Taxes Consolidation Act 1997

(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.

776 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.

777 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.

778 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.

779 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.

780 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.

781 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.

782 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.

CHAPTER 2 Retirement annuities

783 Interpretation and general (Chapter 2). [ITA67 s195B(3) and (6), s235(6) to (9) and s238(3) and (4); FA69 s65(1) and Sch5 PtI; FA72 Sch1 PtIII par4; FA93 s10(1); FA96 s132(2) and Sch5 PtII; FA97 s146(1) and Sch9 PtI par 5(3)]

783.—(1) (a) In this section—

“director” means—

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

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

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

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

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

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

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

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

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

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

(i) future retirement or partial retirement,

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

(iii) similar matters,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

784 Retirement annuities: relief for premiums. [ITA67 s235(1) to (5) and (10); FA74 s65]

784.—(1) Where an individual—

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

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

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

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

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

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

(iii) that it does not—

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

785 Approval of contracts for dependants or for life assurance. [ITA67 s235A(1) to (6); FA74 s66]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

786 Approval of certain other contracts. [FA79 s28(1) to (3)]

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

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

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

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

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

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

787 Nature and amount of relief for qualifying premiums. [ITA67 s236(1) to (2B), (3) to (9) and (11), s238(1) and (2); F(MP)A68 s3(2) and Sch PtI; FA74 s67(1) and (2); FA75 s33(2) and Sch1 PtII; FA78 s4; FA90 s27(1); FA96 s13(a)]

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

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

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

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

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

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

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

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

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

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

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

the election shall have no effect as respects the excess.

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

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

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

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

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

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

(a) an insufficiency of net relevant earnings, or

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

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

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

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

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

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

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

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

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

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

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

CHAPTER 3 Purchased life annuities

788 Capital element in certain purchased annuities. [ITA67 s239; CTA76 s140(1) and Sch2 PtI par9; FA79 s28(4); FA96 s132(1) and Sch5 PtI par1(10) and (11); FA97 s146(1) and Sch9 PtI par1(15)]

788.—(1) In this section—

“life annuity” means an annuity payable for a term ending with (or at a time ascertainable only by reference to) the end of a human life, whether or not there is provision for the annuity to end during the life on the expiration of a fixed term or on the happening of any event or otherwise, or to continue after the end of the life in particular circumstances;

“purchased life annuity” means a life annuity granted for a consideration in money or money's worth in the ordinary course of a business of granting annuities on human life.

(2) This section shall not apply to—

(a) any annuity which apart from this section would be treated for the purposes of the provisions of the Income Tax Acts relating to tax on annuities and other annual payments as consisting to any extent in the payment or repayment of a capital sum,

(b) any annuity purchased under or for the purposes of any sponsored superannuation scheme within the meaning of section 783(1), or any scheme approved under section 784, or in pursuance of any obligation imposed or offer or invitation made under or in connection with any such scheme, or any other annuity purchased by any person in recognition of another's services (or past services) in any office or employment,

(c) any annuity payable under a substituted contract within the meaning of section 786(3),

(d) any annuity where the whole or part of the consideration for the grant of the annuity consisted of sums satisfying the conditions for relief from tax under section 787, or

(e) any annuity purchased in pursuance of any direction in a will, or to provide for an annuity payable by virtue of a will or settlement out of income of property disposed of by the will or settlement (whether with or without resort to capital).

(3) A purchased life annuity (not being of a description excepted by subsection (2)) shall, for the purposes of the provisions of the Income Tax Acts relating to tax on annuities and other annual payments, be treated as containing a capital element and, to the extent of the capital element, as not being an annual payment or in the nature of an annual payment; but the capital element in such an annuity shall be taken into account in computing profits or gains or losses for other purposes of the Income Tax Acts in any circumstances in which a lump sum payment would be taken into account.

(4) In the case of any purchased life annuity to which this section applies—

(a) the capital element shall be determined by reference to the amount or value of the payments made or other consideration given for the grant of the annuity,

(b) the proportion which the capital element in any annuity payment bears to the total amount of that payment shall be constant for all payments on account of the annuity,

(c) where neither the term of the annuity nor the amount of any annuity payment depends on any contingency other than the duration of a human life or lives, that proportion shall be the same proportion which the total amount or value of the consideration for the grant of the annuity bears to the actuarial value of the annuity payments as determined in accordance with subsection (5), and

(d) where paragraph (c) does not apply, that proportion shall be such as may be just, having regard to that paragraph and to the contingencies affecting the annuity.

