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Taxes Consolidation Act, 1997 (Number 39 of 1997)

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790AA Taxation of lump sum payments in excess of the lump sum limit.

(1) (a) In this section—

excess lump sum” has the meaning assigned to it by paragraph (e);

lump sum limit”, for a year of assessment, means—

(i) for the years of assessment 2005 and 2006, €1,250,000, and

(ii) for a year of assessment (in this paragraph referred to as the “relevant year”) after the year of assessment 2006, the amount equivalent to the amount determined by the formula—

SFT

×

1

4

where SFT is the standard fund threshold, within the meaning of section 787O(1), for the relevant year;

relevant pension arrangement” means any one or more of the following—

(i) a retirement benefits scheme, within the meaning of section 771, for the time being approved by the Revenue Commissioners for the purposes of Chapter 1,

(ii) an annuity contract or a trust scheme or part of a trust scheme for the time being approved by the Revenue Commissioners under section 784,

(iii) a PRSA contract, within the meaning of section 787A, in respect of a PRSA product, within the meaning of that section,

(iv) a qualifying overseas pension plan within the meaning of Chapter 2B,

(v) a public service pension scheme within the meaning of Public Service Superannuation (Miscellaneous Provisions) Act 2004,

(vi) a statutory scheme, within the meaning of section 770(1), other than a public service pension scheme referred to in paragraph (v);

specified date” means 7 December 2005.

(b) In this section, “administrator”, in relation to a relevant pension arrangement, means the person or persons having the management of the arrangement, and in particular, but without prejudice to the generality of the foregoing, references to the administrator of a relevant pension arrangement include—

(i) an administrator, within the meaning of section 770(1),

(ii) a person mentioned in section 784, lawfully carrying on the business of granting annuities on human life, including the person mentioned in section 784(4A)(ii), and

(iii) a PRSA administrator, within the meaning of section 787A(1).

(c) (i) For the purposes of this section, a reference to a lump sum is a reference to a lump sum that is paid to an individual under the rules of a relevant pension arrangement by means of commutation of part of a pension or of part of an annuity or otherwise.

(ii) Without prejudice to the generality of subparagraph (i), the reference in that subparagraph to the commutation of part of a pension or of part of an annuity, shall, in a case where an individual opts in accordance with section 772(3A) or, as the case may be, section 784(2A), be construed as a reference to the commutation of part of the pension or, as the case may be, part of the annuity which would, but for the exercise of that option, be payable to the individual.

(d) For the purposes of this section, references to a lump sum that is paid to an individual include references to a lump sum that is obtained by, or given or made available to, an individual and references to a lump sum which was, or has, or had been paid to an individual shall be construed accordingly.

(e) For the purposes of this section, the excess lump sum, if any, in respect of a lump sum that is paid to an individual on or after the specified date (in this paragraph referred to as the “current lump sum”) shall be—

(i) where no other lump sum has been paid to the individual on or after the specified date, the amount by which the current lump sum exceeds the lump sum limit, and

(ii) where before the current lump sum was paid, one or more lump sums had been paid to an individual, on or after the specified date (in this paragraph referred to as the “earlier lump sum”), then—

(I) where the amount of the earlier lump sum is less than the lump sum limit, the amount by which the aggregate of the amounts of the earlier lump sum and the current lump sum exceeds the lump sum limit, and

(II) where the amount of the earlier lump sum is equal to or greater than the lump sum limit, the amount of the current lump sum.

(f) For the purposes of paragraph (e)

(i) where—

(I) the current lump sum is paid in a year of assessment (in this subparagraph referred to as the “relevant year”) after the year of assessment 2006, and

(II) the earlier lump sum was paid before the relevant year,

then the amount of the earlier lump sum (and where the amount of the earlier lump sum is the aggregate of the amounts of 2 or more lump sums, then the amount of each of those lump sums) shall be adjusted to the amount equivalent to the amount determined by the formula—

A

×

B

C

where—

A is the amount of the earlier lump sum,

B is the lump sum limit for the relevant year, and

C is the lump sum limit for the year of assessment in which the earlier lump sum was paid,

and

(ii) (I) a lump sum (in this subparagraph referred to as the “first-mentioned lump sum”) shall be treated as paid before another lump sum (in this subparagraph referred to as the “second-mentioned lump sum”) if the first-mentioned lump sum is paid before the second-mentioned lump sum on the same day, and

(II) a lump sum shall not be treated as paid at the same time as one or more other lump sums and, where but for this subparagraph they would be so treated, the individual to whom the lump sums are paid shall decide on the order in which they are to be deemed to be paid.

