CHAPTER 2

Retirement annuities

783. —(1) (a) In this section—

“director” means—

(i) in relation to a body corporate the affairs of which are managed by a board of directors or similar body, a member of that board or body,

(ii) in relation to a body corporate the affairs of which are managed by a single director or similar person, that director or person,

(iii) in relation to a body corporate the affairs of which are managed by the members themselves, a member of the body corporate,

and includes any person who is or has been a director;

“employee”, in relation to a body corporate, includes any person taking part in the management of the affairs of the body corporate who is not a director, and includes a person who is or has been an employee;

“investment company” means a company the income of which consists mainly of investment income;

“investment income”, in relation to a company, means income which, if the company were an individual, would not be earned income;

“proprietary director” means a director of a company who is either the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent of the ordinary share capital of the company;

“proprietary employee”, in relation to a company, means an employee who is the beneficial owner of, or able, either directly or through the medium of other companies or by any other indirect means, to control, more than 15 per cent of the ordinary share capital of the company;

“sponsored superannuation scheme” means a scheme or arrangement relating to service in particular offices or employments and having for its object or one of its objects the making of provision in respect of persons serving in those offices or employments against—

(i) future retirement or partial retirement,

(ii) future termination of service through death or disability, or

(iii) similar matters,

being a scheme or arrangement under which any part of the cost of the provision so made is or has been borne otherwise than by those persons by reason of their service (whether it is the cost or part of the cost of the benefits provided, or of paying premiums or other sums in order to provide those benefits, or of administering or instituting the scheme or arrangement).

(b) For the purposes of the definitions of “proprietary director” and “proprietary employee”, ordinary share capital which is owned or controlled as is specified in those definitions by a person, being a spouse or an infant child of a director or employee, or by the trustee of a trust for the benefit of a person or persons, being or including any such person or such director or employee, shall be deemed to be owned or controlled by such director or employee and not by any other person.

(c) For the purposes of the definition of “sponsored superannuation scheme”, a person shall be treated as bearing by reason of his or her service the cost of any payment made or agreed to be made in respect of his or her service if that payment or the agreement to make it is treated under the Income Tax Acts as increasing the person's income or would be so treated if he or she were chargeable to tax under Schedule E in respect of his or her emoluments from that service.

(2) (a) For the purposes of this Chapter, an office or employment shall be a pensionable office or employment only if service in it is service to which a sponsored superannuation scheme relates (not being a scheme under which the benefits provided in respect of that service are limited to a lump sum payable on the termination of the service through death before the age of 70 years or some lower age or disability before the age of 70 years or some lower age); but references to a pensionable office or employment apply whether or not the duties are performed wholly or partly in the State or the holder is chargeable to tax in respect of the office or employment.

(b) For the purposes of paragraph (a), service in an office or employment shall not be treated as service to which a sponsored superannuation scheme relates by reason only of the fact that the holder of the office or employment might (though he or she does not) participate in the scheme by exercising or refraining from exercising an option open to him or her by virtue of that service.

(3) For the purposes of this Chapter but subject to subsection (4), “relevant earnings”, in relation to an individual, means any income of the individual chargeable to tax for the year of assessment in question, being either—

(a) income arising in respect of remuneration from an office or employment of profit held by the individual, other than a pensionable office or employment,

(b) income from any property which is attached to or forms part of the emoluments of any such office or employment of profit held by the individual, or

(c) income which is chargeable under Schedule D and is immediately derived by the individual from the carrying on or exercise by the individual of his or her trade or profession either as an individual or, in the case of a partnership, as a partner personally acting in the partnership;

but does not include any remuneration from an investment company of which the individual is a proprietary director or a proprietary employee.

(4) For the purposes of this Chapter, the relevant earnings of an individual shall not be treated as the relevant earnings of his or her spouse, notwithstanding that the individual's income chargeable to tax is treated as his or her spouse's income.

