or if it is earlier, the date of the death of the participant whose shares they are, shall be treated for the purposes of this Chapter as having been disposed of by the trustees immediately before the release date or, as the case may require, the date of the participant’s death, for a consideration equal to their market value at that time.
(6)The locked-in value at any time of any excess shares or unauthorised shares shall be their market value at that time.
(7)Where there has been a company reconstruction to which section 514 applies, a new share (within the meaning of that section) shall be treated as an excess share or unauthorised share if the corresponding share (within the meaning of that section) or, if there was more than one corresponding share, each of them was an excess share or an unauthorised share.
(8)Where an order is proposed to be made under subsection (2A)(b), a draft of the order shall be laid before Dáil Éireann, and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.
516.
Assessment of trustees in respect of sums received.
Where in connection with a direction to transfer the ownership of a participant’s shares to which paragraph (c) of section 511(4) applies the trustees receive such a sum as is referred to in that paragraph –
(a)the trustees shall be chargeable to income tax under Case IV of Schedule D on an amount equal to the appropriate percentage of the locked-in value of the shares at the time of the direction, and
(b)the amount on which the participant is to be charged to income tax as a result of the transfer shall be deemed to be an amount from which income tax has been deducted at the standard rate pursuant to section 238.
517.
Payments to trustees of approved profit sharing scheme.
(1)Subject to subsections (3) and (4), as respects any accounting period, any sum expended in that accounting period by the company concerned or, in the case of a group scheme, by a participating company in making a payment or payments to the trustees of an approved scheme shall be included –
(a)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains for that accounting period of a trade carried on by that company, or
(b)if that company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for that accounting period for the purposes of corporation tax,
only if one of the conditions in subsection (2)(b) is fulfilled.
(2)
(a)In this subsection, “the relevant period” means the period of 9 months beginning on the day following the end of the period of account in which the sum mentioned in subsection (1) is charged as an expense of the company incurring the expenditure or such longer period as the Revenue Commissioners may allow by notice in writing given to that company.
(b)The conditions referred to in subsection (1) are –
(i)that before the expiry of the relevant period the sum mentioned in subsection (1) is applied by the trustees in the acquisition of shares for appropriation to individuals who are eligible to participate in the scheme by virtue of their being or having been employees or directors of the company making the payment, and
(ii)that the sum is necessary to meet the reasonable expenses of the trustees in administering the scheme.
(3)
(a)In this subsection, “trading income”, in relating to any trade, means the income from the trade computed in accordance with the rules applicable to Case I of Schedule D before any deduction under this Chapter and after any set-off or reduction of income by virtue of section 396 or 397, and after any deduction or addition by virtue of section 307 or 308, and after any deduction by virtue of section 666.
(b)No deduction shall be allowed under this section or under any other provision of the Tax Acts in respect of so much of any sum or the aggregate amount of any sums expended by a participating company in an accounting period in the manner referred to in subsection (1) as exceeds the company’s –
(i)trading income for that accounting period, in the case of a company to which paragraph (a) of that subsection applies, or
(ii)income for that accounting period, in the case of a company to which paragraph (b) of that subsection applies, after taking into account any sums which apart from this section are to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(4)The deduction to be allowed under this section or under any other provision of the Tax Acts in respect of any sum or the aggregate amount of any sums expended by a participating company in an accounting period in the manner referred to in subsection (1) shall not exceed such sum as is in the opinion of the Revenue Commissioners reasonable, having regard to the number of employees or directors of the company making the payment who have agreed to participate in the scheme, the services rendered by them to that company, the levels of their remuneration, the length of their service or similar factors.
(5)For the purposes of this section, the trustees of an approved scheme shall be taken to apply sums paid to them in the order in which the sums are received by them.
518.
Costs of establishing profit sharing schemes.
(1)This section shall apply to a sum expended on or after the 10th day of May, 1997, by a company in establishing a profit sharing scheme which the Revenue Commissioners approve of in accordance with Part 2 of Schedule 11 and under which the trustees acquire no shares before such approval is given.
(2)A sum to which this section applies shall be included –
(a)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(b)if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83 (2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(3)In a case where –
(a)subsection (2) applies, and
(b)the approval is given after the end of the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended,
then, for the purpose of subsection (2), the sum shall be treated as expended in the accounting period in which the approval is given and not in the accounting period mentioned in paragraph (b).
Chapter 2
Employee share ownership trusts (s. 519)
519.
Employee share ownership trusts.
(1)
(a)This section shall apply to an employee share ownership trust which the Revenue Commissioners have approved of as a qualifying employee share ownership trust in accordance with Schedule 12 and which approval has not been withdrawn.
(b)This section shall be construed together with Schedule 12.
(2)Where, in an accounting period of a company, the company expends a sum –
(a)in establishing a trust to which this section applies, or
(b)in making a payment by means of contribution to the trustees of a trust which at the time the sum is expended is a trust to which this section applies, and –
(i)at that time the company or a company which it then controls has employees who are eligible to benefit under the terms of the trust deed, and
(ii)before the expiry of the expenditure period the sum is expended by the trustees for one or more of the qualifying purposes,
then, the sum shall be included –
(I)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains for the accounting period of a trade carried on by that company, or
(II)if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for that accounting period for the purposes of corporation tax.
(3)Where –
(a)subsection (2)(a) applies, and
(b)the trust is established after the end of the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended by the company,
then, for the purposes of subsection (2), the sum shall be treated as expended in the accounting period in which the trust is established and not in the accounting period mentioned in paragraph (b).
(4)For the purposes of subsection (2)(b)(i), the question whether one company is controlled by another shall be construed in accordance with section 432.
(5)For the purposes of subsection (2)(b)(ii) –
(a)each of the following shall be a qualifying purpose –
(i)the acquisition of shares in the company which established the trust,
(ii)the repayment of sums borrowed,
(iii)the payment of interest on sums borrowed,
(iv)the payment of any sum to a person who is a beneficiary under the terms of the trust deed,
(iva)the payment of any sum or the transfer of securities to the personal representatives of a deceased beneficiary under the terms of the trust deed, and
(v)the meeting of expenses,
and
(b)the expenditure period shall be the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended by the company or such longer period as the Revenue Commissioners may allow by notice given to the company.
(6)For the purposes of this section, the trustees of an employee share ownership trust shall be taken to expend sums paid to them in the order in which the sums are received by them, irrespective of the number of companies making payments.
(7)The trustees of a trust to which this section applies shall not be chargeable to income tax in respect of income consisting of dividends in respect of securities held by the trust if, and to the extent that, the income is expended within the expenditure period (within the meaning of paragraph 13 of Schedule 12) by the trustees for one or more of the qualifying purposes referred to in that paragraph.
(7A)Where the trustees of a trust to which this section applies –
(a)sell securities on the open market, or
(b)receive a sum on the redemption of securities,
any gain accruing to such trustees shall not be a chargeable gain if, and to the extent that the proceeds of such sale or redemption, as the case may be, are used –
(i)to repay moneys borrowed by those trustees,
(ii)to pay interest on such borrowings, or
(iii)to pay a sum to the personal representatives of a deceased beneficiary.
(8)Where the trustees of a trust to which this section applies transfer securities to the trustees of a profit sharing scheme approved under Part 2 of Schedule 11, any gain accruing to those first-mentioned trustees on that transfer shall not be a chargeable gain.
(8A)Where the trustees of a trust to which this section applies transfer securities to the personal representatives of a deceased beneficiary, any gain accruing to the trustees on that transfer shall not be a chargeable gain.
(8B)The payment of any sum as is referred to in subsection (7A)(iii) or the transfer of any securities to which subsection (8A) applies shall, notwithstanding any other provision of the Income Tax Acts, be exempt from income tax.
(9)Notwithstanding anything in subsections (1) to (8B), where the Revenue Commissioners in accordance with Schedule 12 withdraw approval of an employee share ownership trust as a qualifying employee share ownership trust, then, as on and from the date from which that withdrawal has effect, this section shall not apply in relation to –
(a)any sum expended by a company in making a payment to that trust,
(b)income consisting of dividends in respect of securities held by that trust,
(c)the transfer of securities to a profit sharing scheme approved under Part 2 of Schedule 11,
(ca)the payment of any sum or the transfer of securities to the personal representatives of a deceased beneficiary of the trust, or
(d)the gain accruing to the trustees of that trust from –
(i)the sale on the open market, or
(ii)the redemption,
of securities.
(10)For the purposes of this section –
‘deceased beneficiary’ means a person who on the date of such person’s death –
(a)would have been eligible to have securities appropriated to him or her, had such securities been available for appropriation, under a scheme approved of by the Revenue Commissioners under Schedule 11 and for which approval has not been withdrawn, and
(b)was a beneficiary under the terms of a trust deed of an employee share ownership trust approved of by the Revenue Commissioners under Schedule 12 and for which approval has not been withdrawn and which trust deed contained provision for the transfer of securities to the trustees of the scheme referred to in paragraph (a) and for the payment of sums and for the transfer of securities to the personal representatives of deceased beneficiaries.
Chapter 3
Savings-related share option schemes (ss. 519A-519C)
519A.
Approved savings-related share option schemes.
(1)
(a)The provisions of this section shall apply where an individual obtains a right to acquire shares in a body corporate –
(i)by reason of the individual’s office or employment as a director or employee of that or any other body corporate, and
(ii)that individual obtains that right in accordance with the provisions of a savings-related share option scheme approved under Schedule 12A on or after the 6th day of April, 1999, and in respect of which approval has not been withdrawn.
(b)This section shall be construed together with Schedule 12A.
(2)Tax shall not be chargeable under any provision of the Tax Acts in respect of the receipt of the right referred to in subsection (1).
(3)Subject to subsection (4) if the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved tax shall not be chargeable under any provision of the Tax Acts in respect of any gain realised by the exercise of the right.
(3A)
(a)Where, in exercising a right in accordance with the provisions of the scheme at a time when it is approved, the individual acquires scheme shares from a relevant body, neither a chargeable gain nor an allowable loss shall accrue to the relevant body on the disposal of the scheme shares, and the individual shall, notwithstanding section 547(1)(a), be deemed for the purposes of the Capital Gains Tax Acts to have acquired the scheme shares for a consideration equal to the amount paid for their acquisition.
(b)In this subsection and in section 519B –
‘relevant body’ means a trust or a company which exists for the purpose of acquiring and holding scheme shares;
‘schemes shares’ has the meaning assigned to it by paragraph 10 of Schedule 12A.
(4)Subsection (3) shall not apply in respect of a right obtained by a person under a scheme which is exercised within 3 years of its being obtained by virtue of a provision included in a scheme pursuant to paragraph 22 of Schedule 12A.
(5)In this section ‘savings-related share option scheme has the meaning assigned to it by Schedule 12A.
519B.
Costs of establishing savings-related share option schemes.
(1)Subject to subsection (2A) this section shall apply to a sum expended on or after the 6th day of April, 1999, by a company in establishing a savings-related share option scheme which the Revenue Commissioners approve of in accordance with the provisions of Schedule 12A and under which no employee or director obtains rights before such approval is given.
(2)A sum to which this section applies shall be included –
(a)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(b)if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(2A)Notwithstanding any provision of the Tax Acts, any sum expended by the company, either directly or indirectly, to enable a relevant body to acquire scheme shares shall not be included –
(a)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(b)if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(3)In a case where –
(a)subsection (2) applies, and
(b)the approval is given after the end of the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended,
then, for the purpose of subsection (2), the sum shall be treated as expended in the accounting period in which the approval is given and not the accounting period mentioned in paragraph (b).
519C.
Interest, etc. under certified contractual savings schemes.
(1)In this section –
“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 savings institution” means any of the following persons –
(a)a person who is a holder of a licence granted under section 9 or an authorisation granted under section 9A of the Central Bank Act 1971, or a person who holds a licence or other similar authorisation under the law of an EEA state, other than the State, which corresponds to a licence granted under the said section 9,
(b)a building society within the meaning of section 256,
(c)a trustee savings bank within the meaning of the Trustee Savings Banks Act, 1989,
(d)[deleted]
(e)[deleted]
(f)[deleted]
(g)the Post Office Savings Bank,
(h)a credit union within the meaning of the Credit Union Act, 1997, or
(i)such other person as the Minister for Finance may by order prescribe.
(2)Any terminal bonus or interest paid by a qualifying savings institution to an individual under a certified contractual savings scheme shall be exempt from income tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts.
(3)Any terminal bonus or interest paid by a qualifying savings institution under a certified contractual savings scheme shall not, where the qualifying savings institution is a relevant deposit taker within the meaning of section 256, be relevent interest for the purposes of that section and accordingly shall not be subject to deduction of appropriate tax under section 257.
(4)In this section “certified contractual savings scheme” means a scheme –
(a)which provides for periodical contributions to be made by individuals for a specified period to a qualifying savings institution where the deposit represented by such contributions would, but for subsection (3), constitute a relevant deposit within the meaning of section 256 if the qualifying savings institution were a relevant deposit taker within the meaning of that section,
(b)where the individuals referred to in paragraph (a) –
(i)are eligible to participate in, that is to say, to obtain and exercise rights under, an approved savings-related share option scheme, and
(ii)whose contributions under the scheme are to be used in accordance with paragraph 17 of Schedule 12A,
and
(c)which is certified by the Revenue Commissioners as qualifying for exemption under this section by reference to requirements specified by the Minister for Finance in accordance with Schedule 12B.
(5)Schedule 12B to this Act which contains provisions supplementing this section shall have effect.
(6)This section shall apply in relation to any terminal bonus or interest paid by a qualifying savings institution on or after the 6th day of April, 1999, under a certified contractual savings scheme.
Chapter 4 Approved Share Option Schemes (s. 519D)
519D.
Approved Share Option Schemes.
(1)The provisions of this section shall apply where an individual obtains a right to acquire shares in a body corporate –
(a)by reason of the individual’s office or employment as a director or employee of that or any other body corporate, and
(b)that individual obtains the right in accordance with the provisions of a share option scheme approved under Schedule 12C and in respect of which approval has not been withdrawn.
(2)Tax shall not be chargeable under any provision of the Tax Acts in respect of the receipt of the right referred to in subsection (1).
(3)Subject to subsection (4) (except where paragraph 18(2) of Schedule 12C applies), if the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved –
(a)tax shall not be chargeable under any provision of the Tax Acts in respect of any gain realised by the exercise of the right, and
(b)notwithstanding section 547(1)(a), the individual shall be deemed for the purposes of the Capital Gains Tax Acts to have acquired the shares, acquired by the exercise of the right, for a consideration equal to the amount paid for their acquisition.
(4)Subsection (3) shall not apply in relation to the exercise by any individual of a right in accordance with the provisions of a scheme if the period beginning with his or her obtaining the right and ending with his or her disposal of any of –
(a)the shares acquired by the exercise of the right, or
(b)in a case where section 584, 586 or 587 applies, the shares received in exchange for the shares so acquired,
is less than 3 years.
(5)
(a)Where, in exercising a right in accordance with the provisions of the scheme at a time when it is approved, the individual acquires scheme shares from a relevant body, neither a chargeable gain nor an allowable loss shall accrue to the relevant body on the disposal of the scheme shares, and the individual shall, notwithstanding section 547(1)(a), be deemed for the purposes of the Capital Gains Tax Acts to have acquired the scheme shares for a consideration equal to the amount paid for their acquisition.
(b)In this subsection and in subsection (6) –
‘relevant body’ means a trust or a company which exists for the purpose of acquiring and holding scheme shares;
‘scheme shares’ has the meaning assigned to it by paragraph 11 of Schedule 12C.
(6)
(a)Subject to paragraph (c), this subsection applies to a sum expended by a company in establishing a share option scheme which the Revenue Commissioners approve of in accordance with the provisions of Schedule 12C and under which, subject to subsection (7), no employee or director obtains rights before such approval is given.
(b)A sum to which this subsection applies shall be included –
(i)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(ii)if a company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(c)Notwithstanding paragraph (b) or any other provision of the Tax Acts, any sum expended by a company, either directly or indirectly, to enable a relevant body to acquire scheme shares shall not be included –
(i)in the sums to be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(ii)if the company is an investment company within the meaning of section 83 or a company in the case of which that section applies by virtue of section 707, in the sums to be deducted under section 83(2) as expenses of management in computing the profits of the company for the purposes of corporation tax.