(2) Subject to subsection (4)

(a) where a lump sum is paid to an individual on or after the specified date, the excess lump sum, if any, shall be regarded as a payment to the individual of emoluments to which Schedule E applies, and, accordingly, the provisions of Chapter 4 of Part 42 shall apply to any such payment, and

(b) the administrator of a relevant pension arrangement shall deduct tax from the payment at the higher rate for the year of assessment in which the payment is made unless the administrator has received from the Revenue Commissioners a certificate of tax credits and standard rate cut-off point or a tax deduction card for that year in respect of the individual referred to in paragraph (a).

(3) Subsection (2) of section 787G shall apply in respect of any income tax, being income tax deducted from an excess lump sum by virtue of subsection (2) of this section, by an administrator of a relevant pension arrangement of a kind described in paragraph (iii) of the definition of relevant pension arrangement in subsection (1)(a), as it applies to income tax referred to in subsection (2) of section 787G.

(4) Where a lump sum is paid to an individual, on or after the specified date, under the rules of a relevant pension arrangement of a kind described in paragraph (iv) of the definition of relevant pension arrangement in subsection (1)(a), the excess lump sum, if any, shall be charged to tax under Case IV of Schedule D for the year of assessment in which the lump sum is paid to that individual.

(5) Subsections (2) and (4) shall not apply to a lump sum that is paid to a widow or widower, children, dependants or personal representatives of a deceased individual.

(6) Section 781 shall have effect notwithstanding the provisions of this section.

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790AA Taxation of lump sums in excess of the tax free amount.

(1) (a) In this section—

administrator”, in relation to a relevant pension arrangement, means the person or persons having the management of the arrangement and, in particular, but without prejudice to the generality of the foregoing, references to the administrator of a relevant pension arrangement include—

(i) an administrator within the meaning of section 770(1),

(ii) a person mentioned in section 784, lawfully carrying on the business of granting annuities on human life, including the appointed person mentioned in section 784(4A)(ii), and

(iii) a PRSA administrator within the meaning of section 787A(1);

excess lump sum” shall be construed in accordance with paragraph (e);

relevant pension arrangement” means any one or more of the following—

(i) a retirement benefits scheme, within the meaning of section 771, approved by the Revenue Commissioners for the purposes of Chapter 1,

(ii) an annuity contract or a trust scheme or part of a trust scheme approved by the Revenue Commissioners under section 784,

(iii) a PRSA contract, within the meaning of section 787A, in respect of a PRSA product, within the meaning of that section,

(iv) a qualifying overseas pension plan within the meaning of Chapter 2B,

(v) a public service pension scheme within the meaning of section 1 of the Public Service Superannuation (Miscellaneous Provisions) Act 2004,

(vi) a statutory scheme, within the meaning of section 770(1), other than a public service pension scheme referred to in paragraph (v);

specified date” means 1 January 2011;

standard chargeable amount” means the amount equivalent to the amount determined by the formula—

(SFT)

TFA

4

where—

SFT is the standard fund threshold, within the meaning of section 787O(1), for the year of assessment in which the lump sum is paid, and

TFA is the tax free amount;

standard rate” means the standard rate of income tax in force at the time the lump sum is paid;

tax free amount” means €200,000;

tax year” means a year of assessment within the meaning of the Tax Acts.

(b) (i) For the purposes of this section, a reference to a lump sum is a reference to a lump sum that is paid to an individual under the rules of a relevant pension arrangement by means of commutation of part of a pension or of part of an annuity or otherwise.

(ii) Without prejudice to the generality of subparagraph (i), the reference in that subparagraph to the commutation of part of a pension or of part of an annuity shall, in a case where an individual opts in accordance with section 772(3A) or, as the case may be, section 784(2A), be construed as a reference to the commutation of part of the pension or, as the case may be, part of the annuity which would, but for the exercise of that option, be payable to the individual.

