Revenue Unveil Measures to Tax Pension Lump Sums

April 26, 2011

Revenue have today unveiled new arrangements for taxing retirement pension lump-sums in excess of €200,000.

The 2011 Finance Act included a provision, Section 19 (4)(b), to ensure that an individual’s maximum lifetime retirement  tax-free lump sum is limited to €200,000. This applies from 1 January 2011 onwards.

In calculating the tax-free amount, any earlier lump sum received since 7 December 2005 is also taken into account.

Taxation of Retirement Lump Sums

The remainder of the lump sum(s) is now taxable. This is to be taxed in two stages:

  • The portion between €200,000 and €575,000 is taxed at the standard rate (20%) under Schedule D Case IV.  The taxpayer may not utilise any reliefs, allowances or deductions against this portion.
  • Any additional amount over €575,000 is taxed at the individual’s marginal tax rate. This element is counted as ‘profits or gains arising from an office or employment’ and will generally be subject to PAYE at source.

Revenue have today issued a new Form 790AA, which is to be used by pension administrators to notify Revenue of ‘Case IV’ tax deducted in accordance with the above procedures.

The Revenue eBrief on this matter is here.


15 November is ROS ‘Pay & File’ Tax Return Deadline

April 7, 2011

Revenue have confirmed that the 31 October 2011 Pay & File deadline for 2010 Income Tax returns is being extended for online returns to Tuesday 15 November 2011 . Curiously, this year’s deadline is a day earlier than last year’s deadline of 16 November 2010.

15 November 2011 for ROS Tax Returns

To avail of the extended deadline for 2011, an individual  (or their accountant) must file their 2010 tax return by 15 November 2011 using the online ROS system.  In addition, they must also use the Revenue online ROS system to pay the following tax balances by 15 November.

  • Preliminary Tax for 2011;  and
  • Any remaining Income Tax balance due for 2010

Unless both:

  • the return is filed on ROS; and
  • the required tax payment is made using ROS;

the existing deadline of 31 October 2011 will applies to both the payment and the return.

In accordance with existing practice, I expect that the extended 15 November deadline should also apply for the purposes of RAC, AVC and PRSA pension payments, where a taxpayer pays & files via ROS by 15 November.  This would enable such pension payments, made by 15 November 2011, to attract backdated tax relief against 2010 tax liabilities.  However, these arrangements will become not a reality until and unless confirmed by Revenue  in the meantime – certainly don’t take this for granted without double-checking between now and October.

Thankfully, the Revenue eBrief announcement makes no mention of the recent abortive plan by the outgoing FF/Green government to bring the annual Pay & File tax return deadlines a month forward. Some of us are still having nightmares over that particular bright idea.


High Earners can beat Budget 2011 Pension Blues

December 10, 2010

High earners can beat a Budget 2011 cut in pensions tax relief if they top-up their pensions before 31 December next.

This week’s Budget cut the earnings ceiling for tax relief on personal pension payments, from €150,000 to €115,000. This means that, from 1 January 2011 onwards, the tax relief claimed by a high-income earner in respect of pension payments is limited to the first €115,000 of their earnings.

Liam Ferguson, of Ferguson and Associates has kindly confirmed to me that this lower ceiling relates to ALL contributions physically made in 2011. This includes contributions made by 31 October 2011, which can be backdated to the 2010 tax year for tax relief purposes.

So if you are in a high income bracket, and you leave it until next October to pay a Personal Pension contribution for 2010, the lower ceiling will apply to your contribution.

However, if you top up your pension by 31 December 2010, before the higher €150,000 earnings ceiling expires, you can still avail of the higher ceiling.

21 days left to act…



16 Nov. ROS deadline applies to Pensions Relief

November 8, 2010

Chartered Accountants Ireland have confirmed today that the deadline for paying Pension Contributions that attract backdated tax relief for 2009 is extended from 31 October to 16 November. This applies where an individual has filed their 2009 Income Tax return by 16 November, and paid any 2009 tax balance via ROS by the same date.

In a statement issued  today, Chartered Accountants Ireland stated  “Following a request for confirmation from our members, we wish to advise all readers that where a taxpayer qualifies for the extended ROS Pay & File deadline of 16 November 2010, this extended deadline also applies to RAC, PRSA and AVC contributions.  Readers are reminded that in order to avail of this extended deadline, both the return and the payment must be made online.  Where only one of these actions is completed through ROS, the extension will not apply.”

As yet I don’t have a link for the statement but I will add this when it is online.