Finance Act, 2000

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Profits of life business: new basis.

730A.—(1) In this Chapter and Chapter 5 of this Part—

‘assurance company’ means an assurance company chargeable to corporation tax;

‘new basis business’ means—

(a) where an assurance company was carrying on life business on 1 April 2000, other than where the assurance company's trading operations at that time consisted solely of foreign life assurance business within the meaning of section 451(1)—

(i) all policies and contracts commenced by the assurance company on or after 1 January 2001, and

(ii) all policies and contracts commenced by the assurance company before that date in so far as they relate to—

(I) pension business and general annuity business, and

(II) permanent health insurance, in respect of which the profits arising to the assurance company were before 1 January 2001 charged to tax under Case I of Schedule D,

(b) where an assurance company was carrying on life business on 1 April 2000, and the assurance company's trading operations at that time consisted solely of foreign life assurance business within the meaning of section 451(1), all policies and contracts commenced by the assurance company on or after 1 January 2001, and

(c) where an assurance company was not carrying on life business on 1 April 2000, subject to subsection (2), all policies and contracts commenced by the assurance company from the time it began to carry on life business.

(2) Where an assurance company begins to carry on life business after 1 April 2000 and before 31 December 2000, the assurance company may elect that all policies and contracts commenced by it before 31 December 2000 be treated as not being new basis business in so far as they relate to life business (other than pension business and general annuity business).

(3) Life business of an assurance company, in so far as it comprises new basis business, shall for the purposes of the Corporation Tax Acts be treated as though it were a separate business, that is, a business separate from other business (if any) carried on by the assurance company.

(4) Notwithstanding Chapters 1 and 3 of this Part, an assurance company shall be charged to corporation tax in respect of the profits of new basis business under Case I of Schedule D and those profits shall, subject to subsection (5), be computed in accordance with the provisions applicable to that Case of that Schedule.

(5) Where all or part of the profits of an assurance company are, under this Chapter, to be computed in accordance with the provisions applicable to Case I of Schedule D, the following provisions shall also apply—

(a) such part of those profits as belongs or is allocated to, or is expended on behalf of, policyholders or annuitants shall be excluded in making the computation, and

(b) there shall not be excluded in making the computation any remaining part of those profits reserved for policyholders or annuitants.

Chapter 5

Policyholders — New Basis

Taxation of policyholders.

730B.—(1) In this Chapter ‘return’ means a return under section 730G.

(2) Subject to subsection (3), this Chapter applies for the purpose of imposing certain charges to tax in respect of a policy of assurance on the life of any person (in this Chapter referred to as a ‘life policy’) where the life policy is new basis business of the assurance company which commenced the life policy.

(3) This Chapter does not apply to a life policy which relates to pension business, general annuity business or permanent health insurance business, of an assurance company.

Chargeable event.

730C.—(1) Subject to the provisions of this section, in this Chapter—

(a) ‘chargeable event’, in relation to a life policy, means—

(i) the maturity of the life policy, other than in respect of any death or disability giving rise to benefits under the life policy,

(ii) the surrender in whole or in part of the rights conferred by the life policy, other than in respect of any death or disability giving rise to benefits under the life policy,

(iii) the assignment in whole or in part, of those rights, and

(b)  in the case of a life policy issued by an assurance company which could have made an election under section 730A(2), but did not so do, a chargeable event shall be deemed to happen on 31 December 2000, where the life policy was commenced before that date.

(2) No account shall be taken for the purposes of subsection (1) of any assignment effected by way of security for a debt, or the discharge of a debt secured by the rights concerned.

Gain arising on a chargeable event.

730D.—(1) On the happening of a chargeable event in relation to a life policy, there shall, subject to subsection (2), be treated as arising—

(a) if the chargeable event is the maturity of the life policy or the surrender in whole of the rights thereby conferred, a gain in the amount determined under subsection (3)(a),

(b) if the chargeable event is an assignment of the whole of the rights conferred by the life policy, a gain in the amount determined under subsection (3)(b),

(c) if the chargeable event is the assignment of part of the rights conferred by the life policy, a gain in the amount determined under subsection (3)(d), and

(e) if the chargeable event is deemed to happen on 31 December 2000 under section 730C(1)(b), a gain in the amount determined under subsection (3)(e).

(2) A gain shall not be treated as arising on the happening of a chargeable event in relation to a life policy where, immediately before the chargeable event, the assurance company which commenced the life policy—

(a) is in possession of a declaration, in relation to the life policy, of a kind referred to in—

(i) section 730E(2), or

(ii) where the policyholder (within the meaning of section 730E) is not a company, section 730E(3), and

(b) is not in possession of any information which would reasonably suggest that—

(i) the information contained in that declaration is not, or is no longer, materially correct,

(ii) the policyholder (within the meaning of section 730E) failed to comply with the undertaking referred to in section 730E(2)(f) or, as the case may be, section 730E(3)(f), or

(iii) immediately before the chargeable event, the policyholder (within the said meaning) is resident or ordinarily resident in the State.

