Finance Act, 1992
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Amendment of Part III (special classes of companies) of Corporation Tax Act, 1976. |
44.— Part III of the Corporation Tax Act, 1976 , is hereby amended, as respects accounting periods ending on or after the 1st day of January, 1992, for the purposes of paragraphs (a), (b), (c) and (e) and as respects accounting periods ending on or after the 1st day of January, 1993, for the purposes of paragraphs (d) and (f)— | |
(a) by the substitution for paragraph (a) of subsection (1) of section 33 of the following paragraph: | ||
“(a) there shall be deducted from the amount treated as expenses of management for any accounting period— | ||
(i) any repayment or refund receivable in the period of the whole or part of a sum disbursed by the company (for that period or any earlier period) as expenses of management, including commissions (in whatever manner described), | ||
(ii) reinsurance commissions earned by the company in the period, and | ||
(iii) the amount of any fines or fees receivable in the period or profits arising from reversions in the period, | ||
and in calculating profits arising from reversions the company may set off against those profits any losses arising from reversions in any previous accounting period during which any enactment granting this relief was in operation so far as they have not already been so set off, and”, | ||
(b) by the addition after subsection (2) of section 33 of the following subsection: | ||
“(3) The relief under this section available to an overseas life assurance company in respect of its expenses of management shall be limited to expenses attributable to the life assurance business carried on by the company at or through its branch or agency in the State.”, | ||
(c) by the insertion after section 33 of the following section: | ||
“Acquisition expenses. | ||
33A.—(1) For the purposes of this section and subject to subsections (2), (3) and (4), the acquisition expenses for any period of an assurance company carrying on life assurance business shall be such of the following expenses of management, including commissions (in whatever manner described), as are for that period attributable to the company's life assurance business (excluding pension business and general annuity business), that is to say: | ||
(a) expenses of management which are disbursed solely for the purpose of the acquisition of business, and | ||
(b) so much of any other expenses of management which are disbursed partly for the purpose of the acquisition of business and partly for other purposes as are properly attributable to the acquisition of business, | ||
reduced by— | ||
(i) any repayment or refund receivable in the period of the whole or part of management expenses falling within paragraph (a) or (b) and disbursed by the company (for that period or any earlier period), and | ||
(ii) reinsurance commission earned by the company in that period which is referable to life assurance business (excluding pension business and general annuity business). | ||
(2) Subsection (1) shall not apply to acquisition expenses in respect of policies of life assurance issued before the 1st day of April, 1992, but without prejudice to the application of that subsection to any commission (in whatever manner described) attributable to a variation on or after that date in a policy of life assurance issued before that date, and, for this purpose, the exercise of any rights conferred by a policy shall be regarded as a variation of it. | ||
(3) In subsection (1) ‘the acquisition of business’ includes the securing on or after the 1st day of April, 1992, of the payment of increased or additional premiums in respect of a policy of assurance which has already been issued before, on or after that date. | ||
(4) For the purposes of subsection (1) and in relation to any period, the expenses of management attributable to a company's life assurance business (excluding pension business and general annuity business) are expenses— | ||
(a) which are disbursed for that period (disregarding any treated as so disbursed by subsection (2) of section 15), and | ||
(b) which, disregarding subsection (5), are deductible as expenses of management of such life assurance business in accordance with section 33. | ||
(5) Notwithstanding anything contained in section 33 and subject to subsection (6), only one-seventh of the acquisition expenses for any accounting period (hereafter in this section referred to as ‘the base period’) shall be treated as deductible under that section for the base period, and in subsections (7) and (8) any reference to the full amount of the acquisition expenses for the base period is a reference to the amount of those expenses which would be deductible for that period apart from this subsection. | ||
(6) Subsection (5) shall have effect in the case of acquisition expenses for an accounting period or part of an accounting period falling wholly within the year ending on— | ||
