730F Deduction of tax on the happening of a chargeable event

Summary

This section sets out the rates of tax that will be applied to gains arising on a chargeable event. The assurance company is liable to account for the tax and it has the power to either deduct it from any proceeds payable to the policyholder, or to appropriate sufficient assets underlying the policy to meet the tax liability. Provisions to allow for the refunding of tax, where the final amount due is less than what was paid to Revenue, are also included.

Details

Definitions

(1) In this section and section 730G, “appropriate tax”, where it concerns a chargeable event in relation to a life policy, means a sum representing income tax on a gain arising in accordance with section 730D.

Tax rates

(1)(a),(b) & (1B) The rate applicable on a chargeable event to which this Chapter applies, (see Tables 1(a) and 1(b) below) will depend, on whether or not the policyholder is a company, and if so, on whether or not the life assurance company is in possession of a declaration from the company. The distinction between a company policyholder and other policyholders is of relevance only in respect of chargeable events arising on or after 1 January 2012.

Table 1(a):

Table 1(b):

(1)(c) If the chargeable event occurred on or before 31 December 2000, a rate of 40 per cent applied.

Setting off of appropriate tax in certain circumstances

(1A) Appropriate tax already paid in connection with the ending of a relevant period (i.e. a chargeable event within the meaning of section 730C(1)(a)(iv)) and which has not been repaid may be set off against appropriate tax calculated using the provisions of section 730D(1A)(a) in connection with a subsequent chargeable event. Where tax is overpaid, the assurance company repays the excess to the policyholder and sets off the amount in the return.

Assurance company entitlements

An assurance company, which is liable to account for appropriate tax on the happening of a chargeable event in relation to a life policy is entitled—

• (3)(a)(i) to deduct the appropriate tax from the proceeds due to the policyholder if the chargeable event is the maturity or surrender (wholly or partly) of the rights conferred by the life policy, or
• (3)(a)(ii) to appropriate sufficient assets underlying the life policy to meet their tax liability if the chargeable event is the assignment (wholly or partly) of the rights conferred by the life policy, the ending of a relevant (8-year) period in accordance with section 730C(1)(a)(iv), or if the chargeable event is deemed to happen on 31 December 2000.

Alternative method should assurance company not take up entitlement

(4) During the period between 26 September 2001 and 5 December 2001, if, in relation to a personal portfolio life policy, an assurance company was entitled, but failed, to either deduct an amount equal to the appropriate tax due or to appropriate and realise sufficient assets in order to meet the amount of appropriate tax which they are liable to account for, then, in order to account for the appropriate tax due, section 730FA and subsection (7) of section 730G will apply.

Relevant Date: Finance Act 2021