Finance Act 2006

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Pensions: incentive tax credits.

42.— The Principal Act is amended by inserting the following after Part 36A:

“PART 36B

Pensions: incentive tax credits

Interpretation (Part 36B).

848V.— In this Part—

‘additional voluntary contributions’ and ‘retirement benefits scheme’ have, respectively, the meanings assigned to them in section 770;

‘administrator’ means, subject to section 848AD—

(a) in the case of a PRSA, a PRSA administrator,

(b) in the case of a retirement benefits scheme, an administrator within the meaning of section 770, and

(c) in the case of an annuity contract, a person mentioned in section 784 who is lawfully carrying on the business of granting annuities on human life, including the person mentioned in section 784(4A)(ii);

‘annuity contract’ means an annuity contract or a trust scheme or part of a trust scheme for the time being approved by the Revenue Commissioners under section 784;

‘gross funds’, ‘maturity date’, ‘maturity statement’, ‘maturity tax’ and ‘net funds’, in relation to a special savings incentive account have, respectively, the meanings assigned to them in section 848H(5);

‘gross income’, in relation to an individual for a year of assessment, means the aggregate of—

(a) the income of the individual from all sources for the year of assessment before any reduction is made from that income in respect of allowances, losses, deductions and other reliefs, including reductions by virtue of sections 372AP, 372AR and 372AU and, otherwise than where such allowances are made in taxing a trade, allowances under Part 9, and

(b) the amount of income for the year of assessment which is exempt from tax under the Tax Acts;

‘PPS Number’, in relation to an individual, means the individual’s Personal Public Service Number within the meaning of section 262 of the Social Welfare Consolidation Act 2005 ;

‘PRSA administrator’ and ‘PRSA contribution’ have, respectively, the meanings assigned to them in Chapter 2A of Part 30;

‘special savings incentive account’ has the meaning assigned to it in section 848C and ‘account’ shall be construed accordingly.

Transfer of funds on maturity of SSIA.

848W.— This Part applies to an individual—

(a) whose gross income, for the year of assessment (in this section referred to as the ‘previous year’) immediately before the year of assessment in which the maturity date of the individual’s special savings incentive account falls, does not exceed €50,000, and

(b) none of whose taxable income for the previous year is chargeable to tax at the higher rate, or in the case of an individual who is married, none of whose taxable income for that year would be so chargeable if, where it is not the case, the individual had made an application under section 1023 and that application had effect for that year,

and who—

(i) within the 3 month period commencing on the maturity date—

(I) furnishes his or her maturity statement to an administrator, and

(II) subscribes an amount (in this Part referred to as a ‘pension subscription’) being equal to all or part of the net funds, in relation to his or her special savings incentive account, to the administrator—

(A) as an additional voluntary contribution,

(B) as a PRSA contribution, or

(C) as a premium under an annuity contract,

(ii) makes a declaration of a kind referred to in section 848X,

(iii) does not make a claim, under any provision of the Tax Acts, to a deduction for income tax purposes in respect of the pension subscription other than in respect of the amount by which it exceeds €7,500, the tax credit in relation to the pension subscription or the additional tax credit, and

(iv) does not reduce any amount which he or she is required to pay, in the year in which he or she becomes entitled to be credited with tax credits under section 848Y, under a retirement benefits scheme, or as a PRSA contribution or as a premium under an annuity contract.

Declaration.

848X.— The declaration, referred to in section 848W, is a declaration in writing made by an individual to an administrator which—

(a) is made and signed by the individual,

(b) is made in such form—

(i) as may be prescribed or authorised by the Revenue Commissioners, and

(ii) which contains a reference to the offence of making a false declaration under section 848AF,

(c) contains the individual’s—

(i) name,

(ii) address of his or her permanent residence,

(iii) PPS Number,

(iv) date of birth, and

(v) amount of pension subscription,

and

(d) declares that—

(i) the individual’s gross income, for the year of assessment immediately before the year of assessment in which the maturity date of his or her special savings incentive account falls, does not exceed €50,000,

(ii) none of the individual’s taxable income for the previous year is chargeable to tax at the higher rate, or in the case of an individual who is married, none of the individual’s taxable income for that year would be so chargeable if, where it is not the case, the individual had made an application under section 1023 and that application had effect for that year,

(iii) the individual will not make a claim under any provision of the Tax Acts, to a deduction for income tax purposes in respect of the pension subscription other than in respect of the amount by which it exceeds €7,500, the tax credit in relation to the pension subscription or the additional tax credit, and

(iv) the individual has not and will not reduce any amount which he or she is required to pay, in the year in which he or she becomes entitled to be credited with tax credits under section 848Y, under a retirement benefits scheme, or as a PRSA contribution or as a premium under an annuity contract.

Entitlement to pension tax credit.

848Y.— Where an individual has made a declaration of a kind referred to in section 848X, and furnished to the administrator a maturity statement and a pension subscription, the individual shall, when the pension subscription is irrevocable—

(a) subject to this Part, be treated for the purposes of the Tax Acts as having paid to the administrator a grossed up amount, which amount, after deducting income tax at the rate of 25 per cent, leaves the amount of the pension subscription, and

(b) subject to section 848Z, be entitled to be credited, in accordance with the provisions of this Part and not under any other provision of the Tax Acts, with the amount of income tax (in this Part referred to as the ‘tax credit’, in relation to the pension subscription) treated as having been so deducted.

