Finance Act 2012

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Retirement benefits.

18.— (1) Chapter 1 of Part 30 of the Principal Act is amended in section 772—

(a) in subsection (3A) by substituting the following for the construction of “A” in the formula in paragraph (a):

“A is—

(I) the amount equal to the value of the relevant individual’s accrued rights under the scheme (including accrued rights which relate to additional voluntary contributions under the scheme) exclusive of any lump sum paid in accordance with subsection (3)(f), or

(II) the amount equal to the value of the relevant individual’s accrued rights under the scheme which relate to additional voluntary contributions paid by that individual exclusive of any part of that amount paid by way of lump sum in accordance with subsection (3)(f) in conjunction with the scheme rules, and”,

(b) in subsection (3A)(aa) by substituting the following for subparagraph (ii):

“(ii) clause (I) of the construction of ‘A’ in the formula in paragraph (a) had never been enacted.”,

(c) in subsection (3B)(b) by substituting “other than in the case of an individual referred to in clause (II) of the construction of ‘A’ in the formula in subsection (3A)(a) and an individual referred to in subsection (3A)(aa)” for “other than in the case of an individual referred to in subsection (3A)(aa)”, and

(d) by inserting the following after subsection (3G):

“(3H) A retirement benefits scheme shall neither cease to be an approved scheme nor shall the Revenue Commissioners be prevented from approving a retirement benefits scheme for the purposes of this Chapter because of any provision in the rules of the scheme allowing a member who comes within the provisions of section 787TA to exercise an option in accordance with that section requiring an amount representing the value of, or part of the value of, the member’s accrued rights under the scheme at the date of the exercise of the option to be transferred by the trustees of the scheme to the member.”.

(2) Chapter 2 of Part 30 of the Principal Act is amended in section 784 by inserting the following after subsection (2D):

“(2E) Notwithstanding any other provision of this Chapter, a retirement annuity contract shall not cease to be an annuity contract for the time being approved by the Revenue Commissioners, nor shall the Revenue Commissioners be prevented from approving such a contract, notwithstanding that the contract provides for the annuity secured by the contract for an individual to be commuted, where the individual comes within the provisions of section 787TA, to such extent as may be necessary for the purpose of the exercise of an option by the individual in accordance with that section requiring an amount representing the value of, or part of the value of, the individual’s accrued rights under the contract at the date of the exercise of the option to be transferred to the individual by the person with whom the contract is made.”.

(3) Chapter 2 of Part 30 of the Principal Act is amended in section 784A—

(a) by deleting subsection (1BA),

(b) in subsection (1C) by substituting “section 790D(4)” for “subsection (1BA)(b)”,

(c) in subsection (1E) by substituting “subsection (1B)” for “subsections (1B) and (1BA)”,

(d) in subsection (3) by substituting “Subject to subsections (3A) and (4)” for “Subject to subsection (4)”,

(e) by inserting the following after subsection (3):

“(3A) Subsection (3) shall not apply where the distribution referred to in that subsection is made for the purpose of reimbursing, in whole or in part, an administrator (within the meaning of section 787O(1)) in respect of the payment by that administrator of income tax charged on a chargeable excess under the provisions of Chapter 2C of this Part in respect of the person beneficially entitled to the assets in the fund.”,

and

(f) in subsection (4)(c) by substituting the following for all of the words from “the qualifying fund manager shall” to the end of the provision:

“the qualifying fund manager shall deduct income tax from the distribution under Case IV of Schedule D at a rate of 30 per cent, and—

(I) the amount so charged to tax—

(A) shall not be reckoned in computing total income for the purposes of the Tax Acts, and

(B) shall be computed without regard to any amount deductible from, or deductible in computing, total income for the purposes of the Tax Acts,

(II) the charging of the distribution in such manner shall be without any relief or reduction specified in the Table to section 458, or any other deduction from that distribution, and

(III) section 188 shall not apply as regards the amount so charged.

(d) Where a qualifying fund manager deducts tax in accordance with paragraph (c), subsections (8) to (15) of section 790AA shall, with any necessary modifications, apply as if any reference in those subsections—

(i) to the administrator were a reference to the qualifying fund manager,

(ii) to a relevant pension arrangement were a reference to an approved retirement fund, and

(iii) to an excess lump sum were a reference to a distribution of a kind referred to in paragraph (c).”.

(4) Chapter 2A of Part 30 of the Principal Act is amended—

(a) in section 787G(3)(e) by substituting “section 787K(2A),” for “section 787K(2A).”,

(b) in section 787G(3) by inserting the following after paragraph (e):

“(f) an amount made available from the PRSA, where the PRSA is a vested PRSA (within the meaning of section 790D(1)), for the purpose of reimbursing, in whole or in part, an administrator (within the meaning of section 787O(1)) in respect of the payment by that administrator of income tax charged on a chargeable excess under the provisions of Chapter 2C of this Part in respect of the PRSA contributor.”,

and

(c) in section 787K by inserting the following after subsection (2A):

“(2B) A PRSA product (within the meaning of Part X of the Pensions Act 1990 ) shall neither cease to be an approved product under section 94 of that Act nor shall the Revenue Commissioners be prevented from approving a product under that section notwithstanding that the product permits the PRSA administrator, where the PRSA contributor comes within the provisions of section 787TA, to make available from the PRSA assets to such extent as may be necessary an amount for the purposes of an option exercised by the PRSA contributor in accordance with that section requiring an amount representing the value of, or part of the value of, the PRSA contributor’s accrued rights under the product at the date of the exercise of the option to be transferred to the PRSA contributor by the PRSA administrator.”.