(d)In a case where –
(i)paragraph (b) applies, and
(ii)the approval is given after the end of the period of 9 months beginning on the day following the end of the accounting period in which the sum is expended,
then, for the purposes of paragraph (b), the sum shall be treated as expended in the accounting period in which approval is given and not the accounting period mentioned in subparagraph (ii).
(7)
(a)Where a share option scheme is approved by the Revenue Commissioners under Schedule 12C and, prior to such approval, an individual had obtained under the scheme a right which meets the conditions of paragraph (b), that right shall be treated for all the purposes of this section and Schedule 12C as if it had been obtained under an approved scheme.
(b)The conditions of this paragraph are –
(i)the right was exercised on or after 15 February 2001,
(ii)the scheme is approved by the Revenue Commissioners under Schedule 12C on or before 31 December 2001, and
(iii)at the time –
(I)the right was obtained, and
(II)the right was exercised, if such exercise occurred before the scheme was approved under Schedule 12C,
the scheme would, at each of those times, have been capable of approval under Schedule 12C if that Schedule had been in force from the time the right was obtained.
(8)The exemption from income tax authorised by subsection (2) in respect of the receipt of the right referred to in subsection (1) shall not apply where the right is received on or after 24 November 2010.
(9)The exemption from income tax authorised by subsection (3) in respect of any gain realised by the exercise of the right referred to in subsection (1) shall not apply where the gain from the exercise of the right is realised on or after 24 November 2010.
Schedule 11 Profit Sharing Schemes
Schedule 11, Part 1 Interpretation (paras. 1-2)
Section 510.
1.In this Schedule, “control” shall be construed in accordance with section 432.
2.For the purposes of this Schedule, a company shall be a member of a consortium owning another company if it is one of not more than 5 companies which between them beneficially own not less than 75 per cent of the other company’s ordinary share capital and each of which beneficially owns not less than 5 per cent of that capital.
Schedule 11, Part 2 Approval of schemes (paras. 3-7)
Section 510.
3.
(1)On the application of a body corporate (in this Schedule referred to as “the company concerned”) which has established a profit sharing scheme which complies with subparagraphs (3) and (4), the Revenue Commissioners shall, subject to section 511, approve of the scheme –
(a)if they are satisfied in accordance with paragraph 4, and
(b)unless it appears to them that there are features of the scheme which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of interests in shares.
(2)Where the company concerned has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control, and in this Schedule a scheme which is expressed so to extend is referred to as a “group scheme” and, in relation to a group scheme, “participating company” means the company concerned or a company of which for the time being the company concerned has control and to which for the time being the scheme is expressed to extend.
(3)The scheme shall provide for the establishment of a body of persons resident in the State (in this Schedule referred to as “the trustees”) –
(a)who, out of moneys paid to them by the company concerned or, in the case of a group scheme, by a participating company, are required by the scheme to acquire shares in respect of which the conditions in Part 3 of this Schedule are fulfilled,
(b)who are under a duty to appropriate shares acquired by them to individuals who participate in the scheme, not being individuals ineligible by virtue of Part 4 of this Schedule, and
(c)whose functions with respect to shares held by them are regulated by a trust which is constituted under the law of the State and the terms of which are embodied in an instrument which complies with Part 5 of this Schedule.
(4)The scheme shall provide that the total of the initial market values of the shares appropriated to any one participant in a year of assessment will not exceed €12,700, or where paragraph (b) of subsection (1) of section 515 applies, €38,100.
(5)An application under subparagraph (1) shall be made in writing and shall contain such particulars and be supported by such evidence as the Revenue Commissioners may require.
4.
(1)The Revenue Commissioners shall be satisfied that at any time every person who –
(a)
(i)as respects a profit sharing scheme approved before the 10th day of May, 1997, is then a full-time employee or director of the company concerned or, in the case of a group scheme, of a participating company, or
(ii)as respects a profit sharing scheme approved on or after the 10th day of May, 1997, is then an employee or full-time director of the company concerned or, in the case of a group scheme, of a participating company,
(b)has been such an employee or director at all times during a qualifying period, not exceeding 3 years, ending at that time, and
(c)is chargeable to income tax in respect of his or her office or employment under Schedule E,
will then be eligible, subject to Part 4 of this Schedule, to participate in the scheme on similar terms.
(1A)
(a)As respects a profit sharing scheme approved on or after the date of the passing of the Finance Act, 1998, the Revenue Commissioners must be satisfied –
(i)that there are no features of the scheme (other than any which are included to satisfy the requirements of Chapter 1 of Part 17 and this Schedule) which have or would have the effect of discouraging any description of employees or former employees who fulfil the conditions in subparagraph (1), having regard to subparagraph (1B), from participating in the scheme, and
(ii)where the company concerned is a member of a group of companies, that the scheme does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of higher or the highest levels of remuneration.
(b)For the purposes of this subparagraph –
(i)’a group of companies’ means a company and any other companies of which it has control or with which it is associated, and
(ii)a company shall be associated with another company where it could reasonably be considered that –
(I)both companies act in pursuit of a common purpose,
(II)any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading operations carried on or to be carried on by both companies, or
(III)both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity.
(1B)As respects a scheme which has been established by a relevant company (within the meaning of paragraph 1 of Schedule 12) –
(a)any reference in subparagraph (1)(a)(ii) to an employee or a full-time director shall be deemed to be a reference to an individual who was such an employee or a full-time director, as the case may be, of that relevant company or of a company within the relevant company’s group (within the meaning of paragraph 1(3A) of Schedule 12) on the day the scheme was established, and
(b)for the purposes of satisfying the qualifying period requirement referred to in subparagraph (1)(b), such periods in which an individual was or is an employee or a director of a company referred to in subparagraphs (3)(b) and (13) of paragraph 11A of Schedule 12 shall also be taken into account.
(1C)
(a)As respects a profit sharing scheme approved on or after 4 February 2010, the Revenue Commissioners shall be satisfied that there are no arrangements connected in any way, directly or indirectly, with the scheme, which make provision for a loan or loans to be made to some or all of the individuals eligible to participate in the scheme.
(b)For the purposes of this subparagraph –
‘arrangements’ include any scheme, agreement, undertaking, or understanding of any kind, whether or not it is, or it is intended to be legally enforceable;
‘loan’ includes any form of credit.
(2)For the purposes of subparagraph (1), the fact that the number of shares to be appropriated to the participants in a scheme varies by reference to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that the participants are not eligible to participate in the scheme on similar terms.
5.
(1)Where at any time after the Revenue Commissioners have approved of a scheme –
(a)a participant is in breach of any of his or her obligations under paragraphs (a), (c) and (d) of section 511(4),
(b)there is, with respect to the operation of the scheme, any contravention of any provision of Chapter 1 of Part 17, the scheme itself of the terms or the trust referred to in paragraph 3(3)(c),
(c)any shares of a class of which shares have been appropriated to participants receive different treatment in any respect from the other shares of that class, being in particular different treatment in respect of –
(i)the dividend payable,
(ii)repayment,
(iii)the restrictions attaching to the shares, or
(iv)any offer of substituted or additional shares, securities or rights of any description in respect of the shares,
(d)the Revenue Commissioners cease to be satisfied in accordance with paragraph 4, or
(e)where a person fails to provide information requested by the Revenue Commissioners under section 510(7) or information which is required to be delivered under section 510(8),
then, the Revenue Commissioners may, subject to subparagraph (3), withdraw the approval with effect from that time or from such later time as they may specify.
(2)Where at any time after the Revenue Commissioners have approved of a scheme an alteration is made in the scheme or the terms of the trust referred to in paragraph 3(3)(c), the approval shall not have effect after the date of the alteration unless the Revenue Commissioners have approved of the alteration.
(3)It shall not be a ground for withdrawal of approval of a scheme that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which the shares were issued, treatment less favourable than that accorded to shares issued before that date.
6.A company aggrieved by a decision of the Revenue Commissioners made in respect of that company –
(a)to not approve of a scheme under paragraph 3(1),
(b)to not approve of an alteration to a scheme or the terms of a trust under paragraph 5(2), or
(c)to withdraw approval of a scheme under paragraph 5(1),
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.
7.[deleted]
Schedule 11, Part 3 Conditions as to the shares (paras. 8-11A)
Section 510.
8.Subject to paragraphs 8A and 8B, the shares shall form part of the ordinary share capital of –
(a)the company concerned,
(b)a company which has control of the company concerned,
(c)a company which either is or has control of a company which –
(i)is a member of a consortium owning either the company concerned or a company having control of that company, and
(ii)beneficially owns not less than 15 per cent of the ordinary share capital of the company so owned, or
(d)a company which issued the shares to the trustees of an employee share ownership trust to which section 519 applies, in an exchange to which section 586 applies, which shares were transferred to the trustees of an approved scheme by the trustees of the employee share ownership trust.
8A.Any reference in subparagraph (d) of paragraph 8 to shares shall be construed as including a reference to shares which were issued to the trustees of the employee share ownership trust referred to in that subparagraph as a result of a reorganisation or reduction of share capital (in accordance with section 584) which occurred subsequent to the exchange referred to in that subparagraph and which shares represent –
(a)the shares issued in the exchange referred to in that subparagraph, or
(b)the specified securities issued in the exchange referred to in paragraph (b) of the definition of ‘specified securities’ in section 509(1).
8B.
(1)The shares shall not be shares –
(a)in a service company, or
(b)in a company that has control of a service company, where the company is under the control of a person or persons referred to in subparagraph (2)(a)(i) as it applies to a service company.
(2)For the purposes of this paragraph –
(a)a company is a service company if the business carried on by the company consists wholly or mainly of the provision of the services of persons employed by the company and the majority of those services are provided to –
(i)a person who has, or 2 or more persons who together have, control of the company,
(ii)a company associated with the company, or
(iii)a partnership associated with the company,
(b)a company is associated with another company where –
(i)both companies are under the control (within the meaning of section 432) of the same person or persons, or
(ii)it could reasonably be considered that –
(I)both companies act in pursuit of a common purpose,
(II)any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading operations carried on or to be carried on by both companies, or
(III)both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity,
(c)a partnership is associated with a company where the partnership and the company act in pursuit of a common purpose,
(d)a reference to a person includes a reference to a partnership, and
(e)where a partner, or a partner together with another person or persons, has control of a company, the partnership is to be treated as having control of that company.
9.The shares shall be –
(a)shares of a class quoted on a recognised stock exchange,
(b)shares in a company not under the control of another company, or
(c)shares in a company under the control of a company (other than a company which is, or if resident in the State would be, a close company within the meaning of section 430) whose shares are quoted on a recognised stock exchange.
10.
(1)The shares shall be –
(a)fully paid up,
(b)not redeemable, and
(c)not subject to any restrictions other than restrictions which attach to all shares of the same class or, as respects a profit sharing scheme approved on or after the 10th day of May, 1997, a restriction authorised by subparagraph (2).
(2)Subject to subparagraphs (3) and (4), the shares may be subject to a restriction imposed by the company’s constitution or articles of association –
(a)requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held, and
(b)requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.
(3)A restriction is not authorised by subparagraph (2) unless –
(a)any disposal required by the restriction will be by means of sale for a consideration in money on terms specified in the constitution or articles of association, and
(b)the constitution or articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in clause (a).
(4)Nothing in subparagraph (2) authorises a restriction which would require a person, before the release date, to dispose of his or her beneficial interest in shares the ownership of which has not been transferred to him or her.
11.Except where the shares are in a company whose ordinary share capital, at the time of the acquisition of the shares by the trustees, consists of shares of one class only, the majority of the issued shares of the same class shall be held by persons other than –
(a)persons who acquired their shares –
(i)in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the company concerned or any other company, and
(ii)not in pursuance of an offer to the public,
(b)trustees holding shares on behalf of persons who acquired their beneficial interests in the shares in pursuance of a right or opportunity mentioned in subparagraph (a), and
(c)in a case where the shares are within paragraph 9(c) and are not within paragraph 9(a), companies which have control of the company whose shares are in question or of which that company is an associated company within the meaning of section 432.
11A.
(1)Notwithstanding any other provision of this Schedule, in the case of specified securities, this Schedule shall, with any necessary modification, apply as if this paragraph were substituted for paragraphs 8 to 11.
(2)The specified securities shall be issued by –
(a)a company not under the control of another company, or
(b)a company under the control of a company (other than a company which is, or if resident in the State would be, a close company within the meaning of section 430) whose ordinary shares are quoted on a recognised stock exchange.
(3)The specified securities shall not be subject to any restrictions other than restrictions which attach to all specified securities of the same class, or a restriction authorised by subparagraph (4).
(4)Subject to subparagraphs (5) and (6), the specified securities may be subject to a restriction imposed by the company’s constitution or articles of association –
(a)requiring all specified securities held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held, and
(b)requiring all specified securities acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.
(5)A restriction is not authorised by subparagraph (4) unless –
(a)any disposal required by the restriction is to be by means of a sale for a consideration in money on terms specified in the constitution or articles of association, and
(b)the constitution or articles also contain general provisions by virtue of which any person disposing of specified securities of the same class (whether or not held or acquired as mentioned in subparagraph (4)) may be required to sell them on terms which are the same as those mentioned in clause (a).
Schedule 11, Part 4 Individuals ineligible to participate (paras. 12-14)
Section 510.
12.An individual shall not be eligible to have shares appropriated to him or her under the scheme at any time unless he or she is at that time or was within the preceding 18 months a director or employee of the company concerned or, if the scheme is a group scheme, of a participating company.
12A.Notwithstanding paragraph 12, an individual shall be eligible to have shares appropriated to him or her under the scheme at any time if –
(a)the shares were transferred to the trustees of the scheme by the trustees of an employee share ownership trust to which section 519 applies, and
(b)the individual is at that time, or was within the preceding 30 days, a beneficiary (within the meaning of paragraph 11 or paragraph 11A, as the case may be, of Schedule 12) of that employee share ownership trust.
13.An individual shall not be eligible to have shares appropriated to him or her under the scheme at any time in a year of assessment if in that year of assessment shares have been appropriated to him or her under another approved scheme established by the company concerned or by –
(a)a company which controls or is controlled by the company concerned or which is controlled by a company which also controls the company concerned, or
(b)a company which is a member of a consortium owning the company concerned or which is owned in part by the company concerned as a member of a consortium.
13A.
(1)Notwithstanding paragraph 13, an individual who has had shares appropriated to him or her in a year of assessment under an approved scheme established by a company (‘the first-mentioned company’) shall, subject to subparagraph (2), be entitled to have shares appropriated to him or her in that year of assessment under an approved scheme established by another company (‘the second-mentioned company’) if, in that year of assessment, the second-mentioned company acquires control, or is part of a consortium that acquires ownership, of the first-mentioned company under a scheme of reconstruction or amalgamation (within the meaning of section 587).
(2)Section 515 and paragraph 3(4) shall, subject to any necessary modification, apply as if the first-mentioned company and the second-mentioned company were the same company.
(3)This paragraph shall apply to an appropriation of shares made, on or after the date of the passing of the Finance Act, 2000, by the trustees of an approved scheme (within the meaning of section 510(1)).
13B.
(1)Nothing in paragraph 13 shall prevent shares being appropriated to an individual under an approved scheme established by a relevant company (within the meaning of paragraph 1 of Schedule 12) and where, in a year of assessment, shares have been appropriated to an individual under such an approved scheme, paragraph 13 shall apply as if those shares had not been appropriated to that individual in that year of assessment.
(2)Section 515 and paragraph 3(4) shall, subject to any necessary modification, apply in respect of all shares appropriated to that individual in that year of assessment.
14.
(1)An individual shall not be eligible to have shares appropriated to him or her under the scheme at any time if at that time he or she has, or at any time within the preceding 12 months had, a material interest in a close company which is –
(a)the company whose shares are to be appropriated, or
(b)a company which has control of that company or is a member of a consortium which owns that company.
(2)Subparagraph (1) shall apply in relation to a company which would be a close company but for section 430(1)(a) or 431.
(3)
(a)In this paragraph, “close company” has the meaning assigned to it by section 430.
(b)For the purpose of this paragraph –
(i)subsection (3) of section 433 shall apply –
(I)in a case where the scheme in question is a group scheme, with the substitution of a reference to all participating companies for the first reference to the company in paragraph (c)(ii) of that subsection, and
(II)with the substitution of a reference to 15 per cent for the reference in that paragraph to 5 per cent, and
(ii)section 437(2) shall apply, with the substitution of a reference to 15 per cent for the reference in that section to 5 per cent, for the purpose of determining whether a person has or had a material interest in a company.
