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News Income Tax

  Business

Some Highlights of Budget 2020

Minister for Finance Paschal Donohoe delivered his Budget 2020 speech on Tuesday which included a €2.9bn budget day package. Also confirmed is a €1.2bn Brexit-proof fund. Whether you are for or against it, carbon tax will be the most controversial element of the package and a talking point for many. Below we have outlined the main tax highlights of Budget 2020. Personal Taxes
  • Income tax rates and bands and the USC rates and bands remain unchanged. The Minister for Finance did not want to commit to personal tax cuts in the lead up to a no-deal Brexit.
  • The Home carer credit has increased to €1,600 and the Earned income credit has increased to €1,500.
  • The Group A threshold for CAT has increased from €320,000 to €335,000. The increased threshold applies to gifts or inheritances received on or after 9 October 2019.
Payroll Taxes
  • There was no mention of employer’s PRSI however Budget 2019 announced this would increase from 10.95% to 11.05% from 1 January 2020. Employer’s PRSI has steadily increased over the last few years and represents a significant cost to businesses.
  • SARP relief and the Foreign Earnings Deduction have been extended to 31 December 2022.
  • In 2018, the Government implemented a 0% BIK rate for electric vehicles subject to a value limit of €50,000 in comparison to a rate of 30% of the car’s original market value for non-electric vehicles. This initiative has been extended to 2022.
Business Taxes The R&D tax credit regime has been amended so that it is more accessible to micro and small companies in Ireland. These amendments include the following:
  • An increase in the credit from 25% to 30%.
  • The ability to claim the credit on qualifying expenditure before the company commences trading. It should be noted that any credit claimed in this period can only be offset against VAT and payroll liabilities.
  • An increase in the outsourcing limit applicable to third level institutes from 5% to 15%.
  • Farm restructuring relief, a capital gains tax relief due to expire at the end of this year, has been extended to 31 December 2022.
  • Several amendments will be made to the KEEP scheme to incentivise take-up in the scheme. This includes a change in the definition of a qualifying company so that the scheme applies to group structures and a change in the definition of a qualifying individual so that it applies to part-time and flexible employees.
  • EII relief, an income tax relief for individuals who invest funds in certain companies, will also undergo changes which apply from yesterday. The amendments will allow individuals to claim full relief in the year of investment and the annual investment limit will increase from €150,000 to €250,000.
  • The Minister for Finance announced there will be a significant overhaul to the DWT regime. From 1 January 2021, real-time date collected under the new PAYE Modernisation regime will be used to create a personalised rate of DWT on distributions received by individuals. In the meantime, an increase in the DWT rate from 20% to 25% will apply from 1 January 2020.
(more…)
October 9, 2019
  Income Tax

3 Key Points about the Earned Income Tax Credit

As the old saying goes…“there are only two things in life you can’t avoid – death and taxes!”, but are you sure you’ve been claiming all the credits you’re entitled to?

2016 saw the introduction of the Earned Income Tax Credit. The credit, worth €550 in 2016, and €950 in 2017. It aims to reduce the disparity between self-employed and PAYE workers.

The credit applies to self-employed individuals and directors who cannot claim the PAYE credit.

Below we have outlined three of the most important points about the Earned Income Tax Credit:

1. No Salary = No Credit

If you are self-employed or a director, not entitled to the PAYE credit, then you may be entitled to the Earned Income Credit. However, to avail of the full amount of the credit you must take a salary of at least €4,750 in 2017. Anything less than €4,750 in 2017 may only qualify for a reduced tax credit.

2. PAYE Credit & Earned Income Credit

If you have PAYE income and self-employment/directorship income then the combined value of both tax credits cannot exceed €1,650, i.e. you cannot have the full value of both credits.

3. Spouses

Where the spouse of a director of a company receives a salary from that company he/she is not entitled to claim a PAYE credit. However they may be entitled to claim the Earned Income Credit (see Example 1 below).

Example 1 – Spouses and tax credits

Joe and Mary are a married, Joe is a director of ABC Ltd with a 20% shareholding. Mary also works for ABC Ltd in payroll department.