(3) The amount referred to—

(a) in subsection (1)(a) is the amount determined by the formula—

B — P,

(b) in subsection (1)(b) is the amount determined by the formula—

V — P,

(c) in subsection (1)(c) is the amount determined by the formula—

B

—

V

(d) in subsection (1)(d) is the amount determined by the formula—

A

—

V

and

(e) in subsection (1)(e) is the amount determined by the formula—

V — P,

where—

B is the amount or value of the sum payable and other benefits arising by reason of the chargeable event,

P is subject to subsection (4), an amount of premiums (in this section referred to as ‘allowable premiums’) being the total of all premiums paid in respect of the life policy immediately before the chargeable event, to the extent that they have not been taken into account in determining a gain on the previous happening of a chargeable event,

V is the value of the rights and other benefits conferred by the life policy immediately before the chargeable event, and

A is the value of the part of the rights and other benefits conferred by the life policy, which has been assigned,

without having regard to any amount of appropriate tax (within the meaning of section 730F) in connection with the chargeable event.

(4) (a)  For the purposes of subsection (3), the amount of premiums taken into account in determining a gain on the happening of a chargeable event is, where the gain is determined—

(i) under paragraph (c) of subsection (3), an amount equal to—

V

and

(ii) under paragraph (d) of subsection (3), an amount equal to—

V

where P, A, B and V have, respectively, the meanings assigned to them in subsection (3).

(b)  Where a chargeable event in relation to a life policy is deemed to happen on 31 December 2000 then, for the purposes of determining a gain arising on the happening of a subsequent chargeable event, the allowable premiums immediately after 31 December 2000 shall be deemed to be the greater of—

(i) an amount equal to the value of the policy immediately after 31 December 2000, and

(ii) the allowable premiums immediately before 31 December 2000.

(c)  Where a chargeable event in relation to a life policy is an assignment of the whole of the rights conferred by the life policy then, for the purposes of determining a gain arising on the happening of a subsequent chargeable event, the allowable premiums immediately after the time of assignment shall be deemed to be the greater of—

(i) an amount equal to the value of the policy immediately after the time of the assignment, and

(ii) the allowable premiums immediately before the assignment.

(d)  Where a chargeable event in relation to a life policy is the assignment of part of the rights conferred by the life policy then the policy shall, for the purposes of determining a gain arising on the happening of any subsequent chargeable event, be treated as if it were comprised of 2 policies, that is—

(i) one policy conferring the part of the rights assigned, the allowable premiums in respect of which immediately after the assignment are an amount equal to the value of the policy immediately after the assignment, and

(ii) the other policy conferring the rights which were not assigned, the allowable premiums in respect of which immediately after the assignment are the amount of the allowable premiums immediately before the assignment reduced by the amount of premiums taken into account in determining a gain on the assignment.

Declarations.

730E.—(1) In this section and in section 730F, ‘policyholder’, in relation to a life policy, at any time means—

(a) where the rights conferred by the life policy are vested at that time in a person as beneficial owner, such person,

(b) where the rights conferred by the life policy are held at that time on trusts created by a person, such person, and

(c) where the rights conferred by the life policy are held at that time as security for a debt owed by a person, such person.

(2) The declaration referred to in section 730D(2)(a)(i) in relation to a life policy is, subject to subsection (4), a declaration in writing to the assurance company which—

(a) is made by the policyholder at or about the time the life policy commenced,

(b) is signed by the policyholder,

(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(d) declares that the policyholder is not resident in the State at the time of making the declaration,

(e) contains—

(i) the name of the policyholder,

(ii) the address of the principal place of residence of the policyholder,

(f) contains an undertaking by the policyholder that if the policyholder becomes resident in the State, the policyholder will notify the assurance company accordingly, and

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

(3) The declaration referred to in section 730D(2)(a)(ii) in relation to a life policy is, subject to subsection (4), a declaration in writing to the assurance company which—

(a) is made by the policyholder,

(b) is signed by the policyholder,

(c) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(d)   declares that the policyholder, at the time the declaration is made, is neither resident nor ordinarily resident in the State,

(e)   contains the name and address of the policyholder,

(f)   contains an undertaking by the policyholder that if the policyholder becomes resident in the State, the policyholder will notify the assurance company accordingly, and

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

(4) Where, immediately before the happening of a chargeable event, the rights conferred by a life policy were vested beneficially in 2 or more persons, or were held on trusts created, or as security for a debt owed, by 2 or more persons, this section and section 730D shall have effect in relation to each of those persons as if he or she had been the sole owner, settlor or, as the case may be, debtor, but with references to the amount of the gain construed as references to the part of it proportionate to his or her share in the rights at the time of the event, or, as the case may require, when the trusts were created.

