Revenue Note for Guidance

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Revenue Note for Guidance

787AA Taxation of payments from a PEPP

Summary

Subject to certain exceptions, payments from a PEPP are taxed under Schedule E (PAYE).

Details

(1) Any PEPP assets that a PEPP provider makes available to a PEPP contributor or PEPP beneficiary, including an annuity purchased wholly or partly out of PEPP assets, are regarded as emoluments paid that are subject to PAYE. Where the PEPP provider has not received a revenue payroll notification from Revenue, tax is required to be deducted at the higher rate of income tax.

(2) A PEPP provider is liable to account to the Collector-General for any PAYE which the PEPP provider is required to deduct and the individual beneficially entitled to the assets in the PEPP must allow such deduction. Where the assets of the PEPP are insufficient to discharge the tax, the excess will be an amount due to the PEPP provider from the beneficial owner of the PEPP assets.

Non application of PAYE

(3) PAYE is not to apply to –

  • an amount by way of lump sum, made available when assets of the PEPP are first made available to the PEPP contributor, which does not exceed 25% of the fund,
  • assets transferred to an ARF in accordance with section 787AB,
  • where the assets of the PEPP are transferred to a personal representative following the death of the PEPP contributor,
  • an amount the PEPP provider makes available from the PEPP assets for the purpose of discharging a tax liability in relation to a PEPP contributor in connection with a relevant payment to the PEPP contributor, within the maximum tax relieved pension fund limits,
  • an amount made available from a vested PEPP (within the meaning of section 790D(1)) for the purpose of—
    1. reimbursing, in whole or in part, a PEPP provider in respect of the payment by that PEPP provider of income tax charged on a chargeable excess in respect of the PEPP contributor or,
    2. the payment by the PEPP provider of a non-member spouse or civil partner’s appropriate share of the tax charged on a chargeable excess, or part of it (for which the PEPP provider is made jointly liable with the non-member) in circumstances where a benefit crystallisation event (BCE) giving rise to chargeable excess tax occurs in respect of retirements benefits which are the subject of a pension adjustment order (PAO).

Chapter 2C of Part 30 deals with the taxation treatment of PAOs in the context of the standard fund threshold regime.

(4) The circumstances in which a PEPP provider is treated as making assets available to an individual include the making of a relevant payment [defined in section 787V], circumstances in which assets cease to be PEPP assets, or circumstances whereby assets cease to be beneficially owned by the PEPP contributor. It also includes any annuity paid from PEPP assets that is any of the following:

  • an annuity for the life of the PEPP saver or the PEPP beneficiary concerned,
  • an annuity for the life of the PEPP saver concerned or the widow, widower or surviving civil partner of the PEPP saver concerned,
  • an annuity—
    • ■ for a term certain (not exceeding 10 years) notwithstanding the death of the PEPP saver or the PEPP beneficiary within that term,
    • ■ payment of which may be terminated or suspended on marriage or remarriage or in other circumstances, or
    • ■ which can be assigned by will or by distribution on intestacy.

(5) Where assets in a PEPP (including a vested PEPP within the meaning of section 790D(1)) are used in connection with any transaction that would, if the assets were assets of an ARF, be regarded as giving rise to a distribution, the assets will be treated as having been made available to the individual. Any such transaction will be regarded under section 784 TCA as giving rise to a tax charge under PAYE on the PEPP contributor in the same way as a tax charge would arise where such transactions occur in relation to funds in an ARF.

(6) For the purposes of subsection (9), the provider of a vested PEPP in respect of which benefits have not commenced on or before the date of the contributor’s 75th birthday is treated as making the PEPP assets of the PEPP available to the PEPP contributor on the date the PEPP contributor attains the age of 75 years. In other words, the PEPP becomes a “vested PEPP” within the meaning of section 790D(1) on the applicable date. Accordingly, any assets in such a PEPP when the contributor dies are, as provided for in subsection (6), subject to the taxation regime applying to ARFs.

(7) Where a PEPP provider is not established in the State at any time, they must enter into an enforceable contract with the Revenue Commissioners to meet all of the duties and obligations imposed by the PEPP Regulation, Chapter 2C and Chapter 2D of Part 30 of the Taxes Consolidation Act 1997 and section 125B of the Stamp Duties Consolidation Act 1999 or appoint a person resident in the State to carry out those duties. Any contract between the Revenue Commissioners and a PEPP provider is to be governed by the laws of the State and the courts of Ireland are to have exclusive jurisdiction in determining any dispute arising under such contracts. Where a PEPP provider opts to appoint a resident agent to discharge the duties and obligations, the agent’s identity and the fact that they have been appointed must be notified to the Revenue Commissioners.

(8) The Revenue Commissioners can, by way of notice, seek information from a PEPP Provider or a PEPP distributor about the value of any assets made available to, or paid to, a PEPP contributor or any other person. The information can include the name, address and PPS number of the PEPP contributor and any person who receive assets or payments and the amount or value of any assets or payments.

(9) Where an individual dies after PEPP assets have been or, on reaching age 75, are deemed to have been, made available to them, the assets in the PEPP at the time of death are treated, under section 784A(4), in the same way as assets in an ARF i.e. transfers to an ARF in the name of the individual’s spouse or civil partner or to a child of the deceased or his/her civil partner who is under 21 when the contributor dies are not chargeable to income tax. However, transfers to a child who is 21 or over from the deceased’s PEPP or from the surviving spouse or civil partner’s ARF, following the death of the spouse or civil partner, are taxed under Case IV of Schedule D at the rate of 30%. All other transfers from the deceased’s PEPP are taxed at his or her marginal rate in the year of death.

Relevant Date: Finance Act 2024