First Previous (CHAPTER 3 Know-how and certain training) Next (CHAPTER 2 Retirement annuities)

39 1997

TAXES CONSOLIDATION ACT, 1997

PART 30

Occupational Pension Schemes, Retirement Annuities, Purchased Life Annuities and Certain Pensions

CHAPTER 1

Occupational pension schemes

Interpretation and supplemental ( Chapter 1 ).

[FA72 s13(1), (2) and (4); FA74 s86 and Sch2 PtII]

770. —(1) In this Chapter, except where the context otherwise requires—

administrator”, in relation to a retirement benefits scheme, means the person or persons having the management of the scheme, and references to the administrator of a scheme shall be deemed to include the person mentioned in section 772 (2) (c);

approved scheme” means a retirement benefits scheme for the time being approved by the Revenue Commissioners for the purposes of this Chapter;

company” includes any body corporate or unincorporated body of persons other than a partnership;

director”, in relation to a company, includes—

(a) in the case of a company the affairs of which are managed by a board of directors or similar body, a member of that board or body,

(b) in the case of a company the affairs of which are managed by a single director or similar person, that director or person,

(c) in the case of a company the affairs of which are managed by the members themselves, a member of that company,

and includes a person who is to be or has been a director;

employee”—

(a) in relation to a company, includes an officer of the company, any director of the company and any other person taking part in the management of the affairs of the company, and

(b) in relation to any employer, includes a person who is to be or has been an employee,

and “employer” and other cognate expressions shall be construed accordingly;

exempt approved scheme” has the meaning assigned to it by section 774 ;

final remuneration” means the average annual remuneration of the last 3 years' service;

pension” includes annuity;

relevant benefits” means any pension, lump sum, gratuity or other like benefit—

(a) given or to be given on retirement or on death or in anticipation of retirement or, in connection with past service, after retirement or death, or

(b) to be given on or in anticipation of or in connection with any change in the nature of the service of the employee in question,

but does not include any benefit which is to be afforded solely by reason of the death or disability of a person resulting from an accident arising out of or in the course of his or her office or employment and for no other reason;

service” means service as an employee of the employer in question and other expressions, including “retirement”, shall be construed accordingly;

statutory scheme” means a retirement benefits scheme established by or under any enactment.

(2) Any reference in this Chapter to the provision of relevant benefits, or of a pension, for employees of an employer includes a reference to the provision of those benefits or that pension by means of a contract between the administrator or the employer and a third person.

(3) Schedule 23 shall apply for the purposes of supplementing this Chapter and shall be construed as one with this Chapter.

Meaning of “retirement benefits scheme”.

[FA72 s14]

771. —(1) In this Chapter, “retirement benefits scheme” means, subject to this section, a scheme for the provision of benefits consisting of or including relevant benefits, but does not include any scheme under the Social Welfare (Consolidation) Act, 1993, providing such benefits.

(2) References in this Chapter to a scheme include references to a deed, agreement, series of agreements or other arrangements providing for relevant benefits, notwithstanding that it relates or they relate only to—

(a) a small number of employees or to a single employee, or

(b) the payment of a pension starting immediately on the making of the arrangements.

(3) The Revenue Commissioners may if they think fit treat a retirement benefits scheme relating to employees of 2 or more different classes or descriptions as being for the purposes of this Chapter 2 or more separate retirement benefits schemes relating respectively to such one or more of those classes or descriptions of those employees as the Revenue Commissioners think fit.

(4) For the purposes of this Chapter—

(a) employees may be regarded as belonging to different classes or descriptions if they are employed by different employers, and

(b) a particular class or description of employee may consist of a single employee or any number of employees.

Conditions for approval of schemes and discretionary approval.

[FA72 s15(1) to (7); FA74 s64(1); FA92 s6(a); FA96 s131(2) and Sch5 PtII; FA97 s146(1) and Sch9 PtI par5(1)]

772. —(1) Subject to this section, the Revenue Commissioners shall approve any retirement benefits scheme for the purposes of this Chapter if it satisfies all of the prescribed conditions, namely—

(a) the conditions set out in subsection (2), and

(b) the conditions as respects benefits set out in subsection (3).

