First Previous (CHAPTER 3 Trustee savings banks) Next (CHAPTER 2 Special investment policies)

39 1997

TAXES CONSOLIDATION ACT, 1997

PART 26

Life Assurance Companies

CHAPTER 1

General provisions

Interpretation and general (Part 26).

[CTA76 s36A(7) and s50(2) to (4); FA79 s28(5); FA86 s59(d); FA93 s11(f) and (k); FA96 s132(1) and Sch5 PtI par10(2) and (3)]

706. —(1) In this Part, unless the context otherwise requires—

actuary” has the same meaning as in section 3 of the Insurance Act, 1936 ;

annuity business” means the business of granting annuities on human life;

annuity fund” means, where an annuity fund is not kept separately from the life assurance fund of an assurance company, such part of the life assurance fund as represents the liability of the company under its annuity contracts, as stated in its periodical returns;

assurance company” has the same meaning as in section 3 of the Insurance Act, 1936 ;

excluded annuity business”, in relation to an assurance company, means annuity business which—

(a) is not pension business, or the liability of the company in respect of which is not taken into account in determining the foreign life assurance fund (within the meaning of section 718 (1)) of the company, and

(b) arises out of a contract for the granting of an annuity on human life, being a contract effected, extended or varied on or after the 6th day of May, 1986, and which fails to satisfy any one or more of the following conditions—

(i) that the annuity shall be payable (whether or not its commencement is deferred for any period) until the end of a human life or for a period ascertainable only by reference to the end of a human life (whether or not continuing after the end of a human life),

(ii) that the amount of the annuity shall be reduced only on the death of a person who is an annuitant under the contract or by reference to a bona fide index of prices or investment values, and

(iii) that the policy document evidencing the contract shall expressly and irrevocably prohibit the company from agreeing to commutation in whole or in part of any annuity arising under the contract;

general annuity business” means any annuity business which is not—

(a) excluded annuity business, or

(b) pension business,

and “pension business” shall be construed in accordance with subsections (2) and (3);

life business” includes “life assurance business” and “industrial assurance business”, which have the same meanings respectively as in section 3 of the Insurance Act, 1936 , and where a company carries on both businesses may mean either;

life assurance fund” and “industrial assurance fund” have the same meanings respectively as in the Insurance Acts, 1909 to 1969, and “life assurance fund”, in relation to industrial assurance business, means the industrial assurance fund;

market value'” shall be construed in accordance with section 548 ;

overseas life assurance company” means an assurance company having its head office outside the State but carrying on life assurance business through a branch or agency in the State;

pension fund” and “general annuity fund” shall be construed in accordance with subsection (2);

periodical return”, in relation to an assurance company, means a return deposited with the Minister for Enterprise, Trade and Employment under the Assurance Companies Act, 1909, and the Insurance Act, 1936;

policy” and “premium” have the same meanings respectively as in section 3 of the Insurance Act, 1936 ;

special investment business”, “special investment fund” and “special investment policy” have the meanings respectively assigned to them by section 723 ;

valuation period” means the period in respect of which an actuarial report is made under section 5 of the Assurance Companies Act, 1909, as extended by section 55 of the Insurance Act, 1936 .

(2) Any division to be made between general annuity business, pension business and other life assurance business shall be made on the principle of—

(a) referring to pension business any premiums within subsection (3), together with the incomings, outgoings and liabilities referable to those premiums, and the policies and contracts under which they are or have been paid, and

(b) allocating to general annuity business all other annuity business except excluded annuity business,

and references to “pension fund” and “general annuity fund” shall be construed accordingly, whether or not such funds are kept separately from the assurance company's life assurance fund.

(3) The premiums to be referred to pension business shall be those payable under contracts which are (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 but for an insufficiency of profits or gains would be, chargeable to income tax in respect of relevant earnings (within the meaning of section 783 ) from a trade, profession, office or employment carried on or held by him or her, being a contract approved by the Revenue Commissioners under section 784 or 785 or any contract under which there is payable an annuity in relation to which section 786 (3) applies;

(b) any contract (including a contract of assurance) entered into for the purposes of, and made with the persons having the management of, an exempt approved scheme (within the meaning of Chapter 1 of Part 30 ), being a contract 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 scheme;

(c) any contract with the trustees or other persons having the management of a scheme approved under section 784 or 785 or under both of those sections, being a contract which—

(i) was entered into for the purposes only of that scheme, and

(ii) in the case of a contract entered into or varied on or after the 6th day of April, 1958, 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 scheme;

and, in this subsection and in subsection (2), “premium” includes any consideration for an annuity.

