Revenue E-Brief

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Revenue E-Brief Issue 29/2015, 06 March 2015

Equitable Life Compensation Scheme

Revenue has received a number of enquiries regarding the tax treatment of compensation payments made under the Equitable Life Payment Scheme. This Scheme was set up by the UK Government to compensate Equitable Life policyholders who incurred "relative losses" as a consequence of regulatory failure in the UK.

Compensation under the Scheme is in the form of once-off lump sums or income streams, depending on the type of policy held by the policyholder. Where an individual receives regular annual payments under the Scheme, such payments are chargeable to income tax. Compensation payments in the form of lump sum payments are regarded as capital sums derived from the policies. Gains accruing on the disposal of the policies by the original policyholders would be exempt from Capital Gains Tax (assuming such disposal is permissable). In the light of this, gains in respect of compensation payments under the Scheme to original policyholders may also be treated as exempt from Capital Gains Tax.

Tax and Duty Manual 15-02-09 sets out the tax treatment of such compensation payments in this State.

06 March 2015