Joe and Mary receive annual salaries of €70,000 and €45,000 respectively.

 JoeMaryTotal Additional Credits
    
PAYE SystemNo creditNo credit-
 
Earned Income Credit€950 in 2017   €550 in 2016€950 in 2017   €550 in 2016€1,900 in 2017   €1,100 in 2016

Top Tip!

If you or your spouse is a director of a company, without another source of income, you/they can take a salary from the company of up to €4,750 in 2017 completely tax free.

Unsure about your tax credit entitlements? Contact a member of our team here, they’ll be happy to help!

Images: Shutterstock

May 25, 2017
  Income Tax

Offshore Matters – 4 Target Areas

On the first of May, in just seven weeks’ time, a governmental amnesty will expire. Once May 1st passes, Revenue will initiate an enthusiastic clampdown on offshore assets. Their message between now and the end of April is clear: if you do not avail yourself of the amnesty period and attempt to circumvent Revenue’s requirements, you will be found and you will pay a substantial price; new legislation means penalties for non-disclosure will increase dramatically. If you have already completed your Income Tax returns and declared all your source of income, then no further action is required.

Here are the essential points to bear in mind, for Irish tax residents:

1. Penalties may Increase to 100%

A penalty of 100% of the total underpaid tax in addition to the requirement to settle the tax bill itself. In other words, you can pay 100% on your liabilities now plus interest, or face paying up to 200% plus interest of them from May onwards. This rate will apply to all defaulted tax, whether offshore or on-shore.

2. Offshore Accounts

At the very top of Revenue’s new “to do” list is offshore matters, and specifically undeclared offshore accounts. A number of Roberts Nathan’s clients have had a letter at this stage from Revenue asking for details about any undeclared assets which might be eligible for Irish income tax, and offshore accounts are their top priority.

Additionally, any accounts in foreign bank accounts which have been transferred to an Irish account for any reason whatsoever is a remittance, and must be declared.

For example, a married couple who decided to move from America to Ireland to retire and are now tax resident in Ireland. They have two banks accounts one in Ireland and one in America. The American bank account receives their State pensions from the American Government. What must they declare to Revenue?

Transaction 1: They visit family in New York and use the money from their American bank account during their trip. This does not need to be declared to Revenue as the money never entered Ireland.

Transaction 2: The couple decide to buy a new car in Ireland, they transfer $25,000 from their American account to their Irish bank account. This must be declared to revenue as the monies have entered the State, the couple will be liable to income tax on this transaction.

3. Non-residential Property held Abroad

Very much included in the scope of the upcoming crackdown is undeclared properties held outside the State. Your holiday home in the south of Spain doesn’t qualify unless it generates rental income, but the apartment which you rent to students in London or that warehouse you lease to a mechanic in Florida most assuredly do! If any property holdings anywhere in the world generate income, they absolutely must be declared by May 1st.

4. Business Interests

Likewise, any and all business interests in any part of the world have to be disclosed to Revenue and all liabilities paid before the deadline. This includes partnerships, ownerships, shareholdings, or any other stake in any business.

We’re advising anyone who holds business interests, properties or any other investments abroad to ensure the detail is properly reported to Revenue before the amnesty runs out. Moreover, the sooner the better for everyone: there’s still time to correct any irregularities, but from the beginning of May onwards, those avenues will be closed off.

You may have already disclosed all the necessary information on your income tax return, in which case you can sleep easy knowing your tax affairs are in order. However, if you are unsure of your tax obligations, have any queries in relation to the above, or if you require assistance in amending your returns, please do not hesitate to contact a member of our team, here. They’ll be happy to help!

Images: Shutterstock

March 23, 2017
  Income Tax

Did you know there is Tax Relief for Coeliacs and Diabetics?