(4) (a) In this subsection, “deduction” means any deduction, relief or set-off which may be treated for the purposes of corporation tax as reducing profits of more than one description.

(b) For the purposes of the Corporation Tax Acts, any deduction from the profits of an assurance company, being profits of more than one class of life assurance business referred to in section 707 (2), shall be treated as reducing the amount of the profits of each such class of business by an amount which bears the same proportion to the amount of the deduction as the amount of the profits of that class of business, before any deduction, bears to the amount of the profits of the company brought into charge to corporation tax.

Management expenses.

[CTA76 s33(1) to (2); FA86 s59(a); FA92 s44(a); FA93 s11(a) and (b)]

707. —(1) Subject to sections 709 and 710 , section 83 shall apply for computing the profits of a company carrying on life business, whether mutual or proprietary (and not charged to corporation tax in respect of it under Case I of Schedule D), whether or not the company is resident in the State, as that section applies in relation to an investment company, except that—

(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 in so far as they have not already been so set off, and

(b) no deduction shall be made under section 83 (2)(b).

(2) (a) Where the life assurance business of an assurance company includes more than one of the following classes of business—

(i) pension business,

(ii) general annuity business,

(iii) special investment business, and

(iv) life assurance business (excluding such pension business, general annuity business and special investment business),

then, for the purposes of the Corporation Tax Acts, the business of each such class shall be treated as though it were a separate business, and subsection (1) shall apply separately to each such class of business as if it were the only business of the company.

(b) Any amount of an excess referred to in section 83 (3) which is carried forward from an accounting period ending before the 27th day of May, 1986, may for the purposes of section 83 (2) be deducted in computing the profits of the company for a later accounting period in respect of such of the classes of business referred to in paragraph (a) as the company may elect; but any amount so deducted in computing the profits from one of those classes of business shall not be deducted in computing the profits of the company from another of those classes of business.

(3) Relief under subsection (1) shall not be given for any amount of stamp duty (except any part of such amount as is referable to pension business) charged under subsection (8)(c) of section 92 of the Finance Act, 1982 , on any statement delivered by a company in accordance with subsection (8)(b) of that section in respect of any quarter commencing after the 27th day of May, 1986.

(4) Relief under subsection (1) shall not be given to any such company in so far as it would, if given in addition to all other reliefs to which the company is entitled, reduce the corporation tax borne by the company on the income and gains of its life business for any accounting period to less than would have been paid if the company had been charged to tax at the rate specified in section 21 (1) in respect of that business under Case I of Schedule D and, where relief has been withheld in respect of any accounting period by virtue of this subsection, the excess to be carried forward by virtue of section 83 (3) shall be increased accordingly.

(5) (a) For the purposes of subsection (4)

(i) any tax credit to which the company is entitled in respect of a distribution received by it shall be treated as an equivalent amount of corporation tax borne or paid in respect of that distribution,

(ii) any payment in respect of that credit under section 83 (5), 136 (3), 157 , 158 or 712 (2) shall be treated as reducing the tax so treated as borne or paid,

(iii) relief for the management expenses, if any, attributable to the life business, other than special investment business, of a company shall be withheld before any relief for management expenses attributable to the special investment business of the company is withheld, and

(iv) sections 709 (2), 710 and 714 shall, and section 396 (5) (b) shall not, apply for the purposes of computing the profits of the life assurance business or the industrial assurance business, as the case may be, which would have been charged to tax under Case I of Schedule D.

(b) The reference in section 551 (2) to computing income or profits or gains or losses shall not be taken as applying to a computation of a company's income for the purposes of subsection (4).

Acquisition expenses.

[CTA76 s33A(1) to (5) and (7) to (8); FA92 s44(c); FA93 s23; FA96 s46; FA97 s156(3)]

708. —(1) For the purposes of this section and subject to subsections (2) to (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) and excluding any payment of rent in respect of which a deduction is to be made twice by virtue of section 324 , 333 or 345 in the computation of profits or gains, as are for that period attributable to the company's life assurance business (excluding pension business and general annuity business)—

(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 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 the policy.

(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) shall be expenses—

(a) which are disbursed for that period (disregarding any treated as so disbursed by section 83 (3)), and

(b) which, disregarding subsection (5), are deductible as expenses of management of such life assurance business in accordance with section 707 .