(5) Chapter 2C of Part 30 of the Principal Act is amended in section 787Q—

(a) in subsection (6)(a) by deleting “or, where the individual is deceased, from his or her estate”,

(b) in subsection (6) by substituting the following for paragraph (b):

“(b) the administrator shall be reimbursed by the individual for the tax so paid in accordance with subsection (7).”,

and

(c) by inserting the following after subsection (6):

“(7) An administrator referred to in subsection (6) shall be reimbursed for the payment of tax arising on a chargeable excess in the following manner—

(a) where the amount of tax paid is 50 per cent or a lesser percentage of the amount of the lump sum payable to the individual under the rules of the relevant pension arrangement reduced by the amount of tax charged under subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA on an excess lump sum (within the meaning of subsection (1)(e) of that section), if any, in respect of that lump sum (in this subsection referred to as the ‘net lump sum’)—

(i) by appropriating that percentage of the net lump sum,

(ii) by payment by the individual of an amount to the administrator that is equal to the amount of tax paid, or

(iii) by a combination of subparagraphs (i) and (ii) such that the aggregate of the percentage of the net lump sum appropriated and the amount paid by the individual to the administrator is equal to the amount of tax paid,

(b) where the amount of tax paid is greater than 50 per cent of the net lump sum—

(i) (I) by appropriating not less than 50 per cent of the net lump sum, or such higher percentage as the administrator and the individual may agree,

(II) by payment by the individual of an amount to the administrator that is not less than 50 per cent of the net lump sum, or such higher amount as the administrator and the individual may agree, or

(III) by a combination of clauses (I) and (II) such that the aggregate of the percentage of the net lump sum appropriated and the amount paid by the individual to the administrator is not less than 50 per cent of the net lump sum,

and

(ii) (I) by reducing the gross annual amount of pension payable to the individual under the rules of the relevant pension arrangement (in this subsection referred to as the ‘pension reduction’), for a period agreed between the individual and the administrator that does not exceed 10 years from the date of first payment of the pension (in this subsection referred to as the ‘agreed period’), such that the pension reduction over the agreed period is sufficient to reimburse the administrator for that portion of the tax paid as was not reimbursed under subparagraph (i), if any, (in this subsection referred to as the ‘balance’),

(II) by payment by the individual of an amount equal to the balance to the administrator within the period of 3 months from the date of the benefit crystallisation event that gave rise to the chargeable excess, or

(III) by a combination of a pension reduction over an agreed period as provided for in clause (I) and payment of an amount by the individual as provided for in clause (II) where the aggregate of the amount of the reduction in the pension over the agreed period and the amount payable by the individual equals the balance,

(c) a payment by an individual to an administrator referred to in subparagraphs (ii) and (iii) of paragraph (a) and clauses (II) and (III) of subparagraph (b)(i) (in this paragraph referred to as the ‘first-mentioned payment’) shall be made before the administrator pays the amount of the net lump sum or, as the case may be, such amount of the net lump sum as has not been appropriated to reimburse the administrator for the payment of tax arising on the chargeable excess and the administrator may withhold payment of that amount until such time as the first-mentioned payment is made by the individual.”.

(6) Chapter 2C of Part 30 of the Principal Act is amended in section 787R—

(a) by inserting the following after subsection (3):

“(3A) The references in subsections (2) and (3) to income tax charged under subsection (1) shall be deemed to be a reference to the amount of income tax so charged reduced, as appropriate, under section 787RA.”,

and

(b) in subsection (4) by deleting “and” at the end of paragraph (d) and substituting the following for paragraph (e):

“(e) where the administrator of the arrangement is an administrator of a kind referred to in paragraph (d) of the definition of ‘administrator’ in section 787O(1) and where relevant, details of the amount of unpaid tax required to be paid by the administrator and remitted to the Collector-General under subsections (18) and (19) of section 787TA, and

(f) such other information as the Revenue Commissioners may reasonably require for the purposes of this Chapter.”.

(7) Chapter 2C of Part 30 of the Principal Act is amended—

(a) by inserting the following after section 787R:

“Credit for tax paid on an excess lump sum.

787RA.— (1) Where, on or after 1 January 2011, a benefit crystallisation event that gives rise to a chargeable excess in accordance with section 787Q occurs in relation to an individual in respect of a relevant pension arrangement, then, in so far as income tax has been charged under subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA on an excess lump sum (within the meaning of subsection (1)(e) of that section) in respect of a lump sum paid, on or after that date, to the individual—

(a) by the administrator of that relevant pension arrangement (in this section referred to as the ‘first-mentioned admin-istrator’), whether under that relevant pension arrangement, or under any other relevant pension arrangement administered by the first-mentioned administrator, or

(b) where the condition in subsection (2) is met, by the administrator of another relevant pension arrangement,

the income tax on the chargeable excess charged in accordance with section 787R (in this section referred to as the ‘chargeable excess tax’) shall be reduced by the aggregate of the amount of income tax charged under subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA on the excess lump sum and deducted by the first-mentioned administrator and the amount of such income tax charged on the excess lump sum and deducted by the other administrator (in this section referred to as the ‘lump sum tax’).

(2) The condition referred to in subsection (1)(b) is that the first-mentioned administrator obtains from the other administrator a certificate stating—

(a) the name and address of the administrator,

(b) the individual’s full name, address and PPS Number,

(c) the relevant pension arrangement in respect of which the benefit crystallisation event giving rise to the excess lump sum arose,

(d) the date of payment of the lump sum in respect of which tax on the excess lump sum was deducted under section 790AA and the amount of the lump sum, and

(e) the amount of the lump sum tax in respect of the excess lump sum charged to tax in accordance with subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA and deducted by, and remitted to the Collector-General by the administrator in accordance with subsection (8) of that section.

(3) Subject to subsection (4), where the lump sum tax referred to in subsection (1) is greater than the chargeable excess tax referred to in that subsection, the amount by which the lump sum tax exceeds the chargeable excess tax may be carried forward and aggregated with the lump sum tax on a lump sum (if any) paid to the individual under the next benefit crystallisation event that occurs in relation to that individual (in this section referred to as the ‘tax balance’) and, so far as may be, used to reduce the amount of the chargeable excess tax arising on that benefit crystallisation event (in this section referred to as the ‘future chargeable excess tax’) and so on in respect of each successive benefit crystallisation event until the tax balance is fully used.