(2) The conditions referred to in subsection (1) (a) are—

(a) that the scheme is bona fide established for the sole purpose of providing relevant benefits in respect of service as an employee, being benefits payable to, or to the widow or widower, children or dependants or personal representatives of, the employee;

(b) that the scheme is recognised by the employer and employees to whom it relates, and that every employee who is or has a right to be a member of the scheme has been given written particulars of all essential features of the scheme which concern the employee;

(c) that there is a person resident in the State who will be responsible for the discharge of all duties imposed on the administrator of the scheme under this Chapter;

(d) that the employer is a contributor to the scheme;

(e) that the scheme is established in connection with some trade or undertaking carried on in the State by a person resident in the State;

(f) that no amount can be paid, whether during the subsistence of the scheme or later, by means of repayment of an employee's contributions under the scheme.

(3) The conditions as respects benefits referred to in subsection (1) (b) are—

(a) that any benefit for an employee is a pension on retirement at a specified age not earlier than 60 years and not later than 70 years, or on earlier retirement through incapacity, which does not exceed one-sixtieth of the employee's final remuneration for each year of service up to a maximum of 40 years;

(b) that any pension for any widow or widower of an employee who dies before retirement shall be a pension payable on the employee's death of an amount that does not exceed two-thirds of any pension or pensions which, consonant with the condition in paragraph (a), could have been provided for the employee on retirement on attaining the specified age, if the employee had continued to serve until the employee attained that age at an annual rate of remuneration equal to the employee's final remuneration;

(c) that any lump sums provided for any widow or widower, children, dependants or personal representatives of an employee who dies before retirement shall not exceed in the aggregate 4 times the employee's final remuneration;

(d) that any benefit for any widow or widower of an employee payable on the employee's death after retirement is a pension such that the amount payable to the widow or widower does not exceed two-thirds of any pension or pensions payable to the employee;

(e) that any pensions for the children or dependants of an employee who dies before retirement or on the employee's death after retirement shall not exceed in the aggregate one-half of the pension specified in paragraph (b) or (d), as the case may be;

(f) that no pension is capable in whole or in part of surrender, commutation or assignment, except in so far as the scheme allows an employee on retirement to obtain by commutation of the employee's pension a lump sum or sums not exceeding in all three-eightieths of the employee's final remuneration for each year of service up to a maximum of 40 years;

(g) that no other benefits are payable under the scheme.

(4) (a) The Revenue Commissioners may if they think fit having regard to the facts of a particular case and subject to such conditions, if any, as they think proper to attach to the approval, approve a retirement benefits scheme for the purposes of this Chapter, notwithstanding that it does not satisfy one or more of the prescribed conditions.

(b) The Revenue Commissioners may in particular approve by virtue of this subsection a scheme which—

(i) exceeds the limits imposed by the prescribed conditions as respects benefits for less than 40 years' service,

(ii) allows benefits to be payable on retirement within 10 years of the specified age or on earlier incapacity,

(iii) provides for the return in certain contingencies of employees' contributions and payment of interest (if any) on the contributions, or

(iv) relates to a trade or undertaking carried on only partly in the State and by a person not resident in the State.

(5) Where in the opinion of the Revenue Commissioners the facts concerning any scheme or its administration cease to warrant the continuance of their approval of the scheme, they may at any time, by notice in writing to the administrator, withdraw their approval on such grounds, and from such date, as may be specified in the notice.

(6) Where an alteration has been made in a retirement benefits scheme, no approval given as regards the scheme before the alteration shall apply after the date of the alteration unless the alteration has been approved by the Revenue Commissioners.

(7) For the purpose of determining whether a retirement benefits scheme, in so far as it relates to a particular class or description of employees, satisfies or continues to satisfy the prescribed conditions, that scheme shall be considered in conjunction with any other retirement benefits scheme or schemes relating to employees of that class or description, and, if those conditions are satisfied in the case of both or all of those schemes taken together, they shall be taken to be satisfied in the case of each of them but otherwise those conditions shall be taken to be satisfied in the case of none of them.