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

(a) any entire consideration given for the grant of an annuity and for some other matter shall be apportioned as appears just (but so that a right to a return of premiums or other consideration for an annuity shall not be treated for this purpose as a distinct matter from the annuity),

(b) where it appears that the amount or value of the consideration purporting to be given for the grant of an annuity has affected, or has been affected by, the consideration given for some other matter, the aggregate amount or value of those considerations shall be treated as one entire consideration given for both and shall be apportioned under paragraph (a) accordingly, and

(c) the actuarial value of any annuity payments shall be taken to be their value as at the date when the first of those payments begins to accrue, that value being determined by reference to the prescribed tables of mortality and without discounting any payment for the time to elapse between that date and the date it is to be made.

(6) Where a person making a payment on account of any life annuity has been notified in the prescribed manner of any decision as to its being or not being a purchased life annuity to which this section applies or as to the amount of the capital element, if any, and has not been notified of any alteration of that decision, the notice shall be evidence until the contrary is proved as to those matters for the purpose of determining the amount of income tax which the person is entitled or required to deduct from the payment, or for which the person is liable in respect of the payment.

(7) Where a person making a payment on account of a purchased life annuity to which this section applies has not been notified in the prescribed manner of the amount of the capital element, the amount of income tax which the person is entitled or required to deduct from the payment, or for which the person is liable in respect of it, shall be the same as if the annuity were not a purchased life annuity to which this section applies.

(8) Any person, other than a company which is within the charge to corporation tax, carrying on a business of granting annuities on human life shall be entitled to repayment of any income tax borne by that person by deduction or otherwise for any year of assessment up to the amount of income tax which, if this section had not been enacted, that person would have been entitled to deduct and retain on making payments due in that year of assessment on account of life annuities and which in accordance with this section that person has not deducted.

(9) This section shall apply to life annuities whenever purchased or commencing, and the reference to section 787 in subsection (2)(d) shall be construed accordingly.

789 Supplementary provisions (Chapter 3). [ITA67 s240; F(MP)A68 s3(2) and Sch PtI]

789.—(1) Any question as to whether an annuity is a purchased life annuity to which section 788 applies, or what is the capital element in such an annuity, shall be determined by the inspector, but any person aggrieved by any decision of the inspector on any such question may appeal within the prescribed time to the Appeal Commissioners.

(2) Except where otherwise provided in this Chapter, the procedure to be adopted in giving effect to this Chapter shall be such as may be prescribed.

(3) The Revenue Commissioners may make regulations for prescribing anything which is to be prescribed under this Chapter, and the regulations may apply, for the purposes of this Chapter or of the regulations, any provision of the Income Tax Acts (with or without modifications), and in particular the provisions relating to the rehearing of an appeal and to the statement of a case for the opinion of the High Court on a point of law.

(4) Regulations under subsection (3) may in particular make provision as to the time limit for making any claim for relief from or repayment of tax under this Chapter and as to all or any of the following matters—

(a) the information to be given in connection with the determination of any question whether an annuity is a purchased life annuity to which section 788 applies, or what is the capital element in an annuity, and the persons who may be required to give any such information;

(b) the manner of giving effect to the decision on any such question, and the making of assessments for the purpose on the person entitled to the annuity (notwithstanding anything in section 237);

(c) the extent to which any decision on any such question is to be binding and the circumstances in which it may be reviewed.

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

CHAPTER 4 Miscellaneous

790 Liability of certain pensions, etc. to tax. [ITA67 s225; FA97 s146(1) and Sch9 PtI par1(14)]

790.—Where an individual has ceased to hold an office or employment and a pension, annuity or other annual payment is paid to the individual or to the individual's widow or widower, or to the individual's child or any of the individual's relatives or dependants by the person or the heirs, executors, administrators or successors of the person under whom the individual held such office or by whom the individual was so employed, such pension, annuity or other annual payment shall, notwithstanding that it is paid voluntarily or is capable of being discontinued, be deemed to be income for the purpose of assessment of income tax and shall be assessed and charged under Schedule D or E, as the case may require.

PART 31 Taxation of Settlors, Etc., in Respect of Settled or Transferred Income

CHAPTER 1 Revocable dispositions for short periods and certain dispositions in favour of children

791 Income under revocable dispositions. [ITA67 s438 and s442]

791.—(1) In this Chapter and in paragraph 27 of Schedule 32, except where the context otherwise requires, “disposition” includes any trust, covenant, agreement or arrangement.

(2) Any income of which any person (in this subsection referred to as “the first-mentioned person”) is able or has been able, without the consent of any other person by means of the exercise of any power of appointment, power of revocation or otherwise however by virtue or in consequence of a disposition made directly or indirectly by the first-mentioned person, to obtain for the first-mentioned person the beneficial enjoyment shall be deemed for the purposes of the Income Tax Acts to be the income of the person who is or was able to obtain such beneficial enjoyment, and not to be the income of any other person.