(4) Where a future chargeable excess tax referred to in subsection (3) is in respect of a benefit crystallisation event under a relevant pension arrangement which is not administered by the first-mentioned administrator and the tax balance has not been fully used, the administrator of that relevant pension arrangement shall obtain from the first-mentioned administrator a certificate stating—

(a) the name and address of the first-mentioned administrator,

(b) the individual’s full name, address and PPS Number, and

(c) the amount of the unused tax balance.

(5) Where an administrator receives a certificate referred to in subsection (4), the future chargeable excess tax may be reduced by the aggregate of the amount of the unused tax balance referred to in that certificate and the lump sum tax, if any, charged by that administrator in respect of the benefit crystallisation event giving rise to the future chargeable excess tax.

(6) Subsections (4) and (5) shall apply as appropriate, and with any necessary modifications, on each successive occasion on which a benefit crystallisation event occurs in relation to the individual where the administrator of that benefit crystallisation event and the administrator of the immediately preceding benefit crystallisation event are not the same person.

(7) Subsection (6) of section 787R shall, with any necessary modifications, apply to an administrator who obtains a certificate under subsection (2) or (4) as if the reference in that subsection (6) to a declaration, or declarations were a reference to a certificate, or certificates, to which subsection (2) or (4) applies.

(8) Any lump sum tax or tax balance referred to in this section—

(a) shall be used only once to reduce a chargeable excess tax, and

(b) shall be used for no other purpose.”,

and

(b) by inserting the following after section 787T:

“Encashment option.

787TA.— (1) In this section—

‘active member’, in relation to a public sector scheme, means a member of the scheme who is in reckonable service within the meaning of section 2 (1) of the Pensions Act 1990 ;

‘AMRF’ means an approved minimum retirement fund;

‘ARF’ means an approved retirement fund;

‘Personal Retirement Savings Account’ has the meaning assigned to it by section 787A and the expression ‘PRSA’ shall be construed accordingly;

‘private sector scheme’ means a relevant pension arrangement of a kind described in paragraphs (a) to (d) of the definition of ‘relevant pension arrangement’;

‘PRSA administrator’ has the meaning assigned to it by section 787A;

‘public sector scheme’ means a relevant pension arrangement of a kind described in paragraphs (e) and (f) of the definition of ‘relevant pension arrangement’;

‘qualifying fund manager’ has the meaning assigned to it by section 784A;

‘relevant individual’ means an individual who on 8 February 2012—

(a) (i) is a member of one or more than one private sector scheme or was such a member before that date and one or more than one benefit crystallisation event has occurred in respect of the scheme or schemes in the relevant period, and

(ii) is a member of one or more than one public sector scheme,

or

(b) is a member of one or more than one private sector scheme or becomes such a member after that date and who subsequently becomes a member of one or more than one public sector scheme,

and who continues as an active member of his or her public sector scheme until his or her retirement date;

‘relevant manager’, in relation to a relevant individual, means a qualifying fund manager of an ARF or an AMRF or, as the case may be, a PRSA administrator of a PRSA, the assets in which are beneficially owned by that individual;

‘relevant period’ means the period starting on 7 December 2005 and ending on 7 February 2012;

‘retirement date’, in relation to a public sector scheme, means the earlier of—

(a) the date on which a member of the scheme retires where that date is on or after the date on which the member reaches the age of 60 years, and

(b) the date on which a member of the scheme retires on grounds of incapacity under the rules of the scheme;

‘tax year’ means a year of assessment for income tax purposes.

(2) Subject to subsection (11), this section shall apply in relation to a relevant individual where—

(a) no benefit crystallisation event has occurred in relation to the relevant individual in the relevant period,

(b) the aggregate of the amounts to be crystallised by benefit crystallisation events in relation to the relevant individual under his or her private sector scheme or schemes and his or her public sector scheme or schemes would, but for this section, exceed the standard fund threshold or, as the case may be, the relevant individual’s personal fund threshold (in this section referred to as the ‘specified amount’), and

(c) the benefit crystallisation events in relation to the public sector scheme or schemes of the relevant individual occur after the occurrence of all other benefit crystallisation events in relation to the private sector scheme or schemes of that individual.

(3) (a) Where the conditions set out in subsection (4) are met, an individual in relation to whom subsection (2) may apply may irrevocably instruct in writing the administrator of the private sector scheme or schemes to exercise the option (in this section referred to as the ‘encashment option’) provided for in subsection (6).

(b) The encashment option may be exercised in respect of a relevant individual on one occasion only and on the same date in relation to each of the private sector schemes of the individual in respect of which he or she has irrevocably instructed the administrator to exercise the option.

(c) Where an administrator referred to in paragraph (a) or subsection (11)(a) or, as the case may be, a relevant manager referred to in subsection (11)(a) (in this paragraph referred to as the ‘relevant administrator’) receives an irrevocable instruction in writing from an individual the relevant administrator shall keep and retain for a period of 6 years each such instruction and on being so required by notice given to the relevant administrator in writing by an officer of the Revenue Commissioners make available within the time specified in the notice such instructions as may be required by the notice.

(4) The conditions are that the relevant individual—

(a) notifies the Revenue Commissioners in writing of his or her intention to have the encashment option exercised at least 3 months before the date on which the first benefit crystallisation event in relation to the public sector scheme or schemes is to occur and provides the following information—

(i) his or her full name, address and PPS Number,

(ii) an estimate of the value of the accrued rights in respect of which the encashment option is to be exercised or, as the case may be, the specified amount,

(iii) particulars of the private sector scheme or schemes in respect of which the encashment option is to be exercised,

(iv) the name, address and telephone number of the administrator of each such scheme, and

(v) such other information and particulars as the Revenue Commissioners may reasonably require for the purposes of this section,

and

(b) notifies the Revenue Commissioners in writing, within 7 working days of the exercise of the encashment option, that the option has been exercised and provides a schedule, with the notification, setting out the aggregate amount in respect of which the option was exercised and the amounts in respect of each of the private sector schemes concerned.

