Married & Tax Assessment basis choice

Posted on | August 18, 2010 | 11 Comments

Are you Married?

It’s well worth knowing what Tax Assessment Basis is – and how this could affect your tax bill / tax refund

In the year you are married, you continue to be taxed as a single person – but you may be due a refund through a Year of Marriage Review.

In the years following Marriage, there are 3 basis of assessment allowed:

• Assessment as a single person (Separate Treatment)
• Separate assessment
• Joint assessment/aggregation.

If you get the assessment basis wrong, this will probably cost you in terms of overpaid tax.

 

So what’s the Difference?

Joint Assessment:  With Joint assessment, your tax credits and tax bands can be shared or allocated between the spouses.  So this allows one spouse to allocate some of their tax bands/credits to the other in the current year and back across previous years.  or not, as you wish.  This is the assessment basis you should use to minimise the tax bill you will have in  your current year payslips.  It will also ensure your tax for previous years is minimised.

Separate Assessment:  This differs from Joint assessment in that your current year tax credits cannot be transferred in any way between the spouses.  But you can still review your taxes as a married couple at the end of the year, and if their had been any benefit in transferring tax credits / bands, this will be done automatically.

Assessment as a single person:  With this, you will be treated as a single person, so no tax credits or income deductions or tax bands can be shared.  Once this basis has been chosen for a year, then you cannot remove it in hindsight.  This can adversely affect your tax situation, by amounts in excess of €3,000 p.a.

 

Which basis to use?

We have seen numerous examples of people overpaying tax by up to €10,000 because they selected the wrong basis of assessment.  Our simple advice in this matter is not to choose “Assessment as a single Person” unless you have received professional advice on this matter.

In what circumstances would you choose Assessment as a Single Person?  I can’t think of any that are applicable to PAYE – any one aware of an applicable situation, I’d be glad to hear!

Top Slicing Relief

Posted on | August 16, 2010 | No Comments

This is part of a series of articles on Tax and Redundancy. Click here for the first post in this series.

Reducing the Tax payable

The previous calculations focussed on reducing the amount of the Lump Sum payment that tax is calculated on.
This final calculation examines the amount of the tax charge and looks to reduce it further. This is called Top Slicing Relief.
The key consideration in giving Top Slicing Relief is that the individual should not suffer a tax rate on their Lump Sum in excess of the average rate of tax paid on all their income for the previous 3 years.

i.e. if the lump sum is being taxed at the higher rate (41% in 2009) and the average tax rate applicable for the preceding 3 years was 35%, then a taxable lump sum of €16,800 would give :

Top-Slicing Relief of: €16,800 x (41%-35%) = €1,008.

Top Slicing Relief does not affect your initial tax calculations, but reduces the final figure, in this case by €1,008.

When to Claim

Top Slicing Relief cannot be claimed until after the end of the tax year in which the redundancy payment was received. However, you will need to make sure that your previous 3 years taxes are correct before this can be reviewed – you can work on this straight away!

 

More About Redundancy

Introduction to Redundancy and Tax

Redundancy Eligibility

Statutory Redundancy

Amounts allowed as Tax Exempt by Revenue

 Click the links above to find out more about the different areas of redundancy and taxable events.

Contact us

If you need to contact us for a redundancy consultation, you can use our contact form or email refunds@redoaktaxrefunds.ie

Refunds of DWT (Dividend Withholding Tax)

Posted on | August 15, 2010 | No Comments

DWT, or Dividend Witholding Tax, is deducted from dividends paid by Irish companies. If you are in receipt of Irish dividend income, DWT is deducted at 20%. This 20% is then used as an offset against your income tax liability.

But what if you do not have an Income Tax liability?
You can claim a refund of DWT, where your income tax calculated on your taxable income (from dividends and other sources) is less than the amount of DWT paid. This can in particular happen if you are out of work or finished work.

DWT refunds available if you are over 65 and your income is below the revenue exemption limits, a topic we will cover in a later blog.

If you need further information or help on this matter, why not contact us here

Taxable Redundancy Payment Calculation

Posted on | August 13, 2010 | 2 Comments

This is part of a series of articles on Tax and Redundancy. Click here for the first post in this series. If you have received a redundancy payment in excess of the statutory redundancy amount, we look at additional deductions we can make to that amount here.

Taxable Lump Sum Calculation

The Lump Sum received on Redundancy that exceed the Statutory Redundancy amount is assessable for Income Tax in the tax year in which it is received. However, this taxable amount is reduced by an allowed ‘exempt’ amount.
There are two possible methods to reduce the taxable amount of your redundancy payment and you are allowed whichever gives you the greater reduction in your taxable amount.
These two exempt amount calculation methods are:

• The Basic Exemption/Increased Exemption (BE/IE) method
• The Standard Capital Superannuation Benefit (SCSB) method

BE/IE

The Basic Exemption (BE) is calculated as €10,160 + €760 for each full year of service with the employer.

The Increased Exemption (IE) increases the BE by €10,000 where the individual is not a member of an occupational pension scheme, where no previous claims of a reduction in tax-free payments have been received in the previous 10 years.
If the individual is a member of an occupational pension scheme, the IE can still be given, but is reduced by the following factors:

• Any lump sum from the occupational pension scheme that you receive now.
• The present day value at the date of leaving employment of any tax-free lump sum that may be receivable at a future date (the pension scheme administrator will provide this).

Remember: A PRSA is not an Occupational Pension Scheme, so does not affect your eligibility for IE.