(3) Where any power referred to in subsection (2) may be exercised by a person with the consent of the wife or husband of the person, the power shall for the purposes of subsection (2) be deemed to be exercisable without the consent of another person, except where the husband and wife are living apart either by agreement or under an order of a court of competent jurisdiction.

(4) Where any power referred to in subsection (2) is exercisable by the wife or husband of the person who made the disposition, the power shall for the purposes of subsection (2) be deemed to be exercisable by the person who made the disposition.

792 Income under dispositions for short periods. [ITA67 s439; FA95 s13(1)(a) and (2)]

792.—(1) (a) In this subsection, “relevant individual” means an individual who is—

(i) permanently incapacitated by reason of mental or physical infirmity, or

(ii) aged 65 years or over.

(b) Any income which, by virtue of or in consequence of any disposition made directly or indirectly by any person (other than a disposition made for valuable and sufficient consideration), is payable to or applicable for the benefit of any other person, but excluding any income which—

(i) arises from capital of which the disponer by the disposition has divested absolutely himself or herself in favour of or for the benefit of the other person,

(ii) being payable to any university or college, being a university or college in the State, for the purpose of enabling that university or college to carry on research, is so payable for a period which is or may be 3 years or longer,

(iii) being payable to any body of persons to which section 209 applies, is so payable for a period which is or may be 3 years or longer,

(iv) being payable to a relevant individual for the individual's own use, is so payable for a period which exceeds or may exceed 6 years, or

(v) being applicable for the benefit of a named relevant individual, is so applicable for a period which exceeds or may exceed 6 years,

shall be deemed for the purposes of the Income Tax Acts to be the income of the person, if living, by whom the disposition was made and not to be the income of any other person.

(2) (a) This subsection shall apply to a disposition or dispositions of a kind or kinds referred to in subparagraphs (ii) to (v) of subsection (1)(b) made directly or indirectly by a person being an individual (in this subsection referred to as “the disponer”) except in so far as, by virtue or in consequence of such disposition or dispositions, income is payable or applicable in a year of assessment, in the manner referred to in subparagraph (iv) or (v) of that subsection, to or for the benefit of an individual referred to in subsection (1)(a)(i).

(b) Notwithstanding subsection (1), in relation to the disponer, any income which—

(i) is payable or applicable in a year of assessment by virtue or in consequence of a disposition or dispositions to which this subsection applies, and

(ii) is in excess of 5 per cent of the total income of the disponer for the year of assessment,

shall be deemed for the purposes of the Income Tax Acts to be the income of the disponer, if living, and not to be the income of any other person.

(c) Where paragraph (b) applies in relation to the disponer, for the purpose of determining for income tax purposes the amount of income which remains the income of persons other than the disponer for a year of assessment by virtue or in consequence of a disposition or dispositions to which this subsection applies, the aggregate of the income so remaining shall be apportioned amongst those other persons in proportion to their entitlements under such disposition or dispositions for that year.

(3) (a) In this subsection, “fund” means a fund—

(i) held on irrevocable trusts under the law of the State,

(ii) administered in the State, and

(iii) having for its sole purpose the granting of financial or other aid to universities, colleges or schools in the State in order to assist such universities, colleges or schools to teach any one or more of the natural sciences.

(b) The reference in subsection (1)(b) to any university or college, being a university or college in the State, for the purpose of enabling that university or college to carry on research shall include references to income payable—

(i) to any university, college or school, being a university, college or school in the State, for the purpose of assisting such university, college or school to teach any one or more of the natural sciences, or

(ii) to a fund within the meaning of this subsection.

(4) As respects the year of assessment 1997-98, this section shall apply subject to paragraph 27 of Schedule 32 in respect of a disposition to which that paragraph applies by a person in so far as, by virtue or in consequence of such a disposition, income is payable in that year of assessment to or for the benefit of an individual to whom that paragraph applies.

793 Recovery of tax from trustee and payment to trustee of excess tax recoupment. [ITA67 s441; F(MP)A68 s3(2) and Sch PtI; FA74 s86 and Sch2 PtI; FA96 s132(2) and Sch5 PtII; FA97 s146(1) and Sch9 Pt1 par1(28)]

793.—(1) Where by virtue of section 792 any income tax becomes chargeable on and is paid by the person by whom the disposition was made, that person shall be entitled—

(a) to recover from any trustee or other person to whom the income is payable by virtue or in consequence of the disposition the amount of the tax so paid, and

(b) for that purpose to require the Revenue Commissioners to furnish to that person a certificate specifying the amount of the income in respect of which that person has so paid tax and the amount of the tax so paid, and any certificate so furnished shall be evidence until the contrary is proved of the matters of fact stated in that certificate.

