Stephen Fennell B.Sc. M.Phil.

ACCA ©
Allowances / Charges and Deductions

Introduction to Charges / Deductions / Allowances

Charges / Deductions / Allowances Non-Refundable Tax Credits

Reduces taxable income before calculating tax liability. Reduces tax liability at the standard rate.
The effect of this is that these reliefs will give relief at the The effect of this is that these reliefs will give relief at the
marginal higher rate of 40% before the standard rate of standard rate of 20% only.
20%.

Example1:
Orla is a single person with income of €43,550. Orla will pay tax, €34,550 at 20% and the balance 9,000 at 40% before we
consider reliefs or tax credits.
If Orla has a qualifying deduction relief such as paying nursing home fees of €10,000 for her ill mother, then:

Income €43,550
(Deduction) (€10,000)
Taxable Income €33,550

Orla will now pay tax on €33,550, all of which is at standard 20% rate of tax for a single person.

In summary, Orla has benefited by the deduction by: Deduction Amount Rate Tax Benefit

€9,000 40% €3,600

€1,000 20% €200
€10,000 €3,800
Example2:
Terry is Orla’s brother and he is also a single-person but he has income of €30,000. He also pays €10,000 in Nursing Home
Fees for his ill mother.

Terry only pays tax, €30,000 at 20% because as a single person he earns less than the standard rate band.

For Terry:
Income €30,000
(Deduction) (€10,000)
Taxable Income €20,000

Terry will now pay tax on €20,000, all of which is at 20% standard rate of tax for a single person.

In summary, Terry has only benefited by the deduction by: Deduction Amount Rate Tax Benefit

€10,000 20% €2,000

Orla has nearly benefited twice the amount of Terry because she pays tax at the higher rate and relief is given at the
higher rate first.

For exam purposes and the income tax computation question:

We just simply [Lift] and [Drop] the figures in and work through the proforma:

Income
Schedule D €
Schedule E €
Schedule F €

etc

Deduction
e.g. Nursing Home Expenses (€)

Taxable Income €

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 Stephen Fennell B.Sc. M.Phil. ACCA ©
Maintenance payments
There are two main types of maintenance payments:
- Legally enforceable and
- Unofficial / casual that is not legally enforceable.

Maintenance payments that are of a causal nature that are not legally enforceable by a court are not tax deductible.

Legally enforceable maintenance payments typically have two elements:

- Payments for the benefit of children.
- Payments for the benefit of the other parent.

For tax purposes, we ignore maintenance payments for the benefit of children. They do not give rise to a taxable event.

Therefore, the only consideration that we give to qualifying maintenance payments, are those that are:
- Legally enforceable, and
- Are for the benefit of adult only (usually ex-partner, ex-spouse).

Peter has been legally separated from his wife, Emma since April 2010. Details of the financial
separation arrangements, which were drawn up in April 2010, are as follows: Per month
- Maintenance payments to Emma for herself €1,500
- Maintenance payments to Emma for the children, aged ten and eight years €900
Solution: € Marking Scheme
Deductions
Qualifying Maintenance (Emma) (18,000) [1.0]
Non-Qualifying (Children) (0) [0.5]

Covenants
A Deed of Covenant is a legally binding written agreement made by an individual to pay an agreed amount to another
individual, without receiving any benefit in return. A qualifying deed must be capable of exceeding a period of 6 years to
qualify for tax relief. Only covenants in favour of certain individuals qualify for tax relief:

To incapacitated minors To incapacitated adults To adults over age 65

(<18)
Any child but your own Any Adult Any Adult
Full Tax Relief Full Tax Relief Tax Relief restricted to 5% of taxable income of payer
The payer (covenanter) must deduct tax at the standard rate from the gross payment. So assume a qualifying gross
covenant of €10,000. The person paying pays the individual €8,000 and withholds and pays €2,000 directly to the Revenue
Commissioners. He receives the gross €10,000 as a deduction.
Example
John (age 45) is single and is an employee with BOI and earns 60,000 with PAYE 10,500 deducted. He pays an annual
covenant of €7,000 to Sam (permanently incapacitated age 50) for the next 10 years. Sam is widowed and receives a state
pension of €13,000 as his only income.