(a) the 31st day of December, 1992, as if for one-seventh there were substituted five-sevenths, and | ||
(b) the 31st day of December, 1993, as if for one-seventh there were substituted three-sevenths. | ||
(7) Where, by virtue of subsection (5) and, where appropriate, subsection (6), only a fraction of the full amount of the acquisition expenses for the base period is deductible under section 33 for that period, then, subject to subsection (8) a further one-seventh of the full amount shall be so deductible for each succeeding accounting period after the base period until the whole of the full amount has become so deductible, except that, for any accounting period of less than a year, the fraction of one-seventh shall be proportionately reduced. | ||
(8) For any accounting period for which the fraction of the full amount of the acquisition expenses for the base period which would otherwise be deductible in accordance with subsection (7) exceeds the balance of those expenses which has not become deductible for earlier accounting periods, only that balance shall be deductible.”, | ||
(d) by the insertion after section 46 of the following sections: | ||
“Deemed disposal and reacquisition of certain assets. | ||
46A.—(1) In this section and section 46B— | ||
‘average’, in relation to two amounts, means one-half of the aggregate of those two amounts; | ||
‘closing’, in relation to an accounting period, means the position at the end of the valuation period which coincides with that accounting period or in which that accounting period falls; | ||
‘collective investment undertaking’ has the meaning assigned to it in section 18 of the Finance Act, 1989 ; | ||
‘foreign life assurance fund’ has the meaningassigned to it in section 42; | ||
‘investment reserve’, in relation to an assurance company, means the excess of the value of the assets of the company's life business fund over the liabilities of the life business; | ||
‘life business fund’ means the fund maintained by an assurance company in respect of its life assurance business or, where the company carries on both ordinary life assurance business and industrial assurance business, both of the funds so maintained; | ||
‘linked assets’ means assets of an assurance company which are identified in its records as assets by reference to the value of which benefits provided for under a policy or contract are to be determined; | ||
‘market value’ has the meaning assigned to it in section 49 of the Capital Gains Tax Act, 1975 ; | ||
‘opening’, in relation to an accounting period, means the position at the beginning of the valuation period which coincides with that accounting period or in which that accounting period falls; | ||
‘trading company’ means a company— | ||
(a) whose business consists of the carrying on of insurance business, or the carrying on of any other trade which does not consist to any extent of dealing in commodities, currency, securities, debts or other assets of a financial nature, or | ||
(b) whose business consists wholly or mainly of the holding of shares or securities of trading companies which are its 90 per cent. subsidiaries; | ||
‘units’ has the same meaning as it has in section 18 of the Finance Act, 1989 ; | ||
‘with-profits liabilities’ means liabilities in respect of policies or contracts under which the policy holders or annuitants are eligible to participate in surplus. | ||
(2) Where, on the day on which the accounting period of an assurance company ends, the assets of its life business fund include— | ||
(a) units in a collective investmentundertaking, or | ||
(b) relevant interests in an offshore fund, | ||
then, subject to the following provisions of this section and to section 46B, the company shall, for the purposes of corporation tax on capital gains, be deemed to have disposed of and immediately reacquired each of those assets at its market value on the said day: | ||
Provided that, as respects a disposal of such assets, being a disposal which is deemed to have been made by virtue of this section and not any other disposal, subsection (1) of section 3 of the Capital Gains Tax (Amendment) Act, 1978 , shall apply as if paragraph (b) had been deleted from subsection (3) of the said section 3. | ||
(3) Subsection (2) shall not apply to assets linked solely to pension business or to assets of the foreign life assurance fund and, in relation to other assets which are not assets linked solely to life assurance business (excluding pension business and general annuity business), shall apply only to the relevant chargeable fraction for an accounting period of each class of asset. | ||
(4) In subsection (3) ‘the relevant chargeable fraction for an accounting period’— | ||
(a) in relation to linked assets, means the fraction of which— | ||