(2) Where any person obtains in respect of any allowance or relief a repayment of income tax in excess of the amount of the repayment to which that person would but for section 792 have been entitled, an amount equal to the excess shall be paid by that person to the trustee or other person to whom the income is payable by virtue or in consequence of the disposition or, where there are 2 or more such persons, shall be apportioned among those persons as the case may require.

(3) Where any question arises as to the amount of any payment or as to any apportionment to be made under subsection (2), that question shall be decided by the Appeal Commissioners whose decision on that question shall be final.

(4) Any income which is deemed by virtue of this Chapter to be the income of any person shall be deemed to be the highest part of that person's income.

CHAPTER 2 Settlements on children generally

794 Interpretation and application (Chapter 2). [ITA67 s443(2), (3) and (5), s445 and s447; FA95 s12(1)(a)(ii) and (c)(i) and (ii)]

794.—(1) In this Chapter—

“income” (except where in sections 795(1), 796(2)(b) and subsections (4) and (5) of section 797 it is immediately preceded by “as” or “that person's” and except also in section 798) includes any income chargeable to income tax by deduction or otherwise and any income which would have been so chargeable if it had been received in the State by a person resident or ordinarily resident in the State;

“settlement” includes any disposition, trust, covenant, agreement or arrangement, and any transfer of money or other property or of any right to money or other property.

(2) This Chapter shall apply to every settlement wherever and whenever made or entered into.

(3) This Chapter shall not apply in relation to any income arising under a settlement in any year of assessment for which the settlor is not chargeable to income tax as a resident in the State, and references in this Chapter to income shall be construed accordingly.

(4) This Chapter shall not apply to any income which, by virtue or in consequence of a settlement and during the life of the settlor, is in any year of assessment paid to or for the benefit of a minor, not being a child of the settlor, if such minor is permanently incapacitated by reason of mental or physical infirmity.

(5) For the purposes of this Chapter, the following provisions shall apply in relation to the construction of “irrevocable instrument”:

(a) an instrument shall not be an irrevocable instrument if the trusts of the instrument provide for all or any one or more of the following matters—

(i) the payment or application to or for the settlor for the settlor's own benefit of any capital or income or accumulations of income in any circumstances whatever during the life of a person (in this paragraph referred to as a “beneficiary”) to or for the benefit of whom any income or accumulations of income is or are or may be payable or applicable under the trusts of the instrument,

(ii) the payment or application during the life of the settlor to or for the husband or wife of the settlor for his own or her own benefit of any capital or income or accumulations of income in any circumstances whatever during the life of any beneficiary,

(iii) the termination of the trusts of the instrument by the act or on the default of any person, and

(iv) the payment by the settlor of a penalty in the event of the settlor failing to comply with the instrument;

(b) an instrument shall not be prevented from being an irrevocable instrument by reason only that the trusts of the instrument include any one or more of the following provisions—

(i) a provision under which any capital or income or accumulations of income will or may become payable to or applicable for the benefit of the settlor or the husband or wife of the settlor, on the bankruptcy of a person (in this paragraph referred to as a “beneficiary”) to or for the benefit of whom any income or accumulations of income is or are or may be payable or applicable under the trusts of the instrument,

(ii) a provision under which any capital or income or accumulations of income will or may become payable to or applicable for the benefit of the settlor or the husband or wife of the settlor, in the event of any beneficiary making an assignment of or charge on such capital or income or accumulations of income, and

(iii) a provision for the termination of the trusts of the instrument in such circumstances or manner that such termination would not, during the life of any beneficiary, benefit any person other than that beneficiary or that beneficiary's husband, wife or issue;

(c) “irrevocable instrument” includes instruments whenever made.

795 Income settled on children. [ITA67 s443(1); FA95 s12(1)(a)(i) and (c)]

795.—(1) Where, by virtue or in consequence of a settlement and during the life of the settlor, any income is in any year of assessment paid to or for the benefit of a person, such income shall, if at the time of payment such person is a minor, be treated for the purposes of the Income Tax Acts as income of the settlor for that year and not as income of any other person.

(2) For the purposes of this Chapter, but subject to section 796—

(a) income which, by virtue or in consequence of a settlement to which this Chapter applies, is so dealt with that it or assets representing it will or may become payable or applicable to or for the benefit of a person in the future (whether on the fulfilment of a condition, or on the happening of a contingency, or as the result of the exercise of a power or discretion conferred on any person, or otherwise) shall be deemed to be paid to or for the benefit of that person, and

(b) any income dealt with in the manner referred to in paragraph (a) which is not required by the settlement to be allocated, at the time when it is so dealt with, to any particular person or persons shall be deemed to be paid in equal shares to or for the benefit of each of the persons to or for the benefit of whom or any of whom the income or assets representing it will or may become payable or applicable.