The total amount of the exemption allowable from the BE/IE method is the sum of the BE and IE amounts calculated.

SCSB

This method calculates an exemption based on your recent earnings and number of years service. It allows relief of 1/15th of your average annual pay over the last 3 years, times the number of full years service. This exemption amount is reduced by the amount of any tax-free lump sum received/receivable from the pension scheme.

Calculation

The BE/IE and SCSB should both be calculated with the greater amount being used to reduce the Assessable Lump Sum to the Taxable Lump Sum.

Example:
You have completed 4 full years service:

BE = €10,160 + 760 x 4 = €13,200

You are not a member of an Occupational Pension Scheme AND have not received tax free redundancy lump sum in the previous 10 years.

IE = €10,000

So:

BE/IE exemption = €13,200 + €10,000 = €23,200

Your average pay over the last 3 years is €50,000
Then:

SCSB = 50,000/15 x 4 = €13,333

Since your BE/IE exemption is greater than the SCSB amount, we use the BE/IE amount to reduce your taxable Lump Sum

Your Lump Sum, after deduction of Statutory amount is €40,000 then

Taxable amount = €40,000 – €23,200 = €16,800

This Taxable Lump Sum is treated as Income from employment and taxed in the normal way.

 

More About Redundancy

Introduction to Redundancy and Tax

Statutory Redundancy

Top-slicing Relief

 Click the links above to find out more about the different areas of redundancy and taxable events.

Contact us

If you need to contact us for a redundancy consultation, you can use our contact form or email refunds@redoaktaxrefunds.ie

Dentists in UK, Ireland & Europe

Posted on | August 11, 2010 | No Comments

WhatClinic.com launch

About a year ago, I was fortunate enough to bump into Caelaen King and Philip Boyle of Revahealth.com, as it was known as at the time. 

I had been following their Blog for some time before that – and I’d advise anyone in the Web business in Ireland to do so – for me they are in the top 3 business blogs in Ireland. 

Health, Dentistry and Cosmetic Clinics

Revahealth have now relaunched as WhatClinic.com.  It’s the number 1 resource if you are searching for health and cosmetic clinics in UK, Ireland & Europe - for example Dentists in Ireland.   

They are a fantastic example of how an Irish business can compete as an international web based business.  We look forward to following their experiences in Business and wish them continued success.

Which reminds me: I really should get my teeth checked again soon….

Statutory Redundancy Payments

Posted on | August 11, 2010 | 1 Comment

Redundancy Payments. This post is part of a series of articles relating to Redundancy and Tax issues. For the full list of articles, see the list at the foot of this article.

In particular, check to see if you are eligible for redundancy payments. If so, you will be due a Statutory redundancy Payment.

Statutory Redundancy Payments

In the event of Redundancy there are statutory minimum redundancy payments that the employer must pay to the employee. These minimum amounts are governed by the length of service and the gross weekly Pay of the employee as follows:

• Two weeks Pay per year of employment (Length of Service)
• One further week’s Pay
• Subject to a maximum Pay of €600 per week
  • Any period over 52 consecutive weeks where you were off work due to an injury at work
  • Any period over 26 consecutive weeks where you were off work due to illness
  • Any period on strike
  • Any period of lay off from work

• More About Redundancy

  Introduction to Redundancy and Tax

• Redundancy EligibilityOther Tax-exempt Redundancy payments (basic exemption, increased exemption, SCSB)Top-slicing Relief
   Click the links above to find out more about the different areas of redundancy and taxable events.

  Contact us

  If you need to contact us for a redundancy consultation, you can use our contact form or email refunds@redoaktaxrefunds.ie

The gross weekly Pay is calculated as: your basic wage, before tax and deductions, inclusive of the average amount of any other benefits such as overtime received.
The Length of Service excludes the following absences from work which occurred in the preceding 3 years:

To calculate the Statutory Redundancy Payment, the DETE offer an excellent calculator at:
http://www.entemp.ie/employment/redundancy/calculator.htm

Statutory Redundancy Payments are tax free. You do not need to declare them or include them in any tax returns or Income Tax calculations.

Redundancy in bite-size pieces

Other articles in this series are:
 

Redundancy Payments – Eligibility

Posted on | August 9, 2010 | No Comments

 

This is part of a series of articles on Tax and Redundancy. Click here for the first post in this series.

Being let go from a job is not always treated as a redundancy – there are certain legal criteria that must be met before it is deemed a redundancy and be eligible for Redundancy payments.

Are you eligible for a Redundancy payment?

You are eligible for a Redundancy payment on being let go if you meet the following:

• You are over 16 years old
• You have been employed with the company continuously for 104 weeks (2 years)
• You are in insurable employment. Effectively, these are PRSI class A contributions – you can check this on your payslip.

If you do not meet the conditions above, then any and all payments received upon termination of employment will just be treated as an additional salary payment (or bonus) and is taxable as normal under PAYE income tax.

The good news is that if you do meet the conditions above, then you are legally obliged to receive a redundancy payment. This is called a Statutory Redundancy payment. You may also receive additional amounts at the discretion of your employer, some of which may also be received tax free.

Let’s look at the different types of redundancy payments you can receive and we can look at them in more detail in following posts.

What is a Redundancy payment?

Not every payment received on finishing work is a redundancy payment and eligible for additional tax relief. The following are treated as if they were normal salary payments and taxable under income tax without any special treatment or exemptions:

• Salary owed to you and pay in lieu of notice.
• Payments for holidays due to you.
• Value of assets transferred to you – typically a company car
• Bonuses due.