(5) Subsections (3) and (4) of section 787P shall, with any necessary modifications, apply to a notification under paragraph (a) or (b) of subsection (4) as they apply to a notification under subsection (2) of that section.

(6) (a) The exercise of the encashment option is the transfer by the administrator of the private sector scheme or schemes to the relevant individual—

(i) where the relevant individual’s retirement date is the date referred to in paragraph (b) of the definition of ‘retirement date’, on that date, or

(ii) in any other case, on or before the relevant individual’s retirement date but not before the date on which the relevant individual attains the age of 60 years,

of the amount of the value of the relevant individual’s accrued rights under the private sector scheme or schemes, including rights, if any, which relate to additional voluntary contributions under the scheme or schemes, equal to—

(I) where the condition referred to in paragraph (b) applies, the value of those rights, and

(II) in any other case, the specified amount.

(b) The condition needed is that the amount to be crystallised by the benefit crystallisation events in relation to the relevant individual under his or her public sector scheme or schemes exceeds the standard fund threshold, or, as the case may be, the relevant individual’s personal fund threshold.

(c) (i) In this paragraph—

‘rules’ means anything contained in the rules of a scheme or the terms and conditions of any contract in respect of a scheme;

‘tax-free lump sum’ means the lump sum of a kind that would under the rules have been payable tax-free to a relevant individual if section 790AA had never been enacted;

‘restricted tax-free lump sum’ means an amount equivalent to the amount determined by the formula—

A x (1 - B)

C

where—

A is the amount of the tax-free lump sum,

B is—

(I) the specified amount, or

(II) where the encashment option is exercised in respect of any other private sector scheme or schemes of the relevant individual, an amount equivalent to the amount determined by the formula—

D - E

where—

D equals the specified amount, and

E equals the encashment amount or, as the case may be, the aggregate of the encashment amounts arising from the exercise of the encashment option in respect of the other private sector scheme or schemes,

and

C is the amount equal to the value of the relevant individual’s accrued rights under the scheme.

(ii) Notwithstanding anything contained in this Part or anything contained in the rules, where an encashment option is exercised in respect of a scheme and—

(I) the encashment amount is equal to the value of the relevant individual’s accrued rights under the scheme, the tax-free lump sum shall not be payable, or

(II) the encashment amount is less than the value of the relevant individual’s accrued rights under the scheme, the tax-free lump sum shall be restricted to the restricted tax-free lump sum.

(7) Where an encashment option is exercised in respect of a relevant individual, the whole of the encashment amount in respect of each of the private sector schemes of the relevant individual in respect of which the encashment option is exercised shall be regarded as income of the individual for the tax year in which the amount is paid and shall be chargeable to income tax under Case IV of Schedule D.

(8) Income tax chargeable in accordance with subsection (7) shall be charged at the higher rate for the tax year in which the payment is made (in this section referred to as the ‘encashment tax’) and the administrator of each of the private sector schemes referred to in subsection (7) shall deduct the income tax due from the encashment amount and remit it to the Collector-General in accordance with subsection (10).

(9) Where an encashment amount is regarded as income of the individual under subsection (7) and charged to tax in accordance with subsection (8)—

(a) such income shall be computed without regard to any amount deductible from, or deductible in computing, total income for the purposes of the Tax Acts,

(b) the charging of that income to tax in such manner shall be without any relief or reduction specified in the Table to section 458, or any other deduction from that income, and

(c) section 188 shall not apply as regards the amount so charged.

(10) Where the administrator of a private sector scheme or, as the case may be, a relevant manager referred to in subsection (16) deducts encashment tax in accordance with subsection (8) or, as the case may be, subsection (16), subsections (1) to (8) of section 787S shall, with any necessary modifications, apply as if any reference in those subsections—

(a) to an administrator included a reference to a relevant manager,

(b) to a relevant pension arrangement were a reference to a relevant individual’s private sector scheme,

(c) to a benefit crystallisation event were a reference to an encashment option,

(d) to a chargeable excess were a reference to an encashment amount, or as the case may be, a deemed encashment amount, and

(e) to tax were a reference to encashment tax.

(11) (a) (i) Where the conditions set out in subsection (4), as modified by subsection (12) (in this section referred to as the ‘modified conditions’), are met, an individual in relation to whom the circumstances described in paragraph (b) may apply, may irrevocably instruct in writing the administrator or, as the case may be, the relevant manager of the private sector scheme or schemes to exercise the encashment option as if the benefit crystallisation event or events referred to in subparagraph (i) of paragraph (b) had not occurred.

(ii) Where the encashment option is exercised in respect of a private sector scheme or schemes of a kind referred to in subparagraph (i) of paragraph (b), subsection (6)(a) shall apply as if the reference in that subsection to an administrator were a reference to a relevant manager.

(b) The circumstances referred to in paragraph (a) are that in relation to a relevant individual—

(i) one or more than one benefit crystallisation event has occurred within the relevant period in relation to one or more than one private sector scheme of that relevant individual, and

(ii) the aggregate of—

(I) the amounts so crystallised, and

(II) the amounts to be crystallised in the future by benefit crystallisation events in relation to the relevant individual—

(A) under his or her other private sector scheme or schemes, if any, and

(B) under his or her public sector scheme or schemes,

would, but for this section, exceed the standard fund threshold or, as the case may be, the relevant individual’s personal fund threshold (referred to in paragraph (a)(ii) of subsection (4), as modified by subsection (12), and in the construction of ‘B’ in the formula in subsection (15)(b) as the ‘other specified amount’), and

(iii) the benefit crystallisation events in relation to the public sector scheme or schemes of the relevant individual occur after the occurrence of all other benefit crystallisation events in relation to the private sector scheme or schemes of that individual.

