Taxes Consolidation Act 1997

(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).

708 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.

709 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.

710 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.

711 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.

712 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.

713 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.

714 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.

715 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.

716 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.

717 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.

718 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.

719 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.

720 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.

721 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.

722 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).

CHAPTER 2 Special investment policies

723 Special investment policies. [CTA76 s36A(1) to (6) and (8); FA93 s11(f); FA94 s33; FA96 s49]

723.—(1) In this section—

“excluded shares” means—

(a) shares in an investment company within the meaning of Part XIII of the Companies Act, 1990,

(b) shares in an undertaking for collective investment in transferable securities within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989), or

(c) shares in a company, being shares the market value of which may be expected to approximate at all times to the market value of the proportion of the assets of the company which they represent;

“inspector”, in relation to any matter, means an inspector of taxes appointed under section 852, and includes such other officers as the Revenue Commissioners shall appoint in that behalf;

“mortality cover” means any amount payable under a policy of life assurance in the event of the death of a person specified in the terms of that policy;

“ordinary shares” means shares forming part of a company's ordinary share capital;

“qualifying shares” means ordinary shares—

(a) in a company resident in the State, or

(b) (i) listed in the official list of the Irish Stock Exchange, or

(ii) dealt in on the smaller companies market, or the unlisted securities market, of the Irish Stock Exchange,

other than excluded shares;

“special investment business” means so much of the life business of an assurance company as is connected with special investment policies;

“special investment fund” means a fund in respect of which the conditions specified in subsection (2) are satisfied;

“special investment policy” means a policy of life assurance issued by an assurance company to an individual on or after the 1st day of February, 1993, in respect of which—

(a) the conditions specified in subsection (3) are satisfied, and

(b) a declaration of the kind specified in subsection (4) has been made to the assurance company;

“specified qualifying shares”, in relation to a special investment fund, means qualifying shares in a company the issued share capital of which has a market value of less than £100,000,000 when the shares are acquired for the fund.

(2) The conditions referred to in the definition of “special investment fund” are as follows:

(a) the fund shall be owned by an assurance company;

(b) the fund shall be kept separately from its other funds, if any, by the assurance company;

(c) the fund shall represent only the liabilities of the assurance company in respect of its special investment business, and accordingly there shall not be any arrangements whereby any asset of the fund is connected directly or indirectly with any business of the company other than its special investment business;

(d) the aggregate of the consideration given for shares which are at any time before the 1st day of February, 1994, assets of the fund shall not be less than—

(i) as respects qualifying shares, 40 per cent, and

(ii) as respects specified qualifying shares, 6 per cent,

of the aggregate of the consideration given for the assets which are assets of the fund at that time;

(e) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1995, assets of the fund shall not be less than—

(i) as respects qualifying shares, 45 per cent, and

(ii) as respects specified qualifying shares, 9 per cent,

of the aggregate of the consideration given for the assets which are assets of the fund at that time;

(f) the aggregate of the consideration given for shares which are at any time within the year ending on the 31st day of January, 1996, assets of the fund shall not be less than—

(i) as respects qualifying shares, 50 per cent, and

(ii) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets which are assets of the fund at that time;

(g) the aggregate of the consideration given for shares which are at any time on or after the 1st day of February, 1996, assets of the fund shall not be less than—

(i) as respects qualifying shares, 55 per cent, and

(ii) as respects specified qualifying shares, 10 per cent,

of the aggregate of the consideration given for the assets which are assets of the fund at that time,

and for the purposes of paragraphs (d) to (g) the amount of the consideration given for assets of the fund shall be determined in accordance with sections 547, 580 and 724.

(3) The conditions referred to in the definition of “special investment policy” are as follows:

(a) the policy of life assurance concerned shall be designated by the assurance company concerned as a special investment policy;

(b) any payments received by the company in respect of the policy shall not, or shall not in the aggregate if there is more than one such payment, exceed £50,000;

(c) the company shall ensure that its liability in respect of the policy does not exceed £50,000 at any time on or after the fifth anniversary of the date on which the first payment was received by it in respect of the policy;

(d) the policy shall not be issued to or owned by an individual who is not of full age;

(e) the policy shall be issued to an individual—

(i) who is beneficially entitled to, and

(ii) to whom there shall be paid,

all amounts, other than mortality cover, payable under the policy by the company;

(f) except in the case of a policy issued to and owned jointly only by a couple married to each other, the policy shall not be a joint policy;

(g) unless the policy is issued to and owned jointly only by a couple married to each other, the policy shall be the only such policy owned by the individual;

(h) if the policy is to be issued to and owned jointly only by a couple married to each other, it shall be the only such policy, or one of 2 only such policies, owned only by them;

and for the purposes of paragraphs (d) to (h) references to ownership of a policy shall be construed as references to beneficial ownership of the policy.