Types of Redundancy payments?

Your redundancy payment can be split into the following types:

• Statutory Redundancy payments
• Redundancy payments exempt from income tax
• Further payments taxable as normal under Income Tax

 

More About Redundancy

• Introduction to Redundancy and Tax
• Statutory Redundancy
• Other Tax-exempt Redundancy payments (basic exemption, increased exemption, SCSB)
• Top-slicing Relief

 

Click the links above to find out more about the different areas of redundancy and taxable events.

Contact us

If you need to contact us for a redundancy consultation, you can use our contact form or email refunds@redoaktaxrefunds.ie

Your Employment contributions – how do they compare?

Posted on | August 6, 2010 | No Comments

We talked previously about government representatives talking about how only 50% of workers pay income tax – and why this is not a good measure of the contribution low paid workers make to the government coffers as an effect of their employment.  We looked at a few examples of contributions at low pay levels.

 

So it’s clear that Income Tax is but a small part of the contribution a low paid worker makes.

But how does this compare to other countries in the EU?

We asked Fabien to look at the contribution the typical French worker makes to the coffers.

Now lets me certain of this – France is firmly positioned at one end of the spectrum for employment contributions and that the costs of employment are being blamed in part for the stubbornly high unemployment levels there.

But what a Difference! While I don’t think many in the country would like to see 37% of a job worth €12,840 going to the government, it does illustrate the massive differences in how governments are financed within the EU.

As well as the extent to which low paid workers could be taxed. Let’s see how this moves in December’s Budget.

If you have any comments on this post, you can contact refunds@redoaktaxrefunds.ie or john at 05991 73300

Credit Union Loans for Home improvement

Posted on | July 30, 2010 | No Comments

Getting tax relief for Credit Union Loans

Tax Relief on Home Improvement Loans

Did you know you can claim tax relief on the interest paid on a loan used by you to purchase, improve, repair or develop your main residence or to pay off another loan used for that purpose?  We have previously discussed Mortgage Interest relief but not many people know that you can also get tax relief on your home improvement loan (e.g. a Credit Union loan for home improvements).
The only home improvement that you cannot claim tax relief for is if the loan is used for furniture or removable fittings. For a full list of examples of what the loan can be used for, visit Revenue.

What tax relief will I get?

You get tax relief for interest payments made on your home improvement loans. This tax relief is payable at the standard rate of income tax (20%) and is subject to overall limits.  However if you are already receiving the maximum relief for your mortgage interest, then there will be no additional relief due for your home improvement loan.
You can claim your tax relief for your home improvement loan at the end of the tax year. The tax relief is not granted at source unlike Mortgage Interest relief, where your lender reduces your mortgage repayment by the tax credit due. Instead you receive a tax credit for this relief so you actually have to pay tax to get the benefit of it.

 

Thanks to Jennifer who led this weeks Wednesday Club

Lies, Damn Lies – and politicians quoting EuroStat

Posted on | July 26, 2010 | 6 Comments

“50% of Workers not paying any Income Tax”

This little snippit of fact has been one of the most frequently  quoted up and down the country by Politicians in this last month.  We hear it quoted as from the Commission for Taxation Report, or as being sourced from EuroStat Reports, EuroStat being an EU agency providing statistical reporting on the 27 members of the EU.

While the direct statement is broadly accurate, It is a very selective quote for political expediency that counters how EuroStat measures the financing of a states activities. 

But the suggestion that any worker contributes 0% through their employment to the state, is insulting to anyone who has ever received a Payslip. 

Lets look at Why

Eurostat measurement of Goverment Revenue – and where Income Tax fits in.

EuroStat categorises Government Revenue by economic function under 3 broad headings:

• Labour – Revenue’s garnered direct from a persons employment
• Consumption – VAT and excise duties effectively
• Capital – that being income from businesses and assets

This is a very important way of looking at where our government Revenue comes from.  It asks the questions “What are the primary drivers of income for the government“.  The answer being:

• We can generate money from employment in the Country (Labour),
• We can generate money from what we spend (Consumption) and
• We can generate money from the assets of the state (Capital)

Within the Labour category, our government collects revenue from the following mechanisms:

• Personal Income Tax
• Employer Social Insurance Contributions &
• Employee Social insurance contributions.  

EuroStat does split this into what is collected from each mechanism.  This is likely done to illustrate the effectiveness of each mechanism, but if your job is worth €X and your deductions are €Y, it’s an irrelevance to the ordinary taxpayer what name the government puts on €Y since you are never going to see it.

In the context of this discussion, it’s an irrelevance what money is collected through Income Tax:  the politicians should be talking about how much money you contribute to the government through the work you do. 

Government Income from your Labour.

So we’ve ascertained that if we are trying to generate more money from your employment and it doesn’t really matter what name you put on it. 

So lets illustrate how government deductions on employment operate for some low income levels.

Wow!  As we can from above, if you are a single person on standard tax credits earning either €10,000, €20,000 or €30,000, Income Tax is a relatively small part of the overall ‘tax’ burden on your Job. 

For a job worth just 30,000, you will end up contributing 25% of the value of your job to the government.  Even on €10,000 a year, you are contribution 8%. 

In fact there is no situation in which you do not contribute anything to the state from your employment!

So are we paying enough Tax on our labour?

