Self-administered retirement annuity contracts: conditions of approval
Further conditions of approval
1. Article 115 (fa) of the Income Tax Law exempts from Jersey tax the investment income of the annuity fund of a locally resident insurance company. A company of that kind would not normally be able to carry on insurance business in Jersey without a permit. However, a company that is incorporated by or on behalf of an individual and carries on annuity business solely for the individual and his dependants is exempted from that condition by virtue of Article 1 (2) of the Insurance Business (General Provisions) (Jersey) Order 1996.
2. The effect of the legislation is that an individual may now set up their own annuity company and enter into an annuity contract, with that company, approvable under the provisions of Article 131B of the Income Tax (Jersey) Law, 1961.
3. An application for approval of a contract for the purposes of Article 131B must be submitted to the Comptroller. The Contract must be accompanied by a declaration made by the annuitant and the company holding the annuity fund that the following have been read, understood and will be adhered to:-
- Article 131B
- the contents of this document
- the publication in respect of permitted Investments in a fund held in a contract approved for the purposes of Article 131B
- the publication - Transfers to and from Pension Schemes
4. Exemption from Jersey tax applies only to investment income. Exemption would not, for example, extend to the following:
- trading
- profits from the trade of investment dealing
- gains from transactions in certificates of deposit
- underwriting fees
5. The following prohibitions must be written into the annuity contract.
5.1 The person having control of the annuity fund must not borrow funds on its behalf and funds may not be loaned to the individual or to any person or company connected with the individual.
5.2 Investment transactions between the individual (or any person or company connected with them) and the annuity fund are prohibited.
5.3 Assets of the fund are not to be used for the personal benefit or enjoyment of the individual or any connected party.
5.4 The fund must not invest in a purchased life annuity.
5.5 The annuity company is not permitted to pay an annuity. At the retirement date the annuity fund, net of any permissible lump-sum, is to be applied in the purchase of an annuity from the Jersey or Guernsey office of an authorised insurance company.
6. Accounts of the company, incorporating the annuity fund, must be made up to 31st December each year and must be prepared by an independent qualified accountant, not connected to the annuitant and acceptable to me. The annual claim to exemption from Jersey tax under Article 115 (fa) is to be made as soon as possible after the year-end and is to be accompanied by the accounts of the company.
7. Any transaction made wholly or mainly for the purpose of tax avoidance will lead to the anti-avoidance provisions of Article 134A being invoked.
8. The Comptroller may withdraw approval in certain circumstances, following a breach, or if the scheme is not being operated for the purpose of the arrangement made.