(4) The declaration referred to in paragraph (b) of the definition of “special investment policy” shall be a declaration in writing to an assurance company which—

(a) (i) is made by the individual (in this section referred to as “the declarer”) to whom any amounts, other than mortality cover, are payable by the assurance company in respect of the policy in respect of which the declaration is made, and

(ii) is signed by the declarer,

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

(c) declares that at the time when the declaration is made the conditions referred to in paragraphs (d) to (h) of subsection (3) are satisfied in relation to the policy in respect of which the declaration is made,

(d) contains the full name and address of the individual beneficially entitled to any amounts, other than mortality cover, payable in respect of the policy in respect of which the declaration is made,

(e) contains an undertaking by the declarer that, if any of the conditions specified in paragraphs (d) to (h) of subsection (3) cease to be satisfied in respect of the policy in respect of which the declaration is made, the declarer will notify the assurance company accordingly, and

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

(5) (a) An assurance company shall—

(i) keep and retain for not less than the longer of the following periods—

(I) a period of 6 years, and

(II) a period which, in relation to the policy in respect of which the declaration is made, ends not earlier than 3 years after the date on which the company ceases to have any liability in respect of the policy, and

(ii) on being so required by notice given to it in writing by an inspector, make available to the inspector within the time specified in the notice,

all declarations of the kind specified in subsection (4) which have been made to the company.

(b) The inspector may examine and take copies of or of extracts from a declaration made available to him or her under paragraph (a).

(6) The corporation tax chargeable on any profits on which corporation tax falls finally to be borne which are attributable to the special investment fund of an assurance company shall be reduced, for the purposes of the Tax Acts other than section 707(4), so that, before it is reduced by any credit, relief or other deduction under the Tax Acts apart from this section, it is 10 per cent of those profits; but, in computing profits for the purposes of this subsection, section 78(2) shall apply as if the rate per cent of capital gains tax specified in section 28(3) were the rate per cent of corporation tax specified in section 21(1)(b).

(7) For the purposes of computing income arising from, or chargeable gains accruing from the disposal of, assets of the special investment fund of an assurance company—

(a) each asset of the fund on the day on which an accounting period of the company ends shall be deemed to have been disposed of and immediately reacquired at the asset's market value on that day,

(b) without prejudice to the treatment of losses on such shares as allowable losses, gains accruing on the disposal or deemed disposal of eligible shares (within the meaning of Part 16) in a qualifying company (within the meaning of that Part) shall not be chargeable gains,

(c) section 712 shall not apply to distributions in respect of the shares mentioned in paragraph (b), and

(d) section 726 shall not apply.

724 Transfer of assets into or out of special investment fund. [CTA76 s36B; FA93 s11(f)]

724.—Where an assurance company transfers the whole or part of an asset (any interest in or rights over an asset being regarded for the purposes of this section as part of the asset)—

(a) which it owned before the transfer, or which was created by the transfer, into, or

(b) which it owns after the transfer, out of,

its special investment fund, the company shall be deemed to have disposed of and immediately reacquired the asset or the part of the asset, as the case may be, at the market value of the asset or the part of the asset, as the case may be, at the time of the transfer.

725 Special investment policies: breaches of conditions. [CTA76 s36C; FA93 s11(f)]

725.—(1) For the purposes of this section, a policy of life assurance held by an individual, whether married or not, shall not be a special investment policy at any particular time if—

(a) as respects the policy—

(i) a declaration of the kind specified in section 723(4) has not been made, or

(ii) any of the conditions referred to in section 723(3) is not satisfied at that time,

or

(b) as respects the individual, he or she has at that time a beneficial interest prohibited by section 839 in classes of investment mentioned in paragraphs (a) to (d) of subsection (1) of that section.