The above is not a case for increasing or decreasing tax on employment.  We may all need to look at how much tax we pay on our wages and we may need to pay more.  The ‘mix’ of taxation may also need to looked – but at a cursory review of the mix on low paid workers above, their seems to be a lot of taxes being collected through what are largely regressive sources of taxation.

But as someone who sits and trawls through hundreds of P60’s and P45’s a year, for some politicians to imply that 50% of workers in Ireland do not contribute to the state is not acceptable.

Whether enough is being contributed will be part of the governments Budget 2011 calculations.

Medical Expenses Abroad & Tax Relief

Posted on | July 19, 2010 | 1 Comment

Have you been abroad for medical Treatment? Many foreign nationals working in Ireland travel back to their home EU country for any required medical treatments. And of course, medical tourism abroad for Irish people is a huge business judging by the number of foreign doctors advertising here.  We discussed Tax Relief claims for Medical expenses abroad in this weeks Wednesday Club.

Medical Treatment abroad – the rules

If you are outside Ireland and find yourself in the unfortunate situation where you need medical treatment, or alternatively, you may have travelled to obtain cheaper treatment, (laser eye surgery, dental treatment, etc.). Either way you may be entitled to tax relief on what you paid as long as:

• The cost of qualifying treatment carried out by a practitioner (GP, consultant or dentist) provided such practitioner is entitled under the laws of the country in which the care is provided to practice medicine or dentistry there
• The cost of maintenance or treatment in a hospital, nursing home or clinic is allowable provided that the institution is on the Revenue list of approved hospitals and nursing homes.

We have had a number of people mention in the past that they thought that Tax Relief could only be claimed for medical expenses abroad IF the treatment couldn’t be received at home, but that’s not the case.  As long as you are using a professional practitioner (as that is recognised in the foreign country), you can claim it.

How about my Travel Expenses?

Many people have to travel outside Ireland as the relevant qualifying health care is only available outside of the State.  In that case,  the cost of ‘reasonable travelling and accommodation expenses’ are also allowable. In such cases, the expenses of one person accompanying the patient may also be allowed where the condition of the patient requires it.

Where the patient is a child, the expenses of one parent may generally be allowed and, exceptionally, of both parents where it is clear that both have to be in attendance.

Getting your Teeth done.

Non-routine dental treatment obtained outside the State may be allowed provided the dentist is a qualified practitioner (i.e. entitled under the laws of the country in which the care is provided to practise dentistry there).

Travel in Ireland Relating to Health Issues

Tax relief may be claimed in respect of the cost of transport by ambulance. However, where regular continuing treatment or consultation is required and the patient has to travel long distances, tax relief may be claimed in respect of the cost of the travelling other than by ambulance. It is not the intention that this tax relief be granted for minor local travelling expenses or occasional travelling [e.g. to undergo an operation (unless by ambulance)] – it’s a bit open to interpretation this one, so feel free to talk this one through with us.

Hope that was helpful.  If you have any questions you can call me on 05991 73300

 

best wishes,

Ray

Looking into Medical Expenses

Posted on | July 16, 2010 | No Comments

We all know that an apple a day keeps the doctor away but sometimes we all need some medical treatment regardless. Most people are aware that people who pay tax are entitled to offset a certain amount against doctor bills, prescriptions, hospital visits, etc. (if you’re not check here). As medical expenses tax relief is such a large area we decided to split it over a few weeks, so we can get into the nitty-gritty of it.

This week we decided to look at some areas that may need to be clarified more for people in our latest Wednesday Club meeting (which just happened to be on a Tuesday this week).

What can you not Claim back on

Medical expenses is a fairly broad area of a refund but there are two main things that people don’t realise they can’t claim back on. These are:
• Routine dental treatment, which is defined as “the extraction, scaling and filling of teeth and the provision and repair of artificial teeth and dentures”.
• Routine Ophthalmic Care: Tax relief is not available for the cost of sight testing or the provision and maintenance of spectacles and contact lenses.

That’s the bad news. Now on to the good news and just some of the things you can claim back on.
Dental Treatments for which Tax Relief is Allowable
When applying for dental treatment tax relief you must hold a completed Form Med 2 (Dental), signed and certified by the dental practitioner when making a claim for non-routine dental expenses. These include:
• Crowns
• Veneers/Rembrandt Type Etched Fillings
• Tip Replacing
• Endodontics – Root Canal Treatment
• Periodontal Treatment – Root Planing is a treatment of periodontal (gum) disease.
• Orthodontic Treatment: This involves the provision of braces and similar treatments
• Surgical Extraction of Impacted Wisdom Teeth
• Bridgework

Physiotherapy

Examples of allowable treatments under the heading physiotherapy include treatment by a chiropractor, osteopath and bonesetter. Acupuncture treatment is not allowable unless carried out by a person who is a qualified practitioner. Non-medical card holders may be able to claim tax relief on chiropody services if you are required to attend as part of medical treatment. (That is, you have a significant disability or a serious illness, etc. and your doctor directs you attend chiropody services).

 

Remember, from 2009 you can only get tax relief at a max of 20%, whereas previously you could get it at 41% (higher rate) – calculate your medical expenses tax refund

Single Parents Tax

Posted on | July 8, 2010 | No Comments

Wednesday Club on Single Parents Tax Credit

Aaaaah, the Single Parent Tax Credit.  This is the tax credit that causes the most consternation in our office.  Bit like some Blur song I can’t quite remember the name of, you have people getting it that shouldn’t and people that should, not getting it.

