{"id":11003,"date":"2022-04-18T11:46:30","date_gmt":"2022-04-18T11:46:30","guid":{"rendered":"http:\/\/legalblog.ie\/?p=11003"},"modified":"2024-04-05T20:29:43","modified_gmt":"2024-04-05T20:29:43","slug":"close-company-consequences","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/close-company-consequences\/","title":{"rendered":"Close Company Taxation"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Overview\" title=\"Overview\">Overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Definition_of_Close_Company\" title=\"Definition of Close Company\">Definition of Close Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Excluded_Companies\" title=\"Excluded Companies\">Excluded Companies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Benefits_Received_by_Participators\" title=\"Benefits Received by Participators\">Benefits Received by Participators<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Exceptions_for_Benefits\" title=\"Exceptions for Benefits\">Exceptions for Benefits<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Interest_paid_to_Certain_Directors\" title=\"Interest paid to Certain Directors\">Interest paid to Certain Directors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Economic_Return_Limitation\" title=\"Economic Return Limitation\">Economic Return Limitation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Loans_to_Directors_and_Associates\" title=\"Loans to Directors and Associates\">Loans to Directors and Associates<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Grossed_Up_Loan\" title=\"Grossed Up Loan\">Grossed Up Loan<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Recipient\" title=\"Recipient\">Recipient<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Loan_Exceptions\" title=\"Loan Exceptions\">Loan Exceptions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/#Brexit_Relief\" title=\"Brexit Relief\">Brexit Relief<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#TAXES_CONSOLIDATION_ACT\" title=\"TAXES CONSOLIDATION ACT\">TAXES CONSOLIDATION ACT<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Interpretation_and_general_ss_430-435\" title=\"Interpretation and general (ss. 430-435)\">Interpretation and general (ss. 430-435)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Meaning_of_%E2%80%9Cclose_company%E2%80%9D\" title=\"Meaning of &#8220;close company&#8221;.\">Meaning of &#8220;close company&#8221;.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Certain_companies_with_quoted_shares_not_to_be_close_companies\" title=\"Certain companies with quoted shares not to be close companies.\">Certain companies with quoted shares not to be close companies.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Meaning_of_%E2%80%9Cassociated_company%E2%80%9D_and_%E2%80%9Ccontrol%E2%80%9D\" title=\"Meaning of &#8220;associated company&#8221; and &#8220;control&#8221;.\">Meaning of &#8220;associated company&#8221; and &#8220;control&#8221;.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Meaning_of_%E2%80%9Cparticipator%E2%80%9D_%E2%80%9Cassociate%E2%80%9D_%E2%80%9Cdirector%E2%80%9D_and_%E2%80%9Cloan_creditor%E2%80%9D\" title=\"Meaning of &#8220;participator&#8221;, &#8220;associate&#8221;, &#8220;director&#8221; and &#8220;loan creditor&#8221;.\">Meaning of &#8220;participator&#8221;, &#8220;associate&#8221;, &#8220;director&#8221; and &#8220;loan creditor&#8221;.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Distributions_to_be_taken_into_account_and_meaning_of_%E2%80%9Cdistributable_income%E2%80%9D_%E2%80%9Cinvestment_income%E2%80%9D_%E2%80%9Cestate_income%E2%80%9D_etc\" title=\"Distributions to be taken into account and meaning of &#8220;distributable income&#8221;, &#8220;investment income&#8221;, &#8220;estate income&#8221;, etc.\">Distributions to be taken into account and meaning of &#8220;distributable income&#8221;, &#8220;investment income&#8221;, &#8220;estate income&#8221;, etc.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Information\" title=\"Information.\">Information.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Additional_matters_to_be_treated_as_distributions_charges_to_tax_in_respect_of_certain_loans_and_surcharges_on_certain_undistributed_income_ss_436-441\" title=\"Additional matters to be treated as distributions, charges to tax in respect of certain loans and surcharges on certain undistributed income (ss. 436-441)\">Additional matters to be treated as distributions, charges to tax in respect of certain loans and surcharges on certain undistributed income (ss. 436-441)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Certain_expenses_for_participators_and_associates\" title=\"Certain expenses for participators and associates.\">Certain expenses for participators and associates.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Certain_settlements_made_by_close_companies\" title=\"Certain settlements made by close companies.\">Certain settlements made by close companies.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Interest_paid_to_directors_and_directors_associates\" title=\"Interest paid to directors and directors&#8217; associates.\">Interest paid to directors and directors&#8217; associates.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Loans_to_participators_etc\" title=\"Loans to participators, etc.\">Loans to participators, etc.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Extension_of_section_438_to_loans_by_companies_controlled_by_close_companies\" title=\"Extension of section 438 to loans by companies controlled by close companies.\">Extension of section 438 to loans by companies controlled by close companies.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Effect_of_release_etc_of_debt_in_respect_of_loan_under_section_438\" title=\"Effect of release, etc. of debt in respect of loan under section 438.\">Effect of release, etc. of debt in respect of loan under section 438.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Surcharge_on_undistributed_investment_and_estate_income\" title=\"Surcharge on undistributed investment and estate income.\">Surcharge on undistributed investment and estate income.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/legalblog.ie\/close-company-consequences\/2\/#Surcharge_on_undistributed_income_of_service_companies\" title=\"Surcharge on undistributed income of service companies.\">Surcharge on undistributed income of service companies.<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"Overview\"><\/span>Overview<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Tax rules limit the extent to which shareholders may use close companies in order to postpone, reduce or avoid personal tax liability.\u00a0 Tax law defines certain companies to be \u201cclose companies\u201d.\u00a0 The vast majority of private companies and many non quoted public companies are deemed close companies.<\/p>\n<p>The effect of the definition is that the vast majority of Irish private companies and many non-quoted public companies are deemed close companies.<\/p>\n<p>A number of very significant consequences flow from being classified as a close company.\u00a0\u00a0There are a number of distinct \u00a0aspects to the legislation.<\/p>\n<p>Benefits received by shareholders or persons connected to them are taxed as if they were cash dividends. Excessive interest paid by the company is deemed a benefit to the shareholder. Loans from the company to the shareholder are subject to restrictions and may be deemed to be income.\u00a0 Finally,certain types of passive income or professional service income is subject to a surcharge, if it is not distributed.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Definition_of_Close_Company\"><\/span>Definition of Close Company<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The definition of a \u201cclose company\u201d is designed to catch most companies, public and private, other than those with a genuinely wide dispersal of shareholders. The test is detailed and technical and it is very difficult to avoid being so classified.<\/p>\n<p>A close company for tax purposes is an Irish resident company which is controlled by five or fewer so called \u201cparticipators\u201d or their \u201cassociates\u201d or by \u201cparticipators\u201d who are all \u00a0directors of the company, irrespective of their number.<\/p>\n<p>A \u201cparticipator\u201d is any person having an interest in the capital of a company. This includes a shareholder, a person who holds or who is entitled to hold, share capital or voting rights, certain loan creditors, persons entitled to participate in distributions from the company and persons who are in a position to control directly or indirectly the assets or income of the company or secure that they may be applied for his benefit.<\/p>\n<p>\u201cAssociates\u201d of participators include their relatives including husband, wife, ancestor, descendent, brothers or sisters.\u00a0 In-laws [, nephews or nieces] are excluded.\u00a0 It includes trustees of settlements with which they are connected or which they or any of their relatives created.\u00a0 Trusts for the benefit of employees and pension funds are excluded.<\/p>\n<p>\u201cDirectors\u201d include persons occupying the position of directors irrespective of whether they have been formally appointed as such.\u00a0 It includes persons in accordance with whose instructions, the formally appointed directors act or are accustomed to act.\u00a0 It includes the manager of a company who is, either on his own, or with associates, the beneficial owner or able to control 20% or more of the share capital of the company.<\/p>\n<p>Loan creditors do not include ordinary creditors.\u00a0 In this context, loan creditors means \u00a0creditors who hold debts whose return is linked to the fortunes of the company. The will generally be investors and may also be shareholders. However, they may be more arms length than this and may be entities who have agreed to link their return to the company\u2019s trading results.