Certain Benefits in Kind
Certain benefits in kind outside the benefits in kind taxing legislation is exempt. This includes
- accommodation which is necessary for a particular business or employment;
- the provision of meals in a canteen provided for the staff generally;
- pensions, annuities, sums and benefits given on death, the retirement of a director or employee;
- certain benefits or facilities including travel pass,
- membership of a professional association,
- mobile phones, high-speed Internet connection,
- certain IT equipment, subject to conditions
- bicycles subject to conditions
- child minding services actually provided by the employer.
Finance Act 2018 amends the exemption from benefit in kind for electric vehicles provided to employees. It amends the exemption which was due to expire at the end of 2018 to the end of 2021. There is a cap of €50,000 on the value of the car. Benefit in kind at standard rate supply is on the amount of the excess over €50,000.
Social Protection Payments
Many social welfare benefits are not taxable, including
- jobseekers assistance;
- child benefit
- bereavement grant
- disability allowance;
- family income supplement; and
- maternity benefits.
Jobseekers benefit and disability benefit are taxable, subject to certain exemption within limits. Short term jobseekers benefit is exempt. The benefit is short-term where the number of days worked is less than the number of days in the normal working week in that employment.
Exempt Social Welfare Payments
The terms of the tax exemption for certain social welfare payments are amended by the Finance Act 2018. The below payments are exempt from income tax and are not reckoned as income for the purposes of the income tax Acts.
- Back to education allowance; A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to education allowance’
- Back to work enterprise allowance; A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to work enterprise allowance’
- Back to school clothing and footwear allowance
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Back to school clothing and footwear allowance’ Carer’s support grant Section 225 of the Act of 2005 Constant attendance allowance Section 78 of the Act of 2005
- Death benefit – funeral expenses Section 84 of the Act of 2005 Death benefit – orphans Section 83 of the Act of 2005 Direct provision allowance
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Direct provision allowance’ Disability allowance Section 210 of the Act of 2005 Disablement gratuity Section 75(8) of the Act of 2005 Domiciliary care allowance Section 186F of the Act of 2005 Exceptional needs payment Section 201 of the Act of 2005 Farm assist Section 214 of the Act of 2005 Fuel allowance
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Fuel allowance’ Guardian’s payment (contributory) Section 130 of the Act of 2005 Guardian’s payment (non-contributory) Section 168 of the Act of 2005 Household benefit package
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Household benefit package’ Humanitarian assistance payment
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Humanitarian assistance payment’ Jobseeker’s allowance Section 141 of the Act of 2005 Jobseeker’s transitional payment Section 148A of the Act of 2005 Medical care Section 86 of the Act of 2005 Part-time job incentive scheme
- A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Part-time job incentive scheme’ Rent allowance
- Section 23 of the Housing (Private Rented Dwellings) Act 1982
- Supplementary welfare allowance Section 198 of the Act of 2005 Telephone support allowance A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Telephone support allowance’
Payments to foster parents are exempt. It extends to non-statutory payments to parents taking care of former foster children. This may include those who are over 18 years old, who have a disability, suffer from a disability, or until they reach 21 or while in third level education.
Disabled persons maintenance allowance which is paid (formerly paid) by the HSE, is exempt.
Income from trusts for permanently incapacitated persons raised by public subscription are exempt. The sums raised should be less than €381,000 or if they are greater, the amount donated by any person does not exceed 30 percent of the total. Both income paid from the trust and trust income is exempt from tax.
Prior to FA 2012, the first 36 days of disability benefit or injury benefit were disregarded for the purposes of income tax. FA 2012 removed this exemption.
Taxation of Family Benefits
FA 2013 extended income taxes to certain further social welfare benefits not previously covered. Maternity benefit, adoptive benefit and health and safety benefit are deemed to relate to the person’s employment and are chargeable to Schedule E employment income tax. Revenue may change the statement of tax credits and cut off points in order to collect the tax. Universal Social Charge does not apply.
Payments arising from a settlement or court award arising from personal injuries, where the individual is permanently or totally incapacitated by reason of mental or physical infirmity for maintaining himself are exempt.
It also includes awards of the Injuries Board. Investment and rental income from the investment of the funds is itself exempt. The exemption applies where the income from investment is more than half the person’s total income ignoring social welfare benefits.
There are miscellaneous exemptions for payments made to haemophilia, HIV trust to beneficiaries, compensation from the Hep C Tribunal, compensation received in a civil action within the scope of matters heard by the tribunal.
Payments by the Department of Health or made from a fund for children affected by Thalidomide and the investment and rental income arising on such investments is exempt.