Saturday morning, parents still in bed, you sneak downstairs hushing your little brother. You open and close the sitting room door like a ninja, run to your spot right in front of the tv and turn it on just in time to hear “Can you tell me how to get, how to get to Sesame Street”. Spending Saturday mornings with Elmo, Big Bird and of course the Cookie Monster! We watched, in awe and jealousy, as he ate cookie after cookie… Fast forward twenty-something years and now all you’ll see the Cookie Monster eating is fresh fruit and vegetables. So what happened our beloved? Is he on a healthy eating binge? Watching his waistline? Or like hundreds of thousands of the Irish population is he suffering from coeliac or diabetic disease? If it’s the latter, there is some good tax news! Tax relief at 20% is available to coeliacs and diabetics who are required to purchase specialised food and drink products.

Tax Relief

As anyone who is restricted to a coeliac or diabetic diet will attest, it is significantly more expensive to purchase such specialised foods. And while they are becoming more easily available in supermarkets across Ireland, the cost on average can be twice as much as standard food shop. However, there is tax relief of 20% available on the cost of such foods.

Do I qualify for the relief?

To qualify for tax relief you will need:
  1. To be diagnosed by your doctor as a diabetic or coeliac,
  2. A letter from your doctor stating that they have advised you to maintain a diabetic or coeliac diet.

How do I avail of the relief?

To obtain the 20% tax relief you simply include the cost of your product purchases from supermarkets, along with any other medical expenses for the year in your income tax return.

Example

Jack is a coeliac who, on the advice of his doctor, is following a gluten-free diet. He has receipts for gluten-free products totalling €4,200 and other medical receipts (doctor visits and prescriptions, not claimed under health insurance) totalling €2,080. Jack is entitled to claim for tax relief of €1,256* for 2016. *(€4,200+€2,080 = €6,280 x 20% = €1,256) If you would like further information on this tax relief please do not hesitate to contact a member of our team they’ll be happy to help you!
February 23, 2017
  Income Tax

Tips To Reduce Your Income Tax Liability

Well, it’s that time of the year again. The Income Tax deadline is fast approaching and no doubt those of you are required to file a return are busy gathering information to forward to your accountant or tax advisor. With the knowledge and experience acquired over the past few years working with our clients we have put together some of the key Income Tax deductions, credits, allowances and reliefs which you may be able to claim to help reduce your Income Tax liability.

1. Health Expenses

One of the main tax reliefs claimed by individuals are medical expenses, which may be claimed at the standard rate of 20%.  Examples of claimable medical expenses include:

  • Qualifying medical expenses i.e. prescribed on the advice of a qualifying practitioner.
  • Drugs or medicines prescribed by a practitioner.
  • Qualifying dental expenditure, which must be accompanied by a Form Med 2 (Routine dental treatment such as extraction, scaling and fillings are not allowable expenses.)

In addition to the above, any payments made to a nursing home for the full time care of an individual will provide relief at the Income Tax Rate of up to 40%.

2. Qualifying Tuition Fees paid in 2015

If you have children in third level education you will more than likely have paid a significant amount in tuition fees. The good news for Income Tax purposes is that you can claim a deduction against your Income Tax Liability at the 20% rate.  The deduction may be claimed on the 2015 academic year tuition fees paid, including student contribution.  The maximum limit on qualifying fees paid for the academic year 2014/2015 is €7,000 per individual per course. Unfortunately when calculating the relief, the first €3,000 is disregarded and only the balance is available for relief at 20%.

3. Home Carer’s Tax Credit

If you are jointly assessed and you or your spouse/civil partner is a home carer you may be entitled to claim a Home Carer’s Tax Credit.  For the tax year 31st December 2015 the credit amounts to €810 and may be claimed if care is provided for:

  • A child whom you are entitled to Social Welfare Child Benefit;
  • A person who is permanently incapacitated by reason of mental or physical infirmity and such person normally resides with you for the year or;
  • A person aged 65 or over.

4. Retirement Annuity Contracts (RAC’s)

If you are thinking of topping up your pension you can avail of Tax relief on RAC premiums paid, including any premiums paid between 1st January 2016 and the return filing date.  When deciding on the amount of an RAC contribution you would like to make you must consider two main factors:

Age related percentage limit – This provides for a maximum contribution of your Net Relevant Earnings (NRE)*. For example a person under 30 years of age can make a contribution of 15% of their NRE, with a person aged 60 and over being able to make a contribution of 40% of their NRE.