Summary Position – John € MS Summary Position – Sam € MS

Schedule E 60,000 [0.5] Schedule E 13,000 [0.5]

Deductions Schedule D III – Covenant 7,000 [0.5]
Gross Covenant (7,000) [0.5]

Taxable Income 53,000 Taxable Income 20,000

Tax: 34,550 x 20% 6,910 [0.5] Tax: 20,000 x 20% 4,000

18,450 x 40% 7,380 [0.5]
14,290
Less Tax Credits Less Tax Credits
Single (1,650) [0.5] Widowed Tax Credit (2,190) [0.5]
PAYE (1,650) [0.5] PAYE Tax credit (1,650) [0.5]

Less Tax Deducted Less Tax Deducted

PAYE (10,500) [0.5] Covenant Tax (1,400) [0.5]

Add
Covenant Tax 1,400 [0.5]

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Tax Payable (Refundable) 1,890 Tax Payable
Stephen(Refundable) (1,240)
Fennell B.Sc. M.Phil. ACCA © [0.5]

Employing a Carer
Tax relief is available as a deduction if an individual employs a person to take care of a family member who is totally
incapacitated by physical or mental infirmity. The maximum relief allowance is €75,000.

Example:
Peter employed a specialist nurse to take care of his incapacitated mother. In 2017, he spent €110,000 on her wages
before grant contributions €15,000 local authority and €10,000 from HSE received.
Evaluate Peter’s allowable deduction for tax relief.
Solution
Tax relief is available on the net cost for Peter subject to €75,000 maximum threshold.

Issue Condition
Peter employed a specialist nurse to look after his mother Satisfies family member
Mother is incapacitated Satisfies incapacity requirement
€
Amount Spent 110,000
Grants received (25,000)
Net 85,000
Restricted to** 75,000**

Donations to Approved Bodies

Donations to Approved Bodies such as an approved sports body is treated as a deduction for self-assessment individuals.
For exam purposes, you don’t have to know a list of approved bodies, it may just state that a ‘donation to an approved
body’ has been made.

However, donations to charities as a deduction for the individual are no longer allowed as the tax relief rules have changed
and all tax relief is now refunded directly to the charity.

Permanent Health Insurance (PHI)

A PHI policy (income protection policy) involves an individual who pays a premium on a policy to secure the continuance
of income and payment of benefits during disablement through accident, injury or sickness.
As self-employed individuals operate in a risk-environment they are not automatically entitled to full PRSI employee
benefits in the event of illness/sickness. Revenue Commissioners recognises this risk and as such payments into a PHI
policy are treated as a tax relief deduction.
However, the amount on which relief is granted is limited to 10% of the total income for the year of assessment.

Example:
Una is a self-employed architect and she pays into an annual Permanent Health Insurance policy. In 2017, her Schedule D
Case II income was 50,000 and her PHI policy premium was €7,000.
Solution:
Una will only be allowed a qualifying deduction of €5,000 for PHI policy as this represents 10% of her total income.

Nursing Home Fees

Nursing Home expenses incurred are the only medical expenses that are available as a deduction relief.

• Any contribution from the state to the nursing home expenses is disregarded.

• Relief for Medical expenses, including Nursing Homes are not restricted to family members.

• All other medical expenses are treated as non-refundable tax credits with relief at the standard 20% rate.

Royalties paid (similar treatment to Covenants)

We have looked at royalty payments in corporation tax. Similarly, royalty payments are treated as a charge/deduction in
income tax and as a result relief is available at the marginal rate of tax. A withholding tax of 20% is applied.
Example:
Ann sells CD’s to the general public. Her payment royalty contract states that she must provide for 30% of her Sales in
royalties to the original artists. In 2017, her sales were €30,000.
Requirement:
Calculate Ann’s royalties charge and outline how much tax she has to withhold and pay in 2017.

Deductions € Marking Scheme

Royalty payments (9,000) [1.0]

Add tax paid

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Royalty Income Tax 1,800 [1.0] Stephen Fennell B.Sc. M.Phil. ACCA ©
Start your own business relief
Where an individual has been continuously unemployed for at least the previous 12 months and commences a new trade
or profession, a 2 year ‘start your own business relief’ is available
The main features of this relief are as follows:
- Individual must have been continuously unemployed for at least the previous 12 months.

