Amendments Nos. 20 and 29 are consequential on No. 21. Amendments Nos. 24, 27 and 28 are related. Amendments Nos. 22, 25 and 26 are consequential on No. 27 and No. 23 is consequential on No. 24. I propose that we take amendments Nos. 20 to 29, inclusive, together. Is that agreed? Agreed.
SECTION 17.
I move amendment No. 20:
In page 35, subsection (1) (a), to delete lines 22 to 48, and in page 36, to delete lines 1 to 42 and substitute the following:
""‘specified individual" has the meaning assigned to it by section 14A;',".
This section provides for the liberalisation of what was referred to as the seed capital scheme, which was introduced last year. Out of an excessive sense of caution it was strangled at birth on the far side of Kildare Street or so it appeared to those who were at that time in Kildare Street. This in essence is what the extensive amendment proposes to do.
This scheme is complex. It was a very good idea and was probably introduced because of the collapse of Digital in Galway. Due to the restrictions placed on it when it came into effect, it was, as the Minister said, strangled at birth. The changes proposed here should be of benefit and allow for a greater take up of the scheme.
Amendment agreed to.
I move amendment No. 21:
In page 39, subsection (1), between lines 17 and 18, to insert the following:
"(d) by the insertion of the following section after section 14:
14A.(1) An individual is a specified individual if the individual qualifies for relief in respect of a relevant investment and complies with the requirements of this section.
(2) The individual, in each of the three years of assessment preceding the year of assessment immediately preceding the year of assessment in which that individual makes a relevant investment (being that individual's first such investment), shall not have been in receipt of income chargeable to tax otherwise than under
(a) Schedule E, or
(b) Case III of Schedule D in respect of profits or gains from an office or employment held or exercised outside the State,
in excess of the lesser of
(i) the aggregate of the amounts, if any, of that individual's income chargeable to tax under Schedule E and under Case III of Schedule D as aforesaid, or
(ii) £15,000.
(3) The individual shall, throughout the relevant period, possess at least 15 per cent. of the issued share capital of the company in which that individual makes a relevant investment.
(4) (a) Subject to subsections (5) and (6), the individual at the specified date, in relation to that individual's first relevant investment in a company, or within the period of 12 months immediately preceding that date, either directly or indirectly, shall not possess or have possessed, or shall not be or have been entitled to acquire, more than 15 per cent. of
(i) the issued ordinary share capital, or
(ii) the loan capital (within the meaning of section 14 (5)) and the issued share capital, or
(iii) the voting power,
of any company other than the company in which that individual makes that relevant investment or a company to which subsection (5) relates.
(b) For the purposes of paragraph (a) and subsections (5) and (6) "specified date" , in relation to a relevant investment in a company, means
(i) where the investment consists of the subscription of only one amount for eligible shares, the date of that subscription, or
(ii) where that investment consists of the subscription of more than one amount for eligible shares, the date of the last such subscription.
(5) This subsection relates to a company which during a period of 5 years ending on the specified date, in relation to an individual's first relevant investment in a company
(a) was not entitled to any assets, other than cash on hands or a sum of money on deposit within the meaning of section 230 of the Finance Act, 1992, not exceeding £100, and
(b) did not carry on a trade, profession, business or other activity including the making of investments, and
(c) did not pay charges on income within the meaning of section 10 of the Corporation Tax Act, 1976.
(6) (a) An individual shall not be regarded as failing to satisfy the requirements of subsection (4) merely by reason of the fact that the individual does not satisfy those requirements in relation to one, and only one, company (other than the company in which the individual makes that individual's first relevant investment or a company to which subsection (5) relates)
(i) which exists wholly or mainly for the purpose of carrying on trading operations other than trading operations consisting of dealing in shares, securities, land, currencies, futures or traded options, and
(ii) where the total amount receivable by that company from sales made and services rendered in the course of that company's trading operations did not exceed £100,000 in each of that company's three accounting periods immediately preceding the accounting period of that company in which the specified date occurs in relation to that individual's first relevant investment.
