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39 1997

TAXES CONSOLIDATION ACT, 1997

TRANSACTIONS IN LAND

PART 22

Provisions Relating to Dealing In or Developing Land and Disposals of Development Land

CHAPTER 1

Income tax and corporation tax: profits or gains from dealing in or developing land

Interpretation ( Chapter 1 ).

[F(MP)A68 s16(1), (2) and (4)]

639. —(1) In this Chapter, except where the context otherwise requires—

company” includes any body corporate;

development”, in relation to any land, means—

(a) the construction, demolition, extension, alteration or reconstruction of any building on the land, or

(b) the carrying out of any engineering or other operation in, on, over or under the land to adapt it for materially altered use,

and “developing” and “developed” shall be construed accordingly;

market value”, in relation to any property, means the price which that property might reasonably be expected to fetch if sold in the open market;

trading stock” has the same meaning as in section 89 ;

any reference to the disposal of an interest in land includes a reference to the creation of an interest, and any reference to the acquisition of an interest in land includes a reference to the acquisition of an interest which ceases on the acquisition.

(2) For the purposes of this Chapter—

(a) a person shall not be regarded as disposing of an interest in land by reason of the person conveying or transferring the interest by means of security or of the person granting a lease of the land on terms which do not require the payment of any fine, premium or like sum, and

(b) an option or other right to acquire or dispose of any interest in any land shall be deemed to be an interest in the land.

(3) This Chapter shall apply notwithstanding Chapter 8 of Part 4 .

Extension of charge under Case I of Schedule D to certain profits from dealing in or developing land.

[F(MP)A68 s17; FA81 s28]

640. —(1) For the purposes of subsection (2)

(a) a dealing in land shall be regarded as taking place where a person having an interest in any land disposes, as regards the whole or any part of the land, of that interest or of an interest which derives from that interest, and

(b) a person who secures the development of any land shall be regarded as developing that land.

(2) (a) Where apart from this section all or some of the activities of a business of dealing in or developing land would not be regarded as activities carried on in the course of a trade within Schedule D but would be so regarded if every disposal of an interest in land included among such activities (including a disposal of an interest in land which apart from this section is a disposal of the full interest in the land which the person carrying on the business had acquired) were treated as fulfilling the conditions specified in paragraph (b), the business shall be deemed to be wholly a trade within Schedule D or, as the case may be, part of such a trade, and the profits or gains of that business shall be charged to tax under Case I of Schedule D accordingly.

(b) The conditions referred to in paragraph (a) are—

(i) that the disposal was a disposal of the full interest in the land which the person carrying on the business had acquired, and

(ii) that the interest disposed of had been acquired by such person in the course of the business.

(3) Where an interest in land is disposed of in the course of the winding up of a company, the company shall for the purposes of this section be deemed not to have ceased to carry on the trade or business which it carried on before the commencement of the winding up until the completion of the disposal, or of the last such disposal where there is more than one, and the question whether any such disposal was made in the course of a business of dealing in or developing land which is, or is to be deemed to be, a trade or part of a trade shall accordingly be determined without regard to the fact that the company is being wound up.

Computation under Case I of Schedule D of profits or gains from dealing in or developing land.

[F(MP)A68 s18; FA81 s29(2)(a)]

641. —(1) Where a business of dealing in or developing land is, or is to be regarded as, a trade within Schedule D or a part of such a trade, the provisions applicable to Case I of that Schedule shall, as respects the computation of the profits or gains of the business, apply subject to subsections (2) to (4).

(2) (a) Any consideration (other than rent or an amount treated as rent under section 98 ) for the disposal of an interest in any land or in a part of any land shall be treated as a consideration for the disposal of trading stock and accordingly shall be taken into account as a trading receipt.

(b) Any interest in any land which is held by a person carrying on a trade (in this section referred to as “the trader”) and which has become trading stock of the trade shall thereafter, until the discontinuance of the trade, continue to be such trading stock.

(c) Where the trader has acquired an interest in any land otherwise than for consideration in money or money's worth, the trader shall, subject to paragraph (d), be deemed to have purchased the interest for a consideration equal to its market value at the time of acquisition.

(d) Where at the time of acquisition of an interest in any land the trade had not been commenced or the interest was not then appropriated as trading stock, the trader shall be deemed to have purchased the interest for a consideration equal to its market value at the time of its appropriation as trading stock.