Tax credits.

848Z.— (1) A tax credit in relation to a pension subscription shall not exceed €2,500.

(2) An individual, who is entitled to a tax credit in relation to his or her pension subscription, shall be entitled to be credited, in accordance with the provisions of this Part and not under any other provision of the Tax Acts, with a further amount (in this Part referred to as an ‘additional tax credit’).

(3) The amount of the additional tax credit shall be determined by the formula—

A x C

B

where—

A is the maturity tax in relation to the individual’s account,

B is the net funds, in relation to the individual’s account, and

C is the amount of the pension subscription.

Payment of tax credits.

848AA.— Where an individual becomes entitled to a tax credit, in relation to his or her pension subscription, and an additional tax credit, and the administrator complies with section 848AB—

(a) the Revenue Commissioners shall, subject to that section, pay to the administrator, the tax credit and the additional tax credit,

(b) those tax credits shall, on receipt, be immediately treated by the administrator as an additional voluntary contribution, a PRSA contribution, or as the case may be, a premium under an annuity contract, made by the individual, and

(c) the pension subscription to the extent that it does not exceed €7,500 and the amount of those tax credits shall be disregarded for the purposes of any claim by the individual to relief under Chapters 1, 2, 2A and 2B of Part 30.

Monthly return.

848AB.— An administrator who is or was registered in accordance with section 848AD, shall, within 15 days of the end of every month, make a return (including, where it is the case, a nil return) to the Revenue Commissioners, which—

(a) specifies in respect of all individuals who in the previous month became entitled, under this Part, to be credited with tax credits—

(i) the aggregate amount of tax credits in relation to pension subscriptions,

(ii) the aggregate amount of additional tax credits, and

(iii) the number of pension subscriptions concerned, distinguishing between additional voluntary contributions, PRSA contributions and premiums under an annuity contract,

and

(b) contains a declaration in a form prescribed or authorised by the Revenue Commissioners that, to the best of the administrator’s knowledge and belief, the information referred to in paragraph (a) is correct.

Other returns.

848AC.— An administrator who is or was registered in accordance with section 848AD, shall, in respect of each of the 4 month periods ending on 30 September 2006, 31 January 2007, 31 May 2007 and 30 September 2007, on or before the 28th day of the month following the end of the period, make a return to the Revenue Commissioners (including, where it is the case, a nil return) which specifies—

(a) in respect of each individual for whom tax credits were claimed in the period—

(i) the name of the individual,

(ii) the address of the individual,

(iii) the PPS Number of the individual,

(iv) the maturity date in relation to the individual’s special savings incentive account,

(v) the gross funds in relation to the account,

(vi) the net funds in relation to the account,

(vii) the maturity tax in relation to the account,

(viii) the amount of the pension subscription,

(ix) the amount of the tax credit in relation to the pension subscription that was claimed and paid,

(x) the amount of the additional tax credit that was claimed and paid, and

(xi) whether the tax credits were treated as an additional voluntary contribution, a PRSA contribution or a premium under an annuity contract,

and

(b) in relation to tax credits claimed in the period—

(i) the total amount of tax credits, in relation to pension subscriptions, and

(ii) the total amount of additional tax credits.

Registration and audit of administrators.

848AD.— (1) A person cannot be an administrator for the purposes of this Part unless the person is included in a register maintained by the Revenue Commissioners for the purposes of this Part.

(2) The Revenue Commissioners may—

(a) audit the returns made by administrators under sections 848AB and 848AC, and

(b) examine the procedures put in place by the administrator for the purpose of ensuring that the returns are correct.

Regulations (Part 36B).

848AE.— (1) The Revenue Commissioners may make regulations providing generally as to the administration of this Part and those regulations may, in particular and without prejudice to the generality of the foregoing, include provision—

(a) as to the manner in which an administrator is to be registered under section 848AD,

(b) as to the manner in which a return is to be made under section 848AB, and how errors in such a return are to be corrected,

(c) as to the manner in which a return is to be made under section 848AC, and how errors in such a return are to be corrected,

(d) as to the manner in which tax credits are to be claimed and paid,

(e) as to the period for which the documents referred to in section 848G are required to be retained, and

(f) as to the manner in which the Revenue Commissioners may examine the procedures put in place by an administrator to ensure compliance with the provisions of this Part.

(2) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly but without prejudice to the validity of anything previously done thereunder.

Offences (Part 36B).

848AF.— A person who makes a declaration under section 848X or 848AB which is false, is liable on summary conviction to a fine of €3,000, or at the discretion of the court, to imprisonment for a term not exceeding 6 months or to both the fine and the imprisonment.

Retention of declarations.

848AG.— An administrator shall retain in respect of each individual to whom this Part applies—

(a) the maturity statement in relation to the individual’s special savings incentive account, and

(b) the declaration of a kind referred to in section 848X made by the individual,

for such period and in such form as the Revenue Commissioners may by regulation provide.”.