- New business – new trade or new profession.

- It must commence during 25th October 2013 and 31st December 2018.

- The ‘qualifying period of relief’ is 24 months which begins on commencement date.

- Maximum available relief is €80,000 over the qualifying period and this is restricted on a pro-rate basis.

Example:
Rita was unemployed for a period of 15 months until she commenced a new trade as a ‘fruit stall’ street trader. She
commenced trading on 1st August 2017.
Requirement:
Calculate her maximum business start-up relief available in 2017, 2018 and 2019.
Solution: Tax Year 2017 2018 2019 Total

No. Months 5 12 7 24

Maximum Available Relief €16,667 €40,000 €23,333 €80,000

If Rita’s 2017 taxable income was:

- €20,000. She would be entitled to €16,667 start-up relief deduction.
- €10,000. She would only be entitled to €10,000 start-up relief deduction. It cannot exceed Case I/II income.

Pensions
Making a provision for a private pension is seen as a good thing for the state with a growing population. Therefore
Revenue Commissioners allows for a deduction for contributions to Revenue approved pension schemes such as RAC,
PRSA’s. The maximum amount allowed as a deduction is a function of:
1) ‘Net Relevant Earnings’ of individual
2) Age of the Individual
3) Amount paid

Net Relevant Earnings

A person’s Relevant Earnings (subject to €115,000 maximum restriction) is:
• Schedule D Case I or II income
• Non-pensionable Schedule E income

Age of the Individual

The maximum amount of tax relief available depends on the age of the individual. As an individual gets older, Revenue
Commissioners allows a greater proportion of maximum provision for tax relief for pension payments. The table below is
given in the exam and it shows the maximum available relief dependent on and increasing with individual’s age.
Any unused contribution is carried forward.
Individual Age Maximum Amount which qualifies for Tax Relief
Under 30 15% of Net Relevant Earnings
30 – 39 20% of Net Relevant Earnings
40 – 49 25% of Net Relevant Earnings
50 – 54 30% of Net Relevant Earnings
55 – 59 35% of Net Relevant Earnings
Over 60 40% of Net Relevant Earnings
There are two charges on the course that may affect Net Relevant Earnings and these are Covenants and Patent Royalties.
As tax relief is given to these charges also, these must be negatively taken into consideration when evaluating ‘Net
Relevant Earnings’. To complicate matters, if the person has other income, it positively absorbs and reduces the negative
effect of these other charges first.

Pension Payments Flexibility: All deductions are claimed as they are incurred. However, Revenue Commissioners allow
flexibility in when a pension payment may be claimed. It is possible to claim payments made in current, previous and
future year. Example: Sean with Case I income has paid into pension in 2016, 2017 and 2018 and he has yet to claim

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pension as a deduction. For tax year 2017, Sean can claim pension payments made in 2016 (prior year), 2017 (assessable
year) and 2018 (up to 31st Oct 18 filing date). Stephen Fennell B.Sc. M.Phil. ACCA ©
Introduction to Standard Rate Bands [Table is given in the Examination]
Standard Rate Bands are bands given to individuals depending on their personal circumstances.
Status Single Widowed Single & Widowed & Married
No Child Single Carer Single Carer
Standard Rate Band 34,550 34,550 38,550 38,550 Depends

The standard rate band represents the amount of income an individual can earn at the standard rate of 20%.

If an individual earns greater than the band, the balance of income above the band is subject to the higher rate of 40%.

Example:
John is a single person with employment income of €50,000 with no deductions or charges.
Requirement:
Outline the amount of tax John will pay at standard rate and the amount that he will pay at the higher rate.

Solution to John: Marking Scheme

Income €
Schedule E 50,000 [0.5]

Tax: 34,550 x 20% 6,910 [0.5]

15,450 x 40% 6,180 [0.5]
50,000 13,090

Relevant 37% Rate Band

As we may know from earlier chapters, Deposit Interest subject to DIRT is taxable under Schedule D Case IV. Irrespective
of marital status, Deposit Interest subject to DIRT has its own treatment which is ring-fenced to a relevant rate – it does
not affect the standard rate bands.