Schedule 11, Part 5 Provisions as to the trust instrument (paras. 15-18)
Section 510.
15.The trust instrument shall provide that, as soon as practicable after any shares have been appropriated to a participant, the trustees will give him or her notice in writing of the appropriation –
(a)specifying the number and description of those shares, and
(b)stating their initial market value.
16.
(1)The trust instrument shall contain a provision prohibiting the trustees from disposing of any shares, except as mentioned in paragraphs (a), (b) or (c) of section 511(6), during the period of retention (whether by transfer to the participant or otherwise).
(2)The trust instrument shall contain a provision prohibiting the trustees from disposing of any shares after the end of the period of retention and before the release date except –
(a)pursuant to a direction given by or on behalf of the participant or any person in whom the beneficial interest in the participant’s shares is for the time being vested, and
(b)by a transaction which would not involve a breach of the participant’s obligation under paragraph (c) or (d) of section 511(4).
17.The trust instrument shall contain a provision requiring the trustees –
(a)subject to any direction referred to in section 513(3), to pay over to the participant any money or money’s worth received by them in respect of, or by reference to, any of the participant’s shares, other than money consisting of a sum referred to in section 511(4)(c) or money’s worth consisting of new shares within the meaning of section 514, and
(b)to deal only pursuant to a direction given by or on behalf of the participant (or any person referred to in paragraph 16(2)(a)) with any right conferred in respect of any of the participant’s shares to be allotted other shares, securities or rights of any description.
18.The trust instrument shall impose an obligation on the trustees –
(a)to maintain such records as may be necessary to enable the trustees to carry out their obligations under Chapter 1 of Part 17, and
(b)where the participant becomes liable to income tax under Schedule E by reason of the occurrence of any event, to inform the participant of any facts relevant to determining that liability.
Schedule 12 Employee Share Ownership Trusts
Section 519.
Interpretation
1.
(1)For the purposes of this Schedule –
“ordinary share capital” has the same meaning as in section 2;
“relevant company” means –
(a)a company into which a trustee savings bank has been reorganised under section 57 of the Trustee Savings Banks Act, 1989,
(b)ICC Bank plc,
(c)ACC Bank plc, or
(d)a company which acquired control of the Irish National Petroleum Corporation Limited;
“securities” means shares (including stock) and debentures.
(2)For the purposes of this Schedule, the question whether one company is controlled by another shall be construed in accordance with section 432.
(3)For the purposes of this Schedule, a company falls within the founding company’s group at a particular time if –
(a)it is the founding company, or
(b)at that time, it is controlled by the founding company and the trust concerned referred to in paragraph 2(1) is expressed to extend to it.
(3A)For the purposes of this Schedule a company falls within the relevant company’s group at a particular time if –
(a)it is the relevant company, or
(b)at that time, it is controlled by the relevant company and the trust concerned referred to in paragraph 2(1) is expressed to extend to it.
(4)
(a)In this subparagraph –
“associate” has the meaning assigned to it by subsection (3) of section 433, subject to the reference to the employees in both places where it occurs in subparagraph (ii) of paragraph (c) of that subsection being construed as including a reference to former employees;
“control” shall be construed in accordance with section 432.
(b)For the purposes of this Schedule, a person shall be treated as having a material interest in a company if the person, either on his or her own or with any one or more of his or her associates, or if any associate of his or her with or without any such other associates, is the beneficial owner of, or able directly or through the medium of other companies or by any other indirect means to control, more than 5 per cent of the ordinary share capital of the company.
(5)For the purposes of this Schedule, a trust shall be established when the deed under which it is established is executed.
Approval of Qualifying Trusts
2.
(1)On the application of a body corporate (in this Schedule referred to as ‘the founding company’) which has established an employee share ownership trust, the Revenue Commissioners shall approve of the trust as a qualifying employee share ownership trust if they are satisfied that the conditions in paragraphs 6 to 18 are complied with in relation to the trust.
(2)
(a)Where the founding company is a member of a group of companies, the Revenue Commissioners shall not approve of a trust under subparagraph (1) unless they are satisfied that the trust does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of higher or the highest levels of remuneration.
(b)For the purposes of this subparagraph –
(i)’a group of companies’ means a company and any other companies of which it has control or with which it is associated, and
(ii)a company shall be associated with another company where it could reasonably be considered that –
(I)both companies act in pursuit of a common purpose,
(II)any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading operations carried on or to be carried on by both companies, or
(III)both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity.
3.
(1)Where at any time after the Revenue Commissioners have approved of a trust –
(a)there is with respect to the operation of the trust any contravention of the conditions in paragraphs 6 to 18,
(b)any shares of a class of which shares have been acquired by the trustees receive different treatment in any respect from the other shares of that class, in particular, different treatment in respect of –
(i)the dividend payable,
(ii)repayment,
(iii)the restrictions attaching to the shares, or
(iv)any offer of substituted or additional shares, securities or rights of any description in respect of the shares, or
(c)where a person fails to provide information requested by the Revenue Commissioners under paragraph 3(4) or information which is required to be delivered under paragraph 3(5),
the Revenue Commissioners may, subject to subparagraph (3), withdraw the approval with effect from that time or from such later time as they may specify.
(2)Where at any time after the Revenue Commissioners have approved of a trust an alteration is made to the terms of the trust, the approval shall not have effect after the date of the alteration unless the Revenue Commissioners have approved of the alteration.
(3)It shall not be a ground for withdrawal of approval of a trust that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which the shares were issued, treatment which is less favourable than that accorded to shares issued before that date.
(4)The Revenue Commissioners may by notice in writing require any person to furnish to them, within such time as they may direct which is not less than 30 days, such information as they think necessary to enable them to either or both –
(a)determine whether to approve of an employee share ownership trust or withdraw an approval already given, and
(b)determine the liability to tax of any beneficiary under an approved employee share ownership trust.
(5)Without prejudice to subparagraph (4) the trustees of a trust shall as respects any year, prepare and deliver to the Revenue Commissioners on or before 31 March in the year following that year, a return in the prescribed form (within the meaning of Chapter 3 of Part 41A) of such particulars relating to the trust for that year as may be required by the prescribed form and sections 1052 and 1054 shall apply to a failure by the trustees to deliver a return in accordance with this subparagraph as they apply to a failure to deliver a return referred to in section 1052.
4.A founding company aggrieved by a decision of the Revenue Commissioners made in respect of that company –
(a)to not approve of a trust under paragraph 2(1),
(b)to not approve of an alteration to the terms of a trust under paragraph 3(2), or
(c)to withdraw approval of a trust under paragraph 3(1),
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.
5.The Revenue Commissioners may nominate any of their officers, including an inspector, to perform any acts and discharge any functions authorised by this Schedule to be performed or discharged by them.
General
6.
(1)The trust shall be established under a deed (in this Schedule and in section 519 referred to as “the trust deed”).
(2)The trust shall be established by the founding company which at the time the trust is established is not controlled by another company.
(3)Nothing in subparagraph (2) shall prohibit a company into which a trustee savings bank has been reorganised under section 57 of the Trustee Savings Banks Act, 1989, from establishing the trust at a time when the company is controlled by another company.
Trustees
7.The trust deed shall provide for the establishment of a body of trustees complying with paragraph 8, 9 or 10.
7A.Notwithstanding any other provision in this Schedule, in a case to which paragraph 11A applies, any reference in paragraph 8, 9 or 10 to an employee or a director of a company shall be construed as a reference to an individual who –
(a)was an employee or a director, as the case may be, of the relevant company or of a company within the relevant company’s group on the day the trust was established, and
(b)is, at the relevant time (within the meaning, as may be appropriate in the circumstances, of paragraph 8, 9 or 10), an employee or a director, as the case may be, of a company referred to in paragraph 11A(3)(b).
8.
(1)The trust deed shall –
(a)appoint the initial trustees;
(b)contain rules for the retirement and removal of trustees;
(c)contain rules for the appointment of replacement and additional trustees.
(2)The trust deed shall provide that at any time while the trust subsists (in this subparagraph referred to as “the relevant time”) –
(a)the number of trustees shall not be less than 3;
(b)all the trustees shall be resident in the State;
(c)the trustees shall include one person who is a trust corporation, a solicitor, or a member of such other professional body as the Revenue Commissioners may from time to time allow for the purposes of this paragraph;
(d)the majority of the trustees shall be persons who are not and have never been directors of any company within the founding company’s group at the relevant time;
(e)the majority of the trustees shall be representatives of the employees of the companies within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company;
(f)the trustees to whom subparagraph (e) relates shall, before being appointed as trustees, have been selected by a majority of the employees of the companies within the founding company’s group at the time of the selection.
9.
(1)The trust deed shall –
(a)appoint the initial trustees;
(b)contain rules for the retirement and removal of trustees;
(c)contain rules for the appointment of replacement and additional trustees.
(2)The trust deed shall be so framed that at any time while the trust subsists the conditions in subparagraph (3) are fulfilled as regards the persons who are then trustees, and in that subparagraph “the relevant time” means that time.
(3)The conditions referred to in subparagraph (2) are that –
(a)the number of trustees is not less than 3;
(b)all the trustees are resident in the State;
(c)the trustees include at least one person who is a professional trustee and at least 2 persons who are non-professional trustees;
(d)at least half of the non-professional trustees were, before being appointed as trustees, selected in accordance with subparagraph (6) or (7);
(e)all the trustees so selected are persons who are employees of companies within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.
(4)For the purposes of this paragraph, a trustee shall be a professional trustee at a particular time if –
(a)the trustee is then a trust corporation, a solicitor, or a member of such other professional body as the Revenue Commissioners allow for the purposes of this subparagraph,
(b)the trustee is not then an employee or director of any company then within the founding company’s group, and
(c)the trustee meets the requirements of subparagraph (5),
and for the purposes of this paragraph a trustee shall be a non-professional trustee at a particular time if the trustee is not then a professional trustee for those purposes.
(5)A trustee shall meet the requirements of this subparagraph if –
(a)he or she was appointed as an initial trustee and, before being appointed as trustee, was selected only by the persons who later became the non-professional initial trustees, or
(b)he or she was appointed as a replacement or additional trustee and, before being appointed as trustee, was selected only by the persons who were the non-professional trustees at the time of the selection.
(6)Trustees shall be selected in accordance with this subparagraph if the process of selection is one under which –
(a)all the persons who are employees of the companies within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are, in so far as is reasonably practicable, given the opportunity to stand for selection,
(b)all the employees of the companies within the founding company’s group at the time of the selection are, in so far as is reasonably practicable, given the opportunity to vote, and
(c)persons gaining more votes are preferred to those gaining less.
(7)Trustees shall be selected in accordance with this subparagraph if they are selected by persons elected to represent the employees of the companies within the founding company’s group at the time of the selection.
10.
(1)This paragraph shall apply where the trust deed provides that at any time while the trust subsists there shall be a single trustee.
(2)The trust deed shall –
(a)be so framed that at any time while the trust subsists the trustee is a company which at that time is resident in the State and controlled by the founding company;
(b)appoint the initial trustee;
(c)contain rules for the removal of any trustee and for the appointment of a replacement trustee.
(3)The trust deed shall be so framed that at any time while the trust subsists the company which is then the trustee is a company so constituted that the conditions in subparagraph (4) are then fulfilled as regards the persons who are then directors of the company, and in that subparagraph “the relevant time” means that time and “the trust company” means that company.
(4)The conditions referred to in subparagraph (3) are that –
(a)the number of directors is not less than 3;
(b)all the directors are resident in the State;
(c)the directors include at least one person who is a professional director and at least 2 persons who are non-professional directors;
(d)at least half of the non-professional directors were, before being appointed as directors, selected in accordance with subparagraph (7) or (8);
(e)all the directors so selected are persons who are employees of companies within the founding company’s group at the relevant time, and who do not have and have never had a material interest in any such company.
(5)For the purposes of this paragraph, a director shall be a professional director at a particular time if –
(a)the director is then a solicitor or a member of such other professional body as the Revenue Commissioners may at that time allow for the purposes of this subparagraph,
(b)the director is not then an employee of any company then within the founding company’s group,
(c)the director is not then a director of any such company other than the trust company, and
(d)the director meets the requirements of subparagraph (6),
and for the purposes of this paragraph a director shall be a nonprofessional director at a particular time if the director is not then a professional director for those purposes.
(6)A director shall meet the requirements of this subparagraph if –
(a)he or she was appointed as an initial director and, before being appointed as director, was selected only by the persons who later became the non-professional initial directors, or
(b)he or she was appointed as a replacement or additional director and, before being appointed as director, was selected only by the persons who were the non-professional directors at the time of the selection.
(7)Directors shall be selected in accordance with this subparagraph if the process of selection is one under which –
(a)all the persons who are employees of the companies within the founding company’s group at the time of the selection, and who do not have and have never had a material interest in any such company, are, in so far as is reasonably practicable, given the opportunity to stand for selection,
(b)all the employees of the companies within the founding company’s group at the time of the selection are, in so far as is reasonably practicable, given the opportunity to vote, and
(c)persons gaining more votes are preferred to those gaining less.
(8)Directors shall be selected in accordance with this subparagraph if they are selected by persons elected to represent the employees of the companies within the founding company’s group at the time of the selection.
Beneficiaries
11.
(1)The trust deed shall contain provision as to the beneficiaries under the trust in accordance with this paragraph.
(2)The trust deed shall provide that a person is a beneficiary at a particular time (in this subparagraph referred to as ‘the relevant time’) if –
(a)the person is at the relevant time an employee or director of a company within the founding company’s group,
(b)at each given time in a qualifying period the person was such an employee or director of a company falling within the founding company’s group at that given time,
(c)in the case of a director, at that given time the person worked as a director of the company concerned at the rate of at least 20 hours a week (disregarding such matters as holidays and sickness), and
(d)the person is chargeable to income tax in respect of his or her office or employment under Schedule E.
(2A)The trust deed may provide that a person is a beneficiary at a particular time if, but for subparagraph (2)(d), he or she would be a beneficiary within the rule which is included in the deed and conforms with subparagraph (2).
(2B)Subject to subparagraph (2C), the trust deed may provide that a person is a beneficiary at a particular time (in this subparagraph referred to as ‘the relevant time’) if –
(a)the person has at each given time in a qualifying period been an employee or director of a company within the founding company’s group at that given time,
(b)the person was such an employee or director –
(i)on the date the trust was established or at some time within 9 months prior to that date, or
(ii)at any time in the period of 5 years beginning with such date,
(c)the person has ceased to be an employee or director of the company or the company has ceased to be within that group,
(d)at each given time –
(i)in the case of an employee share ownership trust approved under paragraph 2 before the passing of the Finance Act, 2000, in the 5 year period referred to in clause (b), and
(ii)in the case of an employee share ownership trust approved under paragraph 2 on or after the passing of the Finance Act, 2000, in the 5 year period, or such lesser period as the Minister for Finance may by order prescribe, commencing on the date referred to in clause (b),
50 per cent, or such lesser percentage as the Minister for Finance may by order prescribe, of the securities retained by the trustees at that time were pledged by them as security for borrowings, and
(e)at the relevant time a period of not more than 20 years has elapsed since the trust was established.
(2C)The trust deed shall not contain a rule that conforms with subparagraph (2B) or (3) unless the rule is expressed as applying to every person within it.
(3)The trust deed may provide that a person is a beneficiary at a particular time (in this subparagraph referred to as “the relevant time”) if –
(a)the person has at each given time in a qualifying period been an employee or director of a company within the founding company’s group at that given time,
(b)the person has ceased to be an employee or director of the company or the company has ceased to be within that group, and
(c)
(i)in a case where the founding company is the Electricity Supply Board and as respects securities acquired by the trustees of the trust on or before 31 December 2001, the person was an employee or a director, as the case may be, of a company within the founding company’s group on 1 January 1998, and
(ii)in any other case, at the relevant time a period of not more than 18 months has elapsed since the person so ceased or the company so ceased, as the case may be.
(4)The trust deed may provide for a person to be a beneficiary if the person is a charity and the circumstances are such that –
(a)there is no person who is a beneficiary within the rule which is included in the deed and conforms with subparagraph (2) or with any rule which is so included and conforms with subparagraphs (2A), (2B) and (3), and
(b)the trust is in consequence being wound up.
(5)For the purposes of subparagraphs (2) and (2A), a qualifying period shall be a period –
(a)whose length is not more than 3 years,
(b)whose length is specified in the trust deed, and
(c)which ends with the relevant time (within the meaning of that subparagraph).