<\/p>\n<p>A company is deemed to be an associated company if at any time [ within the previous year] it has control of the other or been controlled by the other or if both are under the control of a third person or company. \u201cControl\u201d is also widely defined.\u00a0 It includes a power or right to exercise or acquire control directly or indirectly of the company&#8217;s affairs including the greater part of any of its [ordinary shares; voting rights]; total share capital; total income of the company on a full distribution; or total assets of the company on a winding up.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Excluded_Companies\"><\/span>Excluded Companies<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Certain limited categories of company are excluded from the definition of close companies, even if they would come within it, under the above definition.\u00a0 They include<\/p>\n<ul>\n<li>companies not resident in Ireland,<\/li>\n<li>State owned or controlled companies,<\/li>\n<li>Companies owned or controlled by EU or DTA states themselves<\/li>\n<li>companies quoted on stock exchanges where at least 35% of the voting power is held by the public and not more than 85% of the voting power is held by at least five shareholders with more than 5% voting power each. (but with exceptions)<\/li>\n<li>certain companies controlled by non-close companies unless that company is one of the five or\u00a0 less participators.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Benefits_Received_by_Participators\"><\/span>Benefits Received by Participators<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Most benefits received by shareholders and persons connected to them, are deemed a distribution and are taxable accordingly. The provisions also apply where assets benefits or expenses reimbursed exceed those actually incurred or where assets are sold at undervalue. The excess reimbursement or undervalue respectively are benefits.<\/p>\n<p>The benefit and the corresponding company expense is effectively deemed to be a dividend to the value of the benefit benefits to the participators or their associates. This means that, for the company, they are not deducted in the calculation of profits for corporation tax purposes.<\/p>\n<p>The company must account for dividend withholding tax on the value of the benefit at the standard rate.\u00a0 The company is obliged to remit tax on the deemed distribution (dividend equivalent) in the month after the benefit is made available, to the shareholder or other participator. The recipient is subject to income tax and levies on the receipt.<\/p>\n<p>See the chapter on distributions and dividends. The concept of the distribution is much wider than that of a dividend. Distributions are always treated in the above manner; i.e.\u00a0 not allowed as a deduction in the calculation of tax, subject to dividend withholding tax and taxable as income in the hands of the recipient.<\/p>\n<p>Interest paid on loan arrangements and loan securities in the company that have the characteristic of equity are treated as dividends under many circumstances.<\/p>\n<p>The recipient shareholder (or other participator) is also assessable to income tax on the value of the benefit received. \u00a0The recipient must account for the benefit in the same way as \u00a0a dividend and pay income tax at his marginal rate of\u00a0 tax.\u00a0 He will obtain a credit for the tax paid by the company, in much the same way as with formal dividends<\/p>\n<p>Expenses covered include entertainment services, accommodation and domestic services. It also includes any other benefits or facilities whatsoever.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Exceptions_for_Benefits\"><\/span>Exceptions for Benefits<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following benefits are not deemed to be distributions:<\/p>\n<ul>\n<li>reimbursed expenses which are legitimate business expenses;<\/li>\n<li>those already deemed to be benefits in kind;<\/li>\n<li>expenses incurred in connection with pensions, lump sums or gratuities on death or retirement subject to compliance with conditions.<\/li>\n<\/ul>\n<p>The exception for benefits taxed as employee or propriety directors benefits in kind covers payments already subject to income tax as benefits in kind. This will apply to many benefits where the recipient is employee or director. The close company provisions apply much more broadly<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Interest_paid_to_Certain_Directors\"><\/span>Interest paid to Certain Directors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Interest paid by a close company on most loans made by directors and associates is treated as a distribution. As set out above, the definition of \u201cdirector\u201d is much broader than those who formally hold the office of director.<\/p>\n<p>[ The\u00a0 provision applies where interest is paid on loans by a close company or associate to a director or an associate of a director of any company which controls or is controlled by the close company or in which he has material interest]. A director has a material interest if he or any one of more of his associates is the owner or beneficial owner or able to control directly more than 5% of the ordinary share capital.<\/p>\n<p>The company must withhold dividend withholding tax on the \u00a0amount or value\u00a0 The recipient must account for income tax on the deemed distribution received.\u00a0 If also taxed on the interest received, he will get a credit for the dividend withholding tax.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Economic_Return_Limitation\"><\/span>Economic Return Limitation<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There is a limitation which is designed to secure that interest which is an economic return on capital actually provided is exempted to this extent. The interest within the limit is calculated. Any excess interest over the limit is apportioned amongst the directors with the material interest concerned. Interest payments above the limit are deemed a distribution.<\/p>\n<p>The limit is related to the share and loan capital of the company. \u00a0It is 13% of the lower of the amount of all loans on which interest is paid in the accounting period to directors with a material interest or the nominal amount of share capital per the share premium account.<\/p>\n<p>Interest in excess of the limit is treated as a distribution. \u00a0Therefore it is not deductible the computation of taxable income. Dividend withholding tax must be withheld and paid to revenue.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Loans_to_Directors_and_Associates\"><\/span>Loans to Directors and Associates<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Many loans to directors and persons connected with them are unlawful or are severely restricted under Companies law. \u00a0Certain participators will not be subject to the company law restriction, although many will. The Companies Act 2014 has increased the scope for making loans to the directors under the summary approval procedure.<\/p>\n<p>Apart from Company law considerations \u00a0the close company tax legislation \u00a0creates a tax liability on loans to participators. In effect the loan is treated as an after-tax distribution upon which tax is immediately payable. Provided it is fully repaid within five years the tax paid may be reimbursed by revenue.<\/p>\n<p>The legislation applies to loans to participators (see definition above) associates of participators (see definition above) non-EU resident companies, companies acting as representatives for participators or their associates. There are anti-avoidance provisions designed to prevent arrangements with third parties which have the same practical effect as a loan or advance to one of these parties.<\/p>\n<p>What constitutes a loan is very broadly defined. It can arise indirectly by reason of an arrangement with a third party. It can arise unintentionally, in any circumstances where the director (and associate et cetera as defined) incur a liability to the company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Grossed_Up_Loan\"><\/span>Grossed Up Loan<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where a loan is made to a participator or an associate, the company must pay income tax on the amount of the loan grossed up at the standard rate, thereby treating the loan as if it was after tax. This means that the amount paid must be increased by an amount of taxation equivalent to the standard rate on the total of the tax plus the loan.<\/p>\n<p>This tax liability is equivalent to a withholding tax liability and cannot be set off against the company&#8217;s tax liabilities.<\/p>\n<p>When the loan is repaid the tax will be refunded provided this is done within [4] years.<\/p>\n<p>By concession, the Revenue allow for loans within the period which are repaid by the filing date to be exempt from the provisions. They must nonetheless be reported. Revenue will be alive to the possibility of its abuse by loans being temporarily advanced and repaid around the filing date. Given the status of this exemption should be checked from time to time as it is not based on the legislation.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Recipient\"><\/span>Recipient<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The loan is treated as income in the hands of the recipient. Although the company withholds income tax at the standard rate, it may also be chargeable as a benefit in kind to income tax at the higher rate as well as to PRSI\u00a0 and USC which may themselves be subject to an obligation to withhold tax via the PAYE system.<\/p>\n<p>Where the loan is repaid the income tax may be reclaimed. However this must be done within the normal time for amending assessments (four years and the end of the year of assessment). If it is done after this time it becomes too late to reclaim.