(c) For the purposes of this section references to a lump sum that is paid to an individual include references to a lump sum that is obtained by, given to, or made available to, an individual and references to a lump sum which was, or has, or had been paid to an individual shall be construed accordingly.

(d) For the purposes of this section—

(i) a lump sum (in this subsection referred to as the “first-mentioned lump sum”) shall be treated as paid before another lump sum (in this subsection referred to as the “second-mentioned lump sum”) if the first-mentioned lump sum is paid before the second-mentioned lump sum on the same day, and

(ii) a lump sum shall not be treated as paid at the same time as one or more than one other lump sum and, where but for this subsection they would be so treated, the individual to whom the lump sums are paid shall decide on the order in which they are to be deemed to be paid.

(e) For the purposes of this section the excess lump sum, if any, in respect of a lump sum that is paid to an individual on or after the specified date (in this paragraph referred to as the “current lump sum”) shall be—

(i) where no other lump sum has been paid to the individual on or after 7 December 2005, the amount by which the current lump sum exceeds the tax free amount, and

(ii) where, before the current lump sum was paid, one or more than one lump sum had been paid to the individual on or after 7 December 2005 (in this section referred to as the “earlier lump sums”), then—

(I) where the amount of the earlier lump sums is less than the tax free amount, the amount by which the aggregate of the amounts of the earlier lump sums and the current lump sum exceeds the tax free amount, and

(II) where the amount of the earlier lump sums is equal to or greater than the tax free amount, the amount of the current lump sum.

(2) Where a lump sum is paid to an individual on or after the specified date, the excess lump sum shall be regarded as income of the individual for the tax year in which the lump sum is paid and shall be chargeable to income tax in accordance with subsection (3).

(3) Subject to subsection (7)(b)—

(a) where the excess lump sum arises in accordance with subsection (1)(e)(i), (1)(e)(ii)(I) or (1)(e)(ii)(II) (in so far as the amount of the earlier lump sums referred to in subsection (1)(e)(ii)(II) is equal to the tax free amount), then—

(i) so much of the excess lump sum as does not exceed the standard chargeable amount shall be charged to income tax under Case IV of Schedule D at the standard rate, and

(ii) so much of the excess lump sum, if any, as exceeds the standard chargeable amount shall be regarded as—

(I) profits or gains accruing from an office or employment (and accordingly tax under Schedule E shall be charged on those payments, and tax so chargeable shall be computed under section 112(1)), and

(II) emoluments to which Chapter 4 of Part 42 applies,

(in this section referred to as “relevant emoluments”).

(b) Where the excess lump sum arises in accordance with subsection (1)(e)(ii)(II) (in so far as the amount of the earlier lump sums referred to in that subsection is greater than the tax free amount), then—

(i) where the amount by which the earlier lump sums is greater than the tax free amount (in this paragraph referred to as the “first-mentioned amount”) is less than the standard chargeable amount—

(I) so much of the excess lump sum as does not exceed an amount equivalent to the difference between the standard chargeable amount and the first-mentioned amount shall be charged to income tax under Case IV of Schedule D at the standard rate, and

(II) so much of the excess lump sum, if any, as exceeds an amount equivalent to the difference between the standard chargeable amount and the first-mentioned amount, shall be relevant emoluments,

and

(ii) in any other case, the excess lump sum shall be relevant emoluments.

(4) The persons liable for income tax charged in accordance with paragraph (a)(i) or (b)(i)(I) of subsection (3) shall be the administrator of the relevant pension arrangement under which the lump sum arises and the individual in relation to whom the lump sum is paid and their liability shall be joint and several.

(5) A person referred to in subsection (4) shall be liable for any income tax referred to in that subsection whether or not that person, or any other person who is liable to the charge, is resident or ordinarily resident in the State.

(6) Where tax arising on an excess lump sum in accordance with paragraph (a)(i) or (b)(i)(I) of subsection (3) is paid—

(a) 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 excess lump sum unless the lump sum paid to the individual under the relevant pension arrangement is 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, or

(b) by the administrator of a relevant pension arrangement of a kind described in paragraphs (v) and (vi) of the definition of “relevant pension arrangement” in subsection (1), then—

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

(ii) the administrator may appropriate so much of the individual’s lump sum 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.