796 Irrevocable instruments. [ITA67 s444 and s447; FA71 s16(2) and (3); FA95 s12(1)(b)]

796.—(1) In this section, “property” does not include any annual or other periodical payment secured by the covenant of the settlor, or by a charge made by the settlor on the whole or any part of the settlor's property or the whole or any part of the settlor's future income, or by both such covenant and such charge.

(2) Where by virtue of an irrevocable instrument property is vested in or held by trustees on such trusts that in any year of assessment section 795 would but for this section apply to the income of such property, the following provisions shall apply:

(a) section 795 shall not apply—

(i) in respect of any part of such income which is in that year of assessment accumulated for the benefit of a person, or

(ii) in respect of income arising in that year of assessment from accumulations of income referred to in subparagraph (i);

(b) whenever in any year of assessment any sum whatever is paid under the trusts of such irrevocable instrument out of—

(i) such property,

(ii) the accumulations of the income of such property,

(iii) the income of such property, or

(iv) the income of those accumulations,

to or for the benefit of a person who at the time of payment is a minor, such sum shall, subject to the limitation in paragraph (c), be deemed for the purposes of this Chapter to be paid as income;

(c) paragraph (b) shall not apply to so much of such sum as is equal to the amount by which the aggregate of such sum and all other sums (if any) paid after the 5th day of April, 1937, under the trusts of such irrevocable instrument to or for the benefit of that person or any other person (being a person who at the time of payment was a minor) exceeds the aggregate amount of the income arising after the 5th day of April, 1937, from such property together with the income arising after that date from those accumulations;

(d) for the purposes of paragraph (c), the reference in that paragraph to another sum paid to or for the benefit of a person who at the time of payment was a minor shall be construed, in relation to a payment to which this paragraph applies of any such sum, as a reference to a sum so paid to or for the benefit of a person who at the beginning of the year of assessment in which such other sum was paid was a minor;

(e) paragraph (d) shall apply to any payment of any such sum—

(i) made before the 6th day of April, 1971, or

(ii) in the case of a payment to or for the benefit of a child born after the 6th day of April, 1971, and so made by virtue or in consequence of a settlement made before the 28th day of April, 1971, made in the year 1971-72;

(f) for the purposes of paragraphs (c) and (d), references in those paragraphs to a person being at a particular time a minor shall, where that time is before the 6th day of April, 1986, be construed as references to a person who at that time was under the age of 21 years and was not or had not been married.

797 Recovery of tax from trustee and payment to trustee of excess tax recoupment. [ITA67 s446; F(MP)A68 s3(2) and Sch PtI; FA74 s86 and Sch2 PtI; FA97 s146(1) and Sch9 PtI par1(29)]

797.—(1) Where by virtue of this Chapter any income tax becomes chargeable on and is paid by a settlor, such settlor shall be entitled—

(a) to recover from any trustee or other person to whom the income is payable by virtue or in consequence of the settlement the amount of the tax so paid, and

(b) for that purpose to require the Revenue Commissioners to furnish to such settlor a certificate specifying the amount of the income in respect of which such settlor has so paid tax and the amount of the tax so paid, and every certificate so furnished shall be evidence until the contrary is proved of the matters of fact stated in the certificate.

(2) Where any person obtains in respect of any allowance or relief a repayment of income tax in excess of the amount of the repayment to which that person would but for this Chapter have been entitled, an amount equal to the excess shall be paid by that person to the trustee or other person to whom the income is payable by virtue or in consequence of the settlement and, where there are 2 or more such trustees or other persons, in such proportions as the circumstances may require.

(3) Where any question arises as to the amount of any payment or as to any apportionment to be made under subsection (2), that question shall be decided by the Appeal Commissioners whose decision on that question shall be final.

(4) Any income which by virtue of this Chapter is treated as income of any person shall be deemed to be the highest part of that person's income.

(5) No repayment shall be made under paragraph 21 of Schedule 32 on account of tax paid in respect of any income which has by virtue of this Chapter been treated as income of a settlor.

798 Transfer of interest in trade to children. [ITA67 s448(1), (3) and (4)]

798.—(1) Where by any means whatever (including indirect means or means consisting of a series of operations and whenever adopted) a trade, which at any time before the adoption of such means was carried on by any person solely or in partnership, becomes a trade carried on by one or more than one child of such person or by means of a partnership in which such person and one or more than one child of such person are partners, the following provisions shall apply:

(a) such means shall for the purposes of this Chapter be deemed to constitute a settlement as respects which such person shall be deemed to be the settlor;

(b) the profits or gains arising from the trade after the adoption of such means, in so far as they arise to one or, as the case may be, more than one child of such person shall for the purposes of this Chapter be deemed to be the same income as would have arisen to such person had such means not been adopted;

(c) “income” where it first occurs in section 795 shall be deemed to include those profits or gains in so far as they arise to one or more than one child of such person.