Example:
Veronica is single (age 42) and earns €56,000 from her employment. She also has Gross Deposit Interest of €5,000 of
which DIRT has been deducted.
Requirement: Calculate Veronica’s tax liability.

Solution:
Always use the [R S B band] approach to all income tax computation questions. If there is no income subject to DIRT, then
income subject to relevant rate is nil.

Do not jump in with standard rate bands, Firstly highlight the Deposit Interest income and apply the relevant rate first
prior to applying the bands.
Marking Scheme
Income €
Schedule E Employment 56,000 [0.5]
Schedule D Deposit Interest 5,000 [0.5]
61,000
Tax:
Relevant Rate: 5,000 x 37% = 1,850 [0.5]
Standard Rate: 34,550 x 20% = 6,910 [0.5]
Balance: 21,450 x 40% = 8,580 [0.5]
61,000
17,340
Less Tax Credits:
Single (1,650) [0.5]
PAYE (1,650) [0.5]
DIRT (<65) (1,950) [0.5]
Tax Liability 12,340

Relevant Rate & Other Points

• We apply the Relevant Rate first before applying any standard rate band.
• We only apply the Relevant Rate to Deposit interest income where DIRT has been deducted.
• It does not apply to Other Interest Income where DIRT has not been deducted and it does not apply to Irish
Dividends, Foreign Interest.

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 • DIRT is only refundable to individuals age 65 or over, those that are permanently incapacitated or individuals who
are 1st time buyers in 2017.
Stephen Fennell B.Sc. M.Phil. ACCA ©
Introduction to Non-Refundable Tax Credits
Tax credits are mitigating tax credits that Revenue Commissioners allow an individual to:
• Reduce tax liability, or
• Eliminate tax liability
Tax credits are available at 20% standard rate. It is important to emphasise tax credits are non-refundable as per following
example:

Example 1:
James (18) is single and is an employee with McDonalds. He earned €12,000 in 2018. As James is single and an employee,
he will be entitled to the single tax credit and PAYE employee tax credit.

Income € €
Schedule E 12,000

Tax: 12,000 x 20% 2,400

Tax Credits:
Single (1,650)
PAYE (1,650) (3,300)
Tax Liability (900)

So we have a negative tax liability of €900. James is not entitled to a refund of this. As tax credits are non-refundable, we
simply state:

Tax Liability NIL

It is important to contrast this with any taxes paid:

Example 2:
Jane (19) is single and is an employee with Burger King. She earned €10,000 in 2018. She paid €200 in PAYE Taxes. As Jane
is single and an employee, she will be entitled to the single tax credit and PAYE employee tax credit.

Income € €
Schedule E 10,000

Tax: 12,000 x 20% 2,000

Tax Credits:
Single (1,650)
PAYE (1,650) (3,300)
Tax Liability NIL (not (1,300) because tax credits non-refundable)

Tax Deducted:
PAYE (200) (tax paid is refundable)
Tax Refund due 200

Jane is not entitled to a refund of her tax credits (NIL) but she is entitled to a refund of any tax paid which is refundable.

Personal Tax Credits

Similarly, to standard rate bands, personal tax credits are given to individuals depending on their personal circumstances.
They allow an individual to Reduce tax liability or Eliminate tax liability but they are non-refundable.
Status Single Widowed Single & Widowed & Married
No Child Single Carer Single Carer
Standard Rate Band 33800 33800 37800 37800 Depends
Tax Credits 1650 2190 1650 1650 3,300 (joint)
1650 (sc) 1650 (sc)

The key exam perspective points are as follows:

• Read the requirement of the question to ascertain who / which individual examiner wants us to evaluate
• Identify carefully the status of the individual and if they have qualifying children.

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 • If the individual is not married, we can preload the standard rate band and the personal tax credit before starting
the content of the question.
• Regarding the standard rate bands, use my fail-safe approach Relevant Rate, Standard Rate and then Balance
(RSB) at all times. Stephen Fennell B.Sc. M.Phil. ACCA ©
Single Carer Tax Credit
This tax credit is a popular tax credit for the examiner and the qualifying conditions must be known thoroughly.
It is highly examinable because it:
• Grants an additional €1,650 in tax credit.
• Uplifts the standard rate band from €34,550 to €38,550.