<\/p>\n<p>If the loan is written off or released then the tax is no longer,potentially recoverable<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Loan_Exceptions\"><\/span>Loan Exceptions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>There are exceptions for money lending and bank businesses;<\/p>\n<p>The provisions do not apply to a loans to a director where are all \u00a0loans by the company and associates to the borrower concerned and his\/her spouse do not exceed \u20ac19,050 and the borrower works full-time and borrower does not have a material interest (5% of ordinary share capital (directly or indirectly held)).<\/p>\n<p>The provisions do not apply where the debt relates to the supply of goods and services in the ordinary course of business of the company unless the credit exceeds six months or is longer than credit terms normally given.<\/p>\n<p>The provisions do not apply whereunto the extent that the sums concerned are already subject to income tax in the hands of the recipient e.g as a benefit in kind to an employee or proprietary director.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Brexit_Relief\"><\/span>Brexit Relief<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Anti-avoidance provisions re-characterise interest as a distribution in certain circumstances. There is\u00a0 an exception from this treatment where the payment is to a company which is a resident of another EU Member State. Finance Act 2019 amends the provision to maintain this treatment for companies that are resident in the United Kingdom, in the event of a disorderly exit of the UK from the EU.<\/p>\n<p>Where a company transfers assets or liabilities to its members or vice versa, the amount by which the market value of the amount or benefit received by the member exceeds the amount or value of any new consideration given by the member, is treated as a distribution. However, such transfers between Irish resident companies are not treated as distributions where one company is a subsidiary of the other or both are subsidiaries of another company which is resident in a \u201crelevant Member State.\u201d Finance Act 2019 ensures that the current treatment continues to apply to Irish subsidiaries of UK-resident companies, in the event of a disorderly exit of the UK from the EU.<\/p>\n<p><!--nextpage--><\/p>\n<h2>TAXES CONSOLIDATION ACT<\/h2>\n<p>&nbsp;<\/p>\n<p>Part 13<\/p>\n<p>Close Companies (ss. 430-441)<\/p>\n<p>Chapter 1<\/p>\n<h4>Interpretation and general (ss. 430-435)<\/h4>\n<p>430.<\/p>\n<h4>Meaning of &#8220;close company&#8221;.<\/h4>\n<p>(1)For the purposes of the Corporation Tax Acts, &#8220;close company&#8221; means a company under the control of 5 or fewer participators, or of participators who are directors, but does not include &#8211;<\/p>\n<p>(a)a company not resident in the State,<\/p>\n<p>(b)a registered industrial and provident society, being a society within the meaning of section 698,<\/p>\n<p>(c)a building society within the meaning of section 702,<\/p>\n<p>(d)a company controlled by or on behalf of the State and not otherwise a close company,<\/p>\n<p>(da)a company controlled by or on behalf of &#8211;<\/p>\n<p>(i)a Member State of the European Communities (other than the State) or,<\/p>\n<p>(ii)the government of a territory, with which government, arrangements having the force of law by virtue of section 826(1) have been made,<\/p>\n<p>and which company is not otherwise a close company, or<\/p>\n<p>(e)a company within subsection (4) or section 431.<\/p>\n<p>(2)For the purposes of this section &#8211;<\/p>\n<p>(a)a company shall be treated as controlled by or on behalf of the State only if it is under the control of the State, or of persons acting on behalf of the State, independently of any other person, and<\/p>\n<p>(b)where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company by virtue of being under the control of persons acting independently of the State.<\/p>\n<p>(2A)For the purposes of this section &#8211;<\/p>\n<p>(a)a company shall be treated as controlled by or on behalf of a Member State of the European Communities (other than the State) or the government of a territory with which arrangements having the force of law by virtue of section 826(1) have been made only if it is under the control of that Member State or the government of that territory, or of persons acting on behalf of that Member State or the government of that territory, independently of any other person, and<\/p>\n<p>(b)where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company by virtue of being under the control of persons acting independently of that Member State or the government of that territory.<\/p>\n<p>(3)A company resident in the State (but not within paragraph (b) or (c) of subsection (1)) shall also be a close company if, on a full distribution of its distributable income, more than 50 per cent of that income would be paid directly or indirectly to 5 or fewer participators, or to participators who are directors.<\/p>\n<p>(4)A company shall not be treated as a close company &#8211;<\/p>\n<p>(a)if &#8211;<\/p>\n<p>(i)it is controlled by a company which is not a close company, or by 2 or more companies none of which is a close company, and<\/p>\n<p>(ii)it cannot be treated as a close company except by taking as one of the 5 or fewer participators requisite for its being so treated a company which is not a close company,<\/p>\n<p>or<\/p>\n<p>(b)if it cannot be treated as a close company except by virtue of paragraph (c) of section 432 (2) and would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.<\/p>\n<p>(5)References in subsection (4) to a close company shall be treated as including a company which if resident in the State would be a close company.<\/p>\n<p>(6)Where shares in any company (in this subsection referred to as &#8220;the first company&#8221;) are at any time after the 5th day of April, 1976, held on trust for an exempt approved scheme (within the meaning of Chapter 1 of Part 30), then, unless the scheme is established wholly or mainly for the benefit of persons who are, or are dependants of, employees or directors or past employees or directors of &#8211;<\/p>\n<p>(a)the first company,<\/p>\n<p>(b)an associated company of the first company,<\/p>\n<p>(c)a company under the control of any director, or associate of a director, of the first company or of 2 or more persons each of whom is such a director or associate, or<\/p>\n<p>(d)a close company,<\/p>\n<p>the persons holding the shares shall for the purposes of subsection (4) be deemed to be the beneficial owners of the shares and in that capacity to be a company which is not a close company.<\/p>\n<p>431.<\/p>\n<h4>Certain companies with quoted shares not to be close companies.<\/h4>\n<p>(1)In this section, &#8220;share&#8221; includes &#8220;stock&#8221;.<\/p>\n<p>(2)For the purposes of this section &#8211;<\/p>\n<p>(a)a person shall be a principal member of a company &#8211;<\/p>\n<p>(i)if such person possesses a percentage of the voting power in the company of more than 5 per cent and, where there are more than 5 such persons, if such person is one of the 5 persons who possess the greatest percentages, or<\/p>\n<p>(ii)if (because 2 or more persons possess equal percentages of the voting power in the company) there are no such 5 persons, such person is one of the 6 or more persons (so as to include those 2 or more who possess equal percentages) who possess the greatest percentages,<\/p>\n<p>(b)a principal member&#8217;s holding shall consist of the shares which carry the voting power possessed by the principal member, and<\/p>\n<p>(c)in determining the voting power which a person possesses, there shall be attributed to such person any voting power which for the purposes of section 432 would be attributed to such person under subsection (5) or (6) of that section.<\/p>\n<p>(3)Subject to this section, a company shall not be treated as being at any time a close company if &#8211;<\/p>\n<p>(a)shares in the company carrying not less than 35 per cent of the voting power in the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) have been allotted unconditionally to, or acquired unconditionally by, and are at that time beneficially held by, the public, and<\/p>\n<p>(b)any such shares have within the preceding 12 months been the subject of dealings on a recognised stock exchange, and the shares have within those 12 months been quoted in the official list of a recognised stock exchange.<\/p>\n<p>(4)Subsection (3) shall not apply to a company at any time when the total percentage of the voting power in the company possessed by all of the company&#8217;s principal members exceeds 85 per cent.<\/p>\n<p>(5)For the purposes of subsection (3), shares in a company shall be deemed to be beneficially held by the public only if the shares &#8211;<\/p>\n<p>(a)are within subsection (6), and<\/p>\n<p>(b)are not within the exceptions in subsection (7),<\/p>\n<p>and the reference to shares which have been allotted unconditionally to, or acquired unconditionally by, the public shall be construed accordingly.<\/p>\n<p>(6)Shares are within this subsection (as being beneficially held by the public) if the shares &#8211;<\/p>\n<p>(a)are beneficially held by a company resident in the State which is not a close company, or by a company not so resident which would not be a close company if it were so resident,<\/p>\n<p>(b)are held on trust for an exempt approved scheme (within the meaning of Chapter 1 of Part 30), or<\/p>\n<p>(c)are not comprised in a principal member&#8217;s holding.<\/p>\n<p>(7)<\/p>\n<p>(a)Shares shall be deemed not to be held by the public if the shares are held &#8211;<\/p>\n<p>(i)by any director, or associate of a director, of the company,<\/p>\n<p>(ii)by any company under the control of any such director or associate, or of 2 or more persons each of whom is such a director or associate,<\/p>\n<p>(iii)by an associated company of the company, or<\/p>\n<p>(iv)as part of any fund the capital or income of which is applicable or applied wholly or mainly for the benefit of, or of the dependants of, the employees or directors, or past employees or directors, of the company, or of any company within subparagraph (ii) or (iii).