(6)For the purposes of subparagraphs (2B) and (3), a qualifying period shall be a period –
(a)whose length is equal to that of the period specified in the trust deed for the purposes of a rule which conforms with subparagraph (2), and
(b)which ends when the person or company, as the case may be, ceased as mentioned in subparagraphs (2B)(c) and (3)(b).
(7)The trust deed shall not provide for a person to be a beneficiary unless the person is within the rule which is included in the deed and conforms with subparagraph (2) or any rule which is so included and conforms with subparagraph (2A), (2B), (3) or (4).
(8)The trust deed shall provide that, notwithstanding any other rule which is included in it, a person cannot be a beneficiary at a particular time (in this subparagraph referred to as “the relevant time”) by virtue of a rule which conforms with subparagraph (2), (2A), (2B), (3) or (4) if –
(a)at the relevant time the person has a material interest in the founding company, or
(b)at any time in the period of one year preceding the relevant time the person has had a material interest in that company.
(9)For the purposes of this paragraph, “charity” means any body of persons or trust established for charitable purposes only.
(10)Where an order is proposed to be made under subparagraph (2B)(d), a draft of the order shall be laid before Dáil Éireann, and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.
11A.
(1)Notwithstanding any other provision of this Schedule, in any case where a trust is established by a company which is a relevant company, this Schedule shall, with any necessary modification, apply as respects the beneficiaries under the trust as if this paragraph were substituted for paragraph 11.
(2)The trust deed shall contain provision as to the beneficiaries under the trust in accordance with this paragraph.
(3)The trust deed shall provide that a person is a beneficiary at a particular time (in this subparagraph referred to as the ‘relevant time’) if –
(a)the person was an employee or a director of the relevant company or of a company within the relevant company’s group on the day the trust was established by that relevant company,
(b)the person is at the relevant time an employee or a director of –
(i)a company (in this subparagraph referred to as the ‘first-mentioned company’) which is, or was at any time since the day the trust was established, within the founding company’s group,
(ii)a company within a group of companies (within the meaning of paragraph 2(2)(b)) which has acquired control of the first-mentioned company,
(iii)a company to which –
(I)an employee, or
(II)a director,
referred to in clause (a) has been transferred under either or both the European Communities (Safe-guarding of Employees’ Rights on Transfer of Undertaking) Regulations, 1980 and 2000 and the Central Bank Act, 1971, or
(iv)a company within a group of companies (within the meaning of paragraph 2(2)(b)), of which the company referred to in subclause (iii) is, or was at any time, a member,
(c)at each given time in a qualifying period the person was such an employee or a director of a company referred to in clause (b),
(d)in the case of a director, at that given time the person worked as a director of a company referred to in clause (b) or of a company within the relevant company’s group at the rate of at least 20 hours a week (disregarding such matters as holidays and sickness), and
(e)the person is chargeable to income tax in respect of his or her office or employment under Schedule E.
(4)The trust deed may provide that a person is a beneficiary at a particular time if, but for subparagraph (3)(e), he or she would be a beneficiary within the rule which is included in the deed and conforms with subparagraph (3).
(5)Subject to subparagraph (6), the trust deed may provide that a person is a beneficiary at a particular time (in this subparagraph referred to as the ‘relevant time’) if –
(a)the person was an employee or a director of the relevant company or of a company within the relevant company’s group on the day the trust was established by that relevant company, or, in the case of a company referred to in clause (d) of the definition of ‘relevant company’ in paragraph 1(1), at some time within 9 months prior to that day,
(b)the person has at each given time in a qualifying period been an employee or a director of a company referred to in subparagraph (3)(b) at that given time,
(c)the person has ceased to be an employee or a director of a company referred to in subparagraph (3)(b),
(d)at each given time in the 5 year period, or such lesser period as the Minister for Finance may by order prescribe, commencing on the date the trust was established, 50 per cent or such lesser percentage as the Minister for Finance may by order prescribe, of the securities retained by the trustees at that time were pledged by them as security for borrowings, and
(e)at the relevant time a period of not more than 20 years has elapsed since the trust was established.
(6)The trust deed may provide that a person is a beneficiary at a particular time (in this subparagraph referred to as the ‘relevant time’) if –
(a)the person was an employee or a director of the relevant company or of a company within the relevant company’s group on the day the trust was established by that relevant company, or, in the case of a company referred to in clause (d) of the definition of ‘relevant company’ in paragraph 1(1), at some time within 9 months prior to that day,
(b)the person has at each given time in a qualifying period been an employee or a director of a company referred to in subparagraph (3)(b) at that given time,
(c)the person has ceased to be an employee or a director of a company referred to in subparagraph (3)(b), and
(d)at the relevant time a period of not more than 18 months has elapsed since the person so ceased.
(7)The trust deed shall not contain a rule that conforms with subparagraph (5) or (6) unless the rule is expressed as applying to every person within it.
(8)The trust deed may provide for a person to be a beneficiary if the person is a charity and the circumstances are such that –
(a)there is no person who is a beneficiary within the rule which is included in the deed and conforms with subparagraph (3) or with any rule which is so included and conforms with subparagraph (4), (5) or (6); and
(b)the trust is in consequence of being wound up.
(9)For the purposes of subparagraph (3), a qualifying period shall be a period –
(a)whose length is not more than 3 years,
(b)whose length is specified in the trust deed, and
(c)which ends with the relevant time (within the meaning of that subparagraph).
(10)For the purposes of subparagraphs (5) and (6), a qualifying period shall be a period –
(a)whose length is equal to that of the period specified in the trust deed for the purposes of a rule which conforms with subparagraph (3), and
(b)which ends when the person ceased as mentioned in subparagraph (5)(c) or (6)(c), as the case may be.
(11)The trust deed shall not provide for a person to be a beneficiary unless the person is within the rule which is included in the deed and conforms with subparagraph (3) or any rule which is so included and conforms with subparagraph (4), (5), (6) or (8).
(12)The trust deed shall provide that, notwithstanding any other rule which is included in it, a person cannot be a beneficiary at a particular time (in this subparagraph referred to as the ‘relevant time’) by virtue of a rule which conforms with subparagraph (3), (4), (5), (6) or (8) if –
(a)at the relevant time the person has a material interest in a company referred to in subparagraph (3)(b), or
(b)at any time in the period of one year preceding the relevant time the person has had a material interest in that company,
and for the purposes of this subparagraph any reference to a company shall, in a case to which clause (a) of the definition of relevant company applies, also include a reference to a trustee savings bank which has been reorganised into the relevant company concerned.
(13)For the purposes of satisfying the qualifying period requirement referred to in subparagraphs (3)(c), (5)(b) and (6)(b) a person shall also be regarded as such an employee or a director for any period in which that person is an employee or a director of, in a case to which clause (a) of the definition of relevant company applies, a trustee savings bank which has been reorganised into that relevant company.
(14)For the purposes of this paragraph ‘charity’ means any body of persons or trust established for charitable purposes only.
(15)Where an order is proposed to be made under subparagraph (5)(d), a draft of the order shall be laid before Dáil Éireann and the order shall not be made until a resolution approving of the draft has been passed by Dáil Éireann.
Trustees’ functions
12.
(1)The trust deed shall contain provision as to the functions of the trustees.
(2)The functions of the trustees shall be so expressed that it is apparent that their general functions are –
(a)to receive sums from the founding company and other sums, by means of loan or otherwise;
(b)to acquire securities;
(c)to grant rights to acquire shares to persons who are beneficiaries under the terms of the trust deed;
(d)to transfer either or both securities and sums to persons who are beneficiaries under the terms of the trust deed;
(da)to pay any sum or to transfer securities to the personal representatives of deceased persons who were beneficiaries under the terms of the trust deed;
(e)to transfer securities to the trustees of profit sharing schemes approved under Part 2 of Schedule 11;
(f)pending transfer, to retain the securities and to manage them, whether by exercising voting rights or otherwise.
Sums
13.
(1)The trust deed shall require that any sum received by the trustees –
(a)shall be expended within the expenditure period,
(b)may be expended only for one or more of the qualifying purposes, and
(c)shall, while it is retained by them, be kept as cash, or be kept in an account with a relevant deposit taker (within the meaning of section 256).
(2)For the purposes of subparagraph (1), the expenditure period shall be the period of 9 months beginning on the day determined as follows –
(a)in a case where the sum is received from the founding company, or a company which is controlled by that company at the time the sum is received, the day following the end of the accounting period in which the sum is expended by the company from which it is received;
(b)in any other case, the day the sum is received.
(3)For the purposes of subparagraph (1), each of the following shall be a qualifying purpose –
(a)the acquisition of shares in the founding company or of securities to which subparagraph (ii) or (iv) of paragraph (b) of the definition of ‘specified securities’ in section 509(1) applies;
(b)the repayment of sums borrowed;
(c)the payment of interest on sums borrowed;
(d)the payment of any sum to a person who is a beneficiary under the terms of the trust deed;
(da)the payment of any sum to the personal representatives of a deceased person who was a beneficiary under the terms of the trust deed;
(e)the meeting of expenses.
(4)The trust deed shall provide that, in ascertaining for the purposes of a relevant rule (being a provision which is included in the trust deed and conforms with subparagraph (1)) whether a particular sum has been expended, sums received earlier by the trustees shall be treated as expended before sums received by them later.
(5)The trust deed shall provide that, where the trustees pay sums to different beneficiaries at the same time, all the sums shall be paid on similar terms.
(6)For the purposes of subparagraph (5), the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service or similar factors shall not be regarded as meaning that the terms are not similar.
Securities
14.
(1)Subject to paragraph 15, the trust deed shall provide that securities acquired by the trustees shall be shares in the founding company which –
(a)form part of the ordinary share capital of the company,
(b)are fully paid up,
(c)are not redeemable, and
(d)are not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by subparagraph (2).
(2)Subject to subparagraph (3), a restriction shall be authorised by this subparagraph if –
(a)it is imposed by the founding company’s constitution or articles of association,
(b)it requires all shares held by directors or employees of the founding company, or of any other company which it controls for the time being, to be disposed of on ceasing to be so held, and
(c)it requires all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.
(3)A restriction shall not be authorised by subparagraph (2) unless –
(a)any disposal required by the restriction will be by means of sale for a consideration in money on terms specified in the constitution or articles of association, and
(b)the constitution or articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in clause (a).
(4)The trust deed shall provide that shares in the founding company may not be acquired by the trustees at a price exceeding the price they might reasonably be expected to fetch on a sale in the open market.
(5)The trust deed shall provide that shares in the founding company may not be acquired by the trustees at a time when that company is controlled by another company, other than where the founding company is a company into which a trustee savings bank has been reorganised under section 57 of the Trustee Savings Banks Act, 1989.
15.The trust deed may provide that the trustees may acquire securities other than shares in the founding company –
(a)if they are securities acquired by the trustees as a result of a reorganisation or reduction of share capital (construing “reorganisation or reduction of share capital” in accordance with section 584), or
(b)if they are securities issued to the trustees in exchange in circumstances mentioned in section 586.
16.
(1)The trust deed shall provide that –
(a)where the trustees transfer securities to a beneficiary, they shall do so on qualifying terms;
(b)the trustees shall transfer securities before the expiry of 20 years beginning on the date on which they acquired them.
(2)For the purposes of subparagraph (1), a transfer of securities shall be made on qualifying terms if –
(a)all the securities transferred at the same time are transferred on similar terms,
(b)securities have been offered to all the persons who are beneficiaries under the terms of the trust deed when the transfer is made, and
(c)securities are transferred to all such beneficiaries who have accepted.
(3)For the purposes of subparagraph (2), the fact that terms vary according to the levels of remuneration of beneficiaries, the length of their service or similar factors shall not be regarded as meaning that the terms are not similar.
(4)The trust deed shall provide that, in ascertaining for the purposes of a relevant rule (being a provision which is included in the trust deed and conforms with subparagraph (1)) whether particular securities are transferred, securities acquired earlier by the trustees shall be treated as transferred by them before securities acquired by them later.
Other features
17.The trust deed shall not contain features which are not essential or reasonably incidental to the purpose of acquiring sums and securities, transferring sums and securities to employees and directors, and transferring securities to the trustees of profit sharing schemes approved under Part 2 of Schedule 11.
18.
(1)The trust deed shall provide that for the purposes of the deed the trustees –
(a)acquire securities when they become entitled to them;
(b)transfer securities to another person when that other person becomes entitled to them;
(c)retain securities if they remain entitled to them.
(2)Where the trust deed provides for the matter set out in paragraph 15, the trust deed shall provide for the following exceptions to any rule which is included in it and conforms with subparagraph (1)(a), namely –
(a)if the trustees become entitled to securities as a result of a reorganisation or reduction of share capital, they shall be treated as having acquired them when they became entitled to the original shares which those securities represent (construing “reorganisation or reduction of share capital” and “original shares” in accordance with section 584);
(b)if securities are issued to the trustees in exchange in circumstances mentioned in section 586, they shall be treated as having acquired them when they became entitled to the securities for which they are exchanged.
(3)The trust deed shall provide that –
(a)if the trustees agree to take a transfer of securities, for the purposes of the deed they become entitled to them when the agreement is made or, if the agreement is subject to one or more specified conditions being satisfied, on that condition or those conditions being satisfied and not on a later transfer made pursuant to the agreement;
(b)if the trustees agree to transfer securities to another person, for the purposes of the deed the other person becomes entitled to them when the agreement is made and not on a later transfer made pursuant to the agreement.
Schedule 12A Approved Savings-Related Share Option Schemes
Section 519A.
Interpretation
1.
(1)For the purposes of this Schedule –
‘approved’ in relation to a scheme, means approved under paragraph 2;
‘associated company’ has the same meaning as in section 432, except that, for the purposes of paragraph 24, subsection (1) of that section shall have effect with the omission of the words ‘or at any time within one year previously’;
‘bonus date’ has the meaning assigned to it by paragraph 18;
‘control’ has the same meaning as in section 432;
‘full-time director’ has the same meaning as in section 250;
‘grantor’, in relation to a scheme, means the company which has established the scheme;
‘group scheme’ and, in relation to such a scheme, ‘participating company’ have the meanings given by subparagraphs (3) and (4), respectively, of paragraph 2;
‘market value’ shall be construed in accordance with section 548;
‘savings-related share option scheme’ means a scheme approved by the Revenue Commissioners in accordance with this Schedule and which approval has not been withdrawn;
‘scheme shares’ has the meaning assigned to it by paragraph 10;
‘shares’ includes stock,
‘specified age’ means an age that is not less than 60 years and not more than pensionable age (within the meaning of section 2 of the Social Welfare Consolidation Act 2005.
(2)Section 10 shall apply for the purposes of this Schedule.
(3)For the purposes of this Schedule, a company is a member of a consortium that owns another company if it is one of not more than 5 companies which between them beneficially own not less than 75 per cent of the other company’s ordinary share capital and each of which beneficially owns not less than 5 per cent of that capital.
(4)For the purposes of this Schedule, the question whether one company is controlled by another shall be determined in accordance with section 432.
Approval of schemes
2.
(1)On the application of a body corporate (in this Schedule referred to as ‘the grantor’) which has established a savings-related share option scheme, the Revenue Commissioners shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule.
(2)An application under subparagraph (1) shall be made in writing and contain such particulars and be supported by such evidence as the Revenue Commissioners may require
(3)Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a ‘group scheme’.
(4)In relation to a group scheme, ‘participating company’ means the grantor or any other company to which for the time being the scheme is expressed to extend.
(5)The scheme shall indicate the specified age for the purposes of the scheme.
3.
(1)The Revenue Commissioners shall not approve a scheme under this Schedule if it appears to them that it contains features which are neither essential nor reasonably incidental to the purpose of providing for employees and directors benefits in the nature of rights to acquire shares.
(2)The Revenue Commissioners shall be satisfied –
(a)that there are no features of the scheme other than any which are included to satisfy requirements of this Schedule which have or would have the effect of discouraging any description of employees who fulfil the conditions in paragraph 9(1) from actually participating in the scheme, and
(b)where the grantor is a member of a group of companies, that the scheme does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of the higher or highest levels of remuneration.
(3)For the purposes of subparagraph (2) –
(a)’a group of companies’ means a company and any other companies of which it has control or with which it is associated, and
(b)a company shall be associated with another company where it could reasonably be considered that –
(i)both companies act in pursuit of a common purpose,
(ii)any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading operations carried on or to be carried on by both companies, or
(iii)both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity.