(5) Notwithstanding anything in section 707 , only one-seventh of the acquisition expenses for any accounting period (in this section referred to as “the base period”) shall be treated as deductible under that section for the base period, and in subsections (6) and (7) 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) Where by virtue of subsection (5) only a fraction of the full amount of the acquisition expenses for the base period is deductible under section 707 for that period, then, subject to subsection (7), 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.

(7) 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 (6) exceeds the balance of those expenses which has not become deductible for earlier accounting periods, only that balance shall be deductible.

Companies carrying on life business.

[CTA76 s34]

709. —(1) Where an assurance company carries on life business in conjunction with insurance business of any other class, the life business shall for the purposes of corporation tax be treated as a separate business from any other class of business carried on by the company.

(2) In ascertaining for the purposes of section 396 or 397 whether and to what extent a company has incurred a loss on its life business, any profits derived from the investments of its life assurance fund (including franked investment income of a company resident in the State) shall be treated as part of the profits of that business.

Profits of life business.

[CTA76 s35; FA91 s30; FA94 s60; FA97 s67]

710. —(1) Where the profits of an assurance company in respect of its life business are for the purposes of the Corporation Tax Acts computed in accordance with the provisions applicable to Case I of Schedule D, the following provisions shall 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;

(b) such part of those profits as is reserved for policyholders or annuitants shall also be excluded in making the computation but, if any profits so excluded as being so reserved cease at any time to be so reserved and are not allocated to, or expended on behalf of, policyholders or annuitants, those profits shall be treated as profits of the company for the accounting period in which they ceased to be so reserved.

(2) (a) Subject to paragraph (b), where a company's trading operations consist solely of a foreign life assurance business (within the meaning of section 451 (1)) the following provisions shall apply:

(i) subject to this subsection, the company shall be chargeable to corporation tax in respect of the profits of that business under Case I of Schedule D;

(ii) notwithstanding subsection (1)(b), where apart from this subparagraph any part of those profits would be excluded in computing the income chargeable under Case I of Schedule D solely by virtue of that part being reserved for policyholders or annuitants, that part shall not be excluded in computing the income so chargeable;

(iii) the charge to corporation tax under Schedule D of income from investments (in this subsection referred to as “shareholders' investments”) which are not investments of any fund representing the amount of the liability of the company in respect of its business with policyholders and annuitants shall not be under Case I of that Schedule;

(iv) notwithstanding section 707 , section 83 shall apply for computing the profits of the company as respects expenses of management, including commissions, to the extent that those expenses—

(I) are disbursed for the purposes of managing shareholders' investments, and

(II) would not apart from this subparagraph be deductible in computing the profits, or any description of profits, of the company for the purposes of corporation tax.

(b) In applying the definition of “foreign life assurance business” in section 451 (1) for the purposes of paragraph (a), section 446 shall apply as if there were deleted from subsection (2) of that section “, and any certificate so given shall, unless it is revoked under subsection (4), (5) or (6), remain in force until the 31st day of December, 2005”.

(3) (a) In this subsection—

policy of assurance” means—

(i) a policy of assurance issued by a company (to which subsection (2) applies) to an individual who on the date the policy is issued resides outside the State and who continuously so resides throughout a period of not less than 6 months commencing on that date, or

(ii) a policy issued or a contract made which is not a retirement benefits policy solely by virtue of the age condition not being complied with;

relevant amount”—

(i) in relation to a policy of assurance, means the amount determined by the formula—

V − P

and

(ii) in relation to a retirement benefits policy, means the amount determined by the formula—

(V − P) ×

75

_____

100

where—

V is the amount or the aggregate of amounts by which the market value of all the entitlements under the policy of assurance or the retirement benefits policy, as the case may be, increased during any period or periods in which the policyholder was residing in the State, and

P is the amount of premiums or like sums paid in respect of the policy of assurance or the retirement benefits policy, as the case may be, during any period or periods in which the policyholder was residing in the State;

retirement benefits policy” means a policy issued or a contract made by a company (to which subsection (2) applies)—

(i) to or with, as the case may be, an individual who, on the date the policy is issued or the contract is made, resides outside the State and who continuously so resides throughout a period of not less than 6 months commencing on that date, and

(ii) on terms which include the condition (in this subsection referred to as “the age condition”) that the main benefit secured by the policy or contract is the payment by the company (otherwise than on the death or disability of the individual) of a sum to the individual on or after the individual attains the age of 60 years and before the individual attains the age of 70 years and that condition is complied with.