(b) For the purposes of paragraph (a)
(i) a company shall be regarded as a company which carries on wholly or mainly such trading operations as are referred to in paragraph (a) (i) if, but only if, in each of the three accounting periods referred to in paragraph (a) (ii) the total amount receivable from sales made or services rendered in the course of such trading operations is not less than 75 per cent. of the total amount receivable by the company from all sales made and services rendered in the course of the trade, and
(ii) "accounting period" means an accounting period determined in accordance with the provisions of section 9 of the Corporation Tax Act, 1976.
(7) An individual shall not be regarded as ceasing to comply with subsection (3) if that individual does so by reason of the company in which the individual makes a relevant investment being wound up or dissolved without winding up before the end of the relevant period but only if it is shown that the winding up or dissolution is for bona fide commercial reasons and not as part of a scheme or arrangement the main purpose or one of the main purposes of which was the avoidance of tax.',".
Amendment agreed to.
I move amendment No. 22:
In page 39, subsection (1), to delete lines 22 and 23 and substitute the following:
"(e) in section 16
(i) in paragraph (a) of subsection (2)".
Amendment agreed to.
I move amendment No. 23:
In page 39, subsection (1) (e), line 44, to delete "subparagraph" and substitute "subparagraphs".
Amendment agreed to.
I move amendment No. 24:
In page 40, subsection (1) (e), between lines 12 and 13, to insert the following:
"(iic) in respect of a relevant investment made on or after the passing of the Finance Act, 1995, the rendering of such services as are referred to in subparagraph (ii) in respect of which an industrial development agency has provided financial support of not less than £2,000 towards the undertaking of a feasibility study by a person approved of by the agency into the potential commercial viability of the services to be rendered,
(iid) in respect of a subscription for eligible shares made on or after the passing of the Finance Act, 1995, research and development activities within the meaning of subsection (2B),',".
Amendment agreed to.
I move amendment No. 25:
In page 40, subsection (1) (e), to delete line 13.
Amendment agreed to.
I move amendment No. 26:
In page 40, subsection (1) (e), line 16, after "Finance Act, 1989)" to insert "to subsection (2)".
Amendment agreed to.
I move amendment No. 27:
In page 40, subsection (1) (e), between lines 21 and 22, to insert the following:
"and
(iii) by the insertion of the following subsection after subsection (2A):
‘(2B) (a) For the purposes of subsection (2) (a) (iid), "research and development activities" means systematic, investigative or experimental activities which
(i) are carried on wholly or mainly in the State, and
(ii) involve innovation or technical risk, and
(iii) are carried on for the purpose of
(I) acquiring new knowledge with a view to that knowledge having a specific commercial application, or
(II) creating new or improved materials, products, devices, processes or services,
and other activities that are carried on wholly or mainly in the State for a purpose directly related to the carrying on of activities of the kind referred to in subparagraph (iii):
Provided that activities that are carried on by way of
(A) market research, market testing, market development, sales promotion or consumer surveys,
(B) quality control,
(C) prospecting, exploring or drilling for minerals, petroleum or natural gas for the purpose of determining the size or quality of any deposits,
(D) the making of cosmetic modifications or stylistic changes to products, processes or production methods,
(E) management studies or efficiency surveys, or
(F) research in social sciences, arts or humanities,
shall not be research and development activities.
(b) For the purposes of paragraph (a) systematic, investigative or experimental activities or other activities shall be regarded as carried on wholly or mainly in the State if, and only if, not less than 75 per cent. of the total amount expended in the course of such activities in the relevant period is expended in the State.',".
Amendment agreed to.
I move amendment No. 28:
In page 40, subsection (1) (f), to delete lines 49 to 53, and in page 41, to delete lines 1 to 35 and substitute the following:
"may be eligible
(i) in the case of such qualifying trading operations as are referred to in subparagraph (iic) (inserted by the Finance Act, 1995) of paragraph (a) of subsection(2) of section 16, based on guidelines agreed, with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Culture and the Gaeltacht or the Minister for Enterprise and Employment (as may be appropriate in the circumstances), for the payment of the grants or the financial assistance referred to in subparagraph (ii) (as amended by the Finance Act, 1995) of paragraph (a) of subsection (2) of section 16 within a reasonable period after the completion of the feasibility study carried out in relation to the trading operations concerned in accordance with the provisions of the said subparagraph (iic), and
(ii) in any other case but subject to subsection (4), based on guidelines agreed
(I) with the consent of the Minister for Finance, between the certifying agency and the Minister for Arts, Culture and the Gaeltacht or the Minister for Enterprise and Employment or the Minister for Tourism and Trade (as may be appropriate in the circumstances), or
(II) between the certifying Minister and the Minister for Finance,
to be grant aided under a scheme of assistance administered by the authority.