(2) The amount of the income of a person from the profits or gains of a trade deemed by virtue of subsection (1) to be income of another person shall, if the first-mentioned person is engaged actively in the carrying on of the trade, be the full amount of that income reduced by a sum (in subsection (3) referred to as “the appropriate sum”) equal to the amount which would have been allowed in computing those profits or gains in respect of the first-mentioned person if that person, instead of being a person engaged in the carrying on of the trade, had been a person employed by a person or persons carrying on the trade.

(3) The appropriate sum shall be deemed to be profits or gains arising to the first-mentioned person referred to in subsection (2) from the exercise of an office or employment within the meaning of Schedule E.

PART 32 Estates of Deceased Persons in Course of Administration and Surcharge on Certain Income of Trustees

CHAPTER 1 Estates of deceased persons in course of administration

799 Interpretation (Chapter 1). [ITA67 s450; CTA76 s140 and Sch2 PtI par23; FA97 s146(1) and Sch9 PtI par1(30)]

799.—(1) (a) In this Chapter—

“administration period” has the meaning assigned to it by section 800(1);

“charges on residue”, in relation to the estate of a deceased person, means the following liabilities properly payable out of the estate and interest payable in respect of those liabilities—

(i) funeral, testamentary, and administration expenses and debts,

(ii) general legacies, demonstrative legacies and annuities, and

(iii) any other liabilities of the deceased person's personal representatives as such,

but, in the case of any such liabilities which, as between persons interested under a specific disposition or in a legacy referred to in paragraph (ii) or in an annuity and persons interested in the residue of the estate, fall exclusively or primarily on the property that is the subject of the specific disposition or on the legacy or annuity, includes only such part (if any) of those liabilities as fall ultimately on the residue;

“foreign estate”, as regards any year of assessment, means an estate other than an Irish estate;

“Irish estate”, as regards any year of assessment, means an estate the income of which comprises only income which either has borne Irish income tax by deduction or in respect of which the personal representatives are directly assessable to Irish income tax, other than an estate any part of the income of which is income in respect of which the personal representatives are entitled to claim exemption from Irish income tax by reference to the fact that they are not resident or not ordinarily resident in the State;

“personal representative”, in relation to the estate of a deceased person, means his or her personal representative within the meaning of section 3(1) of the Succession Act, 1965, and includes any person who takes possession of or intermeddles with the property of the deceased and also includes any person having, in relation to the deceased, under the law of another country any functions corresponding to the functions for administration purposes under the law of the State of a personal representative within the meaning of that section, and references to personal representatives as such shall be construed as references to personal representatives in their capacity as having such functions;

“specific disposition” means a specific devise or bequest made by a testator, and includes any disposition having, whether by virtue of any enactment or otherwise, under the law of the State or of another country an effect similar to that of a specific devise or bequest under the law of the State.

(b) For the purposes of this Chapter—

(i) references to the aggregate income of the estate of a deceased person for any year of assessment shall be construed, subject to section 439(2), as references to the aggregate income from all sources for that year of the personal representatives of the deceased as such, treated as consisting of—

(I) any such income chargeable to Irish income tax by deduction or otherwise, such income being computed at the amount on which that tax falls to be borne for that year, and

(II) any such income which would have been so chargeable if it had arisen in the State to a person resident and ordinarily resident in the State, such income being computed at the full amount of that income actually arising during that year, less such deductions as would have been allowable if it had been charged to Irish income tax, but excluding any income from property devolving on the personal representatives otherwise than as assets for payment of the debts of the deceased;

(ii) references to sums paid include references to assets transferred or appropriated by a personal representative to himself or herself and to debts set off or released;

(iii) references to sums payable include references to assets as to which an obligation to transfer or a right of a personal representative to appropriate to himself or herself is subsisting on the completion of the administration and to debts as to which an obligation to release is set off, or a right of a personal representative so to do in his or her own favour, is then subsisting;

(iv) references to amount in relation to assets referred to in subparagraphs (ii) and (iii) shall be construed as references to the value of those assets at the date on which they were transferred or appropriated, or at the completion of the administration, as the case may require, and, in relation to such debts, as references to the amount of such debts.