<\/p>\n<p>(b)References in this subsection to shares held by any person include references to any shares the rights or powers attached to which could for the purposes of section 432 be attributed to that person under subsection (5) of that section.<\/p>\n<p>432.<\/p>\n<h4>Meaning of &#8220;associated company&#8221; and &#8220;control&#8221;.<\/h4>\n<p>(1)For the purposes of this Part, a company shall be treated as another company&#8217;s associated company at a particular time if, at that time or at any time within one year previously, one of the 2 companies has control of the other company, or both companies are under the control of the same person or persons.<\/p>\n<p>(2)For the purposes of this Part, a person shall be taken to have control of a company if such person exercises, or is able to exercise or is entitled to acquire, control, whether direct or indirect, over the company&#8217;s affairs, and in particular, but without prejudice to the generality of the foregoing, if such person possesses or is entitled to acquire &#8211;<\/p>\n<p>(a)the greater part of the share capital or issued share capital of the company or of the voting power in the company,<\/p>\n<p>(b)such part of the issued share capital of the company as would, if the whole of the income of the company were distributed among the participators (without regard to any rights which such person or any other person has as a loan creditor), entitle such person to receive the greater part of the amount so distributed, or<\/p>\n<p>(c)such rights as would, in the event of the winding up of the company or in any other circumstances, entitle such person to receive the greater part of the assets of the company which would then be available for distribution among the participators.<\/p>\n<p>(3)Where 2 or more persons together satisfy any of the conditions of subsection (2), they shall be taken to have control of the company.<\/p>\n<p>(4)For the purposes of subsection (2), a person shall be treated as entitled to acquire anything which such person is entitled to acquire at a future date or will at a future date be entitled to acquire.<\/p>\n<p>(5)For the purposes of subsections (2) and (3), there shall be attributed to any person any rights or powers of a nominee for such person, that is, any rights or powers which another person possesses on such person&#8217;s behalf or may be required to exercise on such person&#8217;s direction or behalf.<\/p>\n<p>(6)For the purposes of subsections (2) and (3), there may also be attributed to any person all the rights and powers of &#8211;<\/p>\n<p>(a)any company of which such person has, or such person and associates of such person have, control,<\/p>\n<p>(b)any 2 or more companies of which such person has, or such person and associates of such person have, control,<\/p>\n<p>(c)any associate of such person, or<\/p>\n<p>(d)any 2 or more associates of such person,<\/p>\n<p>including the rights and powers attributed to a company or associate under subsection (5), but excluding those attributed to an associate under this subsection, and such attributions shall be made under this subsection as will result in the company being treated as under the control of 5 or fewer participators if it can be so treated.<\/p>\n<p>433.<\/p>\n<h4>Meaning of &#8220;participator&#8221;, &#8220;associate&#8221;, &#8220;director&#8221; and &#8220;loan creditor&#8221;.<\/h4>\n<p>(1)For the purposes of this Part, &#8220;participator&#8221;, in relation to any company, means a person having a share or interest in the capital or income of the company and, without prejudice to the generality of the foregoing, includes &#8211;<br \/>\n(a)any person who possesses, or is entitled to acquire, share capital or voting rights in the company,<br \/>\n(b)any loan creditor of the company,<br \/>\n(c)any person who possesses, or is entitled to acquire, a right to receive or participate in distributions of the company (construing &#8220;distributions&#8221; without regard to section 436 or 437) or any amounts payable by the company (in cash or in kind) to loan creditors by means of premium on redemption, and<br \/>\n(d)any person who is entitled to secure that income or assets (whether present or future) of the company will be applied directly or indirectly for such person&#8217;s benefit.<\/p>\n<p>(2)<\/p>\n<p>(a)References in subsection (1) to being entitled to do anything apply where a person is entitled to do it at a future date or will at a future date be entitled to do it.<\/p>\n<p>(b)Subsection (1) is without prejudice to any particular provision of this Part requiring a participator in one company to be treated as being also a participator in another company.<\/p>\n<p>(3)<\/p>\n<p>(a)In this subsection, &#8220;relative&#8221; means husband, wife, civil partner, ancestor, lineal descendant, brother or sister.<\/p>\n<p>(b)For the purposes of this Part but subject to paragraph (c), &#8220;associate&#8221;, in relation to a participator, means &#8211;<br \/>\n(i)any relative or partner of the participator,<br \/>\n(ii)the trustee or trustees of any settlement in relation to which the participator is, or any relative (living or dead) of the participator is or was, a settlor (&#8220;settlement&#8221; and &#8220;settlor&#8221; having the same meanings respectively as in section 10), and<br \/>\n(iii)where the participator is interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person, any other person interested in those shares or obligations,<br \/>\nand has a corresponding meaning in relation to a person other than a participator.<\/p>\n<p>(c)Paragraph (b)(iii) shall not apply so as to make an individual an associate as being entitled or eligible to benefit under a trust &#8211;<\/p>\n<p>(i)if the trust relates exclusively to an exempt approved scheme (within the meaning of Chapter 1 of Part 30), or<\/p>\n<p>(ii)if the trust is exclusively for the benefit of the employees, or the employees and directors, of the company or their dependants (and not wholly or mainly for the benefit of the directors or their relatives) and the individual in question is not (and could not as a result of the operation of the trust become), either on his or her own or with his or her relatives, the beneficial owner of more than 5 per cent of the ordinary share capital of the company,<\/p>\n<p>and, in applying subparagraph (ii), any charitable trusts which may arise on the failure or determination of other trusts shall be disregarded.<\/p>\n<p>(4)For the purposes of this Part, &#8220;director&#8221; includes &#8211;<br \/>\n(a)any person occupying the position of director by whatever name called,<br \/>\n(b)any person in accordance with whose directions or instructions the directors are accustomed to act, and<br \/>\n(c)any person &#8211;<br \/>\n(i)who is a manager of the company or otherwise concerned in the management of the company&#8217;s trade or business, and<br \/>\n(ii)who is, either on his or her own or with one or more associates, the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control, 20 per cent or more of the ordinary share capital of the company.<\/p>\n<p>(5)In subsection (4)(c)(ii), &#8220;either on his or her own or with one or more associates&#8221; requires a person to be treated as owning or, as the case may be, controlling what any associate owns or controls, even if he or she does not own or control share capital on his or her own and, in subsection (3)(c)(ii), &#8220;either on his or her own or with his or her relatives&#8221; has a corresponding meaning.<\/p>\n<p>(6)<\/p>\n<p>(a)For the purposes of this Part but subject to paragraph (b), &#8220;loan creditor&#8221;, in relation to a company, means a creditor in respect of &#8211;<br \/>\n(i)any debt incurred by the company for &#8211;<br \/>\n(I)any money borrowed or capital assets acquired by the company,<br \/>\n(II)any right to receive income created in favour of the company, or<br \/>\n(III)consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on the debt),<br \/>\nor<br \/>\n(ii)any redeemable loan capital issued by the company.<\/p>\n<p>(b)A person carrying on a business of banking shall not be deemed to be a loan creditor in respect of any loan capital issued or debt incurred by the company for money loaned by such person to the company in the ordinary course of that business.<\/p>\n<p>(7)A person who is not the creditor in respect of any debt or loan capital to which subsection (6) applies but nevertheless has a beneficial interest in that debt or loan capital shall to the extent of that interest be treated for the purposes of this Part as a loan creditor in respect of that debt or loan capital.<\/p>\n<p>434.<\/p>\n<h4>Distributions to be taken into account and meaning of &#8220;distributable income&#8221;, &#8220;investment income&#8221;, &#8220;estate income&#8221;, etc.<\/h4>\n<p>(1)In this section &#8211;<\/p>\n<p>&#8220;estate income&#8221; means income (other than yearly or other interest) chargeable to tax under Case III, IV or V of Schedule D, and arising from the ownership of land (including any interest in or right over land) or from the letting furnished of any building or part of a building;<\/p>\n<p>&#8220;franked investment income&#8221; excludes &#8211;<\/p>\n<p>(a)a distribution made out of exempt profits within the meaning of section 140,<\/p>\n<p>(b)a distribution made out of disregarded income within the meaning of section 141 and to which subsection (3)(a) of that section applies, and<\/p>\n<p>(c)a distribution made out of exempted income within the meaning of section 142;<\/p>\n<p>&#8220;income&#8221; of a company for an accounting period means the income as computed in accordance with subsection (4);<\/p>\n<p>&#8220;investment income&#8221; of a company means income other than estate income which, if the company were an individual, would not be earned income within the meaning of section 3, but, without prejudice to the meaning of &#8216;franked investment income&#8217; in this section, does not include &#8211;<\/p>\n<p>(a)any interest or dividends on investments which, having regard to the nature of the company&#8217;s trade, would be taken into account as trading receipts in computing trading income but for the fact that they have been subjected to tax otherwise than as trading receipts, or but for the fact that by virtue of section 129 they are not to be taken into account in computing income for corporation tax, and<\/p>\n<p>(b)any dividends or other distributions received by the company in respect of shares at a time when any gain on a disposal of the shares would not have been a chargeable gain by virtue of section 626B or would not have been a chargeable gain by virtue of section 626B if paragraphs (a) and (b) of subsection (3) of that section were deleted.