Paschal Donohoe (Dublin Central, Fine Gael)

I move amendment No. 58:

In page 78, between lines 25 and 26, to insert the following: “(b) in subsection (7), by the substitution of the following paragraph for paragraph (a):

“(a) where, other than the holding of shares in an investing company or investing companies, the only business of the first-mentioned company is the on-lending to the investing company or investing companies of moneys which the first-mentioned company has borrowed from persons who are not connected with either or both the first-mentioned company and the investing company or investing companies;”,”.

Section 840A of the Taxes Consolidation Act 1997 is an anti-avoidance provision. The provision generally denies a corporate tax deduction for interest payable on a loan used for the acquisition of an asset from a company connected with the investing company. The section applies where the loan is made to the investing company, that is, the acquirer of the asset, by a connected person. This section of the Bill, as initiated, seeks to allow an interest deduction against trading profits for the acquirer of an asset where, subject to certain conditions, there is an intra-group sale of the asset for commercial purposes. The interest deduction will be allowed where the seller was entitled to a deduction for interest payable on a loan used to acquire the asset concerned immediately before the intra-group sale. The deductible interest for the acquirer will be limited to the amount of interest arising on the principal outstanding on the borrowings of the seller, in respect of the asset concerned, at the time immediately prior to the intra-group sale.

I am proposing two further amendments to address two aspects of the operation of section 840A. The first is an amendment to section 840A(7)(a). This subsection operates as a relief from the general restriction on deductibility of interest where the sole business of the connected lender is the on-lending of funds to an investing company from an external lender. I am expanding this relief to address practical difficulties in its operation such that the connected lender may on-lend to more than one investing company and may hold shares in such investing companies.

The second amendment clarifies the operation of the relief set out in the Bill, as initiated, where there is more than one intra-group acquisition of an asset to which that relief applies.