(7) (a) The administrator of a relevant pension arrangement shall deduct tax from an excess lump sum payment in accordance with this section and remit such tax to the Collector-General.

(b) In so far as any part of an excess lump sum—

(i) is to be regarded as income of the individual for a tax year and charged to income tax at the standard rate in accordance with paragraph (a)(i) or (b)(i)(I) of subsection (3)

(I) such income—

(A) shall not be reckoned in computing total income for the purposes of the Tax Acts, and

(B) shall be computed without regard to any amount deductible from, or deductible in computing, income for the purposes of the Tax Acts,

(II) the charging of that income in such manner shall be without any relief or reduction specified in the Table to section 458 or any other deduction from that income, and

(III) section 188 shall not apply as regards income so charged,

or

(ii) is to be regarded by virtue of this section as relevant emoluments, the administrator of the relevant pension arrangement under which the lump sum is paid shall deduct tax from the payment at the higher rate for the tax year in which the payment is made unless the administrator has received from the Revenue Commissioners [6]>a certificate of tax credits and standard rate cut-off point or a tax deduction card<[6][6]>a revenue payroll notification (within the meaning of section 983)<[6] for that year in respect of the individual.

(8) The administrator of a relevant pension arrangement who deducts tax from an excess lump sum in accordance with paragraph (a)(i) or (b)(i)(I) of subsection (3) shall, within 3 months of the end of the month in which the lump sum giving rise to the excess lump sum is paid, make a return to the Collector-General which shall contain—

(a) the name and address of the administrator,

(b) the name, address and PPS Number of the individual in relation to whom the lump sum has been paid,

(c) details of the relevant pension arrangement under which the lump sum giving rise to the excess lump sum has been paid,

(d) the amount of, and the basis of calculation of, the excess lump sum arising in respect of the lump sum, and

(e) details of the tax which the administrator is required to account for in relation to the excess lump sum.

(9) The tax which the administrator of a relevant pension arrangement is required to account for in relation to an excess lump sum (hereinafter referred to as the “relevant tax”) and which is required to be included in a return in accordance with subsection (8), shall be due at the time by which the return is due to be made and shall be paid by the administrator to the Collector-General and the relevant tax so due shall be payable by the administrator without the making of an assessment; but relevant tax that has become so due may be assessed on any person liable for the tax (whether or not it has been paid when the assessment is made) if that tax or any part of it is not paid on or before the due date.

(10) Where it appears to an officer of the Revenue Commissioners that there is any amount of relevant tax in relation to an excess lump sum which ought to have been but has not been included in a return, or where the officer is dissatisfied with any return, then the officer may make an assessment on any person liable for the relevant tax to the best of his or her judgment, and any amount of relevant tax in relation to an excess lump sum due under an assessment made by virtue of this subsection shall be treated for the purposes of interest on unpaid tax as having been payable at the time by which the return concerned was due to be made.

(11) Where any item has been incorrectly included in a return as an excess lump sum, then an officer of the Revenue Commissioners may make such assessments, adjustments or set-offs as may in his or her judgment be required for securing that the resulting liabilities to tax, including interest on unpaid tax, whether of the administrator of a relevant pension arrangement or the individual, are, so far as possible, the same as they would have been if the item had not been so included.

(12) Any relevant tax assessed on a person under this section shall be due within one month after the issue of the notice of assessment (unless that tax is due earlier under subsection (9)) subject to—

(a) any appeal against the assessment, or

(b) any application under subsection (14),

but no such appeal or application, as the case may be, shall affect the date when any amount is due under subsection (9).

(13) [4]>(a) The provisions of the Income Tax Acts relating to—<[4][4]>(a) The provisions of the Income Tax Acts relating to—<[4]

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(i) assessments to income tax, and

(ii) appeals against such assessments (including the rehearing of appeals and the statement of a case for the opinion of the High Court),

shall, in so far as they are applicable, apply to the assessment of relevant tax.

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(i) assessments to income tax, and

(ii) the collection and recovery of income tax,

shall, in so far as they are applicable, apply to the assessment, collection and recovery of relevant tax.