(12) The modified conditions are that the individual complies with subsection (4) as if the following were substituted for subparagraphs (ii), (iii) and (iv) of paragraph (a) of that subsection:

‘(ii) an estimate of the value of the accrued rights in respect of which the encashment option is to be exercised or, as the case may be, the other specified amount,

(iii) notwithstanding that one or more than one benefit crystallisation event has occurred in relation to one or more than one private sector scheme within the relevant period, particulars of the private sector scheme or schemes in respect of which the encashment option is to be exercised, and

(iv) the name, address and telephone number of the administrator or, as the case may be, the relevant manager of each such scheme,’.

(13) Where an encashment option is exercised in respect of an individual referred to in subsection (11)(a) being at that time a relevant individual, then in so far as the exercise of that option relates to—

(a) one or more than one private sector scheme of the individual in respect of which no benefit crystallisation event has occurred in the relevant period, subsections (7) to (10) shall apply, and

(b) one or more than one private sector scheme of the individual in respect of which one or more than one benefit crystallisation event has occurred in the relevant period, subsection (14) or (15), as the case may be, shall apply.

(14) (a) Where an encashment option relates to a scheme referred to in subsection (13)(b), the value of the individual’s accrued rights under the scheme for the purposes of the exercise of the option shall be the amount crystallised by the benefit crystallisation events and where the encashment option has been exercised in respect of the whole of the scheme the part of the encashment amount from which encashment tax is to be deducted (in this section referred to as the ‘deemed encashment amount’) shall be the amount referred to in paragraph (b).

(b) Where the benefit crystallisation event is—

(i) a lump sum paid under the rules of the scheme (of a kind that would, if section 790AA had never been enacted, have been paid tax-free to the individual and in this section referred to as the ‘tax-free lump sum paid’), the deemed encashment amount shall be the amount of that tax-free lump sum paid,

(ii) the transfer of an amount to an ARF the assets in which are beneficially owned by the relevant individual, the deemed encashment amount shall be the lesser of the amount transferred to the ARF at the time the benefit crystallisation event occurred and the value of the assets in the ARF at the date of the exercise of the encashment option,

(iii) the transfer of an amount to an AMRF the assets in which are beneficially owned by the relevant individual, the deemed encashment amount shall be the lesser of the amount transferred to the AMRF at the time the benefit crystallisation event occurred and the value of the assets in the AMRF at the date of the exercise of the encashment option,

(iv) the retention of the assets of a PRSA in the PRSA (in this section referred to as the ‘vested PRSA’) beneficially owned by the relevant individual, the deemed encashment amount shall be the lesser of the value of the assets retained in the vested PRSA at the time the benefit crystallisation event occurred and the value of the assets in the vested PRSA at the date of the exercise of the encashment option, and

(v) in any other case, the deemed encashment amount shall be nil.

(c) The whole of the deemed encashment amount—

(i) shall be regarded as income of the individual for the tax year in which the encashment option is exercised, and

(ii) the amount so regarded as income shall be chargeable to income tax in accordance with subsection (16) or, as the case may be, subsection (19).

(15) (a) Where an encashment option relates to a scheme referred to in subsection (13)(b) and that option is exercised in respect of only part of the scheme—

(i) the encashment amount shall be an amount equivalent to B in the formula in paragraph (b), and

(ii) where the benefit crystallisation event was in respect of any one or more of the events described in subsection (14)(b), the deemed encashment amount in respect of each of those events shall be an amount equivalent to the amount determined by that formula.

(b) The formula is—

A × B

C

where—

A is—

(i) the amount of the tax-free lump sum paid,

(ii) the lesser of the amount transferred to the ARF at the time the benefit crystallisation event occurred and the value of the assets in the ARF at the date of the exercise of the encashment option (in this paragraph referred to as the ‘encashment date’),

(iii) the lesser of the amount transferred to the AMRF at the time the benefit crystallisation event occurred and the value of the assets in the AMRF at the encashment date, or

(iv) the lesser of the value of the assets retained in the vested PRSA at the time the benefit crystallisation event occurred and the value of the assets in the vested PRSA at the encashment date,

B has the meaning assigned to it in the formula in the definition of ‘restricted tax-free lump sum’ in subsection (6)(c)(i) as if in that meaning a reference to specified amount were a reference to other specified amount,

and

C is the amount crystallised by the benefit crystallisation events under the scheme.

(c) Paragraph (c) of subsection (14) shall apply to the deemed encashment amounts referred to in paragraph (a).

(16) (a) Any deemed encashment amount shall be charged to income tax under Case IV of Schedule D.

(b) The relevant manager shall deduct income tax from the deemed encashment amount at the higher rate for the tax year in which the encashment option is exercised and remit it to the Collector-General in accordance with subsection (10).

(c) Paragraphs (a) to (c) of subsection (9) shall apply to a deemed encashment amount regarded as income of the relevant individual under subsection (14)(c) or (15)(c) and charged to income tax in accordance with paragraph (a).

(d) (i) The deduction of income tax by a relevant manager in accordance with paragraph (b) shall include a deduction for a deemed encashment amount in respect of a tax-free lump sum paid under the rules of the private sector scheme from which the assets were, in whole or in part, transferred to the ARF or the AMRF or, as the case may be, in the case of a scheme that is a PRSA, within which the assets were retained in whole or in part.

(ii) (I) In so far as income tax has been charged under subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA on an excess lump sum (within the meaning of subsection (1)(e) of that section) (in this paragraph referred to as the ‘standard rate income tax’) in respect of a lump sum referred to in subparagraph (i) and deducted by and remitted to the Collector-General by the administrator of the private sector scheme in accordance with subsection (8) of that section, the income tax to be deducted by the relevant manager from the deemed encashment amount in respect of the lump sum shall, where the condition in subparagraph (iii) is met, be reduced by the amount of the standard rate income tax, and

(II) where a deemed encashment amount in respect of a tax-free lump sum has been calculated in accordance with the formula in subsection (15), then in so far as standard rate income tax has been charged in respect of the lump sum, the income tax to be deducted by the relevant manager from the deemed encashment amount shall, where the condition in subparagraph (iii) is met, be reduced by an amount of income tax equivalent to the amount determined by that formula if ‘A’ in the formula was the amount of the standard rate income tax.