To qualify for this, an individual:

• Must have at least one qualifying child.
• Child must reside with the individual.
• Individual must be the parent or an individual who maintains the child at his/her own expense for whole or greater
part of the year (e.g. grand-parent)

A qualifying child is a:
• Child who is born in the tax year, or
• Child who is under age of 18 at the start of the tax year, or
• If over 18, he / she is receiving full-time education, or
• Permanently incapacitated child if it occurred child age<21 or if it occurred when the child was >21 but was in full
time education.
• A child fostered, adopted or in the custody of.

The tax credit is not available to individuals who live with another person, such as married persons, those in a civil
partnership or those who cohabit (live together as partners).

However, it may be available to separated / divorced individuals if they are assessed on a non-joint assessment basis.
Irrespective of the number of children (minimum 1) the tax credit is €1,650.

Claiming the tax credit

Revenue Commissioners replaced the older ‘one-parent family tax credit’ with this single carer tax credit. The old credit
could be claimed by both parents and thus claiming the credit was open to abuse.

The single carer tax credit does not allow for both parents to claim as carers for the child. Revenue Commissioners created
the concepts of a primary carer and a secondary carer.

Upon introduction, the primary carer was the individual who was in receipt of children’s allowance on behalf of the child
which was typically the mother and the secondary carer was typically the father.

The default position is that the primary carer claims the tax credit provided the above conditions are met.

Relinquishing the tax credit

However, it is possible that the secondary carer can claim the credit provided the primary carer agrees to relinquish the
tax credit. In order for the secondary carer to claim the tax credit:
• Must be qualifying child.
• Child must reside for at least 100 days in the year with the secondary carer.
• Secondary carer must not be cohabiting, married, civil partnership.
• Primary carer must agree to relinquish in writing in favour of the secondary carer to Revenue Commissioners.

Widowed and single-carer tax credit

A single individual has a tax credit of €1,650. If an individual is unfortunate to be widowed, an uplift in tax credit to €2,190
is available to an individual without dependent children.

If an individual is widowed and also has dependent children and satisfy the single carer tax credit conditions, they are
entitled to the single carer tax credit but they are not entitled to the €2,190 uplift.

In simple terms, a widowed parent that qualifies for single carer tax credit will have the same tax credits and standard
rate band of that of a single parent that qualifies for a single carer tax credit.

Status Single Widowed Single & Widowed &

No Child Single Carer Single Carer
Standard Rate Band 34550 34550 38550 38550
Tax Credits 1650 2190 1650 1650
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 1650 (sc) 1650 (sc)
| |
No Difference between
Stephen Fennell B.Sc. M.Phil. ACCA ©
Widowed Parent Tax Credit
A Widowed Person is a person that was previously married or in a civil partnership and has suffered the death of a spouse.
Similarly, a Surviving Civil Partner (of a same sex couple) receives the same tax treatment as a Widowed Person.

When a spouse/civil partner dies in the year of death, the tax treatment depends on who the assessable spouse is – This
is not on the course. Revenue Commissioners recognises widowed parents with dependent children may face a financial
burden with the recent passing of a spouse and thus give additional tax credits to the Widowed Person / Surviving Civil
Partners in the five subsequent years, after year of death, as outlined below (given in exam):

Year of Death Widowed Parent Credit

2018 None / Not on course
2017 €3,600
2016 €3,150
2015 €2,700
2014 €2,250
2013 €1,800

To qualify for the Widowed Parent or Surviving Civil Partner Tax Credit (of a same sex couple):

• You must not have re-married by the start of the tax year and must not be cohabiting with a partner and a
‘qualifying child’ must reside with you for some part of the tax year.

Example:
Siobhan was married to David. David passed away in 2014. Siobhan lives alone with her two children.
Outline her 2018 non-refundable tax credits on the basis that she lives alone.
Solution:
Personal – Widowed (with dependent children) €1,650 (not €2,