Upper Limited on NRE – There is an upper earnings limited of €115,000 for 2015 and applies whether an individual is contributing to a single pension product or multiple products.

*NRE are your earnings, less any allowable expenses. For example, if you have a sole trade profit of €80,000 and capital allowances of €10,000 the NRE is €70,000.

5. Personal Retirement Savings Accounts (PRSAs)

Payments made to PRSAs will benefit from tax relief at the individuals highest Income Tax rate.  As with RAC’s above the maximum contribution is linked to your age so it is important to include your date of birth in the personal details section of the Income Tax Return.

6. Employment and Investment Incentive Relief, replacing Business Expansion Scheme

This relief can be claimed as a deduction against your total income, before tax credits and allowances, thus reducing your Income Tax at the higher rate.  The maximum relief claimed in any tax year is €150,000 with a minimum of €250.  If full relief cannot be claimed in the year that monies were invested the excess can be carried forward, but no later than 2020, subject to the above maximum limits. Before a claim can be made you must secure a RICT 3 as you will be required to include the RICT 3 certificate number or Designated Funds reference number on your Income Tax Return.

7. Maintenance Payments and Deeds of Covenants

Tax Relief may only be claimed on maintenance payments made under a legally enforceable arrangement for the benefit of the spouse or civil partner. Relief is not granted on payments for children.

If you have a deed of covenant in place in favour of permanently incapacitated minor, other than your own child, where the recipient is under 18 years of age and unmarried, unrestricted relief may be granted against your Income Tax Liability. Relief is also available for covenants in favour of permanently incapacitated adults with restricted relief available on covenants in favour of adults aged 65 and over.

8. Employing a Carer

Tax relief can be claimed at the higher rate of tax if you employ an individual to care for an incapacitated person.  This relief cannot be claimed in conjunction with the Dependent Relative Tax Credit or the Incapacitated Child Tax Credit.  The relief to be claimed is the cost of employing the carer, subject to a maximum of €50,000, less any amounts recovered from a health or local tax authority.  If two or more people employ the carer, the relief is apportioned between them.

To find out more on how to reduce your Income Tax Liability please do not hesitate to contact one of our team here.

Images: Shutterstock

August 25, 2016
  Income Tax

Tips To Reduce Your Income Tax Liability

Are you required to prepare an Income Tax Return for 2014?  If so you are probably gathering your information to forward to your accountant or tax advisor.  From our years of experience of working with our clients we have put together some of the key Income Tax deductions, credits, allowances and reliefs which you may be able to claim to help reduce your Income Tax Liability.  
  1. Health Expenses

One of the main tax reliefs claimed by individuals are medical expenses, which may be claimed at the standard rate of 20%.  Examples of claimable medical expenses include:
  • Qualifying medical expenses i.e. prescribed on the advice of a qualifying practitioner.
  • Drugs or medicines prescribed by a practitioner.
  • Qualifying dental expenditure, which must be accompanied by a Form Med 2 (Routine dental treatment such as extraction, scaling and fillings are not allowable expenses.)
In addition to the above, any payments made to a nursing home for the full time care of an individual will provide relief at the Income Tax Rate of 41%.  
  1. Qualifying Tuition Fees paid in 2014

If you have children in third level education you will more than likely have paid a significant amount in tuition fees. (Hopefully it will be money well spent!)  The good news for Income Tax purposes is that you can claim a deduction against your Income Tax Liability at the 20% rate.  The deduction may be claimed on the 2014 academic year tuition fees paid, including student contribution.  The maximum limit on qualifying fees paid for the academic year 2013/2014 is €7,000 per individual per course.  Relief may also be claimed for certain training courses in the areas of information technology and foreign languages, with relief applying to fees paid from €315 to a maximum of €1,270 per student.  
  1. Home Carer’s Tax Credit

If you are jointly assessed and you or your spouse/civil partner is a home carer you may be entitled to claim a Home Carer’s Tax Credit.  For the tax year 31st December 2014 the credit amounts to €810 and may be claimed if care is provided for:
  • A child whom you are entitled to Social Welfare Child Benefit;
  • A person who is permanently incapacitated by reason of mental or physical infirmity and such person normally resides with you for the year or;
  • A person aged 65 or over.
 