The Finance Act 2014 exempts compensation for donation of a kidney for transplantation pursuant to EU Regulations on Transplantation of Human Organ.
The exemption in respect of qualifying trusts i.e. trusts for permanently incapacitated persons is amended by the Finance Act 2014. On the death of the individual, the undistributed funds may be appointed in favour of the estate of the deceased individual where the individual is survived by a child, spouse, or civil partner
There is an exemption from tax for certain payments under a scheme in an EEA state to compensate individuals infected with hepatitis C and HIV equivalent to that in respect of compensation payments for the hepatitis C tribunal.
The Finance Act 2018 exempts from tax payments made to women who are resident in certain adjoining institutions in the Magdalen restorative justice ex gratia scheme in the same manner as women resident in Magdalen institutions. It also exempts tax on income or capital gains resulting from investments of awards
The exemption in respect of qualifying trusts i.e. trusts for permanently incapacitated persons is amended by the Finance Act 2014. On the death of the individual, the undistributed funds may be appointed in favour of the estate of the deceased individual where the individual is survived by a child, spouse, or civil partner.
Statutory redundancy payments are exempt.
Compensation payments under employment law are exempt. Payments made from employment bodies including WRC, Labour Court, the courts or settlements arising in respect of the same, are exempt. In the case of a settlement, it must not exceed the amounts which the relevant authority could pay by statute.
There is an exemption for income from child minding services provided in a person’s home/place of residence .It is available in respect of children under 18 who are supervised
The income (before deductions) must not exceed €15,000 per annum. Care may not be provided for more than three children at once, excluding children occupying the home as their main or principal residence.
The exemption must be claimed, and the income must be returned. The income is not subject to USC. Self-employed PRSI applies It must be evidenced that the relevant authorities have been notified that the child minding services are to be provided. The relief does not affect entitlement to mortgage interest relief or the principal private residence exemption.
Certain payments made by way of childcare support to assist parents with the cost of childcare are exempted from income tax.
They include in particular payments under the
- Community childcare subvention
- community childcare subvention plus
- community childcare subvention resettlement
- community childcare subvention universal
- training and employment childcare
They apply in respect of payments to eligible children in accordance with the Childcare Support Act 2018.
The Finance Act 2014 provides for exemption of certain earnings of writers, composers and artists. The 2014 Act provides that the exemption is available to residents in any one or more EU states/EEA states. They must not be resident outside the EEA/EU. The annual exemption is increased to €50,000.
Certain accommodation and health care provided to members of the Permanent Defence Forces is exempt from income tax and benefit in kind. It applies to benefits in connection with the provision of living accommodation to a member of the permanent Defence Force or in connection with the provision of health care to a member of the permanent defence forces.
Training and Employment Supports
A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Training support grant’ Urgent needs payment Section 202 of the Act of 2005 Widowed or surviving civil partner grant Section 137 of the Act of 2005 Working family payment Section 228 of the Act of 2005 Youth employment support scheme
A payment made under a scheme administered by the Minister for Employment Affairs and Social Protection and known as ‘Youth employment support scheme’
There is an exemption from PAYE, PRSI and USC where employers give qualifying incentives to an employee in a year. The benefit cannot exceed €500. It may not be exchanged in part or in full for cash or be part of any salary sacrifice arrangement. Only one voucher or benefit may be provided annually. This, in effect gives effect to the one-off small benefit exemption formerly €500. It is commonly given by way of gift tokens or equivalent.
The 2013 Act grants further exemption is granted for grants and subsidies under the wage subsidy scheme The scheme seeks to encourage the employment of persons with disabilities. The scheme absorbed the pilot program for the employment of persons with disabilities.
FA 2013 provided power to terminate the double deduction in respect of long-term unemployed persons which was granted for 36 months.
Married couples, where either spouse is over 65 years old, with income under €36,000 per annum, are exempt from income tax. Single and widowed persons over 65 years old, with income of less than €18,000 per annum, are exempt.
Either person may be over 65. The exemption is increased by €575 for the first two dependent children and €830 per child thereafter. A dependent child may be in full-time education or training incapacitated physically or mentally (this occurring before 21 years of age)
By Finance Act 2011, the exemption for a single or widowed person over 65 was reduced from €20,000 to €18,000. For a married couple the sum was reduced from €40,000 to €36,000.
Marginal relief is available. It restricts the maximum tax payable under the general rules, to 40 percent of the excess over the above amounts. Where there is DIRT the income exemption is increased by its amount for the purpose of marginal relief.
Persons over 65 whose income is less than the exemption amount, may reclaim DIRT
Former Family Exemptions
The former income exemptions which exempted income below certain amounts (doubled for married couples),with increases for qualifying children, was abolished in 2008.
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