(5) The Revenue Commissioners may make regulations prescribing the procedure to be adopted in giving effect to this Chapter in so far as such procedure is not otherwise provided for and, without prejudice to the generality of the foregoing, may by such regulations—

(a) prescribe the manner and form in which claims for relief from or repayment of tax are to be made,

(b) prescribe the time limit for the making of any such claim,

(c) require the trustees or other persons having the management of an approved trust scheme to deliver from time to time such information and particulars as the Revenue Commissioners may reasonably require for the purposes of this Chapter, and

(d) apply for purposes of this Chapter or of the regulations any provision of the Income Tax Acts (with or without modifications).

(6) Where any person, for the purpose of obtaining for that person or for any other person any relief from or repayment of tax under this Chapter, knowingly makes any false statement or false representation, that person shall be liable to a penalty of £500.

784. —(1) Where an individual—

(a) is (or but for an insufficiency of profits or gains would be) chargeable to tax in respect of relevant earnings from any trade, profession, office or employment carried on or held by him or her, and

(b) pays a premium or other consideration under an annuity contract for the time being approved by the Revenue Commissioners as being a contract by which the main benefit secured is a life annuity for the individual in his or her old age or under a contract for the time being approved under section 785 (in this Chapter referred to as a “qualifying premium”),

relief from income tax may be given in respect of the qualifying premium under section 787 .

(2) (a) Subject to subsection (3), the Revenue Commissioners shall not approve a contract unless it appears to them to satisfy the following conditions—

(i) that it is made by the individual with a person lawfully carrying on in the State the business of granting annuities on human life,

(ii) that it includes provision securing that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment, and

(iii) that it does not—

(I) provide for the payment by that person during the life of the individual of any sum except sums payable by means of annuity to the individual,

(II) provide for the annuity payable to the individual to commence before the individual attains the age of 60 years or after he or she attains the age of 70 years,

(III) provide for the payment by that person of any other sums except sums payable by means of annuity to the individual's widow or widower and any sums which, in the event of no annuity becoming payable either to the individual or to a widow or widower, are payable to the individual's personal representatives by means of return of premiums, reasonable interest on premiums or bonuses out of profits,

(IV) provide for the annuity, if any, payable to a widow or widower of the individual to be of a greater annual amount than that paid or payable to the individual, or

(V) provide for the payment of any annuity otherwise than for the life of the annuitant.

(b) Notwithstanding paragraph (a), the contract may provide for the payment to the individual, at the time the annuity commences to be payable, of a lump sum by means of commutation of part of the annuity not exceeding 25 per cent of the value of the annuity if the individual elects, at or before the time when the annuity first becomes payable to him or her, to be paid the lump sum.

(3) The Revenue Commissioners may, if they think fit and subject to any conditions they think proper to impose, approve a contract otherwise satisfying the conditions referred to in subsection (2), notwithstanding that the contract provides for one or more of the following matters—

(a) the payment after the individual's death of an annuity to a dependant, not being the widow or widower of the individual;

(b) the payment to the individual of an annuity commencing before he or she attains the age of 60 years, where the annuity is payable on the individual becoming permanently incapable through infirmity of mind or body of carrying on his or her own occupation or any occupation of a similar nature for which he or she is trained or fitted;

(c) where the individual's occupation is one in which persons customarily retire before attaining the age of 60 years, the annuity to commence before the individual attains that age (but not before he or she attains the age of 50 years);

(d) where the individual's occupation is one in which persons customarily retire after attaining the age of 70 years, the annuity to commence after the individual attains that age (but not after he or she attains the age of 80 years);

(e) the annuity payable to any person to continue for a term certain (not exceeding 10 years) notwithstanding his or her death within that term, or the annuity payable to any person to terminate, or be suspended, on marriage (or remarriage) or in other circumstances;

(f) in the case of an annuity which is to continue for a term certain, the annuity to be assignable by will and, in the event of any person dying entitled to the annuity, the annuity to be assignable by his or her personal representatives in the distribution of the estate so as to give effect to a testamentary disposition, or to the rights of those entitled on intestacy or to an appropriation of the annuity to a legacy or to a share or interest in the estate.

