Tuesday, 11 December 2018

Questions (145)

Michael McGrath

Question:

145. Deputy Michael McGrath asked the Minister for Finance his plans to review the changes made in the Finance Act 2017 to section 135 of the Taxes Consolidation Act 1997; if he is satisfied as to the way in which it is operating; his views on whether it is preventing bona fide commercial transactions from taking place; and if he will make a statement on the matter. [51823/18]

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Written answers (Question to Finance)

Arising from information brought to my attention by Revenue concerning avoidance schemes, a number of amendments to the tax code were made in the Finance Act 2017. One of the amendments to which the Deputy refers was an amendment to section 135 TCA. This amendment nullified a cash extraction scheme whereby shareholders extracted distributable reserves from their corporate entities but avoided an income tax charge on the receipt of these funds. In essence, the scheme sought to substitute a capital gains tax charge for an income tax charge and where those individuals could also avail of retirement relief under the capital gains tax provisions in many instances no tax was paid on the receipt of these funds.

The amendment passed by the Oireachtas only applies where an arrangement was entered into by a shareholder disposing of shares or securities in a company and the consideration is to be met directly or indirectly from the assets of that company. Revenue has published guidance which makes clear that bona-fide transactions are not affected as such transactions do not entail shareholders entering into arrangements to secure that the proceeds from any share sale are met from their company.

Neither my Department nor Revenue is aware of any instance where a bona-fide transaction did not proceed arising from this amendment.