(2) Where an assurance company becomes aware at any time that a policy of life assurance which it has treated as a special investment policy is not such a policy—

(a) the assurance company shall ensure that in accordance with section 723(2)(c) its special investment fund does not after that time represent its liability in respect of the policy, and

(b) for the purposes of the Tax Acts other than section 958(4), the liability to corporation tax of the company for the accounting period in which it became aware that the policy was not a special investment policy shall be increased by an amount determined by the formula—

(A B)	10 __ 9		S 10 ______ 100

where—

A is the amount which was the assumed liability, other than the liability, if any, in respect of mortality cover, of the company in respect of the policy immediately before it became aware that the policy was not a special investment policy,

B is—

(i) the amount which was the liability, other than the liability, if any, in respect of mortality cover, of the company in respect of the policy when the policy ceased to be a special investment policy, or

(ii) if the policy was never a special investment policy, the amount of the aggregate of the payments received and not repaid by the company in respect of the policy, and

S is the standard rate per cent for the year of assessment in which that accounting period ends.

CHAPTER 3 Provisions applying to overseas life assurance companies

726 Investment income. [CTA76 s43; FA93 s11(h); FA95 s64; FA96 s132(2) and Sch5 PtII]

726.—(1) Any income of an overseas life assurance company from the investments of its life assurance fund (excluding the pension fund, general annuity fund and special investment fund, if any), wherever received, shall, to the extent provided in this section, be deemed to be profits comprised in Schedule D, and shall be charged to corporation tax under Case III of Schedule D.

(2) Distributions received from companies resident in the State shall be taken into account under this section notwithstanding their exclusion from the charge to corporation tax.

(3) Where an overseas life assurance company is entitled to an amount (in this subsection referred to as “the first amount”), being an amount which corresponds to a tax credit, by virtue of having received a distribution from a company not resident in the State, the distribution shall be treated for the purposes of this section as representing income equal to the aggregate of the amount or value of that distribution and the first amount.

(4) A portion only of the income from the investments of the life assurance fund (excluding the pension fund, general annuity fund and special investment fund, if any) shall be charged in accordance with subsection (1), and for any accounting period that portion shall be determined by the formula—

A B _____ C

where—

A is the total income from those investments for that period,

B is the average of the liabilities for that period to policyholders resident in the State and to policyholders resident outside the State whose proposals were made to the company at or through its branch or agency in the State, and

C is the average of the liabilities for that period to all the company's policyholders,

but any reference in this subsection to liabilities does not include liabilities in respect of special investment, general annuity or pension business.

(5) For the purposes of this section—

(a) the liabilities of an assurance company attributable to any business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return, and

(b) the average of any liabilities for an accounting period shall be taken as 50 per cent of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

(6) (a) For the purposes of this subsection—

(i) “the average of branch liabilities for an accounting period” means the aggregate of the amounts represented by B in subsection (4), B in section 727(2) and the average of the liabilities attributable to pension business for the accounting period, and

(ii) “the assets to which this subsection applies” are assets the gains from the disposal of which are chargeable to corporation tax by virtue of subsections (3) and (6) of section 29 together with assets the gains from the disposal of which would be so chargeable but for sections 551, 607 and 613.

(b) Where the average of branch liabilities for an accounting period exceeds the mean value for the accounting period of the assets to which this subsection applies, the amount to be included in profits under section 78(1) shall be an amount determined by the formula—

A B _____ C

where—

A is the amount which apart from this subsection would be so included in profits,

B is the average of branch liabilities for the accounting period, and

C is the mean value for the accounting period of the assets to which this subsection applies.

(7) Section 70(1) as applied to corporation tax shall not apply to income to which subsection (1) applies.

727 General annuity and pension business. [CTA76 s44]

727.—(1) Nothing in the Corporation Tax Acts shall prevent the distributions of companies resident in the State from being taken into account as part of the profits in computing under section 715 the profits arising from pension business and general annuity business to an overseas life assurance company.

(2) Any charge to tax under section 715 for any accounting period on profits arising to an overseas life assurance company from general annuity business shall extend only to a portion of the profits arising from that business, and that portion shall be determined by the formula—

A B _____ C

where—

A is the total amount of those profits,

B is the average of the liabilities attributable to that business for the relevant accounting period in respect of contracts with persons resident in the State or contracts with persons resident outside the State whose proposals were made to the company at or through its branch or agency in the State, and

C is the average of the liabilities attributable to that business for that accounting period in respect of all contracts.