And this isn’t some piddling Tax Credit worth €70 a year – this can really add up.  For instance we had a call a few weeks ago from a fella who had received a notification from Revenue that he owed them €14,000 from incorrectly claiming Single Parent Tax Credit.  On the other hand, we have reclaimed refunds for people of up to €9,000 where they should have been receiving tax benefits for being a single parent that they were not aware of.

Battle of the Sexes

We find that women are far more organised with their taxes.  End of (as they say).  And in no situation is this more prevalent than regarding the Single Parent Tax Credit.

In the first case, guys just are not as well informed about Single Parent Taxation.  We also find that guys can be insecure in their position as Single Parents, worried about rocking the boat and doing anything that may affect their ex-partner’s rights, or their rights regarding the children.  This is a misplaced worry.

I suppose the third case worth mentioning, is men are far more likely, either through chancing their arm or not investigating the eligibility correctly, make a dodgy claim that down the line will end up in a hefty bill like the one mentioned earlier.

Can I Claim Single Parent Tax Credit

Here are the most important eligibility Criteria:

Not only single but also widowed, divorced and separated parents who have a dependent child can claim for One Parent Family Tax Credit.  The child can be adopted, step child or any child you have custody of.

Dependent child is:

- Child  under 18 or

- Over 18 in full time education

Both parents are entitled to this tax credit as long as the child stays with them at least one night a year.

Further condition to qualify:

- You cannot be living with a partner and

- Cannot be entitled to married tax credit

As single parent you can claim €1830 in 2010. Being eligible for this tax credit also means that your tax rate band increases.  So you can earn up to €40400 (instead of normal single person rate of €36,400) in 2010 before you have to pay higher rate.

Review every year.

If you are due single parent tax credit at the start of the year, then you are due it for the year.  But circumstances change, so make sure you check are you still eligible at the start of each year – as Revenue assume you continue to be eligible for this until you tell them otherwise.

Thanks to Slavka for Prepping the Wednesday Club this week and hope you found this useful!

If you need more information contact us on 05991 73300 or via our website

Property tax in next budget?

Posted on | July 2, 2010 | No Comments

You have to pay attention when the Irish independent reports the government is considering a Property tax.  Enda Kenny fresh from sorting out his own house, set about challenging the government on this suggesting that he was “flying kites” and presenting “straw men” through the media.  A blustery day obviously affecting his choice of words and analogies.

Property Tax Budget Rumours

The rumblings on the property tax were reasonably detailed.  Houses are valued by tax band, with houses under €150,000 charged €225, houses from €150,000 – €300,000 charged €675, houses €300,000 to €450,000 charged a €1,125 and after that roughly at a rate of 0.3%, meaning €3,000 if your house is valued at a million.

This would apply to all houses, private residence/rented, occupied/unoccupied if it follows the recommendations of the Taxation commission report.  It would replace the current NPPR second property tax of €200 a year.

The speculation did not extend to what exemptions might apply, but these might not be extensive.

For the record Taoiseach Brian Cowen in reply to Enda Kenny  said he wouldn’t respond to speculation and it was a matter for the budget.  Enda Kenny clarified that Fine Gael is opposed to such a measure.  Let’s see how this one develops over the next few months.

What’s a Principal Private Residence then?

Posted on | July 1, 2010 | No Comments

Principal Private Residence – Why it matters

What’s your Principal Private Residence?  This has massive tax implications across many areas of tax.  In our experience this causes a lot of confusion.

 

What is it

According to Paul Young, wherever he lays his hat, that’s his home.  There’s a bit of all of us who like that defination, but unfortunately Irish tax law is a lot more presciptive.

According to Revenue, Your Principal Private Residence can be defined as

“An individual’s principal private residence at any time is the building or part of a building occupied by the individual as his or her only or main residence: during the period of 12 months ending with that time, or where the building was more recently acquired, from the time of acquisition to that time.”

 

My own individual defination is

“Your Principal Private Residence is the place you live.  If you have two homes, Revenue only allow that you live in one place at any one time, so you have to pick one.”

 

Income Tax FAQ’s

 

Q.  My family are in our mortgaged home in Dublin, but I am working in Cork the last 4 years and have rented a place there.  Can I claim Rent Relief?

It is advisable that you retain the home you own in dublin as your Principal Private Residence as it can have implications for your insurance and mortgage.  Also, you can only choose 1 principal private residence. so you will lose your Mortgage Interest Relief if you look to claim Rent Relief.  You will also be required to register your property in dublin as a second property and pay the €200 a year Property Tax for second properties.

 

Q.  My Son is in college in Limerick.  Can I claim rent relief as I pay for his rent?

Rent Relief is only available for your rent paid on your own principal private residence, so unfortunately you cannot claim Rent Relief for this.

 

Q.  I have a mortgage with my ex-partner but I have moved out.  I am still claiming mortgage interest relief, is this ok?

If you are not living in your principal private residence, then you cannot claim mortgage interest relief.  But if your ex is still living in the house, then they can continue to claim mortgage interest relief.  Depending on the size of the mortgage, your ex may still receive the same amount of mortgage interest relief as you receive when both of you were claiming.

Claiming mortgage interest relief with your ex may also affect your (and your ex’s) right to claim single parent tax credit – make sure you get this right.

 

 

There are also Capital Gains tax implications for your Principal private residence, which we will look at again. 