(iii) The condition referred to in clauses (I) and (II) of subparagraph (ii) is that the relevant manager obtains from the administrator of the private sector scheme a certificate giving the information set out in paragraphs (a) to (e) of subsection (2) of section 787RA.

(iv) Where income tax on a deemed encashment amount is reduced by an amount of standard rate income tax in accordance with clause (I) or (II) of subparagraph (ii), that amount of standard rate income tax shall not be available for the purposes of section 787RA.

(v) Subsection (6) of section 787R shall, with any necessary modifications, apply to a relevant manager who obtains a certificate under subparagraph (ii) as if the reference in that subsection to a declaration, or declarations, were a reference to a certificate, or certificates, to which subparagraph (ii) applies.

(17) The tax required to be deducted by the relevant manager under subsection (16) shall be satisfied out of the funds in the ARF, the AMRF or, as the case may be, the vested PRSA beneficially owned by the relevant individual and the individual shall allow such deduction and where there are no funds or insufficient funds available out of which the relevant manager may satisfy the tax required to be deducted, the amount of such tax for which there are insufficient funds available (in this section referred to as the ‘unpaid tax’) shall be discharged in accordance with subsection (18).

(18) (a) The unpaid tax referred to in subsection (17) shall be deemed to be tax on a chargeable excess in respect of the relevant individual and shall be paid and remitted to the Collector-General by the administrator of the relevant individual’s public sector scheme at the time of the occurrence of the first benefit crystallisation event in respect of the individual in relation to that scheme and the amount so paid shall be a debt due to the administrator from the individual, or where the individual is deceased, from his or her estate.

(b) The administrator referred to in paragraph (a) shall be reimbursed by the relevant individual for the payment of the unpaid tax that is deemed to be tax on a chargeable excess in the manner provided for in paragraphs (a) and (b) of section 787Q(7).

(c) The deemed tax on a chargeable excess referred to in paragraph (a) shall not be tax on a chargeable excess for any other purpose of this Chapter.

(19) (a) Where an encashment option is exercised in relation to a private sector scheme of a relevant individual in circumstances where a tax-free lump sum was paid and the remainder of that individual’s accrued rights under the scheme were applied by way of—

(i) the purchase of an annuity for the individual, or

(ii) the payment of a pension to the individual from the scheme, or

(iii) the transfer to the individual under the rules of the scheme of an amount on the exercise of an option by the individual under section 772(3A)(a) or 784(2A) and taxed in accordance with section 784(2B) (or, as the case may be, taxed in accordance with that section by virtue of section 772(3B)), or an amount transferred to the individual at the time assets of the PRSA are first made available from the PRSA and taxed in accordance with section 787G(1),

then income tax charged under subsection (16)(a) on the deemed encashment amount in relation to the tax-free lump sum shall be chargeable to tax at the higher rate for the tax year in which the encashment option is exercised and the encashment tax so charged shall, subject to paragraph (c), be deemed to be unpaid tax for the purposes of subsection (18) and discharged in accordance with that subsection as if the reference in paragraph (b) of that subsection to paragraphs (a) and (b) of section 787Q(7) were a reference only to paragraph (b) of section 787Q(7).

(b) Subparagraphs (ii) and (iv) of paragraph (d) of subsection (16) shall, with any necessary modifications, apply to encashment tax referred to in paragraph (a), where the relevant individual obtains from the administrator of the private sector scheme a certificate giving the information set out in paragraphs (a) to (e) of subsection (2) of section 787RA.

(c) Subsection (6) of section 787R shall, with any necessary modifications, apply to a relevant individual who obtains a certificate under paragraph (b) as if the reference in that subsection to a declaration, or declarations, were a reference to a certificate, or certificates, to which paragraph (b) applies.

(20) Where a benefit crystallisation event has occurred in relation to a relevant individual under a private sector scheme in respect of which an encashment option is exercised and the benefit crystallisation event has resulted in the individual being the beneficial owner of the assets in an ARF, an AMRF or, as the case may be, a vested PRSA (in this subsection referred to as the ‘fund’), then where the exercise of the option was in respect of—

(a) the whole of the private sector scheme, the value of the assets in the fund, or

(b) a part of the private sector scheme, the value of the assets in the fund that are deemed to be an encashment amount in accordance with subsection (15),

shall for the purposes of this Part no longer be regarded as assets held in an ARF, an AMRF or, as the case may be, a vested PRSA from the date of the exercise of the option.

(21) Where an encashment option is exercised in respect of a relevant individual the encashment amount or, as the case may be, the deemed encashment amount shall not be—

(a) a benefit crystallisation event for the purposes of this Chapter and Schedule 23B and where that amount relates to a private sector scheme in respect of which one or more than one benefit crystallisation event has occurred before the exercise of the option such benefit crystallisation events or, as the case may be, the portion of such benefit crystallisation events represented by the amount of ‘B’ in the formula in subsection (15)(b), shall be disregarded for the purposes of this Chapter and Schedule 23B,

(b) used by the relevant individual as a contribution to, or the payment of a premium under, a relevant pension arrangement, and

(c) regarded under the provisions of Chapter 2 or 2A as a distribution from an ARF or an AMRF or, as the case may be, as the making available to, or paying to, a PRSA contributor of assets of that amount or value from a PRSA.

(22) Where an encashment option is exercised in respect of a relevant individual in relation to a private sector scheme in respect of which one or more than one benefit crystallisation event has occurred in the relevant period and the deemed encashment amount is the amount of the tax-free lump sum paid or, as the case may be, a part of the tax-free lump sum paid, that amount, or that part, shall be disregarded in determining an excess lump sum (within the meaning of subsection (1)(e) of section 790AA) in respect of a lump sum (within the meaning of that section) that is paid to that individual on or after 8 February 2012.