(4) Subsections (1) to (3) shall apply in relation to a contribution under a trust scheme or part of a trust scheme approved by the Revenue Commissioners as they apply in relation to a premium under an annuity contract so approved, with the modification that for the condition in subsection (2)(a)(i) there shall be substituted a condition that the scheme (or the part of the scheme)—

(a) is established under the law of and administered in the State,

(b) is established for the benefit of individuals engaged in or connected with a particular occupation (or one or other of a group of occupations) and for the purpose of providing retirement annuities for those individuals with or without subsidiary benefits for their families or dependants, and

(c) is so established under irrevocable trusts by a body of persons comprising or representing the majority of the individuals so engaged in the State,

and with the necessary modifications of other references to the contract or the person with whom it is made, and exemption from income tax shall be allowed in respect of income derived from investments or deposits of any fund maintained for the purpose referred to in paragraph (b) under a scheme or part of a scheme for the time being approved under this subsection.

(5) The Revenue Commissioners may at any time, by notice in writing given to the persons by and to whom premiums are payable under any contract for the time being approved under this section or to the trustees or other persons having the management of any trust scheme so approved, withdraw that approval on such grounds and from such date (including a date before the date of the notice) as may be specified in the notice and, where any approval is so withdrawn, there shall be made such assessments as may be appropriate for the purpose of withdrawing any reliefs given under this Chapter consequent on the approval.

(6) Nothing in sections 4 and 6 of the Policies of Assurance Act, 1867, shall be taken to apply to any contract approved under this section.

785. —(1) The Revenue Commissioners may approve for the purposes of this Chapter a contract made by an individual with a person (in subsection (2) referred to as “the insurer”) lawfully carrying on in the State the business of granting annuities on human life if—

(a) the main benefit secured by the contract is the provision of an annuity for the wife or husband of the individual or for any one or more dependants of the individual, or

(b) the sole benefit secured by the contract is the provision of a lump sum on the death of the individual before he or she attains the age of 70 years (or any greater age approved under section 784 (3)(d)), being a lump sum payable to the individual's personal representatives.

(2) The Revenue Commissioners shall not approve a contract made by an individual with the insurer under subsection (1)(a) unless it appears to them to satisfy the following conditions—

(a) that any annuity payable to the wife or husband or dependant of the individual commences on the death of the individual;

(b) that any annuity payable under the contract to the individual commences at a time after the individual attains the age of 60 years and, unless the individual's annuity is one to commence on the death of a person to whom an annuity would be payable under the contract if that person survived the individual, cannot commence after the time when the individual attains the age of 70 years (or any greater age approved under section 784 (3)(d));

(c) that the contract does not provide for the payment by the insurer of any sum, other than any annuity payable to the individual's wife or husband or dependant or to the individual except, in the event of no annuity becoming payable under the contract, any sums payable to the individual's personal representatives by means of return of premiums, reasonable interest on premiums or bonuses out of profits;

(d) that the contract does not provide for the payment of any annuity otherwise than for the life of the annuitant;

(e) that the contract provides that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment.

(3) The Revenue Commissioners may, if they think fit and subject to any conditions they think proper to impose, approve a contract under subsection (1)(a), notwithstanding that in one or more respects it does not appear to them to satisfy the conditions specified in subsection (2).

(4) Subsections (2) and (3) of section 784 shall not apply to the approval of a contract under this section.

(5) The Revenue Commissioners may approve a trust scheme or part of a trust scheme otherwise satisfying the conditions specified in paragraphs (a) to (c) of section 784 (4), notwithstanding that its main purpose is to provide annuities for the wives, husbands and dependants of the individuals, or lump sums payable to the individuals' personal representatives on death, and—

(a) subsections (1) to (4) shall apply with any necessary modifications in relation to such approval,

(b) this Chapter shall apply to the scheme or part of the scheme when so approved as it applies to a contract approved under this section, and

(c) the exemption from income tax provided in section 784 (4) shall apply to the scheme or part of the scheme when so approved.