Deduction of tax on the happening of a chargeable event.

730F.—(1) In this section and in section 730G, ‘appropriate tax’, in connection with a chargeable event in relation to a life policy, means a sum representing income tax on the amount of the gain treated in accordance with section 730D as thereby arising—

(a) where the chargeable event falls on or after 1 January 2001, at a rate determined by the formula—

(S + 3) per cent,

where S is the standard rate per cent (within the meaning of section 4), and

(b) where the chargeable event falls on or before 31 December 2000, at a rate of 40 per cent.

(2) An assurance company shall account for appropriate tax in accordance with section 730G.

(3) (a) An assurance company which is liable to account for appropriate tax in connection with a chargeable event in relation to a life policy shall, at the time of the chargeable event, be entitled—

(i) where the chargeable event is the maturity or surrender whether in whole or in part of the rights conferred by the life policy, to deduct from the proceeds payable to the policyholder on maturity, or as the case may be, surrender in whole or in part, an amount equal to the appropriate tax,

(ii) where the chargeable event—

(I) is the assignment, in whole or in part, of the rights conferred by the life policy, or

(II) is deemed to happen on 31 December 2000 under section 730C(1)(b),

to appropriate and realise sufficient assets underlying the life policy, to meet the amount of appropriate tax for which the assurance company is liable to account,

(b)  the policyholder shall allow such deduction or, as the case may be, such appropriation, and

(c)  the assurance company shall be acquitted and discharged of so much as is represented by the deduction or, as the case may be, the appropriation as if the amount of the deduction or the value of the appropriation had been paid to the policyholder.

Returns and collection of appropriate tax.

730G.—(1) Notwithstanding any other provision of the Tax Acts, this section shall apply for the purposes of regulating the time and manner in which appropriate tax in connection with a chargeable event in relation to a life policy shall be accounted for and paid.

(2) An assurance company shall for each financial year make to the Collector-General—

(a) a return of the appropriate tax in connection with chargeable events happening on or prior to 30 June, within 30 days of that date, and

(b) a return of appropriate tax in connection with chargeable events happening between 1 July and 31 December, within 30 days of that later date, and

where it is the case, the return shall specify that there is no appropriate tax for the period in question.

(3) The appropriate tax in connection with a chargeable event which is required to be included in a return shall be due at the time by which the return is to be made and shall be paid by the assurance company to the Collector-General, and the appropriate tax so due shall be payable by the assurance company without the making of an assessment; but appropriate tax which has become so due may be assessed on the assurance company (whether or not it has been paid when the assessment is made) if that tax or any part of it is not paid on or before the due date.

(4) Where it appears to the inspector that there is an amount of appropriate tax in relation to a chargeable event which ought to have been but has not been included in a return, or where the inspector is dissatisfied with any return, the inspector may make an assessment on the assurance company to the best of his or her judgement, and any amount of appropriate tax in connection with a chargeable event due under an assessment made by virtue of this subsection shall be treated for the purposes of interest on unpaid tax as having been payable at the time when it would have been payable if a correct return had been made.

(5) Where any item has been incorrectly included in a return as appropriate tax, the inspector may make such assessments, adjustments or set-offs as may in his or her judgement be required for securing that the resulting liabilities to tax, including interest on unpaid tax, whether of the assurance company making the return or of any other person, are in so far as possible the same as they would have been if the item had not been included.

(6) (a) Any appropriate tax assessed on an assurance company shall be due within one month after the issue of the notice of assessment (unless that tax is due earlier under subsection (3)) subject to any appeal against the assessment, but no appeal shall affect the date when any amount is due under subsection (3).

(b) On determination of the appeal against an assessment under this Chapter, any appropriate tax over-paid shall be repaid.

(7) (a) The provisions of the Income Tax Acts relating to—

(i) assessments to income tax,

(ii) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court), and

(iii) the collection and recovery of income tax,

shall, in so far as they are applicable, apply to the assessment, collection and recovery of appropriate tax.

(b) Any amount of appropriate tax shall carry interest at the rate of 1 per cent for each month or part of a month from the date when the amount becomes due and payable until payment.

(c) Subsections (2) and (4) of section 1080 shall apply in relation to interest payable under paragraph (b) as they apply in relation to interest payable under section 1080.

(d) In its application to any appropriate tax charged by any assessment made in accordance with this Chapter, section 1080 shall apply as if subsection (1) (b) of that section were deleted.

(8) Every return shall be in form prescribed by the Revenue Commissioners and shall include a declaration to the effect that the return is correct and complete.”.