(23) (a) The persons liable for income tax charged in accordance with subsection (8) or (16) shall be the relevant individual and the administrator of the private sector scheme, the relevant manager referred to in subsection (16) or, as the case may be, the administrator of the public sector scheme referred to in subsection (18) and their liability shall be joint and several.

(b) A person liable for income tax charged in accordance with subsection (8) or (16) shall be so liable whether or not that person or any other person who is liable for the charge is resident or ordinarily resident in the State.”.

(8) Chapter 4 of Part 30 of the Principal Act is amended by inserting the following after section 790C:

“Imputed distribution from certain funds.

790D.— (1) In this section—

‘additional voluntary PRSA contributions’ has the meaning assigned to it by section 787A(1);

‘approved minimum retirement fund’ has the meaning assigned to it by section 784C and for the purposes of this section the expression ‘AMRF’ shall be construed accordingly;

‘approved retirement fund’ has the meaning assigned to it by section 784A and for the purposes of this section the expression ‘ARF’ shall be construed accordingly;

‘contributor’ has the meaning assigned to it by section 787A;

‘excluded distributions’ means one or more of the following:

(a) a specified amount regarded as a distribution or the making available of PRSA assets under subsection (4);

(b) a payment, transfer or assignment of the assets of an ARF to another ARF the beneficial owner of the assets in which is the individual who is beneficially entitled to the assets in the first-mentioned ARF, whether or not the payment, transfer or assignment is made to the individual;

(c) a transaction regarded as a distribution for the purposes of section 784A by virtue of subsection (1A) of that section;

(d) a transfer referred to in section 784C(5)(a);

(e) assets made available from a PRSA, being assets of a kind referred to in section 787G(3);

(f) the circumstances set out in section 787G(4A) in which a PRSA administrator is treated as making assets of a PRSA available to an individual;

(g) a distribution made for the purpose set out in section 784A(3A);

‘other manager’, in relation to an individual who has a relevant fund, means a person, other than the nominee, that is—

(a) a qualifying fund manager,

(b) a PRSA administrator, or

(c) both a qualifying fund manager and a PRSA administrator,

and which manages or administers, as the case may be, on the specified date—

(i) one or more than one ARF,

(ii) one or more than one vested PRSA, or

(iii) one or more than one ARF and one or more than one vested PRSA,

the assets in which are beneficially owned by the individual;

‘Personal Retirement Savings Account’ has the meaning assigned to it by section 787A and for the purposes of this section the expression ‘PRSA’ shall be construed accordingly;

‘PRSA administrator’ has the meaning assigned to it by section 787A;

‘qualifying fund manager’ has the meaning assigned to it by section 784A;

‘relevant distributions’, in relation to an individual, means the aggregate of the amount or value of—

(a) the distributions, if any, made during the tax year by a qualifying fund manager in respect of assets held in—

(i) an ARF, or, as the case may be, ARFs the assets of which are beneficially owned by the individual and managed by that qualifying fund manager, and

(ii) an AMRF, if any, the assets of which are beneficially owned by the individual and managed by that qualifying fund manager, (in this paragraph referred to as the ‘funds’) being funds the assets in which were first accepted into the funds by the qualifying fund manager on or after 6 April 2000,

and

(b) the assets, if any, that a PRSA administrator makes available to, or pays to, the individual or to any other person during the tax year from one or more than one vested PRSA that is beneficially owned by that individual and administered by that PRSA administrator,

less the aggregate of the amount or value of any excluded distributions made during the tax year in respect of assets which are beneficially owned by the individual;

‘relevant fund’ means all of the—

(a) ARFs, and

(b) vested PRSAs,

beneficially owned by the same individual on the specified date other than ARFs the assets in which were first accepted into the funds by the qualifying fund manager before 6 April 2000;

‘specified amount’, for a tax year, means an amount equivalent to the amount determined by the formula—

(A × B) - C

100

where the amount so determined is greater than zero and where—

A is the value (in this section referred to as the ‘relevant value’) of the assets in a relevant fund on the specified date, excluding, where appropriate, the value of assets retained by the PRSA administrator as would be required to be transferred to an AMRF if the beneficial owner of the PRSA had opted in accordance with section 787H(1),

B is—

(i) 5, where the relevant value is not greater than €2,000,000, or

(ii) 6, where the relevant value is greater than €2,000,000,

and

C is the amount or value of relevant distributions, if any, made in the tax year;

‘specified date’ means 30 November in the tax year;

‘tax year’ means a year of assessment for income tax purposes;

‘vested PRSA’ means—

(a) a PRSA in respect of which assets of the PRSA have been made available to, or paid to, the PRSA contributor or to any other person, by the PRSA administrator on or after 7 November 2002, other than assets of a kind referred to in paragraphs (b), (c) and (d) of section 787G(3), and for the purposes of this definition the provisions of subsections (4) and (4A) of section 787G shall apply, and

(b) in the case of a PRSA that is a PRSA to which an individual is or was the contributor of additional voluntary PRSA contributions, such a PRSA where benefits become payable to the individual under the main scheme on or after 7 November 2002.

(2) For the purposes of this section, references to the value of an asset in a relevant fund shall, except where the asset is cash, be construed as a reference to the market value of the asset within the meaning of section 548.

(3) This section applies for any tax year in which an individual—

(a) has a relevant fund, and

(b) is aged 60 years or over for the whole of that tax year.