(3) For the purposes of this section—

(a) the liabilities of an assurance company attributable to general annuity business at any time shall be ascertained by reference to the net liabilities of the company as valued by an actuary for the purposes of the relevant periodical return, and

(b) the average of any liabilities for an accounting period shall be taken as 50 per cent of the aggregate of the liabilities at the beginning and end of the valuation period which coincides with that accounting period or in which that accounting period falls.

728 Expenses of management. [CTA76 s33(3); FA92 s44(b)]

728.—The relief under section 707 available to an overseas life assurance company in respect of its expenses of management shall be limited to expenses attributable to the life assurance business carried on by the company at or through its branch or agency in the State.

729 Income tax, foreign tax and tax credit. [CTA76 s45; FA88 s31(2) and Sch2 PtI par2(2); FA97 s37 and Sch2 pars1 and 2]

729.—(1) Section 77(6) shall not affect the liability to tax of an overseas life assurance company in respect of the investment income of its life assurance fund under section 726 or in respect of the profits of its annuity business under sections 715, 717 and 727.

(2) For the purposes of section 25(3) as it applies to life business, the amount of the income tax referred to in that section which shall be available for set-off under that section in an accounting period shall be limited in accordance with subsections (3) and (4).

(3) Where the company is chargeable to corporation tax for an accounting period in accordance with section 726 in respect of the income from the investments of its life assurance fund, the amount of income tax available for set-off against any corporation tax assessed for that period on that income shall not exceed an amount equal to income tax at the standard rate on the portion of income from investments which is chargeable to corporation tax by virtue of subsection (4) of that section.

(4) Where the company is chargeable to corporation tax for an accounting period in accordance with section 727 on a proportion of the total amount of the profits arising from its general annuity business, the amount of income tax available for set-off against any corporation tax assessed for that period on those profits shall not exceed an amount equal to income tax at the standard rate on the like proportion of the income from investments included in computing those profits.

(5) Where an overseas life assurance company receives a distribution in respect of which it is entitled to a tax credit, the company may claim to have that credit set off against any corporation tax assessed on the company under section 726 or 727 for the accounting period in which the distribution is received, but the amount of the tax credit, or aggregate of tax credits if more than one distribution has been received, which may be so set off shall not exceed an amount determined by the formula—

S (A B) _____ 100

where—

S is the standard credit rate per cent for the year of assessment in which the distribution is made,

A is the portion of the income from investments which is chargeable to corporation tax by virtue of section 726(4) or, as the case may be, the portion determined in accordance with subsection (4) of the income from investments included in computing the total amount of the profits of the company arising from its general annuity business, and

B is the aggregate of the payments, the income tax on which, having regard to subsection (3) or (4), as the case may be, the company is entitled to set off against corporation tax by virtue of a claim under section 25(3).

(6) Section 828(4) shall not affect the liability to tax under section 726 of an overseas life assurance company in respect of gains from the disposal of investments held in connection with its life business.

(7) For the purposes of subsection (5), where an accounting period begins before the 6th day of April, 1997, and ends on or after that date, it shall be divided into one part beginning on the day which the accounting period begins and ending on the 5th day of April, 1997, and another part beginning on the 6th day of April, 1997, and ending on the day on which the accounting period ends and both parts shall be treated as separate accounting periods.

730 Tax credit in respect of distributions. [CTA76 s46; FA93 s11(i)]

730.—Where an overseas life assurance company—

(a) receives a distribution from a company resident in the State, and

(b) is not entitled to, or disclaims, by notice in writing to the appropriate inspector (within the meaning of section 950(1)), relief in respect of the distribution under—

(i) the Convention set out in Schedule 25 as applied for corporation tax, or

(ii) arrangements made under section 826 as applied for corporation tax,

then, the overseas life assurance company shall be deemed to be entitled to such a tax credit in respect of the distribution as it would be entitled to if it were a company resident in the State, and accordingly the income represented by the distribution shall be the aggregate of the distribution and the tax credit.

PART 27 Unit Trusts and Offshore Funds

CHAPTER 1 Unit trusts

731 Chargeable gains accruing to unit trusts. [CGTA75 s31; FA77 s34; FA79 s37(1); FA93 s19; FA94 s64]

731.—(1) In this section, “capital distribution” means any distribution from a unit trust, including a distribution in the course of terminating the unit trust, in money or money's worth except a distribution which in the hands of the recipient constitutes income for the purposes of income tax.

(2) For the purposes of the Capital Gains Tax Acts and without prejudice to section 567 and sections 574 to 578, chargeable gains accruing to a unit trust in any year of assessment shall be assessed and charged on the trustees of the unit trust.