(2) For the purposes of this Chapter—

(a) a person shall be deemed to have an absolute interest in the residue of the estate of a deceased person, or in a part of the residue of that estate, if and so long as the capital of the residue or of that part of the residue, as the case may be, would if the residue had been ascertained be properly payable to the person or to another in the person's right for the person's benefit, or is properly so payable, whether directly by the personal representatives, or indirectly through a trustee or other person;

(b) a person shall be deemed to have a limited interest in the residue of the estate of a deceased person, or in a part of the residue of that estate, during any period (other than a period during which the person has an absolute interest in the residue or in that part of the residue, as the case may be) where the income of the residue or of that part of the residue, as the case may be, for that period would, if the residue had been ascertained at the commencement of that period, be properly payable to the person, or to another person in the person's right, for the person's benefit, whether directly by the personal representatives, or indirectly through a trustee or other person;

(c) real estate included (either by a specific or a general description) in a residuary gift made by the will of a testator shall be deemed to be a part of the residue of the testator's estate and not to be the subject of a specific disposition.

(3) Where different parts of the estate of a deceased person are the subjects respectively of different residuary dispositions, this Chapter shall apply in relation to each such part with the substitution—

(a) for references to the estate of references to that part of the estate, and

(b) for references to the personal representatives of the deceased as such of references to those personal representatives in their capacity as having the functions referred to in the definition of “personal representative” in relation to that part of the estate.

800 Limited interest in residue. [ITA67 s451; F(MP)A68 s3(5) and Sch Pt IV; FA74 s11 and Sch1 PtII]

800.—(1) This section shall apply in relation to a person who, during the period commencing on the death of a deceased person and ending on the completion of the administration of the estate of the deceased person (in this Chapter referred to as “the administration period”) or during a part of that period, has a limited interest in the residue of that estate or in a part of the residue of that estate.

(2) When any sum has been paid during the administration period in respect of that limited interest, the amount of that sum shall, subject to subsection (3), be deemed for the purposes of the Income Tax Acts to have been paid to that person as income for the year of assessment in which that sum was paid or, in the case of a sum paid in respect of an interest that has ceased, for the last year of assessment in which that interest was subsisting.

(3) On the completion of the administration of the estate—

(a) the aggregate amount of all sums paid before or payable on the completion of the administration in respect of that limited interest shall be deemed to have accrued due to that person from day to day during the administration period or the part of that period during which that person had that interest, as the case may be, and to have been paid to that person as it accrued due,

(b) the amount deemed to have been paid to that person by virtue of paragraph (a) in any year of assessment shall be deemed for the purposes of the Income Tax Acts to have been paid to that person as income for that year, and

(c) where the amount deemed to have been paid to that person as income for any year by virtue of this subsection is less or greater than the amount deemed to have been paid to that person as income for that year by virtue of subsection (2), such adjustments shall be made as are provided in section 804.

(4) Any amount deemed to have been paid to that person as income for any year by virtue of this section shall—

(a) in the case of an Irish estate, be deemed to be income of such an amount as would after deduction of income tax at the standard rate of tax for that year be equal to the amount deemed to have been so paid and to be income that has borne income tax at that standard rate of tax;

(b) in the case of a foreign estate, be deemed to be income of the amount deemed to have been so paid, and shall be chargeable to income tax under Case III of Schedule D as if it were income arising from securities in a place outside the State.

(5) Where—

(a) a person has been charged to income tax for any year by virtue of this section in respect of an amount deemed to have been paid to that person as income in respect of an interest in a foreign estate, and

(b) any part of the aggregate income of that estate for that year has borne Irish income tax by deduction or otherwise,

the income in respect of which that person has been so charged to tax shall on proof of the facts be reduced by an amount bearing the same proportion thereto as the part of that aggregate income which has borne Irish income tax bears to the whole of that aggregate income.

(6) Where relief has been given in accordance with subsection (5), such part of the amount in respect of which the person has been charged to income tax as corresponds to the proportion referred to in that subsection shall for the purpose of computing the person's total income be deemed to represent income of such an amount as would after deduction of income tax at the standard rate of tax be equal to that part of the amount charged.

801 Absolute interest in residue. [ITA67 s452; CTA76 s140(1) and Sch2 PtI par24]

801.—(1) This section shall apply in relation to a person who during the administration period or a part of that period has an absolute interest in the residue of the estate of a deceased person or in a part of the residue of that estate.

(2) There shall be ascertained in accordance with section 802 the amount of the residuary income of the estate for each whole year of assessment, and for each part of a year of assessment, during which—

(a) the administration period was current, and

(b) that person had that interest,

and the amount so ascertained in respect of any year or part of a year, or, in the case of a person having an absolute interest in a part of a residue, a proportionate part of that amount, is in this Chapter referred to as the “residuary income” of that person for that year of assessment.