<\/p>\n<p>&#8220;relevant charges&#8221;, in relation to an accounting period of a company, means charges on income paid in the accounting period by the company and which are allowed as deductions under section 243, other than so much of those charges as is paid for the purposes of an excepted trade within the meaning of section 21A;<\/p>\n<p>&#8220;trading company&#8221; means any company which exists wholly or mainly for the purpose of carrying on a trade and any other company whose income does not consist wholly or mainly of investment or estate income.<\/p>\n<p>(2)For the purposes of section 440 and subject to subsection (3A) the distributions of a company for an accounting period shall be taken to be the aggregate of &#8211;<\/p>\n<p>(a)any dividends which are declared for or in respect of the accounting period and are paid or payable during the accounting period or within 18 months after the end of the accounting period, and<\/p>\n<p>(b)all distributions, other than dividends, made in the accounting period.<\/p>\n<p>(3)Where &#8211;<\/p>\n<p>(a)a period of account for or in respect of which a company declares a dividend is not an accounting period,<\/p>\n<p>(b)the dividend is paid or payable during the period of account or within 18 months after the end of the period of account, and<\/p>\n<p>(c)part of the period of account falls within an accounting period,<\/p>\n<p>then, the proportion of the amount of the dividend to be treated for the purposes of subsection (2) as being for or in respect of the accounting period shall be the same as the proportion which that part of the period of account bears to the whole of that period.<\/p>\n<p>(3A)<\/p>\n<p>(a)Where a close company pays a dividend, or makes a distribution, to another close company, the companies may jointly elect, by giving notice to the Collector-General in such manner as the Revenue Commissioners may require, that the dividend, or as the case may be the distribution, is to be treated for the purposes of section 440 as not being a distribution.<\/p>\n<p>(b)Where notice is given in accordance with paragraph (a), the dividend, or as the case may be the distribution, shall be treated &#8211;<\/p>\n<p>(i)for the purposes of section 440 as not being a distribution, and<\/p>\n<p>(ii)for the purposes of subsection (5) as not being franked investment income.<\/p>\n<p>(c)An election by a company under paragraph (a) as respects an accounting period shall be included with the return under Chapter 3 of Part 41A which falls to be made by the company for the accounting period.<\/p>\n<p>(4)The income of a company for an accounting period shall be the income for the accounting period, computed in accordance with the Corporation Tax Acts, exclusive of franked investment income, before deducting &#8211;<\/p>\n<p>(a)any loss incurred in any trade or profession carried on by the company which is carried forward from an earlier, or carried back from a later, accounting period,<\/p>\n<p>(b)any loss which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D and which is carried forward from an earlier accounting period or any expenses of management or any charges on income which are so carried forward, and<\/p>\n<p>(c)any excess of deficiencies over surpluses which if such excess were an excess of surpluses over deficiencies would be chargeable to corporation tax on the company under Case V of Schedule D and which is carried forward from an earlier, or carried back from a later, accounting period,<\/p>\n<p>and after deducting &#8211;<\/p>\n<p>(d)any loss incurred in the accounting period in any trade or profession carried on by the company,<\/p>\n<p>(e)any loss incurred in the accounting period which if it were a profit would be chargeable to corporation tax on the company under Case III or IV of Schedule D,<\/p>\n<p>(f)any excess of deficiencies over surpluses which if such excess were an excess of surpluses over deficiencies would be chargeable to corporation tax on the company for the accounting period under Case V of Schedule D,<\/p>\n<p>(g)any amount which is an allowable deduction against relevant trading income by virtue of section 243A.<\/p>\n<p>(5)<\/p>\n<p>(a)The estate and investment income of a company for an accounting period shall be the amount by which the sum of &#8211;<\/p>\n<p>(i)the amount of franked investment income for the accounting period, and<\/p>\n<p>(ii)an amount determined by applying to the amount of the income of the company for the accounting period the fraction &#8211;<\/p>\n<p>&nbsp;<\/p>\n<p>where &#8211;<\/p>\n<p>A is the aggregate of the amounts of estate income and investment income taken into account in computing the income of the company for the accounting period, and<\/p>\n<p>B is the amount of the company&#8217;s income before taking account of any amount specified in paragraphs (d) to (g) of subsection (4),<\/p>\n<p>(b)The trading income of a company for an accounting period shall be the income of the company for the accounting period after deducting &#8211;<\/p>\n<p>(i)an amount equal to the amount specified in subparagraph (ii) of paragraph (a),<\/p>\n<p>(ii)where the aggregate of the amounts specified in clauses (I) and (II) of paragraph (a) exceeds the sum of the amounts specified in subparagraphs (i) and (ii) of that paragraph, the amount of the excess, and<\/p>\n<p>(iii)charges on income paid for the purposes of an excepted trade within the meaning of section 21A.<\/p>\n<p>(5A)<\/p>\n<p>(a)For the purposes of sections 440 and 441, but subject to paragraph (b) &#8211;<\/p>\n<p>&#8216;distributable estate and investment income&#8217; of a company for an accounting period means the estate and investment income of the company for the accounting period after deducting the amount of corporation tax which would be payable by the company for the accounting period if the tax were computed on the basis of that income;<\/p>\n<p>&#8216;distributable trading income&#8217; of a company for an accounting period means the trading income of the company for the accounting period after deducting the amount of corporation tax which would be payable by the company for the accounting period if the tax were computed on the basis of that income;<\/p>\n<p>(b)In the case of a trading company, the distributable estate and investment income for an accounting period shall be the amount determined in accordance with paragraph (a) reduced by 7.5 per cent.<\/p>\n<p>(6)The amount for part of an accounting period of any description of income referred to in this section shall be a proportionate part of the amount for the whole period.<\/p>\n<p>(7)Where a company is subject to any restriction imposed by law as regards the making of distributions, regard shall be had to this restriction in determining the amount of income on which a surcharge shall be imposed under section 440.<\/p>\n<p>435.<\/p>\n<h4>Information.<\/h4>\n<p>(1)The inspector may by notice in writing require any company which is, or appears to the inspector to be, a close company to furnish him or her within such time (not being less than 30 days) as may be specified in the notice with such particulars as he or she thinks necessary for the purposes of this Part.<\/p>\n<p>(2)Where for the purposes of this Part any person in whose name any shares are registered is so required by notice in writing by the inspector, such person &#8211;<\/p>\n<p>(a)shall state whether or not such person is the beneficial owner of the shares, and<\/p>\n<p>(b)if not the beneficial owner of the shares or any of them, shall furnish the name and address of the person or persons on whose behalf the shares are registered in such person&#8217;s name.<\/p>\n<p>(3)Subsection (2) shall apply in relation to loan capital as it applies in relation to shares.<\/p>\n<p>(4)<\/p>\n<p>(a)In this subsection, &#8220;securities&#8221; includes shares, stocks, bonds, debentures and debenture stock and any promissory note or other instrument evidencing indebtedness issued to a loan creditor of the company.<\/p>\n<p>(b)For the purposes of this Part, the inspector may by notice in writing require &#8211;<\/p>\n<p>(i)any company which appears to the inspector to be a close company to furnish him or her with particulars of any bearer securities issued by the company and the names and addresses of the persons to whom the securities were issued and the respective amounts issued to each person, and<\/p>\n<p>(ii)any person to whom securities were so issued, or any person to whom or through whom such securities were subsequently sold or transferred, to furnish the inspector with such further information as he or she may require with a view to enabling him or her to ascertain the names and addresses of the persons beneficially interested in the securities.<\/p>\n<p>Chapter 2<\/p>\n<h4>Additional matters to be treated as distributions, charges to tax in respect of certain loans and surcharges on certain undistributed income (ss. 436-441)<\/h4>\n<p>436.<\/p>\n<p>&nbsp;<\/p>\n<h4>Certain expenses for participators and associates.<\/h4>\n<p>(1)Subject to the exceptions mentioned in section 130, &#8220;distribution&#8221;, in relation to a close company, includes, unless otherwise stated, any such amount as is required to be treated as a distribution by subsection (3).