(6) Except where otherwise provided in this Chapter, any reference in the Income Tax Acts to a contract, scheme or part of a scheme approved under section 784 shall include a reference to a contract, scheme or part of a scheme approved under this section.

786. —(1) The Revenue Commissioners may, if they think fit and subject to any conditions they think proper to impose, approve an annuity contract under section 784 , notwithstanding that the contract provides that the individual by whom it is made may require a sum representing the value of his or her accrued rights under the contract—

(a) to be paid by the person with whom it is made to such other person as the individual may specify, and

(b) to be applied by such other person in payment of the premium or other consideration under an annuity contract made between the individual and that other person and approved by the Revenue Commissioners under that section,

if the first-mentioned contract is otherwise to be approved by the Revenue Commissioners under that section.

(2) References in subsection (1) to the individual by whom a contract is made include references to any widow, widower or dependant having accrued rights under the contract.

(3) Where, in accordance with a provision of the kind referred to in subsection (1) of an annuity contract approved under section 784 or a corresponding provision of a contract approved under section 785 (1)(a), a sum representing the value of accrued rights under one contract (in this subsection referred to as “the original contract”) is paid by means of premium or other consideration under another contract (in this subsection referred to as “the substituted contract”), any annuity payable under the substituted contract shall be treated as earned income of the annuitant to the same extent that an annuity under the original contract would have been so treated.

787. —(1) For the purposes of relief under this section, an individual's relevant earnings shall be those earnings before giving effect to any deduction to be made from those earnings in respect of a loss or in respect of a capital allowance (within the meaning of section 2 ), and references to income in this section (other than references to total income) shall be construed similarly.

(2) For the purposes of this section, “net relevant earnings”, in relation to an individual and subject to subsections (3) to (5), means the amount of the individual's relevant earnings for the year of assessment in question less the amount of any deductions to be made from the relevant earnings in computing the individual's total income for that year, being either—

(a) deductions in respect of payments made by the individual, or

(b) deductions in respect of losses or of such allowances mentioned in subsection (1), being losses or allowances arising from activities, profits or gains of which would be included in computing relevant earnings of the individual or of the individual's spouse for the year of assessment.

(3) Where in any year of assessment for which an individual claims and is allowed relief under this section there is to be made in computing the total income of the individual or of the individual's spouse a deduction in respect of any such loss or allowance of the individual referred to in subsection (2)(b), and the deduction or part of it is to be so made from income other than relevant earnings, then, the amount of the deduction made from that other income shall be treated as reducing the individual's net relevant earnings for subsequent years of assessment and shall be deducted as far as may be from those of the following year, whether or not the individual claims or is entitled to claim relief under this section for that year, and in so far as it cannot be so deducted, then from those of the next year, and so on.

(4) Where an individual's income for any year of assessment consists partly of relevant earnings and partly of other income, then, as far as may be, any deductions to be made in computing the individual's total income, and which may be treated in whole or in part either as made from relevant earnings or as made from other income, shall be treated for the purposes of this section as being made from those relevant earnings in so far as they are deductions in respect of any such loss referred to in subsection (2)(b) and otherwise as being made from that other income.

(5) An individual's net relevant earnings for any year of assessment shall be computed without regard to any relief to be given for that year under this section either to the individual or to the individual's spouse.

(6) Where relief is to be given under this section in respect of any qualifying premium paid by an individual, the amount of that premium shall, subject to this section, be deducted from or set off against the individual's relevant earnings for the year of assessment in which the premium is paid.

