Originally published June 2011
On 22 June 2011, the President
signed into law the Finance (No.2) Act 2011.
We commented on the Bill as originally published in our e-brief of
20 May 2011. Significant changes have been made in the final
version of the Act. The Act remains very poorly drafted and several
sections are quite ambiguous or difficult to interpret. The summary
below cannot fully deal with these ambiguities, and specific advice
should be taken.
Annual Charge
The first major change in the final Act is that the levy will
now be charged on an annual rather than a bi-annual basis.
Therefore chargeable persons will be obliged to pay a stamp duty of
0.6% of the chargeable amount upon submission of their annual
statement.
When will it first apply?
The first due date for submission of a statement has been pushed
back to 25 September 2011. This due date will remain the same for
2012, 2013 and 2014.
Who is liable for the levy?
Under the Act the person responsible for payment of the
levy is described as the "chargeable person". The
chargeable person is the administrator of a scheme (the Trustee,
for a trust board scheme) or, where the scheme assets are contracts
of assurance, the insurer. If the chargeable person is not the
scheme trustee, the chargeable person and the trustee are jointly
and severally liable for paying the levy.
An addition has been made in the final legislation in relation to
what is included under the definition of a "scheme" for
the purposes of the Act.
A "scheme" still includes:
- retirement benefit schemes approved under the Taxes Consolidation Act 1997 (the "TCA") – note this includes overseas schemes so approved
- PRSA contracts (except for PRSA contracts where a tax free lump sum has been paid or made available)
- Individual RACs or trust based RACs (retirement annuity contracts) approved under Section 784 of the TCA (except for RACs where a tax free lump sum has been paid or made available). In addition it now includes annuity contracts approved under Section 785 of the TCA.
The definition of "contract of
assurance" has been expanded in the final Act. The definition
now includes any policy or contract of assurance made by an insurer
with a person or persons having the management of a pension
scheme.
There remains a limited exclusion for schemes where the trustees
have passed a resolution to wind up the scheme and where the
employer is insolvent for the purposes of the Protection of
Employees (Employers' Insolvency) Act 1984.
How is the chargeable amount determined?
The chargeable amount is the aggregate market value of the
assets. As under the original Bill, "assets" means all
property, including investments, deposits, debts and contracts of
assurance held for the purposes of a scheme. However under the
final Act, if land is included in the assets of a scheme, the value
of the land will be taken as not including the amount of any
outstanding borrowings used to acquire that land.
What is the valuation date?
The date for determination of market value has also changed. The
relevant date is now 30 June for 2011 and for 2012, 2013 and 2014
it shall also be 30 June in each year.
Alternatively, it can be the market value as determined on the last
day of the scheme accounting period which ended within 12 months of
the 30 June date. This is only the case where the assets are not
contracts of assurance and are held for the purposes of a scheme
that is a defined benefit scheme or a one member scheme, and which
prepares accounts to an "appropriate" accounting
standard.
Trustees will need to discuss the application of the levy to their
insurance policy assets with the relevant insurer to prevent double
charging or other anomalies.
Who determines the valuation date?
The Act allows the "chargeable person" determine this
where the accounting date option is available. This could give rise
to difficulties where there is more than one chargeable person or
potential chargeable person in practice.
What are the consequences of non-compliance?
Due to the change made to the due date in the final Act,
the first date for payment of the levy is three months away. Apart
from this important change in date, the consequences for
non-compliance remain the same as under the Bill as originally
drafted. If statements and payments are not received on the due
date, the chargeable person will be liable to pay €380 for
every additional day thereafter as well as interest on any unpaid
duty.
What next?
The legislation is now in force. Trustees and other
administrators need to be aware of the relevant date changes and
that the value of assets in their schemes must be calculated as at
30 June 2011 unless the accounting date option is available. They
will have to submit their first statement to the Revenue
Commissioners with a stamp duty payment of 0.6% of the aggregate
market value of the assets by 25 September 2011.
There remain many issues of legal interpretation in the
legislation, and trustees should tread carefully.
This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Eversheds O'Donnell Sweeney for any action taken in reliance on the information contained herein. Any and all information is subject to change. Eversheds O'Donnell Sweeney is not responsible for the contents of any other website or third party material which can be accessed through this website.
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