PayLessTax Paylesstax Blog - Page 8 of 14

Personal Tax Credits- Reliefs and Exemptions

July 27, 2013

There are numerous tax credits and tax claims which often get overlooked. We have divided these into three different categories as follows:

Personal Tax Credits

Allowed at the 20% tax rate as a credit against your income tax liability.

Home Carer’s Tax Credit
Mortgage / Loan Interest
Private Rented Accommodation
Medical Insurance Policies
Tuition Fees & Training Courses
Incapacitated Child
Age Credit
Blind Tax Credits
Incapacitated Child
Dependent Relative Credit
Seafarer’s Credit
Medical Expenses

Personal Tax Reliefs

Allowed as a deduction in calculating your taxable income, which means they are more valuable in terms of tax saved for top rate tax payers.

Nursing Home Costs
Employing a Home Carer
Contributions to Pension Scheme
Revenue Approved Permanent Health Benefit Schemes (PHI)
Employment & Investment Incentive Scheme
Film Investment Relief for 2015 – scheme has been reformed and moved to a film corporation tax credit model with effect from 1 Jan 2015.
Deeds of Covenant

Personal Tax Exemptions

There are not many of these around but we explain the most common ones.

Income Exemptions & Marginal Relief
Child Minding Services in your home
Rent-a-Room Relief Tax Free Income
Leasing Farm Land
Foreign Service Allowances for Employees of Government Agencies

Single Parent Tax Credit

July 27, 2013

This additional tax credit is available to single parents who have dependant children. The extra tax credit is equal to the single persons tax credit so that the combined tax credits for a single parent equal the normal married persons tax credit. In addition a qualifying single parent is entitled to a slightly increased 20% tax rate band.

With effect from 1 January 2014, the additional credit is only available to the principal carer of the child.

A dependant child, for the purposes of this additional tax credit is a child who at the beginning of the year of assessment is under 18 years of age or if over 18 is receiving full time education. A child who is permanently incapacitated by reason of mental or physical infirmity from maintaining himself will also qualify as a dependant child regardless of age provided they were so incapacitated before reaching 21 years of age. A child also includes a stepchild, a child whose parents have not married, a child who has been informally adopted and an adopted child.

This additional single parent tax credit is not available to an unmarried couple who are living together.

Widowed Persons Tax Credit

July 27, 2013

If you are widowed during the tax year, your tax status changes. The extent of this change depends on whether you were the person responsible for making tax returns or whether your deceased spouse was the person responsible for making tax returns.

If the surviving spouse was the person responsible for making the tax returns there is no particular change in the tax year when you are widowed. You continue to be entitled to the normal married persons tax credit and other associated claims e.g. home carer’s tax credit etc.

On the other hand if the surviving spouse was not the person responsible for making tax returns they are treated as a single person for the remainder of the tax year from the date they were widowed. You are entitled to both the single persons tax credit and an additional special tax credit for the year of bereavement, which brings the combined tax credit to the same amount as a married persons tax credit. If you have dependent children you do not get any additional tax credits apart from these in the year of bereavement. In addition you are entitled to the normal single persons 20% tax rate band for the remainder of the tax year.

In the years following bereavement, if you have dependant children you are entitled to both the single parent tax credit and an additional tax credit for each of the following 5 tax years. You are also entitled to a slightly greater 20% tax rate band than a single person.

Separated Couples

July 27, 2013

When a marriage / civil partnership breaks down and couples decide to separate, the tax implications can be significant and need to be carefully considered.

The division of assets, tax treatment of maintenance payments and the claiming of tax credits all need to be examined.

Maintenance payments for the support of children are ignored for tax purposes. Payments for the support of a spouse may also be ignored for tax purposes if the couple involved agree to this. Alternatively the spouse maintenance payments can be treated as income for the recipient and as a tax deduction for the payer.

In the year of separation the spouse who has responsibility for making tax returns to the Revenue continues to be treated as a married person for the remainder of that year assuming the couples tax affairs were previously dealt with on a joint basis of assessment. The other spouse / civil partner may be treated as a single person for the remainder of the tax year. Then the couple must decide how they wish to have their tax affairs dealt with.

They may choose to continue as though they were a married couple/ civil partnership and the normal married persons tax credits and 20% tax rate band will apply. Alternatively they may decide to be taxed as two single people.

We can provide more detailed advice on this area as each individuals’ tax affairs need to be examined to see what works best for them. Please contact us if you would like further information.

Marriage/ Civil Partnership During Tax Year

July 27, 2013

When you get married during a tax year or enter into a civil partnership you may be entitled to a tax refund. This will depend on the amount of income of each of the couple and the time of year involved.

Two calculations are required. The first involves calculating your tax as though you were two single people for the whole of the tax year.