General Medical Services: scheme of superannuation.

[FA91 s12]

773. —(1) The Revenue Commissioners may, if they think fit and subject to any undertakings and conditions that they think proper to attach to the approval, approve for the purposes of this Chapter a scheme of superannuation provided for under an agreement for the provision of services under section 58 of the Health Act, 1970 (in this section referred to as a “relevant scheme”) as if it were a retirement benefits scheme within the meaning of this Chapter and notwithstanding that it does not satisfy one or more of the conditions set out in subsections (2) and (3) of section 772 .

(2) As respects a relevant scheme approved under this section, this Chapter and Schedule 23 shall apply subject to any necessary modifications and in particular as if in this Chapter and in that Schedule—

(a) “employee” included a registered medical practitioner providing services under an agreement for the provision of services under section 58 of the Health Act, 1970 (in this section referred to as an “agreement”),

(b) “service” included services by a registered medical practitioner under an agreement and an “office or employment” included the provision of such services, and

(c) a reference to Schedule E were a reference to Case II of Schedule D except in section 779 .

(3) Chapter 2 of this Part shall apply as if a member of a relevant scheme were the holder of a pensionable office or employment and such member's income assessable to tax under Case II of Schedule D arising from an agreement were remuneration from such an office or employment.

Certain approved schemes: exemptions and reliefs.

[FA72 s16(1) to (5) and (7); CTA76 s164 and Sch3 PtI; FA88 s30(1) and (2) (a); FA91 s38; FA97 s41(1) (a) and (3)]

774. —(1) This section shall apply as respects—

(a) any approved scheme shown to the satisfaction of the Revenue Commissioners to be established under irrevocable trusts, or

(b) any other approved scheme as respects which the Revenue Commissioners, having regard to any special circumstances, direct that this section shall apply,

and any scheme which is for the time being within paragraph (a) or (b) is in this Chapter referred to as an “exempt approved scheme”.

(2) This section shall apply only as respects income arising or contributions paid at a time when a scheme is an exempt approved scheme.

(3) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of income derived from investments or deposits of a scheme if, or to such extent as the Revenue Commissioners are satisfied that, it is income from investments or deposits held for the purposes of the scheme.

(4) (a) In this subsection, “financial futures” and “traded options” mean respectively financial futures and traded options 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 (3), a contract entered into in the course of dealing in financial futures or traded options shall be regarded as an investment.

(5) Exemption from income tax shall, on a claim being made in that behalf, be allowed in respect of underwriting commissions if, or to such extent as the Revenue Commissioners are satisfied that, the underwriting commissions are applied for the purposes of the scheme, and in respect of which the trustees of the scheme would but for this subsection be chargeable to tax under Case IV of Schedule D.

(6) (a) For the purposes of this section and section 775

(i) a reference to a “chargeable period” shall be construed as a reference to a “chargeable period or its basis period” (within the meaning of section 321 ), and

(ii) in relation to an employer whose chargeable period is a year of assessment, “basis period” means the period on the profits or gains of which income tax for that year of assessment is to be finally computed for the purposes of Case I or II of Schedule D in respect of the trade, profession or vocation of the employer.

(b) Any sum paid by an employer by means of contribution under the scheme shall for the purposes of Case I or II of Schedule D and of sections 83 and 707 (4) be allowed to be deducted as an expense, or expense of management, incurred in the chargeable period in which the sum is paid but no other sum shall for those purposes be allowed to be deducted as an expense, or expense of management, in respect of the making, or any provision for the making, of any contributions under the scheme.

(c) The amount of an employer's contributions which may be deducted under paragraph (b) shall not exceed the amount contributed by that employer under the scheme in respect of employees in a trade or undertaking in respect of the profits of which the employer is assessable to income tax or corporation tax, as the case may be.

(d) A sum not paid by means of an ordinary annual contribution shall for the purposes of paragraph (b) be treated, as the Revenue Commissioners may direct, either as an expense incurred in the chargeable period in which the sum is paid, or as an expense to be spread over such period of years as the Revenue Commissioners think proper.