(4) Subject to the other provisions of this section, the specified amount shall for the purposes of subsections (3) and (7)(b) of section 784A or, as the case may be, subsections (1) and (2) of section 787G be regarded as—

(a) where the relevant fund comprises one or more than one ARF, a distribution of that amount from an ARF,

(b) where the relevant fund comprises one or more than one vested PRSA, the making available to, or paying to, the PRSA contributor of assets of that amount or value from a PRSA,

(c) where the relevant fund comprises one or more than one ARF and one or more than one vested PRSA and—

(i) the qualifying fund manager and the PRSA administrator of each ARF and of each PRSA concerned are the same person, a distribution of that amount from an ARF,

(ii) the nominee appointed in accordance with subsection (5) is a qualifying fund manager, a distribution of that amount from an ARF,

(iii) the nominee appointed in accordance with subsection (5) is a PRSA administrator, the making available to, or paying to, the PRSA contributor of assets of that amount or value from a PRSA, or

(iv) the nominee appointed in accordance with subsection (5) is both a qualifying fund manager and a PRSA administrator, a distribution of that amount from an ARF,

not later than the second month of the tax year following the tax year in respect of which the specified amount is determined.

(5) Where—

(a) an individual has a relevant fund and—

(i) the relevant value is €2,000,000 or less,

(ii) the relevant fund comprises—

(I) more than one ARF, or

(II) more than one vested PRSA, or

(III) one or more than one ARF and one or more than one vested PRSA,

and

(iii) in relation to each such relevant fund the qualifying fund manager of each ARF concerned and the PRSA administrator of each vested PRSA concerned are not the same person,

or

(b) where an individual has a relevant fund and the relevant value is greater than €2,000,000 and subparagraphs (ii) and (iii) of subsection (a) apply,

then the individual referred to in paragraph (a) may, and the individual referred to in paragraph (b) shall, appoint one of those persons (in this section referred to as the ‘nominee’) for the purposes of this section.

(6) Where an individual appoints a nominee in accordance with subsection (5) the individual shall—

(i) inform the other manager or the other managers, as the case may be, of such appointment for the purposes of this section,

(ii) where the appointment under subsection (5) is compulsory, advise the other manager or the other managers, as the case may be, of that fact, and

(iii) provide the other manager or the other managers, as the case may be, with the full name, address and telephone number of the nominee.

(7) Where an individual appoints a nominee in accordance with subsection (5)—

(a) the other manager or the other managers, as the case may be, shall within 14 days of the specified date provide the nominee with a certificate for that tax year stating the aggregate value (subject to paragraph (b)) of the assets on that date in, and the relevant distributions from—

(i) the ARF or ARFs, or

(ii) the vested PRSA or vested PRSAs, or

(iii) the ARF or ARFs and the vested PRSA or vested PRSAs,

managed or administered by the other manager or the other managers,

(b) the aggregate value of the assets referred to in paragraph (a) shall, where the assets are in one or more than one vested PRSA, exclude the value of such assets, if any, retained by the PRSA administrator as would be required to be transferred to an AMRF if the beneficial owner of the PRSA had opted in accordance with section 787H(1), and

(c) the nominee shall keep and retain for a period of 6 years each certificate so provided and on being so required by notice given to the nominee in writing by an officer of the Revenue Commissioners, make available within the time specified in the notice such certificates as may be required by the notice.

(8) Where an individual appoints a nominee in accordance with subsection (5) and the nominee receives a certificate or, as the case may be, certificates provided in accordance with subsection (7)(a), from the other manager or from one or more of the other managers, the specified amount shall be determined by the nominee as if the value of the assets and the relevant distributions stated in each certificate so received were the value of assets in and relevant distributions from an ARF or a vested PRSA managed or administered by the nominee in that tax year.

(9) Where an individual appoints a nominee in accordance with subsection (5) in respect of a relevant fund of a kind referred to in paragraph (a) of that subsection and—

(a) the nominee does not receive a certificate referred to in subsection (7)(a) from the other manager, or

(b) the nominee does not receive a certificate referred to in subsection (7)(a)—

(i) from any of the other managers, or

(ii) from any one or more of the other managers, but not all of them,

then—

(I) where paragraph (a) or (b)(i) applies, the nominee and the other manager or, as the case may be, the nominee and each of the other managers, and

(II) where paragraph (b)(ii) applies, each of the other managers in respect of which the nominee has not received a certificate,

(in this subsection referred to as the ‘relevant manager’) shall determine the specified amount in accordance with this section as if the relevant fund of the individual was comprised solely, as the case may be, of—

(A) the ARF or ARFs,

(B) the vested PRSA or vested PRSAs, or

(C) the ARF or ARFs and the vested PRSA or vested PRSAs,

managed or administered by the relevant manager.

(10) Where an individual appoints a nominee in accordance with subsection (5) in respect of a relevant fund of a kind referred to in paragraph (b) of that subsection and paragraph (a) or (b) of subsection (9) applies, the specified amount shall be determined in accordance with subsection (9) as if B in the formula for the specified amount was 6.

(11) Where an individual has a relevant fund of a kind referred to in subsection (5)(a) and the individual opts not to appoint a nominee as provided for in that subsection, then each person who on the specified date is—

(a) a qualifying fund manager,

(b) a PRSA administrator, or

(c) both a qualifying fund manager and a PRSA administrator,

of one or more than one ARF, one or more than one vested PRSA or, as the case may be, one or more than one ARF and one or more than one vested PRSA comprised in that relevant fund shall determine the specified amount in accordance with this section as if the relevant fund was comprised solely, as the case may be, of—

(i) the ARF or ARFs,

(ii) the vested PRSA or vested PRSAs, or

(iii) the ARF or ARFs and the vested PRSA or vested PRSAs,

managed or administered by each such person.”.

(9) (a) Subsection (1) other than paragraph (d) shall be taken to have effect from 6 February 2011.

(b) Paragraphs (a) to (c) of subsection (3) have effect from 1 January 2012.

(c) Paragraph (d) of subsection (1), subsection (2), paragraphs (d) and (e) of subsection (3), subsections (4) to (6) and paragraph (b) of subsection (7) have effect from 8 February 2012.

(d) Paragraph (f) of subsection (3) has effect from the date of passing of this Act.

(e) Paragraph (a) of subsection (7) has effect from 1 January 2011.

(f) Subsection (8) has effect for the year of assessment 2012 and subsequent years of assessment.