4.
(1)If, at any time after the Revenue Commissioners have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Revenue Commissioners under paragraph 6, the Revenue Commissioners may withdraw the approval with effect from that time or such later time as the Revenue Commissioners may specify but where rights obtained under a savings-related share option scheme before the withdrawal of approval from the scheme under this paragraph are exercised after the withdrawal, section 519A(3) shall apply in respect of the exercise as if the scheme were still approved.
(2)If an alteration is made in the scheme at any time after the Revenue Commissioners have approved the scheme, the approval shall not have effect after the date of the alteration unless the Revenue Commissioners have approved the alteration.
5.A grantor aggrieved by a decision of the Revenue Commissioners made in respect of that grantor –
(a)to not approve of a scheme under paragraph 2(1),
(b)to not approve of an alteration to a scheme under paragraph 4(2), or
(c)to withdraw approval of a scheme under paragraph 4(1),
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.
Information
6.The Revenue Commissioners may by notice in writing require any person to furnish them, within such time as the Revenue Commissioners may direct (not being less than 30 days), with such information as the Revenue Commissioners think necessary for the performance of their functions under this Schedule, and which the person to whom the notice is addressed has or can reasonably obtain, including in particular information –
(a)to enable the Revenue Commissioners to determine –
(i)whether to approve a scheme or withdraw an approval already given, or
(ii)the liability to tax, including capital gains tax, of any person who has participated in a scheme, and
(b)in relation to the administration of a scheme and any alteration of the terms of a scheme.
6A.Without prejudice to paragraph 6 the trustees of an approved scheme shall as respects any year, prepare and deliver to the Revenue Commissioners on or before 31 March in the year following that year, a return in the prescribed form (within the meaning of Chapter 3 of Part 41A) of such particulars relating to the approved scheme for that year as may be required by the prescribed form and sections 1052 and 1054 shall apply to a failure by the trustees to deliver a return in accordance with this paragraph as they apply to a failure to deliver a return referred to in section 1052.
7.The Revenue Commissioners may nominate any of their officers, including an inspector, to perform any acts and discharge any functions authorised by this Schedule to be performed or discharged by them.
Eligibility
8.
(1)The scheme shall not provide for any person to be eligible to participate in it, that is to say, to obtain and exercise rights under it at any time if at that time that person has, or has within the preceding 12 months had, a material interest in a close company which is –
(i)a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme, or
(ii)a company which has control of such a company or is a member of a consortium which owns such a company.
(2)Subparagraph (1) shall apply in relation to a company which would be a close company but for section 430(1)(a) or 431.
(3)
(a)In this paragraph, ‘close company’ has the meaning assigned to it by section 430.
(b)For the purpose of this paragraph –
(i)subsection (3) of section 433 shall apply –
(I)in a case where the scheme in question is a group scheme, with the substitution of a reference to all participating companies for the first reference to the company in paragraph (c)(ii) of that subsection, and
(II)with the substitution of a reference to 15 per cent for the reference in that paragraph to 5 per cent, and
(ii)section 437(2) shall apply, with the substitution of a reference to 15 per cent for the reference in that section to 5 per cent, for the purpose of determining whether a person has or had a material interest in a company.
9.
(1)Subject to paragraph 8, every person who –
(a)is an employee or a full-time director of the grantor or, in the case of a group scheme, a participating company,
(b)has been such an employee or director at all times during a qualifying period not exceeding three years, and
(c)is chargeable to tax in respect of that person’s office or employment under Schedule E,
shall be eligible to participate in the scheme, that is to say, to obtain and exercise rights under it, on similar terms.
(2)For the purposes of subparagraph (1), the fact that the rights to be obtained by the persons participating in a scheme vary according to the levels of their remuneration, the length of their service or similar factors shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms.
(3)Except as provided by paragraph 20 or pursuant to such a provision as is referred to in paragraph 22(1)(e) or (f), a person shall not be eligible to participate in the scheme at any time unless he or she is at that time a director or employee of the grantor or, in the case of a group scheme, of a participating company.
Conditions as to the shares
10.The scheme shall provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as ‘scheme shares’) which satisfy the requirements of paragraphs 11 to 15.
11.Scheme shares shall from part of the ordinary share capital of –
(a)the grantor,
(b)a company which has control of the grantor, or
(c)a company which either is, or has control of, a company which –
(i)is a member of a consortium which owns either the grantor or a company having control of the grantor, and
(ii)beneficially owns not less than 15 per cent of the ordinary share capital of the company so owned.
12.Scheme shares shall be –
(a)shares of a class quoted on a recognised stock exchange,
(b)shares in a company not under the control of another company, or
(c)shares in a company which is under the control of a company (other than a company which is, or if resident in the State would be, a close company within the meaning of section 430) whose shares are quoted on a recognised stock exchange.
13.
(1)Scheme shares shall be –
(a)fully paid up,
(b)not redeemable, and
(c)not subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by subparagraph (2).
(2)Subject to subparagraph (3), the shares may be subject to a restriction imposed by the company’s constitution or articles of association –
(a)requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held, and
(b)requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.
(3)A restriction is not authorised by subparagraph (2) unless –
(a)any disposal required by the restriction will be by way of sale for a consideration in money on terms specified in the constitution or articles of association, and
(b)the constitution or articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in paragraph (a).
14.
(1)In determining for the purposes of paragraph 13(1)(c) whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which such person’s freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to that person or to a person connected with that person.
(2)Subparagraph (1) does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Code set out in the Listing Rules of the Irish Stock Exchange.
15.Except where scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class shall be held by persons other than –
(a)persons who acquired their shares –
(i)in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the grantor or any other company, and
(ii)not in pursuance of an offer to the public,
(b)trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in subparagraph (a), and
(c)in a case where the shares fall within paragraph 12(c) and do not fall within paragraph 12(a), companies which have control of the company whose shares are in question or of which that company is an associated company within the meaning of section 432.
Exchange provisions
16.
(1)The scheme may provide that if any company (‘the acquiring company’) –
(a)obtains control of a company whose shares are scheme shares as a result of making a general offer –
(i)to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that if it is satisfied the person making the offer will have control of the company, or
(ii)to acquire all the shares in the company which are of the same class as the scheme shares,
(b)obtains control of a company whose shares are scheme shares in pursuance of a compromise or arrangement sanctioned by the court under section 453 of the Companies Act 2014, or
(c)becomes bound or entitled to acquire shares in a company, under section 457 of the Companies Act 2014, whose shares are scheme shares,
any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, release his or her rights under the scheme (in this paragraph referred to as ‘the old rights’) in consideration of the grant to him or her of rights (in this paragraph referred to as ‘the new rights’) which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within subparagraph (b) or (c) of paragraph 11).
(2)In subparagraph (1) ‘the appropriate period’ means –
(a)in a case falling within clause (a) of that subparagraph, the period of six months beginning with the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made is satisfied,
(b)in a case falling within clause (b) of that subparagraph, the period of six months beginning with the time when the court sanctions the compromise or arrangement, and
(c)in a case falling within clause (c) of that subparagraph, the period during which the acquiring company remains bound or entitled as mentioned in that clause.
(3)The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless –
(a)the shares to which they relate satisfy the conditions specified, in relation to scheme shares, in paragraphs 11 to 15,
(b)the new rights will be exercisable in the same manner as the old rights and subject to the provisions of the scheme as it had effect immediately before the release of the old rights,
(c)the total market value, immediately before the release, of the shares which were subject to the participant’s old rights is equal to the total market value, immediately after the grant, of the shares in respect of which the new rights are granted to the participant, and
(d)the total amount payable by the participant for the acquisition of shares in pursuance of the new rights is equal to the total amount that would have been payable for the acquisition of shares in pursuance of the old rights.
(4)Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded –
(a)for the purposes of section 519A and this Schedule, and
(b)for the purposes of the subsequent application (by virtue of a condition complying with subparagraph (3)(b)) of the provisions of the scheme,
as having been granted at the time when the corresponding old rights were granted.
Exercise of rights
17.The scheme shall provide for the scheme shares to be paid for with moneys not exceeding the amount of repayments made and any interest paid to them under a certified contractual savings scheme within the meaning of subsection (4) of section 519C.
18.Subject to paragraphs 19 to 22, the rights obtained under the scheme must not be capable of being exercised before the bonus date, that is to say, the date on which repayments under the certified contractual savings scheme are due and for the purposes of this paragraph and paragraph 17 –
(a)repayments under a certified contractual savings scheme may be taken as including or as not including a bonus,
(b)the time when repayments are due shall be, where repayments are taken as including the maximum bonus, the earliest date on which the maximum bonus is payable and, in any other case, the earliest date on which a bonus is payable under the scheme, and
(c)the question of what is to be taken as so included must be required to be determined at the time when rights under the scheme are obtained.
19.The scheme shall provide that if a person who has obtained rights under the scheme dies before the bonus date the rights must be exercised, if at all, within 12 months after the date of that person’s death and if that person dies within 6 months after the bonus date the rights may be exercised within 12 months after the bonus date.
20.The scheme shall provide that if a person who has obtained rights under it ceases to hold the office or employment by virtue of which that person is eligible to participate in the scheme by reason of –
(a)injury or disability or on account of his or her being dismissed by reason of redundancy (within the meaning of the Redundancy Payments Acts, 1967 to 1991), or
(b)reaching the specified age,
then the rights shall be exercised, if at all, within 6 months of that person so ceasing and, if that person so ceases for any other reason within 3 years of obtaining the rights, they may not be exercised at all except pursuant to such a provision of the scheme as is mentioned in paragraph 22(1)(e); in relation to the case where that person so ceases, for any other reason, more than 3 years after obtaining the rights, the scheme shall either provide that the rights may not be exercised or that they must be exercised, if at all, within 6 months of that person so ceasing.
21.The scheme shall provide that where a person who has obtained rights under it continues to hold the office or employment by virtue of which that person is eligible to participate in the scheme after the date on which that person reaches the specified age, that person may exercise the rights within 6 months of that date.
22.
(1)The scheme may provide that –
(a)if any person obtains control of a company whose shares are scheme shares as a result of making a general offer falling within clause (a)(i) or (a)(ii) of paragraph 16(1), rights obtained under the scheme to acquire shares in the company may be exercised within 6 months of the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made has been satisfied,
(b)if under section 453 of the Companies Act 2014, (compromise between company and its members or creditors) the court sanctions a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of a company whose shares are scheme shares or its amalgamation with any other company or companies, rights obtained under the share option scheme to acquire shares in the company may be exercised within 6 months of the court sanctioning the compromise or arrangement,
(c)if any person becomes bound or entitled, under section 457 of the Companies Act 2014, (power to acquire shares of shareholders dissenting from schemes or contract which has been approved by majority), to acquire shares in a company shares in which are scheme shares, rights obtained under the scheme to acquire shares in the company may be exercised at any time when that person remains so bound or entitled,
(d)if a company whose shares are scheme shares passes a resolution for voluntary winding up, rights obtained under a scheme to acquire shares in the company may be exercised within 6 months of the passing of the resolution,
(e)if a person ceases to hold an office or employment by virtue of which that person is eligible to participate in the scheme by reason only that –
(i)that office or employment is in a company of which the grantor ceases to have control, or
(ii)that office or employment relates to a business or part of a business which is transferred to a person who is neither an associated company of the grantor nor a company of which the grantor has control,
rights under the scheme held by that person may be exercised within 6 months of that person so ceasing, and
(f)if, at the bonus date, a person who has obtained rights under the scheme holds an office or employment in a company which is not a participating company but which is –
(i)an associated company of the grantor, or
(ii)a company of which the grantor has control,
those rights may be exercised within 6 months of that date.
(2)For the purposes of this paragraph a person shall be deemed to have obtained control of a company if that person and others acting in concert with that person have together obtained control of it.
23.Except as provided in paragraph 19, rights obtained by a person under the scheme shall not be capable –
(a)of being transferred by that person, or
(b)of being exercised later than 6 months after the bonus date.
24.No person shall be treated for the purposes of paragraph 20 or 22(1)(e) as ceasing to hold an office or employment by virtue of which that person is eligible to participate in the scheme until that person ceases to hold an office or employment in the grantor or in any associated company or company of which the grantor has control.
Acquisition of shares
25.
(1)The scheme shall provide for a person’s contributions under the certified contractual savings scheme to be of such amount as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained under the scheme, and for this purpose the amount of repayment under the certified contractual savings scheme shall be determined as mentioned in paragraph 18.
(2)The scheme shall not –
(a)permit the aggregate amount of a person’s contributions under certified contractual savings schemes linked to savings-related share option schemes approved under this Schedule to exceed €500 monthly, nor
(b)impose a minimum on the amount of a person’s contributions which exceeds €12 monthly.
(3)[deleted]
Share price
26.The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme –
(a)shall be stated at the time the right is obtained, and
(b)shall not be manifestly less than 75 per cent of the market value of shares of the same class at that time or, if the Revenue Commissioners and the grantor agree in writing, at such earlier time or times as may be provided in the agreement,
but the scheme may provide for such variation of the price as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
Options etc.
27.
(1)For the purposes of section 437(2), as applied by paragraph 8(3)(b)(ii) of this Schedule, a right to acquire shares (however arising) shall be taken to be a right to control them.
(2)Any reference in subparagraph (3) to the shares attributed to an individual is a reference to the shares which, in accordance with section 437(2) as applied by paragraph 8(3)(b)(ii) of this Schedule, fall to be brought into account in that individual’s case to determine whether their number exceeds a particular percentage of the company’s ordinary share capital.
(3)In any case where –
(a)the shares attributed to an individual consist of or include shares which that individual or any other person has a right to acquire, and
(b)the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company is contractually bound to issue in the event of the exercise of the right;
then, in determining at any time prior to the exercise of that right whether the number of shares attributed to the individual exceeds a particular percentage of the ordinary share capital of the company, that ordinary share capital shall be taken to be increased by the number of unissued shares referred to in clause (b).
Schedule 12B Certified Contractual Savings Schemes
Section 519C.
1.This Schedule shall have effect for the purposes of section 519C.
Specifications by the Minister for Finance
2.
(1)The requirements which may be specified under section 519C(4)(c) are such requirements as the Minister for Finance thinks fit.
(2)In particular, the requirements may relate to –
(a)the descriptions of individuals who may enter into contracts under a scheme;
(b)the contributions to be paid by individuals;
(c)the sums to be paid or repaid to individuals.
3.
(1)Where a specification has been made under section 519C(4)(c), the Minister for Finance may withdraw the specification and stipulate the date on which the withdrawal is to become effective and any certification made by the Revenue Commissioners by reference to such specification shall be deemed to have been withdrawn on the same date.
(2)No withdrawal under this paragraph shall affect –
(a)the operation of a certified contractual savings scheme before the stipulated date, or
(b)any contract under such a scheme entered into before that date.
(3)No withdrawal under this paragraph shall be effective unless the Revenue Commissioners –
(a)send a notice by post to each qualifying savings institution informing it of the withdrawal of both the specification and certification, and
(b)do so not less than 28 days before the stipulated date.
4.
(1)Where a specification has been made under section 519C(4)(c), the Minister for Finance may vary the specification and stipulate the date on which the variation is to become effective and any certification made by the Revenue Commissioners by reference to the specification obtaining before the variation shall be deemed to have been withdrawn on the date the variation became effective.
(2)The Revenue Commissioners may at any time certify a scheme as fulfilling the requirements obtaining after the variation
(3)No variation and withdrawal under this paragraph shall affect –
(a)the operation of a certified contractual savings scheme before the stipulated date, or
(b)any contract under such a scheme entered into before that date.
(4)No variation and withdrawal under this paragraph shall be effective unless the Revenue Commissioners –
(a)send a notice by post to each qualifying savings institution informing it of the variation of the specification and withdrawal of the certification, and
(b)do so not less than 28 days before the stipulated date.
Information
5.The Revenue Commissioners may by notice in writing require any person to furnish them, within such time as the Revenue Commissioners may direct (not being less than 30 days), with such information as the Revenue Commissioners think necessary for the performance of their functions under this Schedule, and which the person to whom the notice is addressed has or can reasonably obtain, including in particular information –
(a)to enable the Revenue Commissioners to determine –
(i)whether to certify a scheme or withdraw a certification already given, or
(ii)the liability to tax, including capital gains tax, of any person who has participated in a scheme, and
(b)in relation to the administration of a scheme and any alteration of the terms of a scheme.