<\/p>\n<p>(2)For the purposes of this section, any reference to a participator includes an associate of a participator, and any participator in a company which controls another company shall be treated as being also a participator in that other company.<\/p>\n<p>(3)<\/p>\n<p>(a)Subject to paragraph (b), where a close company incurs expense in or in connection with the provision for any participator of living or other accommodation, entertainment, domestic or other services, or other benefits or facilities of whatever nature, the company shall be treated as making a distribution to such participator of an amount equal to so much of that expense as is not made good to the company by such participator.<\/p>\n<p>(b)Paragraph (a) shall not apply to expense incurred in or in connection with the provision of benefits or facilities for a person to whom section 118 applies as a director or employee of the company, or the provision for the spouse, civil partner, children, dependants or children of the civil partner of any such person of any pension, annuity, lump sum, gratuity or other like benefit to be given on his or her death or retirement.<\/p>\n<p>(4)Any reference in subsection (3) to expense incurred in or in connection with any matter shall include a reference to a proper proportion of any expense incurred partly in or in connection with that matter, and section 119 shall apply for the purposes of subsection (3) as it applies for the purposes of section 118, references to subsection (3) being substituted for references to section 118(1).<\/p>\n<p>(5)Subsection (3) shall not apply if the company and the participator are both resident in the State and &#8211;<\/p>\n<p>(a)one is a subsidiary of the other or both are subsidiaries of a third company also so resident, and<\/p>\n<p>(b)the benefit to the participator arises on or in connection with the transfer of assets or liabilities by the company to the participator, or to the company by the participator.<\/p>\n<p>(6)The question whether one company is a subsidiary of another company for the purpose of subsection (5) shall be determined as if it were a question whether it is a 51 per cent subsidiary of the other company, except that the other company shall be treated as not being the owner of &#8211;<\/p>\n<p>(a)any share capital which it owns directly in a company if a profit on a sale of the shares would be treated as a trading receipt of its trade,<\/p>\n<p>(b)any share capital which it owns indirectly and which is owned directly by a company for which a profit on the sale of the shares would be a trading receipt, or<\/p>\n<p>(c)any share capital which it owns directly or indirectly in a company not resident in the State.<\/p>\n<p>(7)<\/p>\n<p>(a)Where each of 2 or more close companies makes a payment to a person (in this paragraph referred to as &#8220;the first-mentioned person&#8221;) who is not a participator in that company, but is a participator in another of those companies, and the companies are acting in concert or under arrangements made by any person, then, each of those companies aqnd any participator in it shall be treated as if the payment made to the first-mentioned person had been made by that company.<\/p>\n<p>(b)This subsection shall apply with any necessary modifications in relation to the giving of any consideration and to the provision of any facilities as it applies in relation to the making of a payment.<\/p>\n<p>436A.<\/p>\n<h4>Certain settlements made by close companies.<\/h4>\n<p>(1)<\/p>\n<p>(a)In this section &#8211;<\/p>\n<p>&#8216;member&#8217;, in relation to a company, includes a participator in the company other than a loan creditor of the company;<\/p>\n<p>&#8216;relative&#8217; has the same meaning as in section 433(3)(a);<\/p>\n<p>&#8216;relevant settlement&#8217;, in relation to a close company, means a settlement made by, or on behalf of, the close company other than a settlement which &#8211;<\/p>\n<p>(i)is made expressly for the exclusive benefit of one or more than one person, who is neither a member of the company nor a relative of such a member, and<\/p>\n<p>(ii)does not allow at any time for the possibility of providing any benefit to such member or relative;<\/p>\n<p>&#8216;settlement&#8217; has the same meaning as in section 10 and &#8216;settled&#8217; shall be read accordingly.<\/p>\n<p>(b)For the purposes of this section, any participator in a company which controls another company shall be treated as being also a participator in that other company.<\/p>\n<p>(2)Where any amount, in money or money&#8217;s worth, is settled by, or on behalf of, a close company on or after 21 January 2011 in connection with a relevant settlement, that amount shall, for the purposes of the Tax Acts, be deemed to be a distribution by the company to the trustees of the settlement.<\/p>\n<p>(3)Where, on or after 21 January 2011, an individual who is or was a member of a close company, or a relative of such an individual, receives directly or indirectly an amount in money or money&#8217;s worth out of, or indirectly attributable to, assets comprised in a relevant settlement (whenever made) in relation to the close company, then so much of that amount as exceeds any consideration given by the individual or relative of the individual, as the case may be, to the extent that the individual or relative is not otherwise chargeable to income tax in respect of so much of that amount, shall be deemed for the purposes of the Income Tax Acts to be annual profits or gains of that individual or relative, as the case may be, chargeable to tax under Case IV of Schedule D for the year of assessment in which the amount is received.<\/p>\n<p>(4)This section shall not apply as respects a relevant settlement where the settlement was not made as part of a scheme or arrangement the purpose or one of the purposes of which was the avoidance of tax.<\/p>\n<p>437.<\/p>\n<h4>Interest paid to directors and directors&#8217; associates.<\/h4>\n<p>(1)In this section, &#8220;interest&#8221; includes any other consideration paid or given by the close company for the use of money advanced, or credit given, by any person, and references to interest paid shall be construed accordingly.<\/p>\n<p>(2)For the purposes of this section, a person shall have a material interest in a company if the person, either on the person&#8217;s own or with any one or more of the person&#8217;s associates, or if any associate of the person with or without any such other associates, is the beneficial owner of, or is 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.<\/p>\n<p>(3)Subject to the exceptions mentioned in section 130(1), this section shall apply where in any accounting period any interest is paid by a close company to, or to an associate of, a person &#8211;<\/p>\n<p>(a)who is a director of the close company, or of any company which controls or is controlled by the close company, and<\/p>\n<p>(b)who has a material interest &#8211;<\/p>\n<p>(i)in the close company, or<\/p>\n<p>(ii)where the close company is controlled by another company, in that other company.<\/p>\n<p>(4)Where the total amount so paid to any person in the accounting period exceeds the limit imposed in that person&#8217;s case, the excess shall be deemed to be a distribution made by the close company to that person.<\/p>\n<p>(5)The limit shall be calculated in the first instance as an overall limit applying to the aggregate of all interest which is within subsection (3) and which was paid by the close company in the accounting period and, where there are 2 or more different recipients, that overall limit shall be apportioned between them according to the amounts of interest paid to them respectively.<\/p>\n<p>(6)The overall limit shall be a sum equal to interest at 13 per cent per annum or such other rate of interest as the Minister for Finance may from time to time prescribe on whichever is the lesser of &#8211;<\/p>\n<p>(a)the total of the loans, advances and credits on which the interest within subsection (3) was paid by the close company in the accounting period or, if the total was different at different times in the accounting period, the average total over the accounting period, and<\/p>\n<p>(b)the nominal amount of the issued share capital of the close company plus the amount of any share premium account (or other comparable account by whatever name called) of the company, taking both amounts as at the beginning of the accounting period.<\/p>\n<p>(7)This section shall apply subject to section 436(7).<\/p>\n<p>438.<\/p>\n<h4>Loans to participators, etc.<\/h4>\n<p>(1)<\/p>\n<p>(a)Subject to this section, where a close company, otherwise than in the ordinary course of a business carried on by it which includes the lending of money, makes any loan or advances any money to an individual who is a participator in the company or an associate of a participator, the company shall be deemed for the purposes of this section to have paid in the year of assessment in which the loan or advance is made an annual payment of an amount which, after deduction of income tax at the standard rate for the year of assessment in which the loan or advance is made, is equal to the amount of the loan or advance.<\/p>\n<p>(b)Section 239 shall apply for the purposes of the charge, assessment and recovery of the tax referred to in paragraph (a).<\/p>\n<p>(c)The annual payment referred to in paragraph (a) shall not be a charge on the company&#8217;s income within the meaning of section 243.<\/p>\n<p>(2)For the purposes of this section, the cases in which a close company is to be regarded as making a loan to any person shall include a case where &#8211;<\/p>\n<p>(a)that person incurs a debt to the close company, or<\/p>\n<p>(b)a debt due from that person to a third person is assigned to the close company,<\/p>\n<p>and in such a case the close company shall be regarded as making a loan of an amount equal to the debt; but paragraph (a) shall not apply to a debt incurred for the supply by the close company of goods or services in the ordinary course of its trade or business unless the period of credit given exceeds 6 months or is longer than that normally given to the company&#8217;s customers.