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Taxes Consolidation Act, 1997 (Number 39 of 1997)

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787Q Chargeable excess.

(1) Income tax shall be charged in accordance with section 787R where, on or after [2]>the specified date<[2][2]>7 December 2005<[2], a benefit crystallisation event occurs (in this section referred to as the “current event”) in relation to an individual who is a member of a relevant pension arrangement and either of the conditions in subsection (2) are met.

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

(a) that all or any part of the individual’s standard fund threshold or, as the case may be, personal fund threshold is available at the date of the current event but the amount of that event exceeds the amount of the standard fund threshold or personal fund threshold which is available at that date, or

(b) that none of the individual’s standard fund threshold or personal fund threshold, as the case may be, is available at the date of the current event.

(3) For the purposes of subsection (2), the amount of an individual’s standard fund threshold or, as the case may be, personal fund threshold that is available at the date of the current event shall be determined in accordance with paragraph 4 of Schedule 23B.

(4) Subject to subsection (5), where either of the conditions in subsection (2) are met, the amount of the current event or, as the case may be, the amount by which the amount of that event exceeds the amount of the standard fund threshold or personal fund threshold that is available at that date in relation to the individual, shall be known as the “chargeable excess”.

(5) Where the amount of tax arising on a chargeable excess in accordance with section 787R is paid by the administrator of a relevant pension arrangement in whole or in part, then so much of the tax that is paid by the administrator shall itself be treated as forming part of the chargeable excess unless the individual’s rights under the relevant pension arrangement are reduced so as to fully reflect the amount of tax so paid or the administrator is reimbursed by the individual in respect of any tax so paid.

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(5A) (a) Notwithstanding section 59B of the Pensions Act 1990, where, in accordance with section 787S(3), a non-member’s appropriate share (within the meaning of section 787R(2A)(b)) of tax arising on a chargeable excess is paid by the subsequent administrator, in whole or in part, and the non-member was in receipt of a pension benefit payable from the transfer arrangement at the date the subsequent administrator received the certificate referred to in section 787R(3B), then so much of the tax that is paid by the subsequent administrator shall itself be treated as forming part of the non-member’s appropriate share unless the non-member’s pension benefit payable under the transfer arrangement is reduced so as to fully reflect the amount of tax so paid or the subsequent administrator is reimbursed by the non-member in respect of any tax so paid.

(b) Where, in accordance with section 787S(3), a subsequent administrator or a fund administrator (in this paragraph referred to as the ‘administrator’) is liable to pay the amount of a non-member’s appropriate share (within the meaning of section 787R(2A)(b)) of tax arising on a chargeable excess, or a part of that amount, the administrator shall, for the purposes of payment of the tax, be entitled to dispose of or appropriate such assets of—

(i) the transfer arrangement as represent the non-member’s accrued rights under that arrangement, or

(ii) the approved retirement fund, approved minimum retirement fund (or where the non-member has an approved retirement fund and an approved minimum retirement fund, of both funds) or vested PRSA (or vested PRSAs, where the non-member has more than one vested PRSA), as the case may be, (in this subsection referred to as the ‘fund’),

as are required to meet the amount of the tax so payable and the non-member shall allow such disposal or appropriation.

(c) Where in pursuance of this subsection and section 787S(3) a subsequent administrator reduces a non-member’s pension benefit or disposes of or appropriates an asset of the transfer arrangement, or a fund administrator disposes of or appropriates an asset of the fund, then no action shall lie against the subsequent administrator or the fund administrator in any court by reason of such reduction, disposal or appropriation.

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(6) Where the administrator of a relevant pension arrangement, of a kind described in paragraphs (e) and (f) of the definition of relevant pension arrangement in section 787O(1), pays an amount of tax arising on a chargeable excess in accordance with section 787S(3), then—

(a) the amount of tax so paid shall be a debt due to the administrator from the individual[3]> or, where the individual is deceased, from his or her estate<[3], and

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(b) the administrator may appropriate all or part of the individual’s entitlements under that relevant pension arrangement, and the individual shall allow such appropriation, for the purposes of reimbursing the administrator in respect of the tax so paid.

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(b) the administrator shall be reimbursed by the individual for the tax so paid in accordance with subsection (7).

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(6A) Where the provisions of section 787R(2A) apply in relation to a relevant pension arrangement referred to in subsection (6), then—

(a) where no transfer amount has been applied, or

(b) where a transfer amount has been applied to provide a retirement benefit for or in respect of the non-member under the arrangement of the same actuarial value as the transfer amount,

the provisions of subsections (6), (7), (8) and (9) shall apply, as if the references in those subsections to—

(i) the individual were a reference to the relevant member or the non-member, as the case may be, and

(ii) the rules of the scheme were a reference to the rules of the scheme having regard to the provisions of the pension adjustment order.