(e) Any consideration (other than receipts within section 75 (1)(b) the profits or gains arising from which are by virtue of that section chargeable to tax under Case V of Schedule D) for the granting by the trader of any right in relation to the development of any land shall be taken into account as a trading receipt.

(3) Account shall not be taken of any sum (in this subsection referred to as “the relevant sum”) which is paid or is payable at any time by the trader as consideration for the forfeiture or surrender of the right of any person to an annuity or other annual payment unless—

(a) the annuity or other annual payment arises under—

(i) a testamentary disposition, or

(ii) a liability incurred for—

(I) valuable and sufficient consideration all of which is required to be taken into account in computing for the purposes of income tax or corporation tax the income of the person to whom that consideration is given, or

(II) consideration given to a person who—

(A) has not at any time carried on a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, and

(B) is not and was not at any time connected with any of the following persons—

(aa) the trader,

(bb) a person who is or was at any time connected with the trader, and

(cc) any other person who, in the course of a business of dealing in or developing land which is, or is to be regarded as, a trade or a part of a trade, holds or held an interest in land on which the annuity or other annual payment was charged or reserved,

or

(b) the relevant sum is required to be taken into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the relevant sum is payable.

(4) (a) Paragraph (b) shall apply where—

(i) a sum (in this subsection referred to as “the relevant sum”) is payable—

(I) by a person (in this subsection referred to as “the relevant person”) who is not the trader, and

(II) as consideration for the forfeiture or surrender of the right (in this subsection referred to as “the right”) of any person to an annuity or other annual payment,

(ii) the relevant sum is not required to be taken into account in computing for the purposes of income tax or corporation tax the profits or gains of a trade of dealing in or developing land carried on by the person to whom the relevant sum is payable, and

(iii) the trader incurs expenditure (in this subsection referred to as “the cost”) in acquiring any interest (in this subsection referred to as “the interest”) in land on which the annuity or other annual payment had been reserved or charged.

(b) Where this paragraph applies—

(i) the trader shall be treated as having expended in acquiring the interest an amount equal to the amount which would have been expended if the right had not been forfeited or surrendered, and

(ii) the excess of the cost over the amount determined in accordance with subparagraph (i) shall be treated for the purposes of subsection (3) as having been payable by the trader as consideration for the forfeiture or surrender of the right.

(c) For the purposes of this subsection, all such apportionments and valuations shall be made as appear to the inspector or on appeal to the Appeal Commissioners to be just and reasonable.

(d) This subsection shall not apply where the relevant person carries on a trade of dealing in or developing land and pays the relevant sum in the course of carrying on that trade.

Transfers of interests in land between certain associated persons.

[F(MP)A68 s19]

642. —(1) Where an interest in land is disposed of by any person (in this subsection referred to as “the disponer”) to a person connected with the disponer (in this subsection referred to as “the transferee”) and—

(a) the interest is disposed of at a price greater than its market value, and

(b) the price—

(i) is not to be taken into account in relation to the disponer in computing for tax purposes the profits or gains of a trade which is or includes a business of dealing in or developing land, but

(ii) is to be so taken into account in relation to the transferee,

the transferee shall for tax purposes be deemed to have acquired the interest at a price equal to the market value of the interest at the time of its acquisition by the transferee.

(2) (a) Where an interest in land is disposed of by any person (in this subsection referred to as “the disponer”) to a person connected with the disponer (in this subsection referred to as “the transferee”) and—

(i) the interest is disposed of at a price less than its market value, and

(ii) the price—

(I) is not to be taken into account in relation to the transferee in computing for tax purposes the profits or gains of a trade which is or includes a business of dealing in or developing land, but

(II) is to be so taken into account in relation to the disponer,

the disponer shall for tax purposes be deemed to have disposed of the interest at a price equal to the market value of the interest at the time of the disposal by the disponer.

(b) A disposal by means of gift shall be regarded for the purposes of this subsection as being a disposal at a nominal price.

(3) In the application of this section to a case in which a lease is granted, any reference to price shall be construed as a reference to the fine, premium or like sum payable for the grant of the lease.

Tax to be charged under Case IV on gains from certain disposals of land.