6.The Revenue Commissioners may nominate any of their officers, including an inspector, to perform any acts and discharge any functions authorised by this Schedule to be performed or discharged by them.
Schedule 12C Approved Share Option Schemes
Interpretation
1.
(1)For the purposes of this Schedule –
‘approved’ in relation to a scheme, means approved under paragraph 2;
‘associated company’ has the same meaning as in section 432;
‘auditor’, in relation to a company, means the person or persons appointed as auditor of the company for the purposes of the Companies Acts, 1963 to 1999, or under the law of the territory in which the company is incorporated and which corresponds to those Acts;
‘control’ has the same meaning as in section 432;
‘full-time director’, in relation to a company, means a director who is required to devote substantially the whole of his or her time to the service of the company;
‘grantor’ has the meaning given by paragraph 2(1);
‘group scheme’ has the meaning given by paragraph 2(3);
‘key employee or director’, in relation to a company, means an employee or a full-time director of the company whose specialist skills, qualifications and relevant experience are vital to the future success of the company and is so certified to the Revenue Commissioners by the company;
‘market value’ shall be construed in accordance with section 548;
‘participating company’, in relation to a group scheme, has the meaning given by paragraph 2(4);
‘scheme shares’ has the meaning given by paragraph 11;
‘shares’ includes stock.
(2)Section 10 shall apply for the purposes of this Schedule.
(3)Subsection (3) of section 433 shall have effect in a case where the scheme is a group scheme, with the substitution of a reference to all the participating companies for the first reference to the company in subparagraph (ii) of paragraph (c) of that subsection.
(4)For the purposes of this Schedule –
(a)a company is a member of a consortium that owns another company if it is one of not more than 5 companies which between them beneficially own not less than 75 per cent of the other company’s ordinary share capital and each of which beneficially owns not less than 5 per cent of that capital, and
(b)the question of whether one company is controlled by another shall be determined in accordance with section 432.
Approval of schemes
2.
(1)On the application of a body corporate (in this Schedule referred to as the ‘grantor’) which has established a share option scheme, the Revenue Commissioners shall approve the scheme if they are satisfied that it fulfils the requirements of this Schedule.
(2)An application under subparagraph (1) shall be made in writing and contain such particulars and be supported by such evidence as the Revenue Commissioners may require.
(3)Where the grantor has control of another company or companies, the scheme may be expressed to extend to all or any of the companies of which it has control and in this Schedule a scheme which is expressed so to extend is referred to as a ‘group scheme’.
(4)In relation to a group scheme, ‘participating company’ means the grantor or any other company to which for the time being the scheme is expressed to extend.
3.
(1)The Revenue Commissioners shall not approve a scheme under this Schedule if it appears to them that it contains features which are neither essential nor reasonably incidental to the purpose of providing for employees’ and full-time directors’ benefits in the nature of rights to acquire shares.
(2)The Revenue Commissioners shall be satisfied –
(a)that there are no features of the scheme other than any which are included to satisfy requirements of this Schedule which have or would have the effect of discouraging any description of employees who fulfil the conditions in paragraph 8(1) from actually participating in the scheme, and
(b)where the grantor is a member of a group of companies, that the scheme does not and would not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of the higher or highest levels of remuneration.
(3)For the purposes of subparagraph (2), ‘a group of companies’ means a company and any other companies of which it has control or with which it is associated.
(4)For the purposes of subparagraph (3), a company shall be associated with another company where it could reasonably be considered that –
(a)both companies act in pursuit of a common purpose,
(b)any person or any group of persons or groups of persons having a reasonable commonality of identity have or had the means or power, either directly or indirectly, to determine the trading operations carried on or to be carried on by both companies, or
(c)both companies are under the control of any person or group of persons or groups of persons having a reasonable commonality of identity.
4.
(1)If, at any time after the Revenue Commissioners have approved a scheme, any of the requirements of this Schedule cease to be satisfied or the grantor fails to provide information requested by the Revenue Commissioners under paragraph 20, the Revenue Commissioners may withdraw the approval with effect from that time or such later time as the Revenue Commissioners may specify.
(2)If an alteration is made in the scheme at any time after the Revenue Commissioners have approved the scheme, the approval shall not have effect after the date of the alteration unless the Revenue Commissioners have approved the alteration.
5.A grantor aggrieved by a decision of the Revenue Commissioners made in respect of that grantor –
(a)to not approve of a scheme under paragraph 2(1),
(b)to not approve of an alteration to a scheme under paragraph 4(2), or
(c)to withdraw approval of a scheme under paragraph 4(1),
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 the decision.
6.The Revenue Commissioners may nominate any of their officers, including an inspector, to perform any acts and discharge any functions authorised by this Schedule to be performed or discharged by them.
Eligibility
7.
(1)The scheme shall not provide for any person to be eligible to participate in it, that is to say, to obtain and exercise rights under it –
(a)unless he or she is an employee or director of the grantor or, in the case of a group scheme, of a participating company, or
(b)at any time when he or she has, or has within the preceding 12 months had, a material interest in a close company within the meaning of Chapter 1 of Part 13, which is –
(i)a company the shares of which may be acquired pursuant to the exercise of rights obtained under the scheme, or
(ii)a company which has control of such a company or is a member of a consortium which owns such a company.
(2)Notwithstanding subparagraph 1(a), the scheme may provide that a person may exercise rights obtained under it despite having ceased to be an employee or a director.
8.
(1)The scheme shall provide that, at any time, every person who –
(a)is an employee or a full-time director of the grantor or, in the case of a group scheme, a participating company,
(b)has been such an employee or director at all times during a qualifying period not exceeding three years, and
(c)is chargeable to tax in respect of that person’s office or employment under Schedule E,
shall be eligible to participate in the scheme, that is to say, to obtain and exercise rights under it.
(2)Subject to paragraph 9 every person eligible to participate in the scheme shall do so on similar terms.
(3)For the purposes of subparagraph (2), the fact that –
(a)the rights to be obtained by persons participating in a scheme vary or are different –
(i)in the year of assessment in which they commence to hold the office or employment by virtue of which they are entitled to participate in the scheme, or
(ii)according to the levels of their remuneration, the length of their service or similar factors,
or
(b)a person is not entitled to receive rights within a stated period of his or her normal retirement date,
shall not be regarded as meaning that they are not eligible to participate in the scheme on similar terms.
9.
(1)Subject to the conditions of this paragraph, the scheme may provide for an employee or a director, who is a key employee or director of the grantor or, in the case of a group scheme, a participating company, to obtain and exercise rights under it which do not satisfy the requirement of paragraph 8 regarding participation in the scheme on similar terms.
(2)The conditions of this paragraph are that, in any year of assessment –
(a)the total number of shares in respect of which rights have been granted to key employees and directors in accordance with a rule of the scheme which conforms with this paragraph does not exceed 30 per cent of the total number of shares in respect of which rights have been granted to all employees and directors participating in the scheme whether in accordance with this paragraph or paragraph 8, and
(b)an individual who obtains rights for a year of assessment by virtue of this paragraph shall not also be entitled to obtain rights for that year in accordance with paragraph 8.
10.In determining for the purposes of paragraph 7 –
(a)whether a company is a close company, section 430(1)(a) and subsections (3) to (7) of section 431 shall be disregarded, and
(b)whether a person has or has had a material interest in a company, sections 437(2) and 433(3)(c)(ii) shall have effect with the substitution for the references in those provisions to 5 per cent of references to 15 per cent.
Scheme shares
11.The scheme shall provide for directors and employees to obtain rights to acquire shares (in this Schedule referred to as ‘scheme shares’) which satisfy the requirements of paragraphs 12 to 16.
12.Scheme shares shall form part of the ordinary share capital of –
(a)the grantor,
(b)a company which has control of the grantor, or
(c)a company which either is, or has control of, a company which –
(i)is a member of a consortium which owns either the grantor or a company having control of the grantor, and
(ii)beneficially owns not less than 15 per cent of the ordinary share capital of the company so owned.
13.Scheme shares shall be –
(a)shares of a class quoted on a recognised stock exchange.
(b)shares in a company which is not under the control of another company, or
(c)shares in a company which is under the control of a company (other than a company which is, or if resident in the State would be, a close company within the meaning of section 430) whose shares are quoted on a recognised stock exchange.
14.
(1)Scheme shares –
(a)shall be fully paid up,
(b)shall not be redeemable, and
(c)shall not be subject to any restrictions other than restrictions which attach to all shares of the same class or a restriction authorised by subparagraph (2).
(2)Subject to subparagraph (3), the shares may be subject to a restriction imposed by the company’s articles of association –
(a)requiring all shares held by directors or employees of the company or of any other company of which it has control to be disposed of on ceasing to be so held, and
(b)requiring all shares acquired, in pursuance of rights or interests obtained by such directors or employees, by persons who are not, or have ceased to be, such directors or employees to be disposed of when they are acquired.
(3)A restriction is not authorised by subparagraph (2) unless –
(a)any disposal required by the restriction will be by way of sale for a consideration in money on terms specified in the articles of association, and
(b)the articles also contain general provisions by virtue of which any person disposing of shares of the same class (whether or not held or acquired as mentioned in subparagraph (2)) may be required to sell them on terms which are the same as those mentioned in clause (a).
15.
(1)In determining for the purposes of paragraph 14(1)(c) whether scheme shares which are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which such person’s freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantage to that person or to a person connected with that person.
(2)Subparagraph (1) does not apply to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Listing Rules of the Irish Stock Exchange.
16.Except where scheme shares are in a company whose ordinary share capital consists of shares of one class only, the majority of the issued shares of the same class shall be held by persons other than –
(a)persons who acquired their shares in pursuance of a right conferred on them or an opportunity afforded to them as a director or employee of the grantor or any other company and not in pursuance of an offer to the public,
(b)trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in subparagraph (a), and
(c)in a case where the shares fall within subparagraph (c) of paragraph 13 but do not fall within subparagraph (a) of that paragraph, companies which have control of the company whose shares are in question or of which that company is an associated company.
Exchange provisions
17.
(1)The scheme may provide that if any company (in this paragraph referred to as ‘the acquiring company’) –
(a)obtains control of a company whose shares are scheme shares as a result of making a general offer –
(i)to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that if it is satisfied the person making the offer will have control of the company, or
(ii)to acquire all the shares in the company which are of the same class as the scheme shares,
(b)obtains control of a company whose shares are scheme shares in pursuance of a compromise or arrangement sanctioned by the court under section 201 of the Companies Act, 1963, or
(c)becomes bound or entitled to acquire shares, under section 204 of the Companies Act, 1963, in a company whose shares are scheme shares.
any participant in the scheme may at any time within the appropriate period, by agreement with the acquiring company, release his or her rights under the scheme (in this paragraph referred to as ‘the old rights’) in consideration of the grant to him or her of rights (in this paragraph referred to as ‘the new rights’) which are equivalent to the old rights but relate to shares in a different company (whether the acquiring company itself or some other company falling within subparagraph (b) or (c) of paragraph 12).
(2)In subparagraph (1) ‘the appropriate period’ means –
(a)in a case falling within clause (a) of that subparagraph, the period of 6 months beginning with the time when the person making the offer has obtained control of the company and any condition subject to which the offer is made is satisfied,
(b)in a case falling within clause (b) of that subparagraph, the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, and
(c)in a case falling within clause (c) of that subparagraph, the period during which the acquiring company remains bound or entitled as mentioned in that clause.
(3)The new rights shall not be regarded for the purposes of this paragraph as equivalent to the old rights unless –
(a)the shares to which they relate satisfy the conditions specified, in relation to scheme shares, in paragraphs 12 to 16,
(b)the new rights will be exercisable in the same manner as the old rights and subject to the provisions of the scheme as it had effect immediately before the release of the old rights,
(c)the total market value, immediately before the release, of the shares which were subject to the participant’s old rights is equal to the total market value, immediately after the grant, of the shares in respect of which the new rights are granted to the participant, and
(d)the total amount payable by the participant for the acquisition of shares in pursuance of the new rights is equal to the total amount that would have been payable for the acquisition of shares in pursuance of the old rights.
(4)Where any new rights are granted pursuant to a provision included in a scheme by virtue of this paragraph they shall be regarded –
(a)for the purposes of section 519D and this Schedule, and
(b)for the purposes of the subsequent application (by virtue of a condition complying with subparagraph (3)(b)) of the provisions of the scheme,
as having been granted at the time when the corresponding old rights were granted.
Transfer of rights
18.
(1)The scheme shall not permit any person obtaining rights under it to transfer any of them but may provide that if such a person dies before exercising them, they may be exercised after, but not later than one year after, the date of that person’s death.
(2)Where the scheme contains the provisions permitted by subparagraph (1) and any rights are exercised after the death of the person who obtained them, subsection (3) of section 519D shall apply with the omission of the reference to subsection (4) of that section.
Share price
19.The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme shall be stated at the time the right is obtained and shall not be less than the market value of shares of the same class at that time or, if the Revenue Commissioners and the grantor agree in writing, at such earlier time or times as may be provided in the agreement, but the scheme may provide for such variation of the price so stated as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
Information
20.
(1)The Revenue Commissioners may by notice in writing require any person to furnish them, within such time as the Revenue Commissioners may direct (not being less than 30 days), with such information as the Revenue Commissioners think necessary for the performance of their functions under this Schedule, and which the person to whom the notice is addressed has or can reasonably obtain, including in particular information –
(a)to enable the Revenue Commissioners to determine –
(i)whether to approve a scheme or withdraw an approval already given, or
(ii)the liability to tax, including capital gains tax, of any person who has participated in a scheme,
and
(b)in relation to the administration of a scheme and any alteration of the terms of a scheme.
(2)Notwithstanding the generality of subparagraph (1), the Revenue Commissioners may request a certificate from the auditor of a grantor company certifying that, in his or her opinion –
(a)the terms of any rule or rules included in the scheme by virtue of either or both paragraphs 8 and 9 are complied with in relation to a year of assessment, or
(b)as respects rights obtained under the scheme before it was approved under this Schedule, the conditions in subsection (7)(b) of section 519D are satisfied.
20A.Without prejudice to paragraph 20 the trustees of an approved scheme shall as respects any year, prepare and deliver to the Revenue Commissioners on or before 31 March in the year following that year, a return in the prescribed form (within the meaning of Chapter 3 of Part 41A) of such particulars relating to the approved scheme for that year as may be required by the prescribed form and sections 1052 and 1054 shall apply to a failure by the trustees to deliver a return in accordance with this paragraph as they apply to a failure to deliver a return referred to in section 1052.
21.
(1)For the purposes of section 437(2), as applied by paragraph 10(b) of this Schedule, a right to acquire shares (however arising) shall be taken to be a right to control them.
(2)Any reference in subparagraph (3) to the shares attributed to an individual is a reference to the shares which, in accordance with section 437(2) as applied by paragraph 10(b) of this Schedule, fall to be brought into account in that individual’s case to determine whether their number exceeds a particular percentage of the company’s ordinary share capital.
(3)In any case where –
(a)the shares attributed to an individual consist of or include shares which that individual or any other person has a right to acquire, and
(b)the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company is contractually bound to issue in the event of the exercise of the right,
then, in determining at any time prior to the exercise of that right whether the number of shares attributed to the individual exceeds a particular percentage of the ordinary share capital of the company, that ordinary share capital shall be taken to be increased by the number of unissued shares referred to in clause (b).
Schedule 19 Offshore Funds: Distributing Funds
Schedule 19, Part 1 The Distribution Test
Section 744.
Requirements as to distributions
1.
(1)For the purposes of Chapter 2 of Part 27, an offshore fund pursues a full distribution policy with respect to an account period if –
(a)a distribution is made for the account period or for some other period which in whole or in part falls within that account period,
(b)subject to Part 2 of this Schedule, the amount of the distribution which is paid to the holders of material and other interests in the fund –
(i)represents at least 85 per cent of the income of the fund for the period, and
(ii)is not less than 85 per cent of the fund’s Irish equivalent profits for the period,
(c)the distribution is made during the account period or not more than 6 months after the expiry of that period, and
(d)the form of the distribution is such that, if any sum forming part of it were received in the State by a person resident in the State and did not form part of the profits of a trade, profession or vocation, that sum would be chargeable to tax under Case III of Schedule D,
and any reference in this subparagraph to a distribution made for an account period includes a reference to any 2 or more distributions so made or, in the case of clause (b), the aggregate of those distributions.