  1. Retirement Annuity Contracts (RAC’s)

Are you thinking of topping up your pension for an early retirement?  If so you can avail of Tax relief on RAC premiums paid, including any premiums paid between 1st January 2015 and the return filing date.  When deciding on the amount of an RAC contribution you would like to make you must consider two main factors:

Age related percentage limit – This provides for a maximum contribution of your Net Relevant Earnings (NRE)*. For example a person under 30 years of age can make a contribution of 15% of their NRE, with a person aged 60 and over being able to make a contribution of 40% of their NRE.

For example, if you are aged 28, have earned €45,000 and made a contribution of €7,000 the relief is restricted to €6,750 (€45,000 * 15%).  The remaining €250 may be carried forward to the following year.

Upper Limited on NRE – There is an upper earnings limited of €115,000 for 2014 and applies whether an individual is contributing to a single pension product or multiple products.

*Your Net Relevant Earnings are your earnings, less any allowable expenses. For example, if you have a sole trade profit of €80,000 and capital allowances of €10,000 the NRE is €70,000.  
  1. Personal Retirement Savings Accounts (PRSAs)

Payments made to PRSAs will benefit from tax relief at the individuals highest Income Tax rate.  As with RAC’s above the maximum contribution is linked to your age so it is important to include your date of birth in the personal details section of the Income Tax Return.  
  1. Employment and Investment Incentive Relief, replacing Business Expansion Scheme

This relief can be claimed as a deduction against your total income, before tax credits and allowances, thus reducing your Income Tax at the higher rate.  The maximum relief claimed in any tax year is €150,000 with a minimum of €250.  If full relief cannot be claimed in the year that monies were invested the excess can be carried forward, but no later than 2020, subject to the above maximum limits. Before a claim can be made you must secure a RICT 3 as you will be required to include the RICT 3 certificate number or Designated Funds reference number on your Income Tax Return.  
  1. Maintenance Payments and Deeds of Covenants

Tax Relief may only be claimed on maintenance payments made under a legally enforceable arrangement for the benefit of the spouse or civil partner. Relief is not granted on payments for children. If you have a deed of covenant in place in favour of permanently incapacitated minor, other than your own child, where the recipient is under 18 years of age and unmarried, unrestricted relief may be granted against your Income Tax Liability. Relief is also available for covenants in favour of permanently incapacitated adults with restricted relief available on covenants in favour of adults aged 65 and over.  
  1. Employing a Carer

Tax relief can be claimed at the higher rate of tax if you employ an individual to care for an incapacitated person.  This relief cannot be claimed in conjunction with the Dependent Relative Tax Credit or the Incapacitated Child Tax Credit.  The relief to be claimed is the cost of employing the carer, subject to a maximum of €50,000, less any amounts recovered from a health or local tax authority.  If two or more people employ the carer, the relief is apportioned between them.  

Submitting Your Income Tax Return

Under the pay and file self assessment system for Income Tax you must complete the following before 31st October 2015:
  • File your 2014 Income Tax Return
  • Pay any balance of Income Tax outstanding for 2014
  • Pay your Preliminary Tax for 2015
If you submit and pay our Income Tax through the Revenue Online System (ROS) you can avail of an extended filing and payment deadline of 12th November 2015. If the above deadlines are not met, you may be subject to a surcharge, interest or penalties which may be imposed by the Revenue Commissioners. At Roberts Nathan we have an experienced team of professionals who assist our clients with their tax compliance, including the completion and submission of their annual Income Tax Return. If you have any queries in relation to the above or require assistance you can contact us
here.   Images: Shutterstock
July 23, 2015