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.

Eversheds O'Donnell Sweeney is an Irish partnership and a member firm of the Eversheds International network of firms affiliated with Eversheds International Limited, an English company limited by guarantee. Member firms of Eversheds International are independent firms and members of Eversheds International Limited, but have no authority to obligate or bind Eversheds International Limited or one another vis-à-vis third parties. Neither Eversheds International Limited nor any of its member firms have any liability for each other's acts or omissions.