(3) The trustees of a unit trust shall for the purposes of the Capital Gains Tax Acts be treated as being a single and continuing body of persons (distinct from the persons who may from time to time be the trustees), and that body shall be treated as being resident and ordinarily resident in the State unless the general administration of the unit trust is ordinarily carried on outside the State and the trustees or a majority of them for the time being are not resident or not ordinarily resident in the State.

(4) Where a person receives or becomes entitled to receive in respect of units in a unit trust any capital distribution from the unit trust, such person shall be treated as having in consideration of that capital distribution disposed of an interest in the units.

(5) (a) Where throughout a year of assessment all the issued units in a unit trust are assets such that if those units were disposed of by the unit holder any gain accruing would be wholly exempt from capital gains tax (otherwise than by reason of residence or by virtue of section 739(3)), gains accruing to the unit trust in that year shall not be chargeable gains.

(b) For the purposes of any assessment to capital gains tax, paragraph (a) shall not apply as respects a unit trust to which subsection (6) applies.

(6) Gains accruing on the disposal of units in a unit trust shall not be chargeable gains for the purposes of the Capital Gains Tax Acts where—

(a) the trustees of the unit trust have at all times (but not taking into account any time before the 6th day of April, 1974) been resident and ordinarily resident in the State, and

(b) the unit trust is a scheme which is established for the purpose or has the effect, solely or mainly, of providing facilities for the participation by the public as beneficiaries under a trust in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatever and which is administered by the holder of a licence under the Insurance Act, 1936, and for participation in which, in respect of units first issued after the 14th day of June, 1973, a policy of assurance on human life is required to be effected (but so that the units do not become the property of the owner of the policy either as benefits or otherwise).

(7) (a) Subject to paragraph (b), where there is a disposal in any year of assessment of units in a unit trust—

(i) not being an undertaking for collective investment (within the meaning of section 738) which began carrying on business on or after the 25th day of May, 1993,

(ii) all the assets of which were throughout the year of assessment 1993-94 assets, whether mentioned in section 19 of the Capital Gains Tax Act, 1975, or in any other provision of the Capital Gains Tax Acts, to which that section applied, and

(iii) the person disposing of the units acquired the units before the 6th day of April, 1994, then, the chargeable gain on the disposal shall be computed as if the units had been sold and immediately reacquired by that person on the 5th day of April, 1994, at their market value at that date.

(b) Paragraph (a) shall not apply in relation to the disposal of units—

(i) if as a consequence of the application of that paragraph a gain would accrue on that disposal to the person making the disposal and either a smaller gain or a loss would so accrue if that paragraph did not apply, or

(ii) if as a consequence of the application of that paragraph a loss would so accrue and either a smaller loss or a gain would accrue if that paragraph did not apply,

and accordingly in a case to which subparagraph (i) or (ii) applies, the amount of the gain or loss accruing on the disposal shall be computed without regard to this subsection (other than this paragraph) but, in a case where this paragraph would otherwise substitute a loss for a gain or a gain for a loss, it shall be assumed in relation to the disposal that the units were acquired by the person disposing of them for a consideration such that neither a gain nor a loss accrued to that person on making the disposal.

732 Special arrangements for qualifying unit trusts. [CGTA75 s32; FA77 s35; CGT(A)A78 s16 and Sch1 par9; FA97 s146(2) and Sch9 PtII]

732.—(1) In this section—

“securities” includes securities within section 607 and stocks, shares, bonds and obligations of any government, municipal corporation, company or other body corporate;

“quoted securities” means securities which, at any time at which they are to be taken into account for the purposes of this section, or at any time in the period of 6 years immediately before such time, have or have had quoted market values on a stock exchange in the State or elsewhere.

(2) This section shall apply—

(a) to a unit trust (in this section referred to as a “qualifying unit trust”)—

(i) which is a registered unit trust scheme (within the meaning of section 3 of the Unit Trusts Act, 1972),

(ii) the trustees of which are resident and ordinarily resident in the State,

(iii) the prices of units in which are published regularly by the managers,

(iv) all the units in which are of equal value and carry the same rights, and

(v) which, at all times since it was registered in the register established under the Unit Trusts Act, 1972, but subject to subsection (7), satisfied the conditions specified in subsection (6), and

(b) to disposals of assets which are units in a qualifying unit trust (in this section referred to as “qualifying units”).