(2)Subject to subparagraph (3), with respect to any account period for which –
(a)there is no income of the fund, and
(b)there are no Irish equivalent profits of the fund,
the fund shall be treated as pursuing a full distribution policy notwithstanding that no distribution is made as mentioned in subparagraph (1).
(3)For the purposes of Chapter 2 of Part 27, an offshore fund shall be regarded as not pursuing a full distribution policy with respect to an account period for which the fund does not make up accounts.
(4)For the purposes of this paragraph –
(a)where a period for which an offshore fund makes up accounts includes the whole or part of 2 or more account periods of the fund, then, subject to clause (c), income shown in those accounts shall be apportioned between those account periods on a time basis according to the number of days in each account period comprised in the period for which the accounts are made up,
(b)where a distribution is made for a period which includes the whole or part of 2 or more account periods of the fund, then, subject to subparagraph (5), the distribution shall be apportioned between those account periods on a time basis according to the number of days in each account period which are comprised in the period for which the distribution is made,
(c)where a distribution is made out of specified income but is not made for a specified period, that income shall be attributed to the account period of the fund in which it in fact arose and the distribution shall be treated as made for that account period, and
(d)where a distribution is made neither for a specified period nor out of specified income, then, subject to subparagraph (5), the distribution shall be treated as made for the last account period of the fund which ended before the distribution was made.
(5)Where but for this subparagraph the amount of a distribution made, or treated by virtue of subparagraph (4) as made, for an account period would exceed the income of that period, then, for the purposes of this paragraph –
(a)if the amount of the distribution was determined by apportionment under subparagraph (4)(b), the excess shall be reapportioned, as may be just and reasonable, to any other account period which, in whole or in part, falls within the period for which the distribution was made or, if there is more than one such period, between those periods, and
(b)subject to clause (a), the excess shall be treated as an additional distribution or series of additional distributions made for preceding account periods in respect of which the distributions or the aggregate distributions, as the case may be, would otherwise be less than the income of the period, applying the excess to later account periods before earlier ones until it is exhausted.
(6)In any case where –
(a)for a period which is or includes an account period an offshore fund is subject to any restriction as regards the making of distributions, being a restriction imposed by the law of any territory, and
(b)the fund is subject to that restriction by reason of an excess of losses over profits (applying the concept of “profits” and “losses” in the sense in which, and to the extent to which, they are relevant for the purposes of the law in question),
then, in determining for the purposes of subparagraphs (1) to (5) the amount of the fund’s income for that account period, there shall be allowed as a deduction any amount which apart from this subparagraph would form part of the income of the fund for that account period and which may not be distributed by virtue of the restriction.
Funds operating equalisation arrangements
2.
(1)In the case of an offshore fund which throughout any account period operates equalisation arrangements, on any occasion in that period when there is a disposal to which this subparagraph applies, the fund shall be treated for the purposes of this Part of this Schedule as making a distribution of an amount equal to so much of the consideration for the disposal as, in accordance with this paragraph, represents income accrued to the date of the disposal.
(2)Subparagraph (1) shall apply to a disposal which –
(a)is a disposal of a material interest in the offshore fund concerned,
(b)is a disposal to which Chapter 2 of Part 27 applies (whether by virtue of subsection (3) of section 742 or otherwise) or is one to which that Chapter would apply if subsections (5) and (6) of that section applied generally and not only for the purpose of determining whether, by virtue of subsection (3) of that section, there is a disposal to which that Chapter applies,
(c)is not a disposal with respect to which the conditions in subsection (4) of section 742 are fulfilled, and
(d)is a disposal to the fund itself or to the persons concerned in the management of the fund (in this paragraph referred to as “the managers of the fund”) in their capacity as such.
(3)On a disposal to which subparagraph (1) applies, the part of the consideration which represents income accrued to the date of the disposal shall be, subject to subparagraph (4) and paragraph 4(4), the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if on the date of the disposal the material interest disposed of were acquired by another person by means of initial purchase.
(4)Where, after the beginning of the period by reference to which the accrued income referred to in subparagraph (3) is calculated, the material interest disposed of by a disposal to which subparagraph (1) applies was acquired by means of initial purchase (whether or not by the person making the disposal), then –
(a)the amount which on that acquisition was credited to the equalisation account in respect of accrued income shall be deducted from the amount which in accordance with subparagraph (3) would represent income accrued to the date of the disposal, and
(b)if in that period there has been more than one such acquisition of that material interest by means of initial purchase, the deduction to be made under this subparagraph shall be the amount so credited to the equalisation account on the latest such acquisition before the disposal in question.
(5)Where by virtue of this paragraph an offshore fund is treated for the purposes of this Part of this Schedule as making a distribution on the occasion of a disposal, the distribution shall be treated for those purposes as –
(a)complying with paragraph 1(1)(d),
(b)made out of the income of the fund for the account period in which the disposal occurs, and
(c)paid immediately before the disposal to the person who was then the holder of the interest disposed of.
(6)In any case where –
(a)a distribution in respect of an interest in an offshore fund is made to the managers of the fund,
(b)their holding of that interest is in their capacity as such, and
(c)at the time of the distribution the fund is operating equalisation arrangements,
then, the distribution shall not be taken into account for the purposes of paragraph 1(1) except to the extent that the distribution is properly referable to that part of the period for which the distribution is made during which that interest has been held by the managers of the fund in their capacity as such.
(7)Subsection (2) of section 742 shall apply for the purposes of this paragraph as it applies for the purposes of that section.
Income taxable under Case III of Schedule D
3.
(1)Subparagraph (2) shall apply if any sums which form part of the income of an offshore fund within paragraph (b) or (c) of section 743(1) are of such a nature that –
(a)the holders of interests in the fund who are either companies resident in the State or individuals domiciled and resident in the State –
(i)are chargeable to tax under Case III of Schedule D in respect of such of those sums as are referable to their interests, or
(ii)if any of that income is derived from assets in the State, would be so chargeable had the assets been outside the State,
and
(b)the holders of interests, who are not such companies or individuals, would be chargeable as mentioned in subclause (i) or (ii) of clause (a) if they were resident in the State or, in the case of individuals, if they were domiciled and both resident and ordinarily resident in the State.
(2)To the extent that sums within subparagraph (1) do not actually form part of a distribution complying with clauses (c) and (d) of paragraph 1(1), they shall be treated for the purposes of this Part of this Schedule –
(a)as a distribution complying with those clauses and made out of the income of which they form part, and
(b)as paid to the holders of the interests to which they are referable.
Commodity income
4.
(1)In this paragraph –
“commodities” means tangible assets (other than currency, securities, debts or other assets of a financial nature) dealt with on a commodity exchange in any part of the world;
“dealing”, in relation to dealing in commodities, includes dealing by means of futures contracts and traded options.
(2)To the extent that the income of an offshore fund for any account period includes profits from dealing in commodities, 50 per cent of those profits shall be disregarded in determining for the purposes of paragraphs 1(1)(b) and 5 –
(a)the income of the fund for that period, and
(b)the fund’s Irish equivalent profits for that period;
but in any account period in which an offshore fund incurs a loss in dealing in commodities the amount of that loss shall not be varied by virtue of this paragraph.
(3)Where the income of an offshore fund for any account period consists of profits from dealing in commodities and other income, then –
(a)in determining whether the condition in paragraph 1(1)(b) is fulfilled with respect to that account period, the expenditure of the fund shall be apportioned in such manner as is just and reasonable between the profits from dealing in commodities and the other income, and
(b)in determining whether and to what extent any expenditure is deductible under section 83 in computing the fund’s Irish equivalent profits for that period, so much of the business of the fund as does not consist of dealing in commodities shall be treated as a business carried on by a separate company.
(4)Where there is a disposal to which paragraph 2(1) applies, then, to the extent that any amount which was or would be credited to the equalisation account in respect of accrued income, as mentioned in subparagraph (3) or (4) of paragraph 2, represents profits from dealing in commodities, 50 per cent of that accrued income shall be disregarded in determining under those subparagraphs the part of the consideration for the disposal which represents income accrued to the date of the disposal.
Irish equivalent profits
5.
(1)In this paragraph, “profits” does not include chargeable gains.
(2)A reference in this Schedule to the Irish equivalent profits of an offshore fund for an account period shall be construed as a reference to the amount which, on the assumptions in subparagraph (3), would be the total profits of the fund for that period on which, after allowing for any deductions available against those profits, corporation tax would be chargeable.
(3)The assumptions referred to in subparagraph (2) are that –
(a)the offshore fund is a company which in the account period is resident in the State,
(b)the account period is an accounting period of that company, and
(c)any dividends or distributions which by virtue of section 129 should be disregarded in computing income for corporation tax purposes are nevertheless to be taken into account in that computation in the like manner as if they were dividends or distributions of a company resident outside the State.
(4)Without prejudice to any deductions available apart from this subparagraph, the deductions referred to in subparagraph (2) include –
(a)a deduction equal to any amount which by virtue of paragraph 1(6) is allowed as a deduction in determining the income of the fund for the account period in question,
(b)a deduction equal to any amount of Irish income tax paid by deduction or otherwise by, and not repaid to, the offshore fund in respect of the income of the account period, and
(c)a deduction equal to any amount of tax (paid under the law of a territory outside the State) taken into account as a deduction in determining the income of the fund for the account period in question but which, because it is referable to capital rather than income, is not to be taken into account by virtue of section 71(1) or 77(6);
but section 2(4) shall be disregarded for the purposes of clause (b).
(5)For the avoidance of doubt it is hereby declared that, if any sums forming part of the offshore fund’s income for any period have been received by the fund without any deduction of or charge to tax by virtue of section 43, 49, 50 or 63, the effect of the assumption in subparagraph (3)(a) is that those sums are to be taken into account in determining the total profits referred to in subparagraph (2).
Schedule 19, Part 2 Modifications of Conditions for Certification in Certain Cases
Section 744.
Exclusion of investments in distributing offshore funds
6.
(1)In this Part of this Schedule, an offshore fund within subparagraph (2)(c) is referred to as a “qualifying fund”.
(2)In any case where –
(a)in an account period of an offshore fund (in this Part of this Schedule referred to as “the primary fund”), the assets of the fund consist of or include interests in another offshore fund,
(b)those interests (together with other interests which the primary fund may have) are such that, by virtue of paragraph (a) of subsection (3) of section 744 or, if the other fund concerned is a company, paragraph (b) or (c) of that subsection, the primary fund could not apart from this paragraph be certified as a distributing fund in respect of the account period, and
(c)without regard to this paragraph, that other fund could be certified as a distributing fund in respect of its account period or, as the case may be, each of its account periods which comprises the whole or any part of the account period of the primary fund,
then, in determining whether in section 744(3) (other than paragraph (d)) anything prevents the primary fund being certified as mentioned in clause (b), the interests of the primary fund in that other fund shall be disregarded except for the purposes of determining the total value of the assets of the primary fund.
(3)In a case within subparagraph (2) –
(a)section 744(3) (other than paragraph (d)) shall apply in relation to the primary fund with the modification in paragraph 7 (in addition to that provided for by subparagraph (2)), and
(b)Part 1 of this Schedule shall apply in relation to the primary fund with the modification in paragraph 8.
7.The modification referred to in paragraph 6(3)(a) is that in any case where –
(a)at any time in the account period referred to in paragraph 6(2), the assets of the primary fund include an interest in an offshore fund or in any company (whether an offshore fund or not),
(b)that interest is to be taken into account in determining whether in section 744(3) (other than paragraph (d)) anything prevents the primary fund being certified as a distributing fund in respect of that account period, and
(c)at any time in that account period the assets of the qualifying fund include an interest in the offshore fund or company referred to in clause (a),
then, for the purposes of the application in relation to the primary fund of section 744(3) (other than paragraph (d)), at any time when the assets of the qualifying fund include the interest referred to in clause (c), the primary fund’s share of that interest shall be treated as an additional asset of the primary fund.
8.
(1)The modification referred to in paragraph 6(3)(b) is that, in determining whether the condition in paragraph 1(1)(b)(ii) is fulfilled with respect to the account period of the primary fund referred to in paragraph 6(2), the Irish equivalent profits of the primary fund for that account period shall be treated as increased by the primary fund’s share of the excess income (if any) of the qualifying fund which is attributable to that account period.
(2)For the purposes of this paragraph, the excess income of the qualifying fund for any account period of that fund shall be the amount (if any) by which its Irish equivalent profits for that account period exceed the amount of the distributions made for that account period, as determined for the purposes of the application of paragraph 1(1) to the qualifying fund.
(3)Where an account period of the qualifying fund coincides with an account period of the primary fund, the excess income (if any) of the qualifying fund for that account period shall be the excess income which is attributable to that account period of the primary fund.
(4)In a case where subparagraph (3) does not apply, the excess income of the qualifying fund attributable to an account period of the primary fund shall be the appropriate fraction of the excess income (if any) of the qualifying fund for any of its account periods which comprises the whole or any part of the account period of the primary fund and, if there is more than one such account period of the qualifying fund, the aggregate of the excess income (if any) of each of them.
(5)For the purposes of subparagraph (4), the appropriate fraction shall be determined by reference to the formula –
where –
Ais the number of days in the account period of the primary fund which are also days in an account period of the qualifying fund, and
Bis the number of days in that account period of the qualifying fund or, as the case may be, in each of those account periods of that fund which comprises the whole or any part of the account period of the primary fund.
9.
(1)The references in paragraphs 7 and 8(1) to the primary fund’s share of –
(a)an interest forming part of the assets of the qualifying fund, or
(b)the excess income (within the meaning of paragraph 8) of the qualifying fund,
shall be construed as references to the fraction specified in subparagraph (2) of that interest or excess income.
(2)In relation to any account period of the primary fund, the fraction referred to in subparagraph (1) shall be determined by reference to the formula –
where –
Cis the average value of the primary fund’s holding of interests in the qualifying fund during that account period, and
Dis the average value of all the interests of the qualifying fund held by any persons during that account period.
Offshore funds investing in trading companies
10.
(1)In this paragraph –
“commodities” has the same meaning as in paragraph 4(1);
“dealing”, in relation to commodities, currency, securities, debts or other assets of a financial nature, includes dealing by means of futures contracts and traded options;
“trading company” means a company whose business consists wholly of the carrying on of a trade or trades and does not to any extent consist of –
(a)dealing in commodities, currency, securities, debts or other assets of a financial nature, or
(b)banking or the provision of high cost credit (within the meaning of the Consumer Credit Act 1995).
(2)In any case where the assets of an offshore fund for the time being include an interest in a trading company, section 744(3) shall apply subject to the modifications in subparagraphs (3) and (4).
(3)In the application of section 744(3)(b) to so much of the assets of an offshore fund as for the time being consists of interests in a single trading company, “20 per cent” shall be substituted for “10 per cent”.
(4)In the application of section 730 (3) (c) to an offshore fund, for “more than 10 per cent”, in so far as it would otherwise refer to the share capital of a trading company or to any class of such share capital, “50 per cent or more” shall be substituted.
Offshore funds with wholly-owned subsidiaries
11.
(1)In relation to an offshore fund which has a wholly-owned subsidiary which is a company, section 744(3) or Part 1 of this Schedule shall apply subject to the modifications in subparagraph (4).
(2)Subject to subparagraph (3), for the purposes of this paragraph, a company shall be a wholly-owned subsidiary of an offshore fund if and so long as the whole of the issued share capital of the company is –
(a)in the case of an offshore fund within section 743(1)(a), directly and beneficially owned by the fund,
(b)in the case of an offshore fund within section 743(1)(b), directly owned by the trustees of the fund for the benefit of the fund, and
(c)in the case of an offshore fund within section 743(1)(c), owned in a manner which as near as may be corresponds either to clause (a) or (b).
(3)In the case of a company which has only one class of issued share capital, the reference in subparagraph (2) to the whole of the issued share capital shall be construed as a reference to at least 95 per cent of that share capital.
(4)The modifications referred to in subparagraph (1) are that for the purposes of section 744(3) and Part 1 of this Schedule –
(a)the percentage of the receipts, expenditure, assets and liabilities of the subsidiary which is equal to the percentage of the issued share capital of the company concerned which is owned as mentioned in subparagraph (2) shall be regarded as the receipts, expenditure, assets and liabilities of the fund, and
(b)there shall be disregarded the interest of the fund in the subsidiary and any distributions or other payments made by the subsidiary to the fund or by the fund to the subsidiary.
Offshore funds with interests in dealing and management companies
12.