(7) Where in relation to a year of assessment a qualifying premium is paid after the end of the year of assessment but on or before the 31st day of January in the year following the year of assessment, the premium may, if the individual so elects on or before that date, be treated for the purposes of this section as paid in the earlier year (and not in the year in which it is paid); but where—

(a) the amount of that premium, together with any qualifying premiums paid by the individual in the year to which the assessment relates (or treated as so paid by virtue of any previous election under this subsection), exceeds the maximum amount of the reduction which may be made under this section in the individual's relevant earnings for that year, or

(b) the amount of that premium itself exceeds the increase in that maximum amount which is due to taking into account the income on which the assessment is made,

the election shall have no effect as respects the excess.

(8) Subject to this section, the amount which may be deducted or set off in any year of assessment (whether in respect of one or more qualifying premiums and whether or not including premiums in respect of a contract approved under section 785 ) shall not be more than—

(a) in the case of an individual who at any time during the year of assessment was of the age 55 years or over, 20 per cent, and

(b) in any other case, 15 per cent,

of the individual's net relevant earnings for that year, and the amount to be deducted shall to the greatest extent possible include qualifying premiums in respect of contracts approved under section 785 .

(9) Subject to this section, the amount which may be deducted or set off in any year of assessment in respect of qualifying premiums paid under a contract approved under section 785 (whether in respect of one or more such premiums) shall not be more than 5 per cent of the individual's net relevant earnings for that year.

(10) Where in any year of assessment a reduction or a greater reduction would be made under this section in the relevant earnings of an individual but for either or both of the following reasons—

(a) an insufficiency of net relevant earnings, or

(b) the operation of subsection (9) (as respects a qualifying premium paid under a contract approved under section 785 ),

the amount of the reduction which would be made but for those reasons, less the amount of any reduction which is made in that year, shall be carried forward to the next year of assessment, and shall be treated for the purposes of relief under this section as the amount of a qualifying premium paid in that next year of assessment.

(11) If and in so far as an amount once carried forward under subsection (10) (and treated as the amount of a qualifying premium paid in the next year of assessment) is not deducted from or set off against the individual's net relevant earnings for that year of assessment, it shall be carried forward again to the following year of assessment (and treated as the amount of a qualifying premium paid in that year of assessment), and so on for succeeding years.

(12)(a) In this subsection, “individual's contract” means an approved annuity contract, other than one approved under section 785 .

(b) Paragraphs (c) and (d) shall apply for determining whether and the extent to which an amount carried forward under subsection (10) is to be treated as paid under an individual's contract on the one hand or a contract approved under section 785 on the other.

(c) Any part of the amount carried forward which is referable to a qualifying premium paid under a contract approved under section 785 shall, when carried forward on the first or any subsequent occasion, be treated for the purposes of this Chapter as the amount of a qualifying premium paid under a contract so approved.

(d) The balance, if any, of the amount shall when similarly carried forward be treated as a qualifying premium paid under an individual's contract.

(13) Where relief under this section for any year of assessment is claimed and allowed (whether or not relief is then to be given for that year), and afterwards there is made any additional assessment, alteration of an assessment, or other adjustment of the claimant's liability to tax, there shall be made also such adjustments, if any, as are consequential thereon in the relief allowed or given under this section for that or any subsequent year of assessment.

(14) Where relief under this section is claimed and allowed for any year of assessment in respect of any payment, relief shall not be given in respect of that payment under any other provision of the Income Tax Acts for the same or a later year of assessment nor (in the case of a payment under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract.

(15) Relief shall not be given under this section in respect of a qualifying premium except on a claim made to and allowed by the inspector, but any person aggrieved by any decision of the inspector on any such claim may, on giving notice in writing to the inspector within 21 days after the notification to that person of the decision, appeal to the Appeal Commissioners.

(16) The Appeal Commissioners shall hear and determine an appeal to them under subsection (15) as if it were an appeal to them against an assessment to income tax, and the provisions of the Income Tax Acts relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law shall, with the necessary modifications, apply accordingly.