[F(MP)A68 s20; FA81 s29(3)]

643. —(1) In this section and in section 644

capital amount” means any amount in money or money's worth which apart from this section is not to be included in any computation of income for the purposes of the Tax Acts, and other expressions which include the word “capital” shall be construed accordingly;

chargeable period” means an accounting period of a company or a year of assessment;

land” includes any interest in land, and references to the land include references to all or any part of the land;

share” includes stock;

references to property deriving its value from land include references to—

(a) any shareholding in a company, or any partnership interest, or any interest in settled property, deriving its value or the greater part of its value directly or indirectly from land, and

(b) any option, consent or embargo affecting the disposition of land.

(2) This section shall not apply to a gain accruing to an individual which by virtue of section 604 is exempt from capital gains tax or which would be so exempt but for subsection (14) of that section.

(3) This section shall apply in any case where—

(a) land or any property deriving its value from land is acquired with the sole or main object of realising a gain from disposing of the land,

(b) land is held as trading stock, or

(c) land is developed by a company with the sole or main object of realising a gain from disposing of the land when developed,

and any gain of a capital nature is obtained from disposing of the land—

(i) by the person acquiring, holding or developing the land, or by a person connected with that person, or

(ii) where any arrangement or scheme is effected as respects the land which enables the gain to be realised directly or indirectly by any transaction, or by any series of transactions, by any person who is a party to or concerned in the arrangement or scheme,

and this subsection shall apply whether that gain is obtained by any such person for that person's benefit or for the benefit of any other person.

(4) Where this section applies, the whole of any gain mentioned in subsection (3) shall for the purposes of the Tax Acts be treated—

(a) as being income which arises at the time when the gain is realised and which constitutes profits or gains chargeable to tax under Case IV of Schedule D for the chargeable period in which the gain is realised, and

(b) subject to subsections (5) to (17), as being income of the person by whom the gain is realised.

(5) For the purposes of this section, land shall be treated as disposed of if, by any one or more transactions or by any arrangement or scheme, whether concerning the land or property deriving its value from the land, the property in the land or control over the land is effectively disposed of, and references in subsection (3) to the acquisition or development of land or property with the sole or main object of realising a gain from disposing of the land shall be construed accordingly.

(6) For the purposes of this section—

(a) where, whether by a premature sale or otherwise, a person directly or indirectly makes available to another person the opportunity of realising a gain, the gain of that other person shall be treated as having been obtained for that other person by the first-mentioned person, and

(b) any number of transactions may be regarded as constituting a single arrangement or scheme if a common purpose is discerned in those transactions or if there is other sufficient evidence of a common purpose.

(7) In applying this section, account shall be taken of any method, direct or indirect, by which—

(a) any property or right is transferred or transmitted to another person, or

(b) the value of any property or right is enhanced or diminished,

and accordingly the occasion of the transfer or transmission of any property or right by whatever method and the occasion when the value of any property or right is enhanced may be treated as an occasion on which tax becomes chargeable under this section.

(8) Subsection (7) shall apply in particular to—

(a) sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration,

(b) any method by which any property or right, or the control of any property or right, is transferred or transmitted to any person by assigning—

(i) share capital or other rights in a company,

(ii) rights in a partnership, or

(iii) an interest in settled property,

(c) the creation of any option or consent or embargo affecting the disposition of any property or right, and to the consideration given for the option, or for the giving of the consent or the release of the embargo, and

(d) the disposal of any property or right on the winding up, dissolution or termination of any company, partnership or trust.

(9) For the purposes of this section, such method of computing a gain shall be adopted as is just and reasonable in the circumstances, taking into account the value of what is obtained for disposing of the land and allowing only such expenses as are attributable to the land disposed of, and in applying this subsection—

(a) where an interest in land is acquired and the reversion is retained on disposal, account may be taken of the way in which the profits or gains under Case I of Schedule D of a person dealing in land are computed in such a case, and

(b) account may be taken of the adjustments to be made in computing such profits or gains under sections 99 (2) and 100 (4).

(10) Paragraph (c) of subsection (3) shall not apply to so much of any gain as is fairly attributable to the period, if any, before the intention to develop that land was formed, and which would not be within paragraph (a) or (b) of that subsection, and in applying this subsection account shall be taken of the treatment under Case I of Schedule D of a person who appropriates land as trading stock.

(11) If all or any part of the gain accruing to any person is derived from value, or an opportunity of realising a gain, provided directly or indirectly by some other person (whether or not put at the disposal of the first-mentioned person), subsection (4)(b) shall apply to the gain or that part of the gain with the substitution of that other person for the person by whom the gain was realised.