If you have questions on your taxes, contact us via our website, email refunds@redoaktaxrefunds.ie or call us on 05991 73300

Married – How to be assessed?

Posted on | June 22, 2010 | No Comments

Just Married?  Congrats! 

This week in the Wednesday club we spoke about how you may have potential wedding pressies from the taxman!
If your taxes are not updated you could be missing out on vital tax credits that could make a big difference to your take home pay.  For example:

• If you are married you are entitled to the married tax credit which also increases  your tax band.
• Increase in Rent tax credit  if married.
• Home Carer’s  Tax Credit – if one spouse is at home and cares for one or more dependent children.
• Amongst other changes – our full tax assessment will cover these

How it works?

In the year of marriage both spouses continue to be tax as two single persons but if the tax you paid as single people is greater at the end of the tax year than if tax as a married couple then a refund of the differences can be claimed.

How you can be taxed in the following years?
The following options are available:

• Joint assessment
• Separate Assessment
• Assessment as a Single Person (Separate Treatment)

Joint assessment is the most favourable method of assessment for a married couple and it automatically given by Revenue once they are informed that you are married.  You can at any time elect for any of the other two options. 

WARNING! 

We strongly suggest that you do not choose “Separate Treatment” without getting professional advice.  Once this is chosen, you cannot backdate changes and we have seen where clients missed out on substantial refunds because of this.

It is advisable to be aware of the options that are available to you and how it best suit you tax situation.  You can contact us on 059 9136031 with any questions on the above and we can check your taxes for the last 4 years to make sure you having been missing out on refunds.

Examples

In the following two examples we will use the same figures.  Mary and john and married and the example below will show how being set up correctly as married will affect the tax you will pay. Mary earned €48,000 in 2009 and Tony earned €25,000

Assessment as a Single Person (Separate Treatment)
Mary
Income 48,000

Standard rate band 36,400 x 20% = 7,280
      11,600 x 41% = 4,756
              12,036
Tax Credits
Personal Tax Credit  1,830
PAYE Tax Credit      1,830
        3,660 
         
12,036 – 3,660 = 8,376

John
Income 25,000

Standard rate band 25,000 x 20% = 5,000
          
Tax Credits
Personal Tax Credit   1,830
PAYE Tax Credit       1,830
        3,660 
         
5,000 – 3,660 = 1,340

Total Tax Payable (8,376 + 1,340) = 9,716

Joint Assessment
Mary’s Income 48,000 + John’s Income 25,000 = 73,000

Standard Rate Band
Mary     45,400 x 20% = 9,080
2,600 x 41% = 1,066
John     25,000 x 20% = 5,000
15,146

Tax Credits
Married Tax Credit     3,660
PAYE Tax Credit x 2    3,660
7,320

Tax Payable 15,146 – 7,320 = 7,826

 And Finally, don’t forget that if you are due a child, then your tax situation changes again while on Maternity Leave and receiving Maternity Benefit.  In my own case, I’m a year and a half married and expecting in a few months, so acutely aware of the differences all these can make!

If you have any questions, you can contact me or any of the team on 05991 733 00

 

best wishes,

Yvonne

Claiming for Tuition Fees

Posted on | June 18, 2010 | No Comments

Wednesday Club Blog – Claiming Tuition Fees

When’s a Tuition Fee a Registration fee?

Of the many questions we are asked regarding tuition fees, the most common relate to the difference between Registration fees and Tuition Fees.

From a tax perspective, you will not be able to claim tax relief on Registration fees, but may be able to claim tax relief for Tuition Fees.

 

The term tuition is used to refer to a fee charged for educational instruction. If you’ve had to pay to attend a certain course or college this would be regarded as a tuition fee. Registration fees however are paid to register with the college this why tuition fees usually apply to mature students. The tax relief on tuition fees applies to higher education courses only; it does not encompass PLC courses.

In practice it’s hard to tell the difference between registration fees and tuition fees – and then know if it’s an eligible tuition fee, so you’re not alone!  If you are undertaking a course in Ireland and unsure if it’s a  tuition fee, the proof in the pudding is get the college fees office to send a copy of the invoice clearly stating the Fee is a Tuition fee and that it is eligible for tax relief.  Or just give us a call and we can advise.

Relief for Tuition Fees

Some changes have been made in regards to who can claim this relief, up to 2006 an individual could claim tax relief if he/she has paid tuition fees for third level courses on behalf of a spouse, child or person for whom the individual was the legal guardian. This changed in 2007 and now the required relationship is not relevant, the individual can claim relief as long she or he has paid the qualifying fees. The relief is available for tuition fees paid for certain full-time and part-time courses of at least two years duration. The relief applies to fees paid for certain training courses in the areas of information technology and foreign languages.
Relief is not available if any part of the tuition fees paid are met directly or indirectly by grants, scholarships, or by an employer or otherwise. Also no relief is available for administration, registration or examination fees.
Relief is available per course, per academic year of fees paid up to €5,000 per course. If you have paid fees for more than one individual you are entitled to relief for fees paid for each person up to the maximum limit per course. Where fees are paid in instalments and any such instalments are paid in a tax year following the year in which the academic year of the course commenced, relief may be granted in the tax year the course commenced

