Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I will first read out a short note and then directly answer the question. This section amends section 597AA of the Taxes Consolidation Act 1997, which provides for revised entrepreneur relief. On the satisfaction of various conditions, the relief serves to reduce the rate of capital gains tax to 10% on gains arising from a disposal of qualifying business assets. Those assets include shares in a qualifying company or shares in a holding company of a qualifying group.

The amendment introduces a new definition of "holding company" for the purposes of the relief. The new definition provides that a holding company is one that holds shares in other companies, all of which are its 51% subsidiaries. The definition also requires that the holding company’s business must consist wholly or mainly of the holding of shares in those subsidiaries. The amendment essentially clarifies that all subsidiaries of a holding company must be owned more than 50% by that company in order for any gain arising on the sale of shares in the holding company to qualify for the relief, in line with the policy intention when the relief was originally introduced. All other conditions for revised entrepreneur relief remain unchanged.

The proposed amendment is in line with the original policy intention and the consistently adopted interpretation of the relief to date. The policy intention was that the relief would only be available in group circumstances where all the subsidiaries were 51% subsidiaries and each such subsidiary had to be carrying on a qualifying business. Legal advice received by Revenue in the course of a recent appeal indicated that the section as currently drafted did not adequately stipulate that each subsidiary must be a 51% subsidiary. The amendment to the definition of a holding company clarifies that all subsidiaries of a holding company must be 51% subsidiaries. As such, the proposed section originates in legal advice that Revenue received following a recent appeal, which identified a need to tighten up the section’s drafting.