(3) Chargeable gains accruing to a qualifying unit trust in any year of assessment shall be chargeable to capital gains tax at one-half of the rate specified in section 28(3).

(4) Chargeable gains which derive from the disposal of qualifying units and accrue to a person chargeable to capital gains tax shall be chargeable to tax at one-half of the rate at which those gains would be chargeable under the Capital Gains Tax Acts apart from this subsection.

(5) For any accounting period of a company, being an accounting period for which the company is chargeable to corporation tax in respect of chargeable gains—

(a) where the total amount of chargeable gains accruing to the company for the accounting period derives from the disposal of qualifying units, the amount which apart from this section would be included in respect of chargeable gains in the company's total profits for the accounting period under section 78(1) shall be reduced by 50 per cent,

(b) where the total amount of chargeable gains accruing to the company for the accounting period includes—

(i) an amount in respect of such chargeable gains on the disposal of qualifying units, and

(ii) an amount in respect of such chargeable gains on the disposal of assets other than qualifying units,

the amount which apart from this section would be included in respect of chargeable gains in the company's total profits for the accounting period under section 78(1) shall be reduced by such amount as bears to the amount to be so included the same proportion as one-half of the amount referred to in subparagraph (i) bears to the total of the amounts referred to in subparagraphs (i) and (ii).

(6) The conditions referred to in subsection (2)(a)(v) are that—

(a) not less than 80 per cent of the units were held by persons who acquired them pursuant to an offer made to the general public,

(b) the number of unit holders was not less than 50 and no one unit holder was the beneficial owner of more than 5 per cent of the units in issue at any time, and for the purposes of this paragraph a person and any persons with whom such person is connected shall be treated as one unit holder,

(c) the value of quoted securities held by the trustees on behalf of the unit trust was not less than 80 per cent by value of the assets so held by the trustees, and

(d) the securities held by the trustees on behalf of the unit trust in any one company did not exceed 15 per cent by value of the total securities so held by the trustees.

(7) The Revenue Commissioners may treat a unit trust as a qualifying unit trust for the purposes of this section notwithstanding that one or more of the conditions specified in subsection (6) was or were not complied with in relation to the unit trust—

(a) for the period ending on the 5th day of April, 1978, in the case where the unit trust became registered in the register established under the Unit Trusts Act, 1972, before the 6th day of April, 1976, and

(b) for the period ending on a date not more than 2 years after the date on which the unit trust became registered in that register, in the case where the unit trust became so registered on or after the 6th day of April, 1976.

733 Reorganisation of units in unit trust scheme. [CGTA75 s51(1) and Sch2 par2A; FA90 s87]

733.—(1) In this section, references to a reorganisation of units in a trust scheme include—

(a) any case where persons are, whether for payment or not, allotted units in the scheme in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of units in the scheme or of any class of units in the scheme, and

(b) any case where there is more than one class of units and the rights attached to units of any class are altered.

(2) (a) Subject to paragraph (b), section 584 shall apply with any necessary modification in relation to a reorganisation or reduction of units in any unit trust scheme registered under the Unit Trusts Act, 1972, or authorised under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989), as if (except as respects subsection (7) of that section)—

(i) that scheme were a company, and

(ii) the units in that scheme were shares in the company.

(b) Where but for this paragraph this section would apply to any reorganisation or reduction of units in a unit trust scheme in a year of assessment so that units which are deemed not to be chargeable assets for that year for the purposes of the Capital Gains Tax Acts would be treated as “original shares” or a “new holding” within the meaning of section 584, that section shall not apply to that reorganisation or reduction of units in the unit trust scheme.

(3) The references in subsection (2) to section 584 do not include references to that section as applied by section 585 or 586.

734 Taxation of collective investment undertakings. [FA89 s18(1) to (9), (11), (11A) and (12); FA91 s19 (1) and (2); FA93 s20(a); FA94 s25(1); S.I. No. 227 of 1994; FA95 s38; FA96 s35(1); FA97 s32]

734.—(1) (a) In this section and in Schedule 18—

“accounting period”, in relation to a collective investment undertaking, means the chargeable period or its basis period (within the meaning of section 321(2)) on the income or profits of which the undertaking is chargeable to income tax or corporation tax, as the case may be, for any chargeable period (within the meaning of that section), or would be so chargeable but for an insufficiency of income or profits, and—