(b) Where, in respect of a policy of assurance or a retirement benefits policy, a sum is payable by a company (otherwise than by reason of death or disability of the policyholder) to a policyholder who is resident or ordinarily resident in the State (within the meaning of Part 34 ), then—

(i) the company shall be deemed for the purposes of the Corporation Tax Acts to have made, in the year of assessment in which the sum is payable, an annual payment of an amount equal to the relevant amount in relation to the policy of assurance or the retirement benefits policy, as the case may be, and section 239 shall apply for the purposes of the charge, assessment and recovery of such tax,

(ii) the company shall be entitled to deduct the tax out of the sum otherwise payable,

(iii) the recipient of the sum payable shall not be entitled to repayment of, or credit for, such tax so deducted, and

(iv) the sum paid, or any part of the sum paid, shall not be reckoned in computing total income of the recipient of the sum paid for the purposes of the Income Tax Acts.

(4) Where an assurance company carries on both life assurance business and industrial assurance business, the business of each such class shall for the purposes of the Corporation Tax Acts be treated as though it were a separate business, and section 707 shall apply separately to each such class of business.

(5) (a) Where under section 25 (1) of the Insurance Act, 1989 , an assurance company amalgamates its industrial assurance and life assurance funds, subsection (4) shall not apply to that company for any accounting period ending on or after the completion of the amalgamation and before the recommencement, if any, of a separate industrial assurance or life assurance fund.

(b) For the purposes of applying section 707 , in so far as it is affected by—

(i) management expenses or charges on income which apart from section 83 (3) would be treated as respectively incurred for or paid in an accounting period ending before the day on which the amalgamation is completed, or

(ii) any loss incurred in such a period,

to a company which has amalgamated its industrial assurance and life assurance funds, subsection (4) shall apply as if the company had not amalgamated its funds.

(6) For the purposes of subsections (2) and (5), where an accounting period of an assurance company begins before the day (in this subsection referred to as “the day of amalgamation”) on which the company completes the amalgamation of its industrial assurance and life assurance funds and ends on or after the day of amalgamation, that period shall be divided into one part beginning on the day on which the accounting period begins and ending on the day before the day of amalgamation and another part beginning on the day of amalgamation and ending on the day on which the accounting period ends, and both parts of the accounting period shall be treated as if they were separate accounting periods.

Chargeable gains of life business.

[CTA76 s35A; FA93 s11(d); FA96 s47(1)]

711. —(1) For the purpose of computing corporation tax on chargeable gains accruing to a fund or funds maintained by an assurance company in respect of its life business—

(a) (i) section 556 , and

(ii) section 607 ,

shall not apply, and

(b) section 581 shall, as respects—

(i) subsections (1) and (2) of that section, and

(ii) subsection (3) of that section, in so far as a chargeable gain is not thereby disregarded for the purposes of that subsection,

apply as if paragraph 24 of Schedule 32 , section 719 , section 723 (7)(a) and paragraph (a)(ii) had not been enacted.

(2) (a) In this subsection—

the appropriate amount in respect of the interest” means the appropriate amount in respect of the interest which would be determined in accordance with Schedule 21 if a company were the first buyer and carried on a trade to which section 749 (1) applies but, in so determining the appropriate amount in respect of the interest in accordance with Schedule 21 , paragraph 3(4) of that Schedule shall apply as if “in the opinion of the Appeal Commissioners” were deleted;

securities” has the same meaning as in section 815 .

(b) Where in an accounting period a company disposes of any securities and in the following accounting period interest becoming payable in respect of the securities is receivable by the company, the gain or loss accruing on the disposal shall be computed as if the price paid by the company for the securities was reduced by the appropriate amount in respect of the interest; but where for an accounting period this paragraph applies so as to reduce the price paid for securities, the amount by which the price paid for the securities is reduced shall be treated as a loss arising in the immediately following accounting period from the disposal of the securities.

(3) Subject to section 720 , where an assurance company, in the course of carrying on a class of life assurance business mentioned in subparagraph (iii) or (iv) of section 707 (2)(a), disposes of or is deemed to dispose of assets in an accounting period, the amount, if any, for each such class of business by which the aggregate of allowable losses exceeds the aggregate of chargeable gains on the disposals or deemed disposals in the course of that class of business in the accounting period shall be—

(a) disregarded for the purposes of section 31 , and

(b) treated for the purposes of the Corporation Tax Acts as a sum disbursed by the company in the accounting period as an expense of management, other than an acquisition expense (within the meaning of section 708 ), incurred in the course of carrying on that class of business.