(12) Where there is a disposal of shares in—

(a) a company which holds land as trading stock, or

(b) a company which owns directly or indirectly 90 per cent or more of the ordinary share capital of another company which holds land as trading stock,

and all the land so held is disposed of in the normal course of its trade by the company which held the land, and so as to procure that all opportunity of profit in respect of the land arises to that company, then, notwithstanding subsection (3)(i), this section shall not apply to any gain accruing to the holder of shares as being a gain on property deriving value from that land (but without prejudice to any liability under subsection (3)(ii)).

(13) In ascertaining for the purposes of this section the intentions of any person, the objects and powers of any company, partners or trustees, as set out in any memorandum or articles of association or other document, shall not be conclusive.

(14) For the purposes of ascertaining whether and to what extent the value of any property or right is derived from any other property or right, value may be traced through any number of companies, partnerships and trusts, and the property held by any company, partnership or trust shall be attributed to the shareholders, partners or beneficiaries at each stage in such manner as is just and reasonable.

(15) In applying this section—

(a) any expenditure, receipt, consideration or other amount may be apportioned by such method as is just and reasonable, and

(b) all such valuations shall be made as may be necessary to give effect to this section.

(16) For the purposes of this section, partners, trustees of settled property or personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being partners, trustees or personal representatives.

(17) This section shall apply to a person, whether resident in the State or not, if all or any part of the land in question is situated in the State.

Provisions supplementary to section 643 .

[F(MP)A68 s21; FA81 s29(3)]

644. —(1) (a) Where a person (in this subsection referred to as “the first-mentioned person”) is assessed to tax under section 643 and that assessment to tax arises in consequence of and in respect of consideration receivable by another person (in this subsection referred to as “the second-mentioned person”)—

(i) the first-mentioned person shall be entitled to recover from the second-mentioned person any part of that tax which the first-mentioned person has paid,

(ii) if any part of that tax remains unpaid at the expiration of 6 months from the date when it became due and payable, it shall be recoverable from the second-mentioned person as though the second-mentioned person were the person so assessed, but without prejudice to the right to recover the tax from the first-mentioned person, and

(iii) for the purposes of subparagraph (i), the inspector shall on request furnish a certificate specifying the amount of income in respect of which tax has been paid and the amount of tax so paid, and the certificate shall be evidence until the contrary is proved of any facts stated in the certificate.

(b) For the purposes of this subsection, any amount which by virtue of section 643 is treated as the income of a person shall, notwithstanding any other provision of the Tax Acts, be treated as the highest part of the person's income.

(2) Where it appears to the Revenue Commissioners that any person entitled to any consideration or other amount chargeable to tax under section 643 is not resident in the State, they may direct that section 238 shall apply to any payment forming part of that amount as if the payment were an annual payment charged with tax under Schedule D, but without prejudice to the final determination of the liability of that person, including any liability under subsection (1)(a)(ii).

(3) Section 643 shall apply subject to any provision of the Tax Acts deeming income to be income of a particular person.

(4) Where by virtue of section 643 (3)(c) any person is charged to tax on the realisation of a gain, and by virtue of section 643 (10) the computation of the gain proceeded on the basis that the land or some other property was appropriated at any time as trading stock, that land or other property shall also be treated on that basis for the purposes of section 596 .

(5) Where by virtue of section 643 (11) the person charged to tax is a person other than the person for whom the capital amount was obtained or the person by whom the gain was realised and the tax has been paid, then, for the purposes of sections 551 and 554 , the person for whom the capital amount was obtained or the person by whom the gain was realised, as may be appropriate, shall be regarded as having been charged to the tax so paid.

Power to obtain information.

[F(MP)A68 s22; FA81 s29(3)]

645. —(1) The inspector may by notice in writing require any person to furnish him or her within such time as may be specified in the notice (not being less than 30 days) with such particulars as the inspector thinks necessary for the purposes of sections 643 and 644 .

(2) The particulars which a person is obliged to furnish under this section, if required by notice to do so, shall include particulars as to—

(a) transactions or arrangements with respect to which the person is or was acting on behalf of others,

(b) transactions or arrangements which in the opinion of the inspector should properly be examined for the purposes of sections 643 and 644 , notwithstanding that in the opinion of the person to whom the notice is given no liability to tax arises under those sections, and

(c) whether the person to whom the notice is given has taken or is taking any transactions or arrangements of a description specified in the notice and, if so, what transactions or arrangements, and what part the person has taken or is taking in those transactions or arrangements.

