Revenue Note for Guidance

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Revenue Note for Guidance

595 Life assurance policy or deferred annuity contract entered into or acquired by company


This section provides that where a company enters into a life assurance-based investment which suffers tax under the I – E regime, the return on that investment is to be charged to tax at the standard rate of corporation tax. This charge is reduced by the credit for the tax at the standard rate of income tax paid by the life assurance company effectively on behalf of the corporate policyholder. The charge at the standard rate of corporation tax applies only where the return on a life assurance product is received as a return on an investment. Where the proceeds of a policy are paid on the death, disablement or illness of a party insured under the policy, no chargeable gain is deemed to accrue to the company. (For policies issued after 1 January 2001, see Part 26, Chapter 5).


Definitions and construction

(1)(a)relevant disposal” is a disposal of the rights under a relevant policy or of an interest in those rights. It does not, however, include a disposal by a person who is not the original beneficial owner of those rights and who acquired them or an interest in them for money or money’s worth (such a disposal would already be chargeable under section 593(2)). Neither does it include a disposal resulting from the death, disablement or disease of a person, or one of a class or persons, specified in the terms of the policy. (This is intended to limit the charge on life assurance policy gains to gains arising from the use of life assurance products for investment rather than protection purposes.) The phrase “one of a class of persons” is intended to cover contracts issued in respect of a specific class of persons such as, for example, the employees of the company which is entering into the contract.

relevant gain” is a chargeable gain arising on a relevant disposal.

relevant policy” means a policy of life assurance or a contract for a deferred annuity on the life of a person, entered into or acquired by a company on or after 11 April, 1994 which is not—

Under the new taxation regime for policyholders, which was introduced in the Finance Act, 2000, tax is deducted from payments made to policyholders (see Part 26, Chapter 5). There is no longer a need for the separate taxation regime for policyholders who are companies. Accordingly, a policy which is “new basis business” (viz. policies commenced on or after 1 January, 2001) are excluded from the tax regime in section 595.

(1)(b)(i) A policy of life assurance or a contract for a deferred annuity on the life of any person, which is issued or made before 11 April, 1994, is treated as one issued or made after that date if there is a variation of the policy or contract on or after that date which enhances it or extends its term. This is intended to prevent the circumvention of section 594 by the variation of agreements in existence on 11 April, 1994.

(1)(b)(ii) The substitution of a new policy or contract for one made before 11 April, 1994 or a change in the terms of such a policy or contract constitutes a variation for the purposes of subsection (1)(b)(i). This applies even where the substitution or changed terms were provided for in the policy or contract as made or issued before 11 April, 1994.

(1)(c) Subsections (3) and (4) of section 593 apply for the purposes of construing section 594 so as to specify transactions which constitute a disposal of rights under a policy of assurance or a deferred annuity contract. However, the application of subsections (3) and (4) of section 593 are not subject to subsection (2) of that section which provides the exemption withdrawn by section 595.

Withdrawal of exemption

(2) The exemption of life assurance or deferred annuity product gains provided by section 593(2) is withdrawn where those gains are enjoyed by companies.

Taxation of “relevant gains”

(3)(a) Any relevant gain made by a company is treated as having being made net of corporation tax applied at the standard rate of income tax. The gross amount of the gain (the net amount is regrossed at the standard rate of income tax) is then taxed as a chargeable gain of the company but the deemed corporation tax deducted at the standard rate of income tax is available for set off against the company’s corporation tax liability for the accounting period in which the relevant gain arises. In effect, this provision acknowledges that the gain received by the corporate policyholder has suffered standard rate tax at source under the basis of charging life assurance companies to corporation tax.

(3)(b) A loss arising on a relevant disposal is not to be subjected to the regrossing treatment provided by subsection (3)(a).

(3)(c) Subsection (3) is to be construed together with the Corporation Tax Acts despite the fact that it is part of the Capital Gains Tax Acts.

Transitional relief

(4) The charge under the section applies only to policies of life assurance or contracts for deferred annuities entered into by a company on or after 11 April, 1994. To facilitate business that was in train, a contract for a life policy or deferred annuity is treated as having been entered into before 11 April, 1994 if —

  • (4)(a) a contract document was served on the company before 11 April, 1994 and the company entered into the contract on or before 22 April, 1994, or
  • (4)(b)(i) the contract was entered into before 30 June, 1994,
  • (4)(b)(ii) before 11 April, 1994 a binding agreement was in existence under which the company was obliged to acquire land and the company had entered into a preliminary commitment to obtain a loan, secured on the land, to acquire the land and to enter into the contract to repay the loan, and
  • (4)(b)(iii) the loan agreement obliged the company to apply any payment made to it under the contract towards the repayment of the loan before any other application of such a payment.

Relevant Date: Finance Act 2021