(i) where 2 basis periods overlap, the period common to both shall be deemed to fall in the first basis period only,

(ii) where there is an interval between the end of the basis period for one chargeable period and the basis period for the next chargeable period, the interval shall be deemed to be part of the second basis period, and

(iii) the reference in paragraph (i) to the overlapping of 2 periods shall be construed as including a reference to the coincidence of 2 periods or to the inclusion of one period in another, and the reference to the period common to both shall be construed accordingly;

“the Acts” means the Tax Acts and the Capital Gains Tax Acts;

“the airport” has the same meaning as in the Customs-Free Airport Act, 1947;

“appropriate tax”, in relation to the amount of any relevant payment made by a collective investment undertaking or in relation to any amount of undistributed relevant income of such an undertaking, as the case may be, means a sum representing tax on the amount of the payment or the amount of the undistributed relevant income, as appropriate, at a rate equal to the standard rate of income tax in force at the time of the payment or at the end of the accounting period to which the undistributed relevant income relates, as the case may be, after making a deduction from that sum of an amount equal to, or to the aggregate of—

(i) in the case of a relevant payment—

(I) in so far as it is made wholly or partly out of relevant income which at a previous date had been or formed part of the undistributed relevant income of the undertaking, the amount of any appropriate tax deducted—

(A) from the relevant income, or

(B) where the payment, or that part of the payment which is made out of relevant income, is less than the relevant income, from such part of the relevant income as is represented by the payment, or that part of the payment, as the case may be, and

(II) any other amount or amounts of tax deducted—

(A) from the relevant profits out of which the relevant payment is made, or

(B) where the payment is less than the profits, from such part of the profits as is represented by the payment,

under any of the provisions of the Acts apart from this section and which is or are not repayable to the collective investment undertaking,

or

(ii) in the case of an amount of undistributed relevant income, any amount or amounts of tax deducted from the income under any of the provisions of the Acts apart from this section and which is or are not repayable to the collective investment undertaking,

but the amount of the deduction shall not exceed the amount of the sum;

“the Area” has the same meaning as it has for the purposes of section 446;

“chargeable gain” has the same meaning as in the Capital Gains Tax Acts;

“collective investor”, in relation to an authorised investment company (within the meaning of Part XIII of the Companies Act, 1990), means an investor, being a life assurance company, pension fund or other investor—

(i) who invests in securities or any other property whatever with moneys contributed by 50 or more persons—

(I) none of whom has at any time directly or indirectly contributed more than 5 per cent of such moneys, and

(II) each of a majority of whom has contributed moneys to the investor with the intention of being entitled, otherwise than on the death of any person or by reference to a risk of any kind to any person or property, to receive from the investor—

(A) a payment which, or

(B) payments the aggregate of which,

exceeds those moneys by a part of the profits or income arising to the investor,

and

(ii) who invests in the authorised investment company primarily for the benefit of those persons;

“collective investment undertaking” means, subject to paragraph (b)—

(i) a unit trust scheme which is or is deemed to be an authorised unit trust scheme (within the meaning of the Unit Trusts Act, 1990) and which has not had its authorisation under that Act revoked,

(ii) any other undertaking which is an undertaking for collective investment in transferable securities within the meaning of the relevant Regulations, being an undertaking which holds an authorisation, which has not been revoked, issued pursuant to the relevant Regulations,

(iii) a limited partnership which—

(I) has as its principal business, as expressed in the partnership agreement establishing the limited partnership, the investment of its funds in property, and

(II) has been authorised to carry on that business, under any enactment which provides for such authorisation, by the Central Bank of Ireland,

and where, in addition to being a collective investment undertaking, it is also a specified collective investment undertaking, and

(iv) any authorised investment company (within the meaning of Part XIII of the Companies Act, 1990)—

(I) which has not had its authorisation under that Part of that Act revoked, and

(II) (A) which has been designated in that authorisation as an investment company which may raise capital by promoting the sale of its shares to the public and has not ceased to be so designated, or

(B) (aa) which is not a qualified company,

(bb) which in addition to being a collective investment undertaking is also a specified collective investment undertaking, and

(cc) where all the holders of units who must be resident outside the State, for the company to be a specified collective investment undertaking, are collective investors;

“distribution” has the same meaning as in the Corporation Tax Acts;

“qualified company” has, in relation to any business of a collective investment undertaking carried on in—

(i) the airport, the same meaning as it has for the purposes of section 445, or