(e) In the case of any employer for a chargeable period, being—

(i) where the chargeable period is an accounting period of a company, an accounting period ending on or before the 21st day of April, 1997, and

(ii) where the chargeable period is a year of assessment, any year of assessment the employer's basis period for which ends on or before that date,

this subsection shall apply subject to paragraph 26 of Schedule 32 .

(7) (a) Any ordinary annual contribution paid under the scheme by an employee shall, in assessing income tax under Schedule E, be allowed to be deducted as an expense incurred in the year in which the contribution is paid.

(b) Any contribution, which is not an ordinary annual contribution, paid or borne by an employee under the scheme may, as the Revenue Commissioners think proper—

(i) be treated, as respects the year in which it is paid, as an ordinary annual contribution paid in that year, or

(ii) be apportioned among such years as the Revenue Commissioners direct, and the amount of the contribution attributed thereby to any year shall be treated as an ordinary annual contribution paid in that year.

(c) The aggregate amount of any contributions (whether ordinary annual contributions or contributions treated as ordinary annual contributions) allowed to be deducted in any year shall not exceed 15 per cent of the remuneration for that year of the office or employment in respect of which the contributions are paid.

Certain approved schemes: provisions supplementary to section 774 (6).

[FA72 s16A; FA97 s41(1) (b)]

775. —(1) Where—

(a) after the 21st day of April, 1997, there is an actual payment by an employer of a contribution under an exempt approved scheme,

(b) apart from this section that payment would be allowed to be deducted as an expense, or expense of management, of the employer in relation to any chargeable period, and

(c) the total of previously allowed deductions exceeds the relevant maximum,

then, the amount allowed to be so deducted in respect of the payment mentioned in paragraph (a) and of any other actual payments of contributions under the scheme which, having been made after the 21st day of April, 1997, are within paragraph (b) in relation to the same chargeable period shall be reduced by whichever is the lesser of the excess and the amount which reduces the deduction to nil.

(2) In relation to any such actual payment by an employer of a contribution under an exempt approved scheme as would be allowed to be deducted as mentioned in subsection (1) in relation to any chargeable period—

(a) the reference in that subsection to the total of previously allowed deductions is a reference to the aggregate of every amount in respect of the making, or any provision for the making, of that or any other contribution under the scheme, which has been allowed to be deducted as an expense, or expense of management, of that person in relation to all previous chargeable periods, and

(b) the reference to the relevant maximum is a reference to the amount which would have been that aggregate if the restriction on deductions for sums other than actual payments imposed by virtue of section 774 (6) had been applied in relation to every previous chargeable period,

and for the purposes of this subsection an amount the deduction of the whole or any part of which is to be taken into account as allowed in relation to more than one chargeable period shall be treated as if the amount allowed were a different amount in the case of each of those periods.

(3) For the purposes of this section, any payment which is treated under paragraph (d) of section 774 (6) as spread over a period of years shall be treated as actually paid at the time when it is treated as paid in accordance with that paragraph.

Certain statutory schemes: exemptions and reliefs.

[FA72 s17(1) and (2)]

776. —(1) This section shall apply to any statutory scheme established under a public statute.

(2) (a) Any ordinary annual contribution paid under a scheme to which this section applies by any officer or employee shall, in assessing income tax under Schedule E, be allowed to be deducted as an expense incurred in the year in which the contribution is paid.

(b) Any contribution, which is not an ordinary annual contribution, paid or borne by an officer or employee under a scheme to which this section applies may, as the Revenue Commissioners think proper—

(i) be treated, as respects the year in which it is paid, as an ordinary annual contribution paid in that year, or

(ii) be apportioned among such years as the Revenue Commissioners direct, and the amount of the contribution attributed thereby to any year shall be treated as an ordinary annual contribution paid in that year.

(c) The aggregate amount of any contributions (whether ordinary annual contributions or contributions treated as ordinary annual contributions) allowed to be deducted in any year shall not exceed 15 per cent of the remuneration for that year of the office or employment in respect of which the contributions are paid.

Charge to income tax in respect of certain relevant benefits provided for employees.