(4) For the purposes of subsection (3), any amount which apart from paragraph 24 of Schedule 32 would be treated as a chargeable gain or an allowable loss of an accounting period of a company by virtue of section 720 shall also be treated as arising on a disposal of assets by the company in the accounting period so that each such amount shall be taken into account in determining the amount, if any, by which the aggregate of allowable losses exceeds the aggregate of chargeable gains on disposals of assets by the company in the course of carrying on life assurance business (excluding pension business, general annuity business and special investment business) in the accounting period.

Distributions received from Irish resident companies.

[CTA76 s33B; FA93 s11(c)]

712. —(1) Sections 129 and 153 (1) shall not apply as respects a distribution received by an assurance company in connection with that part of its life business the profits of which are charged to corporation tax otherwise than under Case I or IV of Schedule D, and the income represented by the distribution shall be equal to the aggregate of the amount of the distribution and the amount of the tax credit in respect of the distribution.

(2) Where an assurance company is entitled to a tax credit in respect of a distribution chargeable to corporation tax by virtue of subsection (1)

(a) the assurance company may, subject to section 729 (5), set the credit against the corporation tax, as reduced by virtue of sections 713 (3) and 723 (6) or by either of those sections, chargeable on its profits for the accounting period in which the distribution is made and, where the credit exceeds that corporation tax, the excess shall be paid to the assurance company, and

(b) notwithstanding sections 4 and 156 , the income represented by the distribution shall not be franked investment income for the purposes of sections 83 and 157 .

Investment income reserved for policyholders.

[CTA76 s36; FA93 s11(e); FA96 s48(1); FA97 s68]

713. —(1) For the purposes of this section—

(a) “unrelieved profits” means the amount of profits on which corporation tax falls finally to be borne;

(b) the amount of tax which is or would be chargeable on a company shall be taken to be the amount of tax which is or would be so chargeable after allowance of any relief to which the company is or would be entitled otherwise than under this section or under section 136 , 712 (2) or 730 .

(2) A claim may be made under this section by an assurance company in respect of unrelieved profits from investments referable to life business, other than special investment business, carried on by the company.

(3) Where in a financial year (being the financial year 1997 and subsequent financial years) the rate per cent (in this subsection and in subsection (4) referred to as “the specified rate per cent”) of corporation tax specified in section 21 (1)(b) exceeds the standard rate per cent for either of the years of assessment, part of each of which falls within the financial year, the corporation tax in respect of any of the unrelieved profits of the company for that year shall be reduced on a claim in that behalf being made by the company by so much of that tax as is equal to the amount by which—

(a) the corporation tax chargeable on the company for that year in respect of the part specified in subsection (5) of the unrelieved profits,

exceeds—

(b) the corporation tax which would be so chargeable in respect of that part of those profits if the specified rate per cent for each part of the financial year which coincides with a part of a year of assessment were equal to the standard rate per cent for the year of assessment.

(4) In computing that part of those profits for the purposes of subsection (3)(b), section 78 (2) shall apply as if the rate per cent of capital gains tax specified in section 28 (3) were the specified rate per cent.

(5) (a) Subject to paragraph (b), the franked investment income from investments held in connection with a company's life business shall be apportioned between—

(i) policyholders or annuitants, and

(ii) shareholders,

by attributing to policyholders or annuitants such fraction of that income as the fraction (in this subsection referred to as “the appropriate fraction”) of the profits of the company's life business which, on a computation of such profits in accordance with the provisions applicable to Case I of Schedule D (whether or not the company is in fact charged to tax under that Case for the relevant accounting period or periods), would be excluded under section 710 (1).

(b) Where the franked investment income referred to in paragraph (a) exceeds the profits of the company's life business as computed in accordance with the provisions applicable to Case I of Schedule D other than section 710 , the part of the franked investment income attributable to policy holders or annuitants shall be the aggregate of—

(i) the appropriate fraction of the franked investment income in so far as not exceeding those profits, and

(ii) the amount of the excess of the franked investment income over those profits.

(6) (a) Where the aggregate of the unrelieved profits and the shareholders' part of the franked investment income exceeds the profits of the company in respect of its life business for the relevant accounting periods computed in accordance with the provisions of Case I of Schedule D as extended by sections 710 and 714 (whether or not the company is charged to tax under that Case), the part referred to in subsection (3) shall be the lesser of—

(i) the amount of that excess, and

(ii) the unrelieved profits,

and

(b) where the aggregate referred to in paragraph (a) is less than the profits of the company's life business as so computed, subsection (3) shall not apply.

(7) This section shall apply subject to paragraph 24 of schedule 32 .

Life business: computation of profits.