Third Level Education
Approved Colleges
Approved Colleges for the purpose of the tuition fees tax relief include:
• Universities, Public and Private Colleges and Institutes of Higher Education in the State that provide courses that are approved for higher education grants.
A college or institution of higher education in the State which operates in accordance with certain codes of standards laid down by the Minister for Education and Skills (these colleges and institutions must be approved by the Department of Education and Skills for the purpose of this tax relief)
• Publicly funded or duly accredited Universities and Institutions of Higher Education in another EU Member State
• A college or institution of higher education in any other EU Member State providing distance education in this state, which provides courses approved for the Higher Education Grants Scheme (this includes the Open University)
• Publicly funded or duly accredited Universities and Institutions of Higher Education in non-EU Member states (N.B applies to postgraduate courses only) and
• Colleges or Institutions (in the state and in any E.U Member State) which provide distance education in the state and which operate in accordance with a certain code of standards laid down by the Minister for Education and Skills
(These colleges and institutions must be approved by the Department of Education and Skills for the purposes of this relief)

 

DOCUMENTATION REQUIRED

• Amount of Tuition Fees
• Name and address of student
• Name and address of individual who paid tuition fees
• Course of study and duration
• Confirmation that the college is publicly/privately funded in an EU/NON-EU Country

COMMON QUESTIONS:

My boyfriend paid for my course can he claim for relief?
Yes, with effect from 2007, an individual can claim tax relief on fees paid for third-level courses as long they paid the qualifying fees.

Mortgage Interest Relief – Wednesday Club

Posted on | June 9, 2010 | No Comments

Wednesday Club Blog – Mortgage Interest Relief

If you are one of the many people who took the plunge and bought your home since 2002, during the infamous Celtic Tiger, you would have been entitled to claim Mortgage Interest Relief or tax relief at source (TRS). With effect from 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers from the start of your mortgage. If you haven’t claimed already you may claim back from 2006 to 2009.

What is a qualifying loan?

A qualifying loan for the purpose of mortgage interest relief (TRS) is a secured loan which must be used solely for the purchase, repair, development or improvement of your principal private residence. It must be used solely for the purchase, repair, development or improvement of a principal private residence (PPR), i.e. where you live, within the State. TRS can also be claimed on a mortgage you are paying for a separated spouse or dependent relative for whom you are claiming a dependent relative tax credit. A loan used for the purchase of an investment property or holiday home does not qualify for mortgage interest relief (TRS). Switching lender or mortgage type to achieve a better interest rate does not equate to a new loan but it does not affect your entitlement to the tax relief if you are already claiming it.

See some examples of mortgage interest relief  in action.

 

Amount of mortgage interest relief (TRS) available

The rates of relief were changed in January 2009. If you are a single first time buyer in years one and two of your mortgage you can get relief at 25% of your interest up to a ceiling of €10,000, i.e. €2,500. In years three, four and five it is 22.5%, i.e. €2,250 and in years six and seven it is 20%, i.e. €2,000. If you are married or widowed the same figures apply only the ceiling is doubled to €20,000. If you are a single non-first time buyer, i.e. you previously had a mortgage and wish to purchase a new house, the ceiling is €3,000 with a flat rate of 15% across the first seven years of your mortgage, i.e. €450. Again if you are married or widowed the ceiling is doubled to €6,000. Mortgage interest relief is given, by your lender, either in the form of a reduced mortgage payment or a credit to your funding account. Relief is calculated on the qualifying interest on your loan, or on your ceiling, whichever is the lesser. 

Mortgage Interest Relief Timeline

Changes were made in 2009 and in 2010 to TRS entitlements. Your entitlement to mortgage interest relief depends on the start date of your mortgage. Below is a guide to entitlement based on when you took your mortgage out.
• If you took out the mortgage in 2003 or earlier, your entitlement expired in 2009 under the provisions of the Supplementary Budget of April 2009.
• If the start date of your mortgage is between 1 January 2004 and 31 December 2011, the Finance Act 2010 provides that your entitlement to relief will continue at the current rates until the end of 2017.
• If you take out a mortgage between 1 January 2012 and 31 December 2012, there will be a 15% rate of relief for first-time buyers and a 10% rate for non-first-time buyers. The maximum amounts of interest that will qualify for relief will be €6,000 for married or widowed people and €3,000 for single people. These ceilings will be the same for first-time buyers and non-first-time buyers. For mortgages taken out after 31 December 2012, no mortgage interest relief will be allowed.
• Mortgages taken out on or after 1 January 2013 will not qualify for mortgage interest relief.
• Mortgage interest relief will be abolished completely after 31 December 2017.

Procedure

This is a hugely complicated area and we’ll do a number of case studies on the area going forward to highlight how complicated it can get!  But here is the general application procedure:

 
To apply for TRS, you need your Personal Public Service Number (PPSN) and your mortgage account number(s) as provided by your bank. You should not apply to register your mortgage until after the date of your first mortgage repayment. Payment for prior years is made directly into a bank account nominated by you.

If your property ceases to be your Principal Private Residence and the mortgage account is not cleared and paid, or if your loan’s qualifying percentage changes you must notify Revenue immediately.   In particular, if you separate from a partner and move out, then you should no longer be receiving mortgage interest relief – even though your partner and children may still be living there.

Hope you get the most out of your interest payments on your mortgage and if you have any questions you can call me on 05991 36031

Best Regards,

Ray

 

Find out more

• See our Tax Refund calculator
• And all our mortgage interest relief blog posts
• Apply for a tax refund assessment now

Why you might be due Home Carers Tax Credit

Posted on | May 27, 2010 | No Comments

Background

At the Wednesday Club this week, Frances lead the discussion on Home Carer’s Tax Credit and how it is applied.

