Deemed Disposal Provisions Introduced in The Finance Act 2006

The Finance Act 2006 changed the taxation of life assurance policies by introducing a deemed disposal event at the end of eight years. This is effective retrospectively and will apply to all life assurance policies set up since 1st January 2001. It will apply to QUINN-life savings and investments policies.

In circumstances where the policy has not been surrendered, a deemed disposal event occurs on the 8th anniversary of the inception of the policy whereby exit tax, currently 23%, is payable on the excess of the surrender value over the sum invested.

This exit tax will be deducted by QUINN-life in accordance with Revenue procedures and paid to Revenue as with the current exit tax deduction on surrender.

Where there is an actual disposal subsequent to the deemed disposal, an adjustment is made so that the total tax paid does not exceed that which would have been payable had the deemed disposal not occurred.

While some of the practicalities of how this will work still have to be established, it is expected the Finance Bill 2007 will clarify further. We will keep you updated.

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