(3) The carrying on of such qualifying trading operations as are referred to in subsection (2) by a company shall not be regarded as not being a bona fide new venture by reason only that they were carried on as, or as part of, a trade by another person at any time before the issue of the eligible shares in respect of which relief is claimed.”.
Amendment agreed to.
I move amendment No. 29:
In page 42, subsection (2), lines 37 and 38, to delete "(e) (other than subparagraph (i) (I)), (f), (g) and (h) of subsection (1)" and substitute "(e), (f) (other than subparagraph (i) (I)), (g), (h) and (i) of subsection) (1)".
Amendment agreed to.
Section 17, as amended, agreed to.
SECTION 18.
Question proposed: "That section 18 stand part of the Bill."
This is a black economy measure. It relates to C45 certificates.
I have no particular liking for this section but it brings me back to my first days as an apprentice articled clerk in a chartered accountant's office. That coincided with the introduction of section 17 of the Finance Act, 1970, which is the basis of this section. Over the years it has been amended and turned upside down. In the interim we have seen the establishment of the construction industry district. This section appears to have followed me around throughout my accountancy life.
The section relates to the construction industry. Section 17 of the Finance Act, 1970 was the result of the lump system in the construction industry. It was decided to give sub-contractors certificates of authorisation. It was so easy to get them in those days that one simply had to fill up a form declaring that one had an accountant and would keep accounts. About 90 per cent of the people who got certificates initially did not follow the rules. Over the years the provision has been changed. However, section 17 of the Finance Act, 1970, is the basis of all legislation relating to tax clearance certificates — the idea started with that section and subsequent legislation flowed from it.
Section 17 of the Finance Act, 1970 is now being used as the vehicle in this section to allow Revenue to decide the difference between a contract of service and a contract for services. In the last couple of years many companies and employers, rather than employing employees directly, have put many of their employees on sub-contract. That phenomenon is not unique to Ireland and we should look at the reasons for it. All types of employers believe that this is the better way to proceed. However, what has been troubling people in many areas is how one makes the differentiation.
I recognise the problems of the Revenue Commissioners and the Department of Social Welfare in this regard. However, we should not try to push back the tide in this area. The purpose of section 18 as it stands is to publish regulations which will assist employers or the principal contractors in differentiating between an employee and a subcontractor. I do not see the purpose of this. That question will be decided by the Revenue in due course. I do not know why we are going to the trouble of publishing these regulations. They arose from the recommendations of a subcommittee composed of people in the construction industry. However, I do not see this as a great benefit and I do not think it should be moved along in that area either.
The Deputy is correct. This emerged as a recommendation from the black economy monitoring group, which is made up of the CRC and includes representatives from CIF, the Revenue Commissioners and ICTU. Clearly, we are not in the business of determining law regarding what constitutes an employment contract or contract for services or a contract of service. That is a matter for the courts. We are issuing guidelines.
The intention is that the new regulations will help to ensure that the system of tax deduction from payments to sub-contractors will apply only to genuine contracts between self-employed contractors and not to what in reality are employer-employee contracts. Second, they will assist in improving information in relation to the gang system of sub-contracting. This was open to dreadful abuse.
That was 50 years ago.
It still must be addressed. Other colleagues may not know that once a contractor acted as the leader of a team of sub-contractors where the principal made a gross payment to the leader, who then sub-divided the payments among the team to ensure that all members of the gang would provide certain information to principal contractors. This will assist in ensuring that all gang members — wonderful phrase — pay the correct amount of tax on their income and will also combat abuses in social welfare entitlements.
Section 18 agreed to.