This initially started as a House Wife’s tax credit, for the stay at home mum minding the children.  But we more and more find that a Married couple will be due this for a partner who has been made redundant and is not working – and this can be either the Mother or Father of the house.

You may also be due Home Carers Tax Credit where you have been on Maternity Leave  and not receiving employment income for that reason.

How it works

If you are married and have children (or care for other dependents) then you may be eligible for the Home Carers Tax Credit.
To claim the full tax credit the home carer’s income (and this includes any Welfare payments) must not exceed €5,080 for the year.  If the income is between €5,250 and €6,750 then you will be due a portion of the tax credit.
You cannot claim this home carer’s tax credit and the increased standard rate band for dual income couples.  If the Married Standard Rate Cut Off Point (€45,400 for 2009) is sufficient to cover the combined income of both spouses then this issue doesn’t arise.  We can help you determine which is better for you and when Revenue assess the application they will automatically grant the more beneficial treatment. 
This tax credit can be claimed for the last 4 years at a rate of €770 for 2006 and 2007 and €900 for 2008 onwards.
One point that is often overlooked is that if you got the Home Carers tax credit in one year you can still claim it the following year even if the home carer’s income exceeded the €5,080 threshold.
It can be slightly complicated determining if you are eligible for the Home Carers tax credit but we can let you know Revenue’s rules for defining a dependent person and we can also calculate yours and your spouse’s incomes for the last 4 years and determine the most beneficial tax treatment for each of the last 4 years.

Single parents reviewed by Revenue

Posted on | May 24, 2010 | 1 Comment

Are you a Single Parent?

Not the most complicated question I hear you say - most of us instinctively know the answer to this question and feel it true for our own situation. 

But the Revenue Commissioners take a more definite view on this. 

In Tax Terms, being a Single Parent can be of great benefit and can be worth more that €2,700 in Tax Refunds for a single year.  But If you claim it incorrectly, then Revenue can review your taxes going back 6 Years – and you could easily be stuck with a Tax bill of over  €10,000.

How to qualify as a Single Parent?

The two primary considerations to be deemed a Single Parent by Revenue are:

• You have a Child under the age of 18 who is ‘dependent on you’ – not as onerous a test of eligibility as you might think this one, you will be eligible if your child resides with you overnight from time to time.
• You are not living with a partner as ‘Man and Wife’, whether married or not.  This is how Revenue express it and where most people come unstuck and make mistakes.

 

Where is it going wrong?

There can be a misunderstanding as to what constitutes living together as Man and Wife  – and it really is the wrong term as people understand it in this day and age.

Take the example of Seamus and Debbie who get together, have baby Johnny and get a mortgage together.  Certainly not single parents.  A year later, Seamus and Mary break up and Mary stays in the house while Seamus moves back home and minds baby Johnny at the weekend.  Are they single parents now?  Well, yes you’d think, of course they are.  So both Mary and Seamus apply for the Single Parent Tax Credit and receive it.

So what goes wrong in this case?  Quite a few things really.

Mortgage Interest Relief

Mortgage Interest Relief is granted on the interest paid on your principle private residence.  i.e. where you live.  Seamus and Mary are still in touch and Seamus contributes to the mortgage payment as he had when they were together.  But he is receiving mortgage interest relief on the loan when he shouldn’t be – as it is not his ‘principal private residence’.

The Revenue Clampdown

This is from observation rather than any Revenue communication on the subject, but Revenue have been targetting incorrect Single Parent claims since the start of this year.   How?  They are looking at Single Parent Tax Credit claimants who also receive Mortgage Interest Relief on a joint mortgage.  In terms of arguing your corner with Revenue, you really are stuck  in a catch 22 here as:

• To get Mortgage interest relief you have to be living in the house
• In order to get Single Parent Tax Credits, you should not be living there.

So you are going to get caught for either the Mortgage Interest Relief or for the Single Parent Tax Credit and have to pay back a hefty sum.

We have spoken to a number of people this year who came to us to help them with their tax assessments which show them owing sums of up to €14,000, so situations similar to the one above are happening across the country today.

Fixing the Single Parent Tax Problem

The above situation illustrates how complicated individual taxation can be and how easy it is for expensive mistakes to be made.  We normally talk about the Expensive mistakes and ommission that when  ‘righted’ can be worth significant Tax Refunds.  But we also feel a duty of care to ensure that our clients taxes are left in good nick and this shows how not having someone professional check your taxes can cost you a lot of money and stress.

With the granting of Single Parent Tax Credits so much based on your personal situation – breaking up, moving back in, meeting someone else, moving home etc – We think it’s completely inappropriate that this Credit  is carried forward in your tax credits from year to year without question.  Either Revenue should oblige that you reapply for this tax credit each year, or inform you of your obligation each year to inform them if your personal situation has changed. 

This will help ensure that Revenue can spend more catch those who are trying to fraud the system in this way, rather than having to reclaim tax from those who made an honest mistake.

Further Information:

• Check out our other blog posts relating to Single Parents
• See what Tax Credits are available to you
• Get a Complete Tax Refund Review now
• Get a Tax Refund Estimate

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Welcome to the Red Oak Tax Refund Blog, where we will discuss money matters, tax and in particular tax refunds relating to PAYE employment in Ireland. If you have any topics you would like discussed, send us a mail to refunds@redoaktaxrefunds.ie and happy reading!.

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