[CTA76 s38; FA93 s11(g)]

714. —(1) For the purposes of sections 707 and 713 , the exclusion by section 129 from the charge to corporation tax of franked investment income shall not prevent such income of a company resident in the State attributable to the investments of the company's life assurance fund from being taken into account as part of the profits in computing trading income in accordance with the provisions applicable to Case I of Schedule D.

(2) The corporation tax which would have been paid by a company referred to in subsection (1) if it had been charged to tax in respect of its life business under Case I of Schedule D shall be computed for the purposes of section 707 as if so much of the trading income of the company in respect of its life business as does not exceed the franked investment income attributable by reference to section 713 (5) to the shareholders of the company were charged to corporation tax, notwithstanding section 21 , at a rate per cent determined by the formula—

A

___

B

× 100

where—

A is the aggregate amount of the tax credits comprised in the franked investment income received in the accounting period concerned by the company in connection with its life business, and

B is the aggregate amount of that franked investment income.

Annuity business: separate charge on profits.

[CTA76 s39; FA86 s59(b); FA96 s131(2) and Sch5 Pt2]

715. —(1) 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, profits arising to an assurance company from pension business or general annuity business shall be treated as annual profits or gains within Schedule D and shall be chargeable to corporation tax under Case IV of that Schedule, and for that purpose—

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

(b) subject to paragraph (a) and subsection (2), the profits from each such class of business shall be computed in accordance with the provisions applicable to Case I of Schedule D.

(2) In making the computation in accordance with the provisions applicable to Case I of Schedule D—

(a) subsection (1) of section 710 shall apply with the necessary modifications and in particular shall apply as if there were deleted from that subsection all references to policyholders other than holders of policies referable to pension business,

(b) no deduction shall be allowed in respect of any expense, being an expense of management referred to in section 707 , and

(c) there may be set off against the profits of pension business or general annuity business any loss, to be computed on the same basis as the profits, which was sustained in the same class of business in any previous accounting period while the company was within the charge to corporation tax in respect of that class of business in so far as that loss not already been so set off.

(3) Section 399 shall not be taken as applying to a loss sustained by a company on its general annuity business or pension business.

(4) The treatment of an annuity as containing a capital element for the purposes of section 788 shall not prevent the full amount of the annuity from being deductible in computing profits or from being treated as a charge on income for the purposes of the Corporation Tax Acts.

(5) Notwithstanding any other provision of the Corporation Tax Acts, any annuity paid by a company and referable to its excluded annuity business—

(a) shall not be treated as a charge on income for the purposes of the Corporation Tax Acts, and

(b) shall be deductible in computing for the purposes of Case I of Schedule D the profits of the company in respect of its life assurance business.

General annuity business.

[CTA76 s40; FA86 s59(c)]

716. —(1) In this section, “taxed income” means income charged to corporation tax, otherwise than under section 715 , and franked investment income.

(2) In the case of a company carrying on general annuity business, the annuities paid by the company, in so far as referable to that business and in so far as they do not exceed the taxed income of the part of the annuity fund so referable, shall be treated as charges on income.

(3) Notwithstanding any other provision of the Corporation Tax Acts, any annuities which under subsection (2) are treated as charges on income of a company (in this subsection referred to as “the first-mentioned company”) for an accounting period shall not be allowed as deductions against any profits (whether of the first-mentioned company or of any other company) other than against that part of the total profits (including, where a claim is made under section 157 for the purposes mentioned in subsection (2)(a) of that section, any franked investment income) arising in that accounting period to the first-mentioned company from its general annuity business.

(4) In computing under section 715 the profits arising to an assurance company from general annuity business—

(a) taxed income shall not be taken into account as part of those profits, and

(b) of the annuities paid by the company and referable to general annuity business—

(i) those which under subsection (2) are treated as charges on income shall not be deductible, and

(ii) those which are not so treated shall, notwithstanding section 76 , be deductible.

(5) A company not resident in the State which carries on through a branch or agency in the State any general annuity business shall not be entitled to treat any part of the annuities paid by it which are referable to that business as paid out of profits or gains brought into charge to income tax.

Pension business.

[CTA76 s41; FA88 s30(1) and (2)(c); FA91 s38]

717. —(1) Exemption from corporation tax shall be allowed in respect of income from, and chargeable gains in respect of, investments and deposits of so much of an assurance company's life assurance fund and separate annuity fund, if any, as is referable to pension business.

(2) (a) In this subsection, “financial futures” and “traded options” mean respectively financial futures and traded options which are for the time being dealt in or quoted on any futures exchange or any stock exchange, whether or not that exchange is situated in the State.

