TAXES CONSOLIDATION ACT, 1997

• (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

• (ii) the Area, the same meaning as it has for the purposes of section 446;

“qualifying management company”, in relation to a collective investment undertaking, means a qualified company which in the course of relevant trading operations carried on by the qualified company manages the whole or any part of the investments and other activities of the business of the undertaking;

“relevant gains”, in relation to a collective investment undertaking, means gains accruing to the undertaking, being gains which would constitute chargeable gains in the hands of a person resident in the State;

“relevant income”, in relation to a collective investment undertaking, means any amounts of income, profits or gains which arise to or are receivable by the collective investment undertaking, being amounts of income, profits or gains—

• (i) which are or are to be paid to unit holders as relevant payments,

• (ii) out of which relevant payments are or are to be made to unit holders, or

• (iii) which are or are to be accumulated for the benefit of, or invested in transferable securities for the benefit of, unit holders,

and which if they arose to an individual resident in the State would in the hands of the individual constitute income for the purposes of income tax;

“relevant payment” means a payment made to a unit holder by a collective investment undertaking by reason of rights conferred on the unit holder as a result of holding a unit or units in the collective investment undertaking, other than a payment made in respect of the cancellation, redemption or repurchase of a unit;

“relevant profits”, in relation to a collective investment undertaking, means the relevant income and relevant gains of the undertaking;

“relevant Regulations” means the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (S.I. No. 78 of 1989);

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

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

• (ii) the Area, the same meaning as it has for the purposes of section 446;

“return” means a return under paragraph 1(2) of Schedule 18;

“specified collective investment undertaking” means, subject to paragraph (c), a collective investment undertaking—

• (i) most of the business of which, to the extent that it is carried on in the State—

• (I) (A) is carried on in the Area by the undertaking or by a qualifying management company of the undertaking or by the undertaking and the qualifying management company of the undertaking, or

• (B) is not so carried on in the Area but—

• (aa) is so carried on in the State,

• (bb) would be so carried on in the Area but for circumstances outside the control of the person or persons carrying on the business, and

• (cc) is so carried on in the Area when those circumstances cease to exist,

or

• (II) is carried on in the airport by the undertaking or by a qualifying management company of the undertaking or by the undertaking and the qualifying management company of the undertaking,

and

• (ii) in which, except to the extent that such units are held by the undertaking itself, the qualifying management company of the undertaking, a company referred to in section 710(2), a specified company or another specified collective investment undertaking, all the holders of units in the undertaking are persons resident outside the State,

and includes any company limited by shares or guarantee which—

• (iii) is wholly owned by such a collective investment undertaking or its trustees, if any, for the benefit of the holders of units in that undertaking,

• (iv) is so owned solely for the purpose of limiting the liability of that undertaking or its trustees, as the case may be, in respect of futures contracts, options contracts or other financial instruments with similar risk characteristics, by enabling it or its trustees, as the case may be, to invest or deal in such investments through the company, and

• (v) would, if references to an undertaking in paragraph (i) were to be construed as including references to a company limited by shares or guarantee, satisfy the condition set out in paragraph (i);

“specified company” means a company—

• (i) which is—

• (I) a qualified company carrying on relevant trading operations (within the meaning of section 446), or

• (II) a qualified company carrying on relevant trading operations (within the meaning of section 445) so long as those relevant trading operations could be certified by the Minister for Finance as relevant trading operations for the purposes of section 446 if they were carried on in the Area rather than in the airport,

and

• (ii) not more than 25 per cent of the share capital of which is owned directly or indirectly by persons resident in the State;

“tax” means income tax, corporation tax or capital gains tax, as may be appropriate;

“transferable securities” has the same meaning as in the relevant Regulations; “undistributed relevant income”, in relation to a collective investment undertaking, means any relevant income arising to or receivable by the undertaking in an accounting period of the undertaking and which at the end of the accounting period has not been paid to the unit holders and from which appropriate tax has not previously been deducted;

“unit” includes any investment, such as a subscription for shares or a contribution of capital, in a collective investment undertaking, being an investment which entitles the investor—

• (i) to a share of the investments or relevant profits of, or

• (ii) to receive a distribution from,

the collective investment undertaking;

“unit holder”, in relation to a collective investment undertaking, means any person who by reason of the holding of a unit, or under the terms of a unit, in the undertaking is entitled to a share of any of the investments or relevant profits of, or to receive a distribution from, the undertaking.

• (b) References in this section to a collective investment undertaking, apart from such references in the definition of “specified collective investment undertaking”, shall include references to a company limited by shares or guarantee which is a specified collective investment undertaking.

• (c) For the purposes of the definition of “specified collective investment undertaking”, a reference to a qualifying management company shall be construed as if—

• (i) in section 445(2) there were deleted “, 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”, and

• (ii) in section 446(2) there were deleted “, 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”.

• (2) For the purposes of this section—

• (a) Where any payment is made out of relevant profits or out of any part of such profits from which any tax including appropriate tax has been deducted and the payment is less than the relevant profits or that part of such profits, the amount of the tax so deducted which is referable to the part of the profits represented by the payment shall be the amount which bears to the total amount of the tax deducted from the relevant profits or the part of such profits, the same proportion as the amount of the payment bears to the amount of the relevant profits or the part of such profits, as the case may be, and

• (b) any reference in this section to the amount of a relevant payment shall be construed as a reference to the amount which would be the amount of the relevant payment if the appropriate tax were not to be deducted from the relevant payment or from any undistributed relevant income out of which the relevant payment or any part of such payment is made.

• (3) Notwithstanding anything in the Acts but subject to subsection (5), a collective investment undertaking shall not be chargeable to tax in respect of relevant profits, but the relevant profits shall be chargeable to tax in the hands of any unit holder, including the undertaking, to whom a relevant payment of or out of the relevant profits is made if and to the extent that the unit holder would be chargeable to tax in the State on such relevant profits, or on such part of the relevant profits as is represented by the payment, on the basis that and in all respects as if, subject to subsections (4) and (6), the relevant profits or that part of the relevant profits had arisen or accrued to the unit holder without passing through the hands of the undertaking.

• (4) Where in accordance with subsection (3) a unit holder is to be charged to tax on a relevant payment made by a collective investment undertaking which is not a specified collective investment undertaking—