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(b) Any amount of relevant tax payable in accordance with this section without the making of an assessment shall carry interest at the rate of 0.0219 per cent for each day or part of a day from the date when the amount becomes due and payable until payment.

(c) Subsections (3) to (5) of section 1080 shall apply in relation to interest payable under paragraph (b) as they apply in relation to interest payable under section 1080.

(d) In its application to any relevant tax charged by any assessment made in accordance with this section, section 1080 shall apply as if subsection (2)(b) of that section were deleted.

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(13A) (a)Subject to paragraph (b), a person aggrieved by an assessment made on that person under this section may appeal the assessment to the Appeal Commissioners, in accordance with section 949I, within the period of 30 days after the date of the notice of assessment.

(b) Where, in accordance with this section, an administrator of a relevant pension arrangement is required to make a return and account for relevant tax to the Collector-General, no appeal lies against an assessment until such time as the administrator makes the return and pays or has paid the amount of the relevant tax payable on the basis of that return.

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(14) (a) Where the administrator of a relevant pension arrangement reasonably believed, in respect of a lump sum paid to an individual, that—

(i) the lump sum did not give rise to an income tax liability, or

(ii) the amount of the income tax liability arising on the excess lump sum was less than the actual amount,

the administrator may apply to the Revenue Commissioners in writing to have that tax liability or, as the case may be, the amount of the difference between the amount which the administrator believed to be the amount of the tax liability and the actual amount (in this subsection referred to as the “referable tax liability”) discharged.

(b) Where, following receipt of an application referred to in paragraph (a), the Revenue Commissioners are of the opinion that in all of the circumstances it would not be just and reasonable for the administrator to be made liable to the referable tax liability they may discharge the administrator from that liability and shall notify the administrator in writing of that decision.

(c) Without prejudice to any other circumstance in which an individual will be liable to discharge a tax liability due in respect of an excess lump sum, where an administrator of a relevant pension arrangement is discharged from a referable tax liability in accordance with paragraph (b), the individual in respect of whom the income tax charge arises shall become liable for the tax.

(15) Every return referred to in this section shall be in a form specified or authorised by the Revenue Commissioners and shall include a declaration to the effect that the return is correct and complete.

(16) Subsection (2) of section 787G shall apply in respect of any income tax deducted from an excess lump sum by virtue of subsection (3) of this section, by an administrator of a relevant pension arrangement of a kind described in paragraph (iii) of the definition of “relevant pension arrangement” in subsection (1)(a) of this section, as it applies to income tax referred to in subsection (2) of section 787G.

(17) Where a lump sum is paid to an individual, on or after the specified date, under the rules of a relevant pension arrangement of a kind described in paragraph (iv) of the definition of “relevant pension arrangement” in subsection (1)(a), the excess lump sum, if any, shall be charged to tax under Case IV of Schedule D for the tax year in which the lump sum is paid to that individual at the rate or rates determined in accordance with subsection (3).

(18) This section shall not apply to—

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(a) a lump sum that is paid to—

(i) a widow or widower,

(ii) children,

(iii) dependants, or

(iv) personal representatives,

of a deceased individual, or

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(a) a lump sum that is paid to—

(i) a widow or widower,

(ii) a surviving civil partner,

(iii) children,

(iv) dependants,

(v) personal representatives, or

(vi) children of the civil partner

of a deceased individual, or

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(b) the balance of a lump sum paid to an individual in accordance with paragraph 5 of Appendix A of the Department of Finance Circular 12/09, dated 30 April 2009, entitled “Incentivised Scheme of Early Retirement”.

(19) Section 781 shall have effect notwithstanding the provisions of this section.

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

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Substituted by FA11 s19(4)(b). Has effect as on and from 1 January 2011.

[3]

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Substituted by F(No.3)A11 sched1(220).

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Substituted by F(TA)A15 s38(7)(g)(i). With effect from 21 March 2016 per S. I. No 110 of 2016.

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Inserted by F(TA)A15 s38(7)(g)(ii). With effect from 21 March 2016 per S. I. No 110 of 2016.

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Substituted by FA18 s58(1)(k). Applies for the year of assessment 2019 and each subsequent year of assessment in respect of emoluments paid on or after 1 January 2019.