[FA72 s18(1)(a), (2), (3), (4) and (5); FA97 s146(1) and Sch9 PtI par5(2)]

777. —(1) Subject to this Chapter, where pursuant to a retirement benefits scheme the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for any employee of that employer, then (whether or not the accrual of the benefits is dependent on any contingency), the sum paid, if not otherwise chargeable to income tax as income of the employee, shall be deemed for the purposes of the Income Tax Acts to be income of that employee for that year of assessment and assessable to income tax under Schedule E.

(2) Subject to this Chapter, where—

(a) the circumstances in which any relevant benefits under a retirement benefits scheme are to accrue are not such as will render the benefits assessable to income tax as emoluments of the employee in respect of whom the benefits are paid, and

(b) the provision of those benefits is not, or is not fully, secured by the payment of sums by the employer with a view to the provision of those benefits,

then (whether or not the accrual of the benefits is dependent on any contingency), an amount equal to the cost, estimated in accordance with subsection (3), of securing the provision by a third person of the benefits or, as the case may be, of the benefits in so far as not already secured by the payment of sums mentioned in subsection (1) shall be deemed for the purposes of the Income Tax Acts to be income of the employee for the year or years of assessment specified in subsection (3) and assessable to income tax under Schedule E.

(3) The cost referred to in subsection (2) shall be estimated either—

(a) as an annual sum payable in each year of assessment in which the scheme in question is in force or the employee is serving, up to and including the year of assessment in which the benefits accrue or there ceases to be any possibility of the accrual of the benefits, or

(b) as a single sum payable in the year of assessment in which falls the date when the employee acquired the right to the relevant benefits or the date when the employee acquired the right to any increase in the relevant benefits,

as may be more appropriate in the circumstances of the case.

(4) Where the employer pays any sum mentioned in subsection (1) in relation to more than one employee, the sum so paid shall for the purpose of that subsection be apportioned among those employees by reference to the separate sums which would have had to be paid to secure the separate benefits to be provided for them respectively, and the part of the sum apportioned to each of them shall be deemed for that purpose to have been paid separately in relation to that one of them.

(5) Any reference in this section to the provision for an employee of relevant benefits shall include a reference to the provision of benefits payable to the employee's spouse, widow or widower, children, dependants or personal representatives.

Exceptions to charge to tax under section 777.

[FA72 s19]

778. —(1) Neither subsection (1) nor subsection (2) of section 777 shall apply where the retirement benefits scheme in question is—

(a) an approved scheme,

(b) a statutory scheme, or

(c) a scheme set up by a Government outside the State for the benefit, or primarily for the benefit, of its employees.

(2) Neither subsection (1) nor subsection (2) of section 777 shall apply for any year of assessment where apart from those subsections the employee is under the Income Tax Acts either not assessable to income tax in respect of the emoluments of his or her employment or is so assessable in respect of those emoluments on the basis of the amount received in the State.

(3) Where, in respect of the provision for an employee of any relevant benefits, a sum has been deemed to be income of the employee by virtue of subsection (1) or (2) of section 777 , and subsequently the employee proves to the satisfaction of the Revenue Commissioners—

(a) that no payment in respect of or in substitution for the benefits has been made, and

(b) that some event has occurred by reason of which no such payment will be made,

and the employee makes application for relief under this subsection within 6 years from the time when that event occurred, the Revenue Commissioners shall give relief in respect of tax on that sum by repayment or otherwise as may be appropriate, and, if the employee satisfies the Revenue Commissioners in relation to some particular part of the benefits but not the whole of the benefits, the Revenue Commissioners may give such relief as may seem to them just and reasonable.

Charge to income tax of pensions under Schedule E.

[FA72 s20]

779. —(1) Subject to subsection (2), pensions paid under any scheme which is approved or is being considered for approval under this Chapter shall be charged to income tax under Schedule E, and Chapter 4 of Part 42 shall apply accordingly.

(2) In respect of any scheme which is approved or is being considered for approval under this Chapter, the Revenue Commissioners may direct that until such date as they may specify pensions under the scheme shall be charged to tax as annual payments under Case III of Schedule D, and tax shall be deductible under section 237 or 238 accordingly.

