This section provides that where on or after 6th April, 1976 a resident company receives from another such company payments from which income tax is deductible the companies may jointly elect that payments be made without deduction of income tax. The company making the payment must be a 51 per cent subsidiary of the recipient company or a 51 per cent subsidiary of a resident company of which the recipient company is also a 51 per cent subsidiary, or a trading or holding company owned by a consortium, which includes the recipient company. The joint election may also be made where the recipient company is a 51 per cent subsidiary of the paying company. The section will not apply to payments received by a company in relation to any investments where profit on the sale of such investments would be treated as a trading receipt of that company.
SECTION 105.
Does a 51 per cent subsidiary mean at least a 51 per cent subsidiary of a holding company?
Yes, that is the provision.
It is not quite clear.
Section 156 says "For the purposes of the Corporation Tax Act a company shall be deemed to be—(a) a ‘51 per cent subsidiary' of another company if and so long as more than 50 per cent of its ordinary share capital is owned directly or indirectly by that other company".
It is covered.
(Dublin Central): Does that mean the transfer of funds from one company to the other? Is that what the section is catering for?
It is the transfer of funds but it is more than that. It is payments from which income tax is deductible.
(Dublin Central): What is the purpose of it?
It is to avoid the double tax transaction. Has the Deputy got the set of examples?
I understand the first half of the example but what the second half means is beyond me. Do we end up better off or worse off?
The same. It is a machinery provision to operate for mutual convenience.
What is the minus £350/£150; at the end? Does somebody end up with £150 that he would not otherwise have?
No. The Deputy can be sure of that. It is the tax credit.
Is this a re-enactment or is it new in any sense?
The group of provisions in this Bill are a substantial easement of companies. This machinery is part of the process of dealing with group relief.
Does it apply only to subsidiaries where there is a majority shareholding on the part of the holding company?
Yes.
It cannot be operated as it was on a 40 per cent holding.
No.