The second calculates your tax as though you were a married couple/ civil partnership for the whole of the tax year.
If the second calculation gives a lower tax bill the difference between the two claculations is called a refund. This refund is then time apportioned over the tax year. for example if you got married half way during the tax year you would be entitled to 50% of this refund. If you got married at the end of the tax year no refund would be due.

Refunds will only arise where one of the couple pays tax at the low rate (20%) and the other at the top rate (40%). If both parties pay tax at the same rate as single persons then no refund will be due.

Married Persons/ Civil Partnerships Tax Credit

July 27, 2013

This credit is available for all married couples/ civil partnerships (referred to in future collectively as qualifying couples) living together that are not continuing to pay their tax as single persons. Qualifying couples have different options as to how they should pay their tax. There are 3 different options for known as Joint Assessment, Separate Assessment and Single Assessment.

Joint Assessment
The majority of couples pay their tax on this basis. One spouse/partner is responsible for completion and submission of tax forms to the Revenue and for paying any tax owed to the Revenue. All tax credits are normally given to this spouse/partner and if the other spouse/partner is working they receive basic tax credits only against their earnings e.g. PAYE allowance for PAYE earners.

Separate Assessment
This is not to be confused with separated couples. A qualifying couple can elect to be taxed as single people during the tax year subject to re-examination after the end of the tax year to see if they would pay less tax under the Joint Assessment basis. If so they will get a refund.

This option can lead to cash flow disadvantages between spouses if there is a substantial difference in their incomes. However, provided you claim the re-examination of your joint tax position after the end of the tax year any tax overpaid during the tax year will be refunded to you.

If you wish to use this separate assessment method you have to apply for it to your tax office before the 1st of April during the relevant tax year.

Single Assessment
As the name implies this option means each spouse/partner is taxed as though they remained single. Your tax affairs are never joined together. This can result in more tax being paid than under the Joint Basis and Separate Assessment Basis.

This option is not chosen very often by qualifying couples because unlike the Separate Assessment Basis there is no option for re-examining your tax affairs on a Joint Basis after the end of the tax year.

If you wish to use this single assessment method you have to apply for it to your tax office before the end of the relevant tax year.

TAX TREATMENT OF ETF, UCITS AND OTHER FUND INVESTMENTS

July 4, 2013

Exchange Traded Funds (ETFs) & Other Fund Investment Products – Offshore Fund Tax Regime

Our online system caters for the tax reporting required for ETF, UCITS and other fund investments. Through our traditional tax practice we have extensive knowledge and experience in this area and assist a large number of clients who hold these types of investments to meet their tax reporting requirements each year.

A particular set of rules, known as the offshore fund tax regime, can apply to these types of investments depending on the nature and location of the fund investment. Where they apply, the rules can give rise to a number of tax implications –

41% income tax on any income or gains
Deemed disposal of units on 8^th year anniversary of purchase
No relief for losses made on sale of units
Purchases of units to be reported even where no income or gains
Non-domiciled individuals cannot claim the remittance basis of taxation on these investments

If you acquire units in an investment product that is subject to the offshore fund rules then you must file a Form 11 income tax return for the year via the self-assessment system. Payments from and gains from such investments must also be reported on your Form 11.

The financial advisor arranging your investment will often explain the tax rules involved which can be complex. However if you are purchasing units in an ETF, UCITS or other fund investment directly yourself using an online brokerage or online trading platform then the appropriate tax treatment can be more difficult to ascertain but we can assist you with this – please see here for further details.

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Disposal of a Business upon Retirement – Retirement Relief

July 4, 2013

This relief is available to individuals who have reached the ripe old age of fifty-five and are disposing of all or part of their business assets. The business may have been carried on either in their sole name, in partnership or through the medium of a limited company.

While the relief from capital gains tax is called retirement relief you do not have to actually retire to avail of the relief. This means that the relief could be used by somebody trading in their own name or in partnership and deciding to trade through a limited company. The sole trader or partnership business could be sold to the limited company and provided all qualifying conditions are satisfied exemption from tax claimed under these rules.

Needless to say there are various rules and regulations attaching to the operation of the relief and we can provide advice on these for your own specific circumstances for which a separate charge will arise.

Personal Exemption

July 4, 2013

Every individual is entitled to an annual exemption of €1,270. Only gains made in excess of this amount are liable to tax. The exemption if not used in one year cannot be carried forward to future years.

For married couples each spouse is entitled to his or her own exemption. The unused exemption of one spouse cannot be transferred to the other.

Sale of an Option or Contract over a Property

July 2, 2013

There are two separate situations here.

One is the sale of an option and the other the selling on of a contract.

The rules for dealing with options are quite complex and we deal with same by way of consultation only. An additional charge will arise.

The selling on of a contract may be relatively straightforward. Any profit made may be liable for Capital Gains Tax at 33%. Our calculator for dealing with an outright sale can be used to determine the gain if any arising. Where an individual is involved in numerous sell-ons the profits made could be charged to income tax.

We can provide more detailed advice on this area by way of consultation and an additional charge will arise.

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