(i) the denominator is the average of such of the opening and closing life business liabilities as are liabilities in respect of benefits to be determined by reference to the value of linked assets, other than assets linked solely to life assurance business (excluding pension business and general annuity business) or pension business and assets of the foreign life assurance fund, and | ||
(ii) the numerator is the average of such of opening and closing liabilities within subparagraph (i) as are liabilities of business the profits of which are not charged to tax under Case I or Case IV of Schedule D, | ||
and | ||
(b) in relation to assets other than linked assets, means the fraction of which— | ||
(i) the denominator is the aggregate of— | ||
(I) the average of the opening and closing life business liabilities, other than liabilities in respect of benefits to be determined by reference to the value of linked assets and liabilities of the foreign life assurance business, and | ||
(II) the average of the opening and closing amounts of the investment reserve, | ||
and | ||
(ii) the numerator is the aggregate of— | ||
(I) the average of the opening and closing liabilities within sub-paragraph (i) as are liabilities of business the profits of which are not charged to tax under Case I or Case IV of Schedule D, and | ||
(II) the average of the appropriate parts of the opening and closing amounts of the investment reserve. | ||
(5) (a) In this subsection ‘liabilities’ does not include the liabilities of the foreign life assurance business. | ||
(b) In subsection (4) ‘appropriate part’ in relation to the investment reserve, means— | ||
(i) where none, or none but an insignificant proportion, of the liabilities of the life business are with-profits liabilities, the part of that reserve which bears to the whole the same proportion as the amount of the liabilities of business, the profits of which are not charged to tax under Case I or Case IV of Schedule D, which are not linked liabilities bears to the whole amount of the liabilities of the life business which are not linked liabilities, and | ||
(ii) in any other case, the part of that reserve which bears to the whole the same proportion as the amount of the with-profits liabilities of business, the profits of which are not charged to tax under Case I or Case IV of Schedule D, bears to the whole amount of the with-profits liabilities of the life business. | ||
(6) For the purposes of this section assets of the foreign life assurance fund and liabilities of the foreign life assurance business shall be left out of account in determining the investment reserve. | ||
(7) For the purposes of this section an interest is a relevant interest in an offshore fund if— | ||
(a) it is a material interest in an off-shore fund for the purposes of Chapter VII of Part I of the Finance Act, 1990 , or | ||
(b) it would be such an interest if the shares and interests excluded by subsections (6) and (8) of section 65 of the Finance Act, 1990 , were limited to shares or interests in trading companies. | ||
Gains or losses arising by virtue of section 46A. | ||
46B.—(1) Subject to subsections (2) and (3), chargeable gains or allowable losses which would otherwise accrue on disposals deemed by virtue of section 46A to have been made in a company's accounting period (other than a period in which the company ceased to carry on life business) shall be treated, subject to paragraphs (b) and (c), as not accruing to it, but instead— | ||
(a) there shall be ascertained the difference (hereafter in this section referred to as ‘the net amount’) between the aggregate of those gains and the aggregate of those losses, and | ||
(b) one-seventh of the net amount shall be treated as a chargeable gain or, where it represents an excess of losses over gains, as an allowable loss accruing to the company in the accounting period, and | ||
(c) a further one-seventh shall be treated as a chargeable gain or, as the case may be, as an allowable loss accruing in each succeeding accounting period until the whole amount has been accounted for. | ||
(2) For any accounting period of less than one year, the fraction of one-seventh referred to in subsection (1) (c) shall be proportionately reduced; and where this subsection has had effect, in relation to any accounting period before the last for which subsection (1) (c) applies, the fraction treated as accruing in that last accounting period shall be reduced so as to secure that no more than the whole of the net amount has been accounted for. | ||
(3) Where a company ceases to carry on life business before the beginning of the last of the accounting periods for which paragraph (c) of subsection (1) would apply in relation to a net amount, the fraction of that amount that is treated as accruing in the accounting period in which the company ceases to carry on life business shall be such as to secure that the whole of the net amount has been accounted for.”, | ||
(e) by the deletion of section 47, and | ||
(f) by the insertion, in subsection (1) of section 50, of “including sections 46A and 46B (inserted by the Finance Act, 1992)”, after “sections 33 to 49”. |