(3) Notwithstanding anything in subsection (2), a solicitor shall not be deemed for the purposes of subsection (2)(c) to have taken part in any transaction or arrangements by reason only that he or she has given professional advice to a client in connection with the transaction or arrangements, and shall not, in relation to anything done by him or her on behalf of a client, be compellable under this section, except with the consent of the client, to do more than state that he or she is or was acting on behalf of a client, and give the name and address of the client.

Postponement of payment of income tax to be permitted in certain cases.

[F(MP)A68 s23(1) to (3) and (5)]

646. —(1) In this section, “basis period”, in relation to any year of assessment, means the period on the profits or gains of which income tax for that year is finally computed under Case I of Schedule D in respect of the trade or, where by virtue of the Income Tax Acts the profits or gains of any other period are taken to be the profits or gains of that period, that other period.

(2) Where—

(a) a person (in this section referred to as “the vendor”) carrying on a trade of dealing in or developing land (in this section referred to as “the trade”) disposes in the course of the trade of the full interest acquired by the person in any land,

(b) the person to whom the disposition is made (in this section referred to as “the purchaser”) is not connected with the vendor,

(c) the terms subject to which the disposition is made provide for the grant of a lease of the land by the purchaser to the vendor,

(d) a sum representing the value of the vendor's right to be granted a lease is to be taken into account as a consideration for the disposal in computing the profits or gains of the trade, and

(e) within 6 months after the time of the disposition, a lease of the land in accordance with those terms is granted by the purchaser to the vendor,

subsections (3) and (4) shall apply in relation to income tax for a year of assessment in the basis period for which the disposition is made.

(3) Where, at the time when any amount of income tax charged by an assessment in respect of the profits or gains of the trade would but for this subsection become due and payable, the vendor—

(a) retains the leasehold interest acquired by the vendor from the purchaser, and

(b) has not disposed, as regards the whole or any part of the land, of an interest derived from that leasehold interest,

then, a part of that amount of income tax equal to 90 per cent of so much of such tax as would not have been chargeable if no sum had to be taken into account as mentioned in subsection (2)(d) shall be payable in 9 equal instalments at yearly intervals the first of which is payable on the 1st day of January in the year following that in which but for this subsection that amount of income tax would have been payable.

(4) Where, in a case in which the postponement of payment of any amount of income tax has been authorised by subsection (3), the vendor—

(a) ceases to retain the leasehold interest acquired by the vendor from the purchaser,

(b) disposes, as regards the whole or any part of the land, of an interest derived from that leasehold interest,

(c) being an individual, dies, or

(d) being a company, commences to be wound up,

then, that amount of income tax or, as the case may be, so much of that amount of income tax as has not already become due and payable shall become due and payable forthwith.

Postponement of payment of corporation tax to be permitted in certain cases.

[CTA76 s150]

647. —(1) Where—

(a) for any accounting period the profits of a company consist of or include income from a trade of dealing in or developing land in the course of which the company disposes of the full interest acquired by it in any land,

(b) in relation to that disposal, the conditions specified in paragraphs (b) to (e) of section 646 (2) are satisfied, and

(c) at the time when any amount of corporation tax charged by an assessment for that accounting period would but for this section become due and payable the company—

(i) retains the leasehold interest acquired by it from the person to whom the disposition is made, and

(ii) has not disposed, as regards the whole or any part of the land, of an interest derived from that leasehold interest,

then, a part of that amount of corporation tax equal to 90 per cent of so much of that amount as would not have been chargeable if no sum had to be taken into account as mentioned in section 646 (2)(d) shall be payable in 9 equal instalments at yearly intervals the first of which shall be payable on the expiration of 12 months from the date on which but for this section that amount of corporation tax would have been payable.

(2) Where, in a case in which the postponement of payment of any amount of corporation tax has been authorised by subsection (1), the company—

(a) ceases to retain the leasehold interest acquired by it,

(b) disposes, as regards the whole or any part of the land, of an interest derived from that leasehold interest, or

(c) commences to be wound up,

then, that amount of corporation tax or, as the case may be, so much of that amount of corporation tax as has not already become due and payable shall become due and payable forthwith.