<\/p>\n<p>(3)Subsection (1) shall not apply to a loan made to a director or employee of a close company, or of an associated company of the close company, if &#8211;<\/p>\n<p>(a)the amount of the loan, or that amount when taken together with any other outstanding loans which were made by the close company or any of its associated companies to the borrower, or to the spouse or civil partner of the borrower, does not exceed \u20ac19,050,<\/p>\n<p>(b)the borrower works full-time for the close company or any of its associated companies, and<\/p>\n<p>(c)the borrower does not have a material interest in the close company or in any associated company of the close company but, if the borrower acquires such a material interest at a time when the whole or part of any such loan remains outstanding, the close company shall be regarded as making to the borrower at that time a loan of an amount equal to the sum outstanding.<\/p>\n<p>(4)<\/p>\n<p>(a)Where, after a company has been assessed to tax under this section in respect of any loan or advance, the loan or advance or any part of it is repaid to the company, relief shall be given from that tax or a proportionate part of that tax by discharge or repayment.<\/p>\n<p>(b)Notwithstanding any limitation in section 865(4) on the time within which a claim for a repayment of tax is required to be made, relief under this subsection shall be given on a claim which shall be made within 4 years from the end of the year of assessment in which the loan or advance, or any part of it, as the case may be, is repaid to the company.<\/p>\n<p>(5)Where under arrangements made by any person otherwise than in the ordinary course of a business carried on by that person &#8211;<\/p>\n<p>(a)a close company makes a loan or advance which apart from this subsection does not give rise to any charge on the company under subsection (1), and<\/p>\n<p>(b)some person other than the close company makes a payment or transfers property to, or releases or satisfies (in whole or in part) a liability of, an individual who is a participator in the company or an associate of a participator,<\/p>\n<p>then, unless in respect of the matter referred to in paragraph (b) there is to be included in the total income of the participator or associate an amount not less than the loan or advance, this section shall apply as if the loan or advance had been made to the participator or associate.<\/p>\n<p>(6)In subsections (1) and (5)(b), the references to an individual shall apply also to a company receiving the loan or advance in a fiduciary or representative capacity and to a company that is resident in neither a Member State of the European Union nor the United Kingdom and, for the purposes of this subsection &#8211;<\/p>\n<p>(a)a company is a resident of a Member State of the European Union if the company is by virtue of the law of that Member State resident for the purposes of tax (being, in the case of the State, corporation tax and, in any other case, being any tax imposed in the Member State which corresponds to corporation tax in the State) in such Member State, and<\/p>\n<p>(b)a company is a resident of the United Kingdom if the company is by virtue of the law of the United Kingdom resident for the purposes of tax (being any tax imposed in the United Kingdom which corresponds to corporation tax in the State) in the United Kingdom.<\/p>\n<p>(7)For the purposes of this section, any participator in a company which controls another company shall be treated as being also a participator in that other company, and section 437(2) shall apply for the purpose of determining whether a person has for the purpose of subsection (3) a material interest in a company.<\/p>\n<p>(8)For the purposes of this section and in relation to any loan or advance made on or after the 23rd day of May, 1983, section 430(1) shall apply as if paragraph (b) of that section were deleted.<\/p>\n<p>438A.<\/p>\n<h4>Extension of section 438 to loans by companies controlled by close companies.<\/h4>\n<p>(1)In this section &#8211;<\/p>\n<p>&#8216;loan&#8217; includes advance;<\/p>\n<p>&#8216;relevant arrangement&#8217; means any arrangement, the main purpose, or one of the main purposes, of which is to avoid or reduce a charge to tax under section 438.<\/p>\n<p>(2)Subject to subsection (5), where a company which is controlled by a close company makes a loan which, apart from this section, does not give rise to a charge under subsection (1) of section 438, that section applies as if the loan had been made by the close company.<\/p>\n<p>(3)Subject to subsection (5), where a company which is not controlled by a close company makes a loan which, apart from this section, does not give rise to a charge under subsection (1) of section 438 and a close company subsequently acquires control of it, that section applies as if the loan had been made by the close company immediately after the time when it acquired control.<\/p>\n<p>(3A)Where a participator, or an associate of a participator, in a close company is party to any relevant arrangement, as a result of which a loan is made to a participator, or an associate of a participator, which, apart from this section, does not give rise to a charge under subsection (1) of section 438, that section shall apply as if the loan had been made by the close company to such participator, or such associate of a participator, as the case may be.<\/p>\n<p>(4)Where 2 or more close companies together control the company that makes or has made the loan, subsections (2) and (3) apply &#8211;<\/p>\n<p>(a)as if each of them controlled that company, and<\/p>\n<p>(b)as if the loan had been made by each of those close companies,<\/p>\n<p>but the loan shall be apportioned between those close companies in such proportion as may be appropriate having regard to the nature and amount of their respective interests in the company that makes or has made the loan.<\/p>\n<p>(5)Subsections (2) and (3) do not apply if it is shown that no person has made any arrangements (otherwise than in the ordinary course of a business carried on by that person) as a result of which there is a connection &#8211;<\/p>\n<p>(a)between the making of the loan and the acquisition of control, or<\/p>\n<p>(b)between the making of the loan and the provision by the close company of funds for the company making the loan,<\/p>\n<p>and the close company shall be regarded as providing funds for the company making the loan if it directly or indirectly makes any payment or transfers any property to, or releases or satisfies (in whole or in part) a liability of, the company making the loan.<\/p>\n<p>(6)Where, by virtue of this section, section 438 applies as if a loan made by one company had been made by another company, any question under that section whether &#8211;<\/p>\n<p>(a)the company making the loan did so otherwise than in the ordinary course of a business carried on by it which includes the lending of money,<\/p>\n<p>(b)the loan or any part of it has been repaid to the company,<\/p>\n<p>(c)the company has released or written off the whole or part of the debt in respect of the loan,<\/p>\n<p>shall be determined by reference to the company that makes the loan.<\/p>\n<p>(7)References to a company making a loan include references to cases in which the company is, or if it were a close company would be, regarded as making a loan by virtue of section 438(2).<\/p>\n<p>(8)This section shall be construed together with section 438.<\/p>\n<p>439.<\/p>\n<h4>Effect of release, etc. of debt in respect of loan under section 438.<\/h4>\n<p>(1)Subject to this section, where a company is assessed or liable to be assessed under section 438 in respect of a loan or advance and releases or writes off the whole or part of the debt in respect of the loan or advance, then &#8211;<\/p>\n<p>(a)for the purpose of computing the total income of the person to whom the loan or advance was made, a sum equal to the amount so released or written off shall be treated as income received by such person after deduction of income tax by virtue of section 238 (at the standard rate for the year of assessment in which the whole or part of the debt was released or written off) from a corresponding gross amount,<\/p>\n<p>(b)no repayment of income tax shall be made in respect of that income,<\/p>\n<p>(c)notwithstanding paragraph (a), the income included by virtue of that paragraph in the total income of that person shall be treated for the purposes of sections 237 and 238 as not brought into charge to income tax, and<\/p>\n<p>(d)for the purposes of section 59(ii), any amount to be treated as income by virtue of paragraph (a) shall be treated as if income tax had been deducted from that amount at the standard rate for the year of assessment in which the whole or part of the debt was released or written off; but, where such amount (or the aggregate of such amounts if more than one) exceeds the amount of the individual&#8217;s taxable income charged at the standard rate or the higher rate, the amount of the credit under section 59(ii) in respect of the excess shall not, notwithstanding anything in section 59, exceed the amount of the income tax, if any, charged on that excess.<\/p>\n<p>(2)If the loan or advance referred to in subsection (1) was made to a person who has since died, or to trustees of a trust which has come to an end, this section, instead of applying to the person to whom it was made, shall apply to the person from whom the debt is due at the time of release or writing off (and accordingly, if it is due from such person as personal representative within the meaning of Chapter 1 of Part 32, the amount treated as received by such person shall be, as regards the higher rate of tax, included for the purposes of that Chapter in the aggregate income of the estate), and subsection (1) shall apply accordingly with the necessary modifications.