Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I move amendment No. 42:

In page 76, before section 33, to insert the following new section:33.—(1) Section 486C of the Principal Act is amended—

(a) in subsection (2)(a) by substituting "at any time" for "in at any time",
(b) by substituting the following for subsection (3):

"(3) Where a company carries on a qualifying trade in an accounting period falling partly within the relevant period in relation to that qualifying trade, then, for the purposes of this section, the income from the qualifying trade for that accounting period shall be the amount of the income of the qualifying trade for that part of the accounting period and that part of the accounting period shall be treated as a separate accounting period.",

(c) in subsection (4)(a) by deleting "wholly or partly",
(d) in subsection (4)(b) by deleting "wholly or partly",
(e) in subsection (4)(c) by substituting "For the purposes of this subsection and subsection (4A)" for "For the purposes of this subsection",
(f) in subsection (4)(d) by substituting "For the purposes of this subsection and subsection (4A)" for "For the purposes of this subsection",
(g) by inserting the following after subsection (4):

"(4A) (a) In this subsection—

'accounting period following the relevant period', in relation to a company carrying on a qualifying trade, means an accounting period commencing on a date which occurs after the expiry of the relevant period in relation to the qualifying trade;
'corporation tax referable to the qualifying trade', in relation to an accounting period of a company, means the corporation tax payable by the company for the accounting period, so far as it is referable to—
(i) income from the qualifying trade for that accounting period,
and
(ii) chargeable gains on the disposal of relevant assets in relation to the trade in that accounting period.

(b) (i) Where for an accounting period of a company falling within the relevant period in relation to a qualifying trade carried on by the company—

(I) the total corporation tax payable by the company for the accounting period does not exceed the lower relevant maximum amount, and
(II) the total contribution for the accounting period exceeds the corporation tax referable to the qualifying trade for that accounting period,
the amount (in paragraph (c) referred to as a 'first relevant amount') of the excess referred to in clause (II) shall be available to reduce, in accordance with this subsection, the corporation tax referable to the qualifying trade for an accounting period following the relevant period.
(ii) Where for an accounting period of a company falling within the relevant period in relation to a qualifying trade carried
on by a company—
(I) the total corporation tax payable by the company for the accounting period exceeds the lower relevant maximum amount but does not exceed the upper relevant maximum amount, and
(II) the total contribution for the accounting period exceeds the corporation tax referable to the qualifying trade for that accounting period,

an amount (in paragraph (c) referred to as a 'second relevant amount') determined by the following formula:

[C — (3 X (T — M) X C/T)] — R

where—
C is the total contribution for the accounting period,
T is the total corporation tax payable by the company for the accounting period,
M is the lower relevant maximum amount, and
R is the amount of relief to which the company is entitled under subsection (4)(b) for the accounting period,

shall be available to reduce, in accordance with this subsection, the corporation tax referable to the qualifying trade for an accounting period following the relevant period.

(c) For the purposes of this subsection, the aggregate of all amounts which are—

(i) the first relevant amount, or
(ii) the second relevant amount,
if any, for each accounting period falling within the relevant period, shall be referred to as a 'specified aggregate'.

(d) (i) Subject to paragraphs (e) and (f), where a company carries on a qualifying trade in an accounting period following the relevant period, the corporation tax referable to the qualifying trade for that accounting period shall be reduced by the specified aggregate.

(ii) Subject to paragraphs (e) and (f), where there is a reduction in the corporation tax for an accounting period following the relevant period by virtue of subparagraph (i) and the specified aggregate exceeds the amount of that reduction, the corporation tax referable to the qualifying trade for the next accounting period shall be reduced by the amount of that excess and so much of that excess as is not applied to reduce that corporation tax shall, in turn, be applied by the company to reduce the corporation tax referable to the qualifying trade for the succeeding accounting period and so on for each succeeding accounting period.

(e) As respects a qualifying trade carried on by a company, the amount by which the corporation tax referable to the qualifying trade for an accounting period following the relevant period may be reduced under this subsection shall not exceed the lesser of—

(i) such corporation tax, and
(ii) the total contribution,
for that accounting period.

(f) So much of a specified aggregate as is applied by a company to reduce corporation tax under this subsection shall be so applied only once.",

(h) in subsection (5) by substituting "subsections (4) and (4A)" for "subsection (4)", and (i) in subsection (7) by substituting "subsections (4) and (4A)" for
"subsection (4)".
(i) in subsection (7) by substituting "subsections (4) and (4A)" for "subsection (4)".

(2) Paragraphs (e) to (i) of subsection (1) have effect as respects any first relevant amount or second relevant amount (both within the meaning of section 486C of the Principal Act (as amended by subsection (1))) for accounting periods ending on or after 1 January 2013.".

This amendment removes section 33 of the Bill and replaces it with a revised section. This is necessary to ensure the section will operate as intended. The purpose of the section is to enhance the three year tax relief for start-up companies. This was announced in budget 2013 as part of the package of measures to support small businesses. The section is being revised primarily to cement the link between the relief and employment by ensuring the amount of relief in any year does not exceed a company's total employer's PRSI contribution and also to make it simpler and easier to operate as intended in the budget provision. The section, as amended, provides for a significant enhancement of the three year tax relief for start-up companies. The purpose of the relief is to facilitate new business ventures and promote job creation. At present, the relief operates on a "use it or lose it" basis. Relief is not available if a company incurs a loss or does not have a sufficient amount of profits and tax payable in any of the first three years of trading to absorb the employer's PRSI contributions.

The purpose of the section is to increase the flexibility of the scheme. The relief is being extended to allow unused relief arising in the first three years of trading due to losses or insufficient profits to be carried forward for use in subsequent years indefinitely. This effectively creates a bucket of credits which can be carried forward for use in each subsequent year until such conditions arise where they can be utilised. To ensure the company availing of the relief maintains its commitment to employment, the amount of relief is restricted by reference to the total employer's PRSI contribution for each year in respect of the company's employees. This change will provide for further assistance for new start-up businesses, many of which do not make profits in their early years. Allowing unused relief to be carried forward to later years when they become profitable is a significant enhancement of existing relief.

To put it very simply, the original section 33 which was published in the Finance Bill did not accurately put into effect the intention of the budget announcement; therefore, we went back for a redraft which is now before the committee by way of an amendment. It does not add to or subtract anything from the scheme as originally announced; therefore, there is nothing new in substance included and nothing is being subtracted. It is simply the case that on examination, the original draft was flawed and this is a draft that accurately delivers on the intention of the measure.