(b) For the purposes of subsection (1), a contract entered into in the course of dealing in financial futures or traded options shall be regarded as an investment.

(3) The exemption from tax conferred by subsection (1) shall not exclude any sums from being taken into account as receipts in computing profits or losses for any purpose of the Corporation Tax Acts.

(4) Subject to subsection (5), the exclusion by section 129 from the charge to corporation tax of franked investment income shall not prevent such income being taken into account as part of the profits in computing under section 715 income from pension business.

(5) (a) Where for any accounting period there is apart from this subsection a profit arising to an assurance company from pension business (computed in accordance with section 715 ) and the company so elects as respects all or any part of its franked investment income arising in that period, being an amount of franked investment income not exceeding the amount of the profit arising from pension business, subsections (1) and (4) shall not apply to the franked investment income to which the election relates.

(b) An election under paragraph (a) shall be made by notice in writing given to the inspector not later than 2 years after the end of the accounting period to which the election relates or within such longer period as the Revenue Commissioners may by notice in writing allow.

(6) In computing under section 715 the profits from pension business, annuities shall be deductible notwithstanding section 76 (5), and a company shall not be entitled to treat as paid out of profits or gains brought into charge to income tax any part of the annuities paid by the company which is referable to pension business.

Foreign life assurance funds.

[CTA76 s42(1) to (5) and (8)]

718. —(1) In this section, “foreign life assurance fund” means—

(a) any fund representing the amount of the liability of an assurance company in respect of its life business with policyholders and annuitants residing outside the State whose proposals were made to, or whose annuity contracts were granted by, the company at or through a branch or agency outside the State, and

(b) where such a fund is not kept separately from the life assurance fund of the company, such part of the life assurance fund as represents the liability of the company under such policies and annuity contracts, such liability being estimated in the same manner as it is estimated for the purposes of the periodical returns of the company.

(2) Corporation tax under Case III of Schedule D on income arising from securities and possessions in any place outside the State which form part of the investments of the foreign life assurance fund of an assurance company shall be computed on the full amount of the actual sums received in the State from remittances payable in the State, or from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of such remittances, property, money or value brought into the State without any deduction or abatement.

(3) Where—

(a) any securities issued by the Minister for Finance with a condition in the terms specified in section 43 , or

(b) any stocks or other securities to which section 49 applies and which are issued with either or both of the conditions specified in subsection (2) of that section,

for the time being form part of the investments of the foreign life assurance fund of an assurance company, the income arising from any of those stocks or securities, if applied for the purposes of that fund or reinvested so as to form part of that fund, shall not be liable to corporation tax.

(4) Where the Revenue Commissioners are satisfied that any income arising from the investments of the foreign life assurance fund of an assurance company has been remitted to the State and invested as part of the investments of that fund in any stocks or securities of a type referred to in subsection (3), that income shall not be liable to corporation tax and any such tax paid on that income shall if necessary be repaid to the company on the making of a claim.

(5) Where income from investments of the foreign life assurance fund of an assurance company has been relieved from corporation tax in accordance with this section, a corresponding reduction shall be made—

(a) in the relief granted under section 707 in respect of expenses of management, and

(b) in any amount on which the company is chargeable to corporation tax by virtue of section 715

(i) in respect of general annuity business, or

(ii) in respect of pension business,

in so far as the investment income relieved is referable to general annuity business or pension business, as the case may be.

(6) Where this section applies in relation to income arising from investments of any part of an assurance company's life assurance fund, it shall apply in the like manner in relation to chargeable gains accruing from the disposal of any such investments, and losses so accruing shall not be allowable losses.

Deemed disposal and reacquisition of certain assets.

[CTA76 s46A; FA92 s44(d); FA93 s11(j); FA97 s69]

719. —(1) In this section and in section 720

average”, in relation to 2 amounts, means 50 per cent of the aggregate of those 2 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;

foreign life assurance fund” has the same meaning as in section 718 ;

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 or funds maintained by an assurance company in respect of its life business other than its special investment business;

linked assets” means assets of an assurance company 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;

linked liabilities” means liabilities in respect of benefits to be determined by reference to the value of linked assets;

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;

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) Each asset of the life business fund of an assurance company on the day on which an accounting period of the company ends shall, subject to this section, be deemed to have been disposed of and immediately reacquired by the company on that day at the asset's market value on that day.

