Finance Act, 1958

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Taxation of assurance companies doing annuity business.

42.— (1) Where an assurance company carries on pension annuity business—

(a) exemption from income tax shall be allowed in respect of income from investments and deposits of so much of the company's annuity fund as is referable to that business, and

(b) the company shall not be entitled to treat as paid out of profits or gains brought into charge to tax any part so referable of the annuities paid by the company.

(2) Except in the case of an assurance company charged to tax in accordance with the provisions applicable to Case I of Schedule D in respect of the profits of its life assurance business or in respect of (where the company has made an election under subsection (3) of section 3 of the Finance Act, 1947 (No. 15 of 1947)) the profits of its ordinary life assurance business, profits arising to an assurance company from pension annuity business, or from general annuity business, shall be treated as annual profits or gains within Schedule D, and be chargeable under Case VI of that Schedule, and for that purpose—

(a) the business of each such class shall be treated separately, and

(b) subject to the foregoing paragraph, the profits therefrom shall be computed in accordance with the provisions applicable to Case I of Schedule D (and without regard to the provisions of Rule 2 of the Rules applicable to Case VI of Schedule D as to the period to be taken in computing profits for the purposes of the said Case VI):

Provided that in making any such computation—

(i) the provisions of subsection (1) of section 3 of the Finance Act, 1947 , shall apply with the necessary modifications and, in particular, with the omission therefrom of all references to policy-holders,

(ii) no deduction shall be allowed in respect of any expense being an expense of management referred to in section 33 of the Income Tax Act, 1918, and

(iii) there may be set off against the profits any loss, to be computed on the same basis as the profits, which has been sustained in annuity business of the same class in any previous year for which this section was in operation; but no such loss shall be taken into account more than once for the purposes of this paragraph.

(3) Where income from the investments of the foreign life assurance fund of an assurance company having its head office in the State has been relieved from tax under Rule (2) of the Rules contained in Part II of the First Schedule to the Finance Act, 1929 (No. 32 of 1929), a corresponding reduction shall be made in any amount on which the company is chargeable to tax by virtue of subsection (2) of this section in like manner as a corresponding reduction is made under subsection (5) of section 33 of the Income Tax Act, 1918, in the relief granted to the company in respect of expenses of management.

(4) Where an assurance company not having its head office in the State carries on life assurance business through any branch or agency in the State, then, any charge to tax under subsection (2) of this section for any year of assessment on the profits arising to the company from pension annuity business, or from general annuity business,—

(a) shall be made on an amount bearing to the total amount of those profits, wherever arising, the same proportion as, under Rule 3 of the Rules applicable to Case III of Schedule D, the part of the income of the company's life assurance fund charged to tax under the said Case III bears in that year to the total amount of that income, and

(b) shall not be treated as a charge to tax in respect of life assurance business for the purposes of paragraph (4) of the said Rule 3.

(5) The exemption from tax conferred by subsection (1) of this section shall not exclude any sums from being taken into account as receipts in computing profits or gains or losses for any purpose of the Income Tax Acts; and an assurance company shall not, by virtue of subsection (2) of this section, be entitled to any relief under section 2 of the Finance Act, 1945 (No. 20 of 1945), in respect of losses on its pension annuity business or on its general annuity business.

(6) For the purposes of this section “general annuity business” means any annuity business which is not pension annuity business, and any division to be made between the two classes of business shall be made on the principle of referring to pension annuity business any premiums falling within subsection (7) of this section, together with the part resulting therefrom of the company's annuity fund and liability for annuities, and of dealing with other incomings and outgoings accordingly:

Provided that a division as at the commencement of the year beginning on the 6th day of April, 1958, or any earlier time may be made by apportionment according to the company's liability at that time on contracts then falling within paragraph (b) of subsection (7) of this section and on other annuity contracts.

(7) The premiums to be referred to pension annuity business are those payable under contracts falling (at the time when the premium is payable) within one or other of the following descriptions:

(a) any contract with an individual who is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings (as defined in section 40 of this Act) from a trade, profession, vocation, office or employment carried on or held by him, being a contract approved by the Revenue Commissioners under that section; and

(b) any contract with the trustees or other persons having the management of a superannuation fund within the meaning of section 32 of the Finance Act, 1921 , or of a scheme approved under section 40 of this Act, being a contract which—

(i) was entered into for the purposes only of that fund or scheme or, in the case of a fund part only of which is approved under the said section 32, then for the purposes only of that part of that fund, and

(ii) (in the case of a contract entered into or varied after the coming into force of this section) is so framed that the liabilities undertaken by the assurance company under the contract correspond with liabilities against which the contract is intended to secure the fund (or the relevant part of it) or scheme.

(8) This section shall be construed in accordance with section 237 of the Income Tax Act, 1918; and for the purposes of this section “annuity business” means the business of granting annuities on human life and “premium” includes any consideration for an annuity.

(9) The following transitional provisions shall have effect for the purposes of subsection (2) of this section:

(a) where tax for any year of assessment is chargeable on the amount of the profits for a year falling wholly or partly before the 6th day of April, 1958, that amount shall be computed as if subsections (1) and (5) of this section had had effect for the whole of that year; and

(b) where, in arriving at the amount on which tax is chargeable for any year of assessment, it is necessary to divide and apportion profits or gains or losses for a period for which accounts have been made up and which falls wholly or partly before the 6th day of April, 1958, the profits or gains or losses for such period shall be computed as if subsections (1) and (5) of this section had had effect for the whole of the period.