(3) When any sum has or any sums have been paid during the administration period in respect of that absolute interest, the amount of that sum or the aggregate amount of those sums shall, subject to subsection (4), be deemed for the purposes of the Income Tax Acts to have been paid to that person as income to the extent to which, and for the year or years of assessment for which, that person would have been treated for those purposes as having received income if—

(a) that person had had a right to receive in each year of assessment—

(i) in the case of an Irish estate, that person's residuary income for that year less income tax for that year at the standard rate of tax, or

(ii) in the case of a foreign estate, that person's residuary income for that year,

and

(b) that sum or the aggregate of those sums had been available for application primarily in or towards satisfaction of those rights as they accrued and had been so applied.

(4) In the case of an Irish estate, any amount deemed to have been paid to that person as income for any year by virtue of subsection (3) shall be deemed to be income of such an amount as would after deduction of income tax at the standard rate of tax for that year be equal to the amount deemed to have been so paid, and to be income which has borne income tax at the standard rate of tax.

(5) On the completion of the administration of the estate—

(a) the amount of the residuary income of that person for any year of assessment shall be deemed for the purposes of the Income Tax Acts to have been paid to that person as income for that year and, in the case of an Irish estate, shall be deemed to have borne tax by reference to the standard rate of tax, and

(b) where the amount deemed to have been paid to that person as income for any year by virtue of this subsection is less or greater than the amount deemed to have been paid to that person as income for that year by virtue of subsection (3) or (4), such adjustments shall be made as are provided in section 804.

(6) In the case of a foreign estate, any amount deemed to have been paid to that person as income for any year by virtue of this section shall be deemed to be income of that amount, and shall be chargeable to income tax under Case III of Schedule D as if it were income arising from securities in a place outside the State.

(7) Where—

(a) a person has been charged to income tax for any year by virtue of this section in respect of an amount deemed to have been paid to that person as income in respect of an interest in a foreign estate, and

(b) any part of the aggregate income of that estate for that year has borne Irish income tax by deduction or otherwise,

the income in respect of which that person has been so charged to tax shall on proof of the facts be reduced by an amount bearing the same proportion thereto as the part of that aggregate income which has borne Irish income tax bears to the whole of that aggregate income.

(8) Where relief has been given in accordance with subsection (7), such part of the amount in respect of which the person has been charged to income tax as corresponds to the proportion referred to in that subsection shall for the purpose of computing the person's total income be deemed to represent income of such an amount as would after deduction of income tax at the standard rate of tax be equal to that part of the amount charged.

(9) For the purposes of any charge to corporation tax to which this section is applied, the residuary income of a company shall be computed in the first instance by reference to years of assessment, and the residuary income for any such year shall be apportioned between the accounting periods (if more than one) comprising that year.

802 Supplementary provisions as to absolute interest in residue. [ITA67 s453]

802.—(1) The amount of the residuary income of an estate for any year of assessment shall be ascertained by deducting from the aggregate income of the estate for that year—

(a) the amount of any annual interest, annuity or other annual payment for that year which is a charge on residue and the amount of any payment made in that year in respect of any such expenses incurred by the personal representatives as such in the management of the assets of the estate as, in the absence of any express provision in a will, would be properly chargeable to income, but excluding any such interest, annuity or payment allowed or allowable in computing the aggregate income of the estate, and

(b) the amount of any of the aggregate income of the estate for that year to which a person has on or after assent become entitled by virtue of a specific disposition either for a vested interest during the administration period or for a vested or contingent interest on the completion of the administration.

(2) (a) In this subsection, “benefits received”, in relation to an absolute interest, means the following amounts in respect of all sums paid before, or payable on, the completion of the administration in respect of that interest—

(i) as regards a sum paid before the completion of the administration in the case of an Irish estate, such an amount as would, after deduction of income tax at the standard rate of tax for the year of assessment in which that sum was paid, be equal to that sum or, in the case of a foreign estate, the amount of that sum, and

(ii) as regards a sum payable on the completion of the administration in the case of an Irish estate, such an amount as would, after deduction of income tax at the standard rate of tax for the year of assessment in which the administration is completed, be equal to that sum or, in the case of a foreign estate, the amount of that sum.

(b) In the event of its appearing, on the completion of the administration of an estate in the residue of which, or in a part of the residue of which, a person had an absolute interest at the completion of the administration, that the aggregate of the benefits received in respect of that interest does not amount to as much as the aggregate for all years of the residuary income of the person having that interest, that person's residuary income for each year shall be reduced for the purpose of section 801 by an amount bearing the same proportion thereto as the deficiency bears to the aggregate for all years of that person's residuary income.

(3) In the application of subsection (2) to a residue or a part of a residue in which a person, other than the person having an absolute interest at the completion of the administration, had an absolute interest at any time during the administration period, the aggregates mentioned in that subsection shall be computed in relation to those interests taken together, and the residuary income of that other person shall also be subject to reduction under that subsection.

803 Special provisions as to certain interests. [ITA67 s454]