(3) Subsection (2) shall not apply to—

(a) (i) assets to which section 607 applies, other than, with effect as on and from the 26th day of March, 1997, where such assets are held in connection with a contract or other arrangement which secures the future exchange of the assets for other assets to which that section does not apply, and

(ii) assets which are strips within the meaning of section 55 ,

(b) assets linked solely to pension business or special investment business, or

(c) 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, general annuity business and special investment 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—

(I) assets linked solely to life assurance business (excluding pension business, general annuity business and special investment business), special investment business or pension business, and

(II) assets of the foreign life assurance fund, and

(ii) the numerator is the average of such of the 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 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 or special investment 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 such of the 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 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 or special investment business.

(b) In subsection (4), “appropriate part”, in relation to the investment reserve, means—

(i) where none, or only 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 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 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, in applying section 557 to the computation of gains accruing to an assurance company on the disposal, on the day on which an accounting period of the company ends, of assets which are not linked solely to life assurance business (excluding pension business, general annuity business or special investment business), the company shall be deemed to have acquired all of the assets of its life business fund, other than the assets it acquired in that accounting period, at their respective market values on the day immediately before the day on which that period began.

(7) For the purposes of this section, assets of the foreign life assurance fund or special investment fund and liabilities of the foreign life assurance business or special investment business shall be disregarded in determining the investment reserve.

Gains or losses arising by virtue of section 719 .

[CTA76 s46B; FA92 s44(d); FA95 s69; FA96 s50]

720. —(1) Subject to subsections (2) to (4), chargeable gains or allowable losses which would otherwise accrue on disposals deemed by virtue of section 719 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 the company, but instead—

(a) there shall be ascertained the difference (in this section referred to as “the net amount”) between the aggregate of those gains and the aggregate of those losses,

(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) As respects chargeable gains or allowable losses accruing on disposals of rights under reinsurance contracts (within the meaning of section 594 (4)) deemed by virtue of section 719 to have been made in the accounting period or part of an accounting period falling wholly within the year ending on—

(a) the 31st day of December, 1997, this section shall not apply to three-sevenths,

(b) the 31st day of December, 1998, this section shall not apply to two-sevenths, or

(c) the 31st day of December, 1999, this section shall not apply to one-seventh,

of those chargeable gains and allowable losses.

(3) 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 applied 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.

(4) Where a company ceases to carry on life business before the beginning of the last of the accounting periods for which subsection (1)(c) would apply in relation to a net amount, the fraction of that amount which 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.

(5) Where in an accounting period a company incurs a loss on the disposal (in this subsection referred to as the “first-mentioned disposal”) of an asset the gain or loss in respect of a deemed disposal of which was included in a net amount to which subsection (1)(b) applied for any preceding accounting period, then, so much of the allowable loss on the first-mentioned disposal as is equal to the excess of the amount of the loss over the amount which, if section 719 had not been enacted, would have been the allowable loss on the first-mentioned disposal shall be treated for the purposes of this section as an allowable loss which would otherwise accrue on disposals deemed by virtue of section 719 to have been made in the company's accounting period.

Life policies carrying rights not in money.

[CTA76 s48]

721. —Where any investments or other assets are, in accordance with a policy issued in the course of life business carried on by an assurance company, transferred to the policyholder, the policyholder's acquisition of the assets and the disposal of the assets to the policyholder shall be deemed to be for a consideration equal to the market value of the assets—

(a) for the purposes of the Capital Gains Tax Acts, and

(b) for the purposes of computing income in accordance with Case I or IV of Schedule D.

Benefits from life policies issued before 6th April, 1974.

[CTA76 s49]

722. —(1) This section shall apply in relation to policies of life assurance issued before the 6th day of April, 1974, by a company carrying on life business, being policies which-—

(a) provide for benefits consisting to any extent of investments of a specified description or of a sum of money to be determined by reference to the value of such investments, but

(b) do not provide for the deduction from those benefits of any amount by reference to tax chargeable in respect of chargeable gains.

(2) Where—

(a) the investments of the company's life assurance fund, in so far as referable to those policies, consist wholly or mainly of investments of the description so specified, and

(b) on the company becoming liable under any of those policies for any such benefits (including benefits to be provided on the surrender of a policy), a chargeable gain accrues to the company from the disposal, in meeting or for the purpose of meeting that liability, of investments of that description forming part of its life assurance fund, or would so accrue if the liability were met by or from the proceeds of such a disposal,

then, the company shall be entitled as against the person receiving the benefits to retain out of the benefits a part of the benefits not exceeding in amount or value corporation tax at the full rate in respect of the chargeable gain referred to in paragraph (b) computed without regard to any amount retained under this subsection and reduced in accordance with section 78 (1).