Revenue Note for Guidance
This section provides the tax regime for an equity/gilt investment product known as a special portfolio investment account (SPIA) operated on behalf of individuals by designated stockbrokers. The tax treatment of SPIAs is broadly similar to that which applies to special investment policies issued by life assurance companies and special investment schemes which are a type of unit trust – refer to the notes on sections 723 and 737, respectively. Certain investment criteria must be met by a SPIA, and income and gains – both realised and unrealised – arising from the investment are subject to an annual 20 per cent tax charge. This is a final tax.
These accounts can not be commenced after 5 April, 2001. In relation to accounts existing at that date, the requirement that investment be focused on Irish equities and bonds has been removed and there will no longer be a limit to the value of assets held in the account on every fifth anniversary of the date it was opened.
(1)(a) “designated broker” defines the stockbrokers who operate the SPIAs.
“gains” means chargeable gains within the meaning of the Capital Gains Tax Acts and includes gains on gilts.
“qualifying shares” are ordinary shares listed on, or quoted on, the Irish Stock Exchange but excluding shares which are shares in an investment company or any kind of collective investment undertaking.
“relevant income or gains” identifies the investment return, net of expenses due to the broker, which qualifies for the 20 per cent rate – it covers, in addition to dividend income, capital gains (and losses) arising from a relevant investment.
“relevant investment” indicates the investments which may be held by a designated broker in a SPIA. These are either —
It is a requirement that the broker acquires the relevant investment at market value by means of expending funds contributed by the individual investor by way of a specified deposit. Existing shares or securities held by the investor cannot be simply transferred to the SPIA.
(1)(b)(i) Various terms used in the legislation governing deposit interest retention tax (DIRT) set out in Chapter 4 of Part 8 are linked to terms used in this section so that by virtue of subsection (3) the DIRT collection mechanism can be applied in broad terms to the collection of tax in respect of SPIAs.
(1)(b)(ii) However, the provisions relating to the interim payment of DIRT are disapplied for the purposes of this section.
(1)(c) & (2) Despite the provisions of subsection (3) (which apply the DIRT provisions governing special savings accounts to special portfolio investment accounts), the conditions under which special savings accounts operate do not apply in full to SPIAs since some of them have no relevance to those accounts. However, the following conditions are to apply to SPIAs —
These accounts cannot be commenced on or after 5 April, 2001.
(3) SPIAs are linked into the DIRT legislation as it applies to special savings accounts and in particular as regards the tax rate on those accounts.
(4) & (5) Provision is made for special rules in relation to the tax treatment of SPIAs which apply so as to overrule any other provision of the Tax Acts or the Capital Gains Tax Acts. These rules are as follows —
(6) A designated broker is deemed to have made a payment on 31 December in each year of assessment of the amount of relevant income or gains for that year of assessment. This triggers a tax charge on that amount to which the 20 per cent tax rate is to be applied. The tax is due on or before 31 October in the following year of assessment. The broker is indemnified against any claim that the income or gains should be accumulated without deduction of tax for the benefit of the investor. Furthermore, if there are not sufficient funds within the SPIA to pay the tax (this can arise since there is a tax liability on unrealised gains) any shortfall made up by the broker is to be a debt due from the investor to the broker.
(7) Investments in shares held in a SPIA cannot in addition qualify for BES relief.
Relevant Date: Finance Act 2020