Charge to income tax on repayment of employees' contributions.

[FA72 s21(1) to (5)(a) and (6) and (7); FA73 s18; FA92 s6(b)]

780. —(1) In this section and in section 781 , “employee”, in relation to a statutory scheme, includes an officer.

(2) Subject to this section, tax shall be charged under this section on any repayment to an employee during his or her lifetime of any contribution (including interest on contributions, if any) if the payment is made under—

(a) a scheme which is or has at any time been an exempt approved scheme, or

(b) a statutory scheme established under a public statute.

(3) This section shall not apply where the employee's employment was carried on outside the State.

(4) Subsection (2)(a) shall not apply in relation to a contribution made after the scheme ceases to be an exempt approved scheme unless it again becomes an exempt approved scheme.

(5) Where any payment is chargeable to tax under this section, the administrator of the scheme shall be charged to income tax under Case IV of Schedule D and, subject to subsection (7), the rate of the tax shall be 25 per cent; but, in the case of any repayment under a statutory scheme established under a public statute, the administrator of the scheme shall be entitled to deduct the tax chargeable in respect of that repayment from the amount of that repayment.

(6) The tax shall be charged on the amount paid or, if the administrator is entitled under the rules of the relevant scheme or otherwise to deduct the tax before payment, on the amount before deduction of tax, and the amount so charged to tax shall not be treated as income for any other purpose of the Income Tax Acts.

(7) (a) The Minister for Finance may by order from time to time increase or decrease the rate of tax under subsection (5).

(b) Every order under paragraph (a) shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the order is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the order is laid before it, the order shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

Charge to income tax: commutation of entire pension.

[FA72 s22(1) to (4); FA92 s6(c)]

781. —(1) Where—

(a) a scheme which is or has at any time been an approved scheme, or

(b) a statutory scheme established under a public statute,

contains a rule allowing in special circumstances a payment in commutation of an employee's entire pension, and any pension is commuted, whether wholly or not, under the rule, tax shall be charged on the amount by which the sum receivable exceeds—

(i) the largest sum which would have been receivable in commutation of any part of the pension if the scheme had contained a rule providing that the aggregate value of the relevant benefits payable to an employee on or after retirement, excluding any pension which was not commutable, should not exceed three-eightieths of the employee's final remuneration for each year of service up to a maximum of 40 years, or

(ii) the largest sum which would have been receivable in commutation of any part of the pension under any rule of the scheme authorising the commutation of part (but not the whole) of the pension, or which would have been so receivable but for those circumstances,

whichever gives the lesser amount chargeable to tax.

(2) This section shall not apply where the employee's employment was carried on outside the State.

(3) Where any amount is chargeable to tax under this section, the administrator of the scheme shall be charged to income tax under Case IV of Schedule D on that amount and, subject to subsection (6) of section 780 which shall apply as it applies to tax chargeable under that section, the rate of tax shall be 10 per cent.

(4) In applying paragraph (i) or (ii) of subsection (1)—

(a) the same considerations shall be taken into account, including the provisions of any other relevant scheme, as would have been taken into account by the Revenue Commissioners in applying section 772 , and

(b) where the scheme has ceased to be an approved scheme, account shall only be taken of the rules of the scheme at the date of the cesser.

Charge to tax: repayments to employer.

[FA72 s23]

782. —(1) Where any payment is made or becomes due to an employer out of funds which are or have been held for the purposes of a scheme which is or has at any time been an exempt approved scheme, then—

(a) if the scheme relates to a trade or profession carried on by the employer, the payment shall be treated for the purposes of the Tax Acts as a receipt of that trade or profession receivable when the payment is due or on the last day on which the trade or profession is carried on by the employer, whichever is the earlier;

(b) if the scheme does not relate to such a trade or profession, the employer shall be charged to tax on the amount of the payment under Case IV of Schedule D, but only in proportion to the extent that the payment represents contributions by the employer under the scheme which were allowable as deductions for tax purposes.

(2) This section shall not apply to a payment which was due before the scheme became an exempt approved scheme.

(3) References in this section to any payment include references to any transfer of assets or other transfer of money's worth.