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(7) An administrator referred to in subsection (6) shall be reimbursed for the payment of tax arising on a chargeable excess in the following manner—

(a) where the amount of tax paid is [6]>50 per cent<[6][6]>20 per cent<[6] or a lesser percentage of the amount of the lump sum payable to the individual under the rules of the relevant pension arrangement reduced by the amount of tax charged under subsection (3)(a)(i) or (3)(b)(i)(I) of section 790AA on an excess lump sum (within the meaning of subsection (1)(e) of that section), if any, in respect of that lump sum (in this subsection referred to as the “net lump sum”)—

(i) by appropriating that percentage of the net lump sum,

(ii) by payment by the individual of an amount to the administrator that is equal to the amount of tax paid,[7]> or<[7]

(iii) by a combination of subparagraphs (i) and (ii) such that the aggregate of the percentage of the net lump sum appropriated and the amount [8]>paid<[8][8]>paid, or<[8] by the individual to the administrator is equal to the amount of tax paid,

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(iv) by the individual exercising the option referred to in subsection (8),

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(b) where the amount of tax paid is greater than [6]>50 per cent<[6][6]>20 per cent<[6] of the net lump sum[10]>, by the individual exercising the option referred to in subsection (8), or<[10]

(i) (I) by appropriating not less than [6]>50 per cent<[6][6]>20 per cent<[6] of the net lump sum, or such higher percentage as the administrator and the individual may agree,

(II) by payment by the individual of an amount to the administrator that is not less than [6]>50 per cent<[6][6]>20 per cent<[6] of the net lump sum, or such higher amount as the administrator and the individual may agree, or

(III) by a combination of clauses (I) and (II) such that the aggregate of the percentage of the net lump sum appropriated and the amount paid by the individual to the administrator is not less than [6]>50 per cent<[6][6]>20 per cent<[6] of the net lump sum,

and

(ii) (I) by reducing the gross annual amount of pension payable to the individual under the rules of the relevant pension arrangement (in this subsection referred to as the “pension reduction”), for a period agreed between the individual and the administrator that does not exceed [11]>10 years<[11][11]>20 years<[11] from the date of first payment of the pension (in this subsection referred to as the “agreed period”), such that the pension reduction over the agreed period is sufficient to reimburse the administrator for that portion of the tax paid as was not reimbursed under subparagraph (i), if any, (in this subsection referred to as the “balance”),

(II) by payment by the individual of an amount equal to the balance to the administrator within the period of 3 months from the date of the benefit crystallisation event that gave rise to the chargeable excess, or

(III) by a combination of a pension reduction over an agreed period as provided for in clause (I) and payment of an amount by the individual as provided for in clause (II) where the aggregate of the amount of the reduction in the pension over the agreed period and the amount payable by the individual equals the balance,

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(c) a payment by an individual to an administrator referred to in subparagraphs (ii) and (iii) of paragraph (a) and clauses (II) and (III) of sub-paragraph (b)(i) (in this paragraph referred to as the “first-mentioned payment”) shall be made before the administrator pays the amount of the net lump sum or, as the case may be, such amount of the net lump sum as has not been appropriated to reimburse the administrator for the payment of tax arising on the chargeable excess and the administrator may withhold payment of that amount until such time as the first-mentioned payment is made by the individual.

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(8) The option referred to in paragraphs (a)(iv) and (b) of subsection (7) is the option to have the gross annual amount of pension payable to the individual under the rules of the relevant pension arrangement reduced for a period that does not exceed 20 years from the date of first payment of the pension, such that the reduction in the pension over the period is sufficient to reimburse the administrator for the tax paid.

(9) A payment by an individual to an administrator referred to in subparagraphs (ii) and (iii) of paragraph (a) of subsection (7) and in clauses (II) and (III) of paragraph (b)(i) of that subsection (in this subsection referred to as the “first-mentioned payment”) shall be made before the administrator pays the amount of the net lump sum or, as the case may be, such amount of the net lump sum as has not been appropriated to reimburse the administrator for the payment of tax arising on the chargeable excess and the administrator may withhold payment of that amount until such time as the first-mentioned payment is made by the individual.

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Inserted by FA06 s14(1)(e). Has effect as on and from 7 December 2005.

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Substituted by FA11 s19(3)(n). Has effect as on and from 7 December 2010.

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Deleted by FA12 s18(5)(a). Has effect from 8 February 2012.

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Substituted by FA12 s18(5)(b). Has effect from 8 February 2012.

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Inserted by FA12 s18(5)(c). Has effect from 8 February 2012.

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Substituted by F(No.2)A13 s18(2)(c)(i)(I). Has effect from 1 January 2014.

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Deleted by F(No.2)A13 s18(2)(c)(i)(II). Has effect from 1 January 2014.

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Substituted by F(No.2)A13 s18(2)(c)(i)(III). Has effect from 1 January 2014.

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Inserted by F(No.2)A13 s18(2)(c)(i)(IV). Has effect from 1 January 2014.

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Inserted by F(No.2)A13 s18(2)(c)(i)(V). Has effect from 1 January 2014.

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Substituted by F(No.2)A13 s18(2)(c)(i)(VI). Has effect from 1 January 2014.

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Deleted by F(No.2)A13 s18(2)(c)(i)(VII). Has effect from 1 January 2014.

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Inserted by F(No.2)A13 s18(2)(c)(ii). Has effect from 1 January 2014.

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Inserted by FA14 s19(4)(b)(i). Has effect on and from 1 January 2015.

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Inserted by FA14 s19(4)(b)(ii). Has effect on and from 1 January 2015.