(1)Section 744(3)(c) shall not apply to so much of the assets of an offshore fund as consists of issued share capital of a company which is either –
(a)a wholly-owned subsidiary of the fund which is within subparagraph (2), or
(b)a subsidiary management company of the fund (within the meaning of subparagraph (3)).
(2)A company which is a wholly-owned subsidiary of an offshore fund shall be one to which subparagraph (1)(a) applies if –
(a)the business of the company consists wholly of dealing in material interests in the offshore fund for the purposes of and in connection with the management and administration of the business of the fund, and
(b)the company is not entitled to any distribution in respect of any material interest for the time being held by the company,
and paragraph 11(2) shall apply to determine whether a company is for the purposes of this paragraph a wholly-owned subsidiary of an offshore fund.
(3)A company (being a company in which an offshore fund has an interest) shall be a subsidiary management company of the fund for the purposes of subparagraph (1)(b) if –
(a)the company carries on no business other than providing services within subparagraph (4) either for the fund alone or for the fund and for any other offshore fund which has an interest in the company, and
(b)the company’s remuneration for the services it provides to the fund is not greater than it would be if it were determined at arm’s length between the fund and a company in which the fund has no interest.
(4)The services referred to in subparagraph (3) are –
(a)holding property (being property of any description) occupied or used in connection with the management or administration of the fund, and
(b)providing administrative, management and advisory services to the fund.
(5)In determining in accordance with subparagraph (3) whether a company in which an offshore fund has an interest is a subsidiary management company of that fund –
(a)every business carried on by a wholly-owned subsidiary of the company shall be treated as carried on by the company,
(b)no account shall be taken of so much of the company’s business as consists of holding its interests in a wholly-owned subsidiary, and
(c)any reference in subparagraph (3)(b) to the company shall be taken to include a reference to a wholly-owned subsidiary of the company.
(6)A reference in subparagraph (5) to a wholly-owned subsidiary of a company shall be construed as a reference to another company, the whole of the issued share capital of which is for the time being directly and beneficially owned by the first-mentioned company.
Disregarding of certain investments forming less than 5 per cent of a fund
13.
(1)In this paragraph, “excess holding” means any holding within subparagraph (2).
(2)In any case where –
(a)in any account period of an offshore fund the assets of the fund include a holding of issued share capital (or any class of issued share capital) of a company, and
(b)that holding is such that by virtue of section 744(3)(c) the fund could not (apart from this paragraph) be certified as a distributing fund in respect of that account period,
then, if the condition in subparagraph (3) is fulfilled, that holding shall be disregarded for the purposes of section 744(3)(c).
(3)The condition referred to in subparagraph (2) is that at no time in the account period in question does that portion of the fund which consists of –
(a)excess holdings, and
(b)interests in other offshore funds which are not qualifying funds,
exceed 5 per cent by value of all the assets of the fund.
Power of Revenue Commissioners to disregard certain breaches of conditions
14.Where in the case of any account period of an offshore fund it appears to the Revenue Commissioners that there has been a failure to comply with any of the conditions in paragraphs (a), (b) and (c) of section 744(3) (as modified, where appropriate, by the preceding provisions of this Part of this Schedule) but they are satisfied that the failure –
(a)occurred inadvertently, and
(b)was remedied without unreasonable delay,
then, the Revenue Commissioners may disregard the failure for the purposes of determining whether to certify the fund as a distributing fund in respect of that account period.
Schedule 19, Part 3 Certification Procedure
Section 744.
Application for certification
15.
(1)The Revenue Commissioners shall, in such manner as they consider appropriate, certify an offshore fund as a distributing fund in respect of an account period if –
(a)an application in respect of that period is made under this paragraph,
(b)the application is accompanied by the accounts of the fund for, or for a period which includes, the account period to which the application relates,
(c)such information as the Revenue Commissioners may reasonably require for the purpose of determining whether the fund should be so certified is furnished to the Revenue Commissioners, and
(d)the Revenue Commissioners are satisfied that nothing in subsection (2) or (3) of section 744 prevents the fund being so certified.
(2)An application under this paragraph shall be made to the Revenue Commissioners by the fund or by a trustee or officer of the fund on behalf of the fund and may be so made before the expiry of the period of 6 months beginning at the end of the account period to which the application relates.
(3)In any case where on an application under this paragraph the Revenue Commissioners determine that the offshore fund concerned should not be certified as a distributing fund in respect of the account period to which the application relates, they shall give notice of that determination to the fund.
(4)Where at any time it appears to the Revenue Commissioners that –
(a)the accounts accompanying an application under this paragraph in respect of any account period of an offshore fund are not such, or
(b)any information furnished to them in connection with such an application is not such,
as to make full and accurate disclosure of all facts and considerations relevant to the application, the Revenue Commissioners shall give notice to the fund accordingly, specifying the period concerned.
(5)Where a notice is given by the Revenue Commissioners under subparagraph (4), they shall be deemed never to have certified the offshore fund in respect of the account period in question.
Appeals
16.
(1)An offshore fund, or a trustee or officer of the fund, as the case may be, aggrieved by –
(a)a notice of a determination under paragraph 15(3), or
(b)a notice given under paragraph 15(4),
as the case may be, given to that fund, trustee or officer may appeal the notice to the Appeal Commissioners, in accordance with section 949I, within the period of 30 days after the date of that notice.
(2)The Appeal Commissioners shall hear and determine an appeal under subparagraph (1) in accordance with the principles to be followed by the Revenue Commissioners in determining applications under paragraph 15.
(3)[deleted]
Schedule 19, Part 4 Supplementary
Section 744.
Assessment: effect of non-certification
17.No appeal may be brought against an assessment to tax on the ground that an offshore fund should have been certified as a distributing fund in respect of an account period of the fund.
18.
(1)Without prejudice to paragraph 17, in any case where no application has been made under paragraph 15 in respect of an account period of an offshore fund, any person liable to pay tax which that person would not be liable to pay if the offshore fund were certified as a distributing fund in respect of that period may by notice in writing require the Revenue Commissioners to take action under this paragraph for the purposes of determining whether the fund should be so certified.
(2)Subject to subparagraphs (3) and (5), where the Revenue Commissioners receive a notice under subparagraph (1) they shall by notice, given in such manner as they consider appropriate in the circumstances, invite the offshore fund concerned to make an application under paragraph 15 in respect of the period in question.
(3)Where subparagraph (2) applies, the Revenue Commissioners shall not be required to give notice under that subparagraph before the expiry of the account period to which the notice is to relate nor if an application under paragraph 15 has already been made; but where notice is given under subparagraph (2), an application under paragraph 15 shall not be out of time under paragraph 15(2) if it is made within 90 days of the date of that notice.
(4)Where an offshore fund to which notice is given under subparagraph (2) does not make an application under paragraph 15 in respect of the account period in question within the time allowed by subparagraph (3) or paragraph 15(2), as the case may be, the Revenue Commissioners shall proceed to determine the question of certification in respect of that period as if such an application had been made.
(5)Where the Revenue Commissioners receive more than one notice under subparagraph (1) with respect to the same account period of the same offshore fund, their obligations under subparagraphs (2) and (4) shall be taken to be fulfilled with respect to each of those notices if they are fulfilled with respect to any of them.
(6)Notwithstanding anything in subparagraph (5), for the purpose of a determination under subparagraph (4) with respect to an account period of an offshore fund, the Revenue Commissioners shall have regard to accounts and other information furnished by all persons who have given notice under subparagraph (1) with respect to that account period, and paragraph 15 shall apply as if accounts and information so furnished had been furnished in compliance with subparagraph (1) of that paragraph.
(7)Without prejudice to subparagraph (5), in any case where –
(a)at a time after the Revenue Commissioners have made a determination under subparagraph (4) that an offshore fund should not be certified as a distributing fund in respect of an account period, notice is given under subparagraph (1) with respect to that period, and
(b)the person giving that notice furnishes the Revenue Commissioners with accounts or information which had not been furnished to them at the time of the earlier determination,
then, the Revenue Commissioners shall reconsider their previous determination in the light of the new accounts or information and, if they consider it appropriate, may determine to certify the fund accordingly.
(8)Where any person has given notice to the Revenue Commissioners under subparagraph (1) with respect to an account period of an offshore fund and no application has been made under paragraph 15 with respect to that period, then –
(a)the Revenue Commissioners shall notify that person of their determination with respect to certification under subparagraph (4), and
(b)paragraph 16 shall not apply in relation to that determination.
Information as to decisions on certification etc.
19.Any obligation on the Revenue Commissioners to maintain secrecy or any other restriction upon the disclosure of information by them shall not preclude them from disclosing to any person appearing to them to have an interest in the matter –
(a)any determination of the Revenue Commissioners or (on appeal) the Appeal Commissioners as to whether an offshore fund should or should not be certified as a distributing fund in respect of any account period, or
(b)the content and effect of any notice given by the Revenue Commissioners under paragraph 15(4).
20.The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by this Schedule to be performed or discharged by the Revenue Commissioners, and references in this Schedule to the Revenue Commissioners shall, with any necessary modifications, be construed as including references to an officer so nominated.
Schedule 20 Offshore Funds: Computation of Offshore Income Gains
Schedule 20, Part 1 Disposal of Interests in non-qualifying funds
Section 745.
Interpretation
1.In this Part of this Schedule, “material disposal” means a disposal to which Chapter 2 of Part 27 applies otherwise than by virtue of section 742.
Calculation of unindexed gain
2.
(1)Where there is a material disposal, there shall first be determined for the purposes of this Part of this Schedule the amount (if any) which in accordance with this paragraph is the unindexed gain accruing to the person making the disposal.
(2)Subject to subsections (2) to (6) of section 741 and paragraph 3, the unindexed gain accruing on a material disposal shall be the amount which would be the gain on that disposal for the purposes of the Capital Gains Tax Acts if it were computed without regard to –
(a)any charge to income tax or corporation tax by virtue of section 745, and
(b)any adjustment (in this Part of this Schedule referred to as “the indexation allowance”) made under section 556(2) to sums allowable as deductions in the computation of chargeable gains.
3.
(1)Where the material disposal forms part of a transfer to which section 600 applies, the unindexed gain accruing on the disposal shall be computed without regard to any deduction to be made under that section in computing a chargeable gain.
(2)Notwithstanding sections 538 and 546, where apart from this subparagraph the effect of any computation under the preceding provisions of this Part of this Schedule would be to produce a loss, the unindexed gain on the material disposal shall be treated as nil, and accordingly for the purposes of this Part of this Schedule no loss shall be treated as accruing on a material disposal.
Gains since the 6th day of April, 1990
4.
(1)This paragraph shall apply where –
(a)the interest in the offshore fund which is disposed of by the person making a material disposal was acquired by that person before the 6th day of April, 1990, or
(b)that person is treated by virtue of any provision of subparagraphs (3) and (4) as having acquired the interest before that date.
(2)Where this paragraph applies, the amount which would have been the gain on the material disposal shall be determined for the purposes of this Part of this Schedule –
(a)on the assumption that on the 6th day of April, 1990, the interest was disposed of and immediately reacquired for a consideration equal to its market value at that time, and
(b)subject to that assumption, on the basis that the gain is computed in the like manner as the unindexed gain on the material disposal is determined under paragraphs 2 and 3,
and that amount is in paragraph 5(2) referred to as “the gain since the 6th day of April, 1990”.
(3)Where the person making the material disposal acquired the interest disposed of –
(a)on or after the 6th day of April, 1990, and
(b)in such circumstances that by virtue of any enactment other than section 556(4) that person and the person (in this subparagraph and subparagraph (4) referred to as “the previous owner”) from whom that person acquired the interest disposed of were to be treated for the purposes of the Capital Gains Tax Acts as if that person’s acquisition were for a consideration of such an amount as would secure that, on the disposal under which that person acquired the interest disposed of, neither a gain or a loss accrued to the previous owner,
then, the previous owner’s acquisition of the interest shall be treated as that person’s acquisition of the interest.
(4)Where the previous owner acquired the interest disposed of –
(a)on or after the 6th day of April, 1990, and
(b)in circumstances similar to those referred to in subparagraph (3),
then, the acquisition of the interest by the predecessor of the previous owner shall be treated for the purposes of this paragraph as the previous owner’s acquisition, and so on back through previous acquisitions in similar circumstances until the first such acquisition before the 6th day of April, 1990, or, as the case may be, until an acquisition on a material disposal on or after that date.
The offshore income gain
5.
(1)Subject to subparagraph (2), a material disposal shall give rise to an offshore income gain of an amount equal to the unindexed gain on that disposal.
(2)In any case where –
(a)paragraph 4 applies, and
(b)the gain since the 6th day of April, 1990 (within the meaning of paragraph 4(2)) is less than the unindexed gain on the disposal,
the offshore income gain to which the disposal gives rise shall be an amount equal to the income gain since the 6th day of April, 1990 (within the meaning of that paragraph).
Schedule 20, Part 2 Disposals involving an equalisation element
Section 745.
6.
(1)Subject to paragraph 7, a disposal to which Chapter 2 of Part 27 applies by virtue of section 742(3) shall give rise to an offshore income gain of an amount equal to the equalisation element relevant to the asset disposed of.
(2)Subject to subparagraphs (4) to (6), the equalisation element relevant to the asset disposed of by a disposal within subparagraph (1) shall be the amount which would be credited to the equalisation account of the offshore fund concerned in respect of accrued income if, on the date of the disposal, the asset disposed of were acquired by another person by means of initial purchase.
(3)In the following provisions of this Part of this Schedule, a disposal within subparagraph (1) is referred to as a “disposal involving an equalisation element”.
(4)Where the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal after the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, the amount which apart from this subparagraph would be the equalisation element relevant to that asset shall be reduced by the following amount, that is –
(a)if that acquisition took place on or after the 6th day of April, 1990, the amount which on that acquisition was credited to the equalisation account of the offshore fund concerned in respect of accrued income or, as the case may be, would have been so credited if that acquisition had been an acquisition by means of initial purchase, and
(b)in any other case, the amount which would have been credited to that account in respect of accrued income if that acquisition had been an acquisition by means of initial purchase taking place on the 6th day of April, 1990.
(5)In any case where –
(a)the asset disposed of by a disposal involving an equalisation element was acquired by the person making the disposal at or before the beginning of the period by reference to which the accrued income referred to in subparagraph (2) is calculated, and
(b)that period began before the 6th day of April, 1990, and ends after that date,
the amount which apart from this subparagraph would be the equalisation element relevant to that asset shall be reduced by the amount which would have been credited to the equalisation account of the offshore fund concerned in respect of accrued income if the acquisition referred to in clause (a) had been an acquisition by means of initial purchase taking place on the 6th day of April, 1990.
(6)Where there is a disposal involving an equalisation element, then, to the extent that any amount which was or would be credited to the equalisation account of the offshore fund in respect of accrued income (as mentioned in subparagraph (2), (3), (4) or (5)) represents profits from dealing in commodities (within the meaning of paragraph 4 of Schedule 19), 50 per cent of that accrued income shall be disregarded in determining under those subparagraphs the equalisation element relevant to the asset disposed of by that disposal.
7.
(1)For the purposes of this Part of this Schedule, the Part 1 gain (if any) on any disposal involving an equalisation element shall be determined in accordance with paragraph 8.
(2)Notwithstanding anything in paragraph 6 –
(a)where there is no Part 1 gain on a disposal involving an equalisation element, that disposal shall not give rise to an offshore income gain, and
(b)where apart from this paragraph the offshore income gain on a disposal involving an equalisation element would exceed the Part 1 gain on that disposal, the offshore income gain to which that disposal gives rise shall be reduced to an amount equal to that Part 1 gain.
8.
(1)On a disposal involving an equalisation element, the Part 1 gain shall be the amount (if any) which, by virtue of Part 1 of this Schedule (as modified by subparagraphs (2) and (3)), would be the offshore income gain on that disposal if it were a material disposal within the meaning of that Part.
(2)For the purposes only of the application of Part 1 of this Schedule to determine the Part 1 gain (if any) on a disposal involving an equalisation element, subsections (5) and (6) of section 742 shall apply as if in subsection (5) of that section “by virtue of subsection (3)” were deleted.
(3)Where a disposal involving an equalisation element is one which by virtue of any enactment other than section 556(4) is treated for the purposes of the Capital Gains Tax Acts as one on which neither a gain nor a loss accrues to the person making the disposal, then, for the purpose only of determining the Part 1 gain (if any) on the disposal, that enactment shall be deemed not to apply to such a disposal (but without prejudice to the application of that enactment to any earlier disposal).