<\/p>\n<p>(3)This section shall be construed together with section 438.<\/p>\n<p>440.<\/p>\n<h4>Surcharge on undistributed investment and estate income.<\/h4>\n<p>(1)<\/p>\n<p>(a)Where for an accounting period of a close company the distributable estate and investment income exceeds the distributions of the company for the accounting period, there shall be charged on the company an additional duty of corporation tax (in this section referred to as a &#8220;surcharge&#8221;) amounting to 20 per cent of the excess.<\/p>\n<p>(b)Notwithstanding paragraph (a) &#8211;<\/p>\n<p>(i)a surcharge shall not be made on a company where the excess is equal to or less than the lesser of the following amounts &#8211;<\/p>\n<p>(I)\u20ac2,000 or, if the accounting period is less than 12 months, \u20ac2,000 proportionately reduced, and<\/p>\n<p>(II)where the company has one or more associated companies, \u20ac2,000 divided by one plus the number of those associated companies or, if the accounting period is less than 12 months, \u20ac2,000 proportionately reduced divided by one plus the number of those associated companies;<\/p>\n<p>(ii)where the excess is greater than the lesser amount on which by virtue of subparagraph (i) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to 80 per cent of the amount by which the excess is greater than that lesser amount.<\/p>\n<p>(2)Where the aggregate of &#8211;<\/p>\n<p>(a)the accumulated undistributed income of the company at the end of the accounting period, and<\/p>\n<p>(b)any amount which, on or after the 27th day of November, 1975, was transferred to capital reserves or was used to issue shares, stock or securities as paid up otherwise than for new consideration (within the meaning of section 135) or was otherwise used so as to reduce the amount referred to in paragraph (a),<\/p>\n<p>is less than the excess referred to in subsection (1), that subsection shall apply as if the amount of that aggregate were substituted for the excess.<\/p>\n<p>(2A)[deleted]<\/p>\n<p>(3)In applying subsection (1) to any accounting period of a company, an associated company which has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period) shall be disregarded.<\/p>\n<p>(4)In determining how many associated companies a company has in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and 2 or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.<\/p>\n<p>(5)[deleted]<\/p>\n<p>(6)A surcharge made under this section on a company in respect of an accounting period (in this subsection referred to as &#8220;the first-mentioned accounting period&#8221;) &#8211;<\/p>\n<p>(a)shall be charged on the company for the earliest accounting period which ends on or after a day which is 12 months after the end of the first-mentioned accounting period, and<\/p>\n<p>(b)shall be treated as corporation tax chargeable for that accounting period;<\/p>\n<p>but where there is no such accounting period so ending, the surcharge shall be charged for, and treated as corporation tax of, the accounting period in respect of which it is made.<\/p>\n<p>(7)The provisions of the Corporation Tax Acts relating to &#8211;<\/p>\n<p>(a)assessments to corporation tax, and<\/p>\n<p>(b)the collection and recovery of corporation tax,<\/p>\n<p>shall apply in relation to a surcharge made under this section as they apply to corporation tax charged otherwise than under this section.<\/p>\n<p>441.<\/p>\n<h4>Surcharge on undistributed income of service companies.<\/h4>\n<p>(1)In this section, &#8220;service company&#8221; means, subject to subsection (2) &#8211;<\/p>\n<p>(a)a close company whose business consists of or includes the carrying on of a profession or the provision of professional services,<\/p>\n<p>(b)a close company having or exercising an office or employment, or<\/p>\n<p>(c)a close company whose business consists of or includes the provision of services or facilities of whatever nature to or for &#8211;<\/p>\n<p>(i)a company within either of the categories referred to in paragraphs (a) and (b),<\/p>\n<p>(ii)an individual who carries on a profession,<\/p>\n<p>(iii)a partnership which carries on a profession,<\/p>\n<p>(iv)a person who has or exercises an office or employment, or<\/p>\n<p>(v)a person or partnership connected with any person or partnership referred to in subparagraphs (i) to (iv);<\/p>\n<p>but the provision by a close company of services or facilities to or for a person or partnership not connected with the company shall be disregarded for the purposes of this paragraph.<\/p>\n<p>(2)Where the principal part of a company&#8217;s income which is chargeable to corporation tax under Cases I and II of Schedule D and Schedule E is not derived from &#8211;<\/p>\n<p>(a)carrying on a profession,<\/p>\n<p>(b)providing professional services,<\/p>\n<p>(c)having or exercising an office or employment,<\/p>\n<p>(d)providing services or facilities (other than providing services or facilities to or for a person or partnership not connected with the company) to or for any person or partnership referred to in subparagraphs (i) to (v) of subsection (1)(c), or<\/p>\n<p>(e)any 2 or more of the activities specified in paragraphs (a) to (d),<\/p>\n<p>the company shall be deemed not to be a service company.<\/p>\n<p>(3)For the purposes of this section &#8211;<\/p>\n<p>(a)a partnership shall be treated as connected with a company or individual (and a company or individual shall be treated as connected with a partnership) if any one of the partners in the partnership is connected with the company or individual, and<\/p>\n<p>(b)a partnership shall be treated as connected with another partnership if any one of the partners in the partnership is connected with any one of the partners in the other partnership.<\/p>\n<p>(4)<\/p>\n<p>(a)Where for an accounting period of a service company the aggregate of &#8211;<\/p>\n<p>(i)the distributable estate and investment income, and<\/p>\n<p>(ii)50 per cent of the distributable trading income,<\/p>\n<p>exceeds the distributions of the company for the accounting period, there shall be charged on the company an additional duty of corporation tax (in this section referred to as a &#8220;surcharge&#8221;) amounting to 15 per cent of the excess.<\/p>\n<p>(b)Notwithstanding paragraph (a) &#8211;<\/p>\n<p>(i)a surcharge shall not be made on a company where the excess is equal to or less than the lesser of the following amounts &#8211;<\/p>\n<p>(I)\u20ac2,000 or, if the accounting period is less than 12 months, \u20ac2,000 proportionately reduced, and<\/p>\n<p>(II)where the company has one or more associated companies, \u20ac2,000 divided by one plus the number of those associated companies or, if the accounting period is less than 12 months, \u20ac2,000 proportionately reduced divided by one plus the number of those associated companies;<\/p>\n<p>(ii)where the excess is greater than the lesser amount on which by virtue of subparagraph (i) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to 80 per cent of the amount by which the excess is greater than that lesser amount;<\/p>\n<p>(iii)the surcharge shall apply to so much of the excess calculated under this subsection in respect of an accounting period of a company as is not greater than the excess of the distributable estate and investment income of the accounting period over the distributions of the company for the accounting period as if the reference in this subsection apart from this subparagraph to 15 per cent were a reference to 20 per cent.<\/p>\n<p>(5)Section 440(1) shall not apply in relation to a service company, but subsections (2) to (7) of section 440 shall apply in relation to a surcharge made under this section as they apply in relation to a surcharge made under section 440 with the substitution in subsections (2) and (3) of section 440 of a reference to subsection (4) of this section for the reference to subsection (1) of that section.<\/p>\n<p>(6)<\/p>\n<p>(a)Subsections (2), (3), (3A), (6) and (7) of section 434 shall apply for the purposes of this section as they apply for the purposes of section 434 or 440, as the case may be.<\/p>\n<p>(b)For the purposes of this section &#8211;<\/p>\n<p>(i)the income of a company for an accounting period shall be its income computed for that period in accordance with section 434 (4);<\/p>\n<p>(ii)&#8217;distributable estate and investment income&#8217; and &#8216;distributable trading income&#8217; of a company for an accounting period have the same meanings respectively as in subsections (1) and (5A) of section 434 with the substitution for the reference to a trading company in each place where it occurs in subsection (5) of that section of a reference to a service company.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-11003\" data-postid=\"11003\" class=\"themify_builder_content themify_builder_content-11003 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>Overview Tax rules limit the extent to which shareholders may use close companies in order to postpone, reduce or avoid personal tax liability.\u00a0 Tax law defines certain companies to be \u201cclose companies\u201d.\u00a0 The vast majority of private companies and many non quoted public companies are deemed close companies. The effect of the definition is that [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[399],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/11003"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=11003"}],"version-history":[{"count":11,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/11003\/revisions"}],"predecessor-version":[{"id":34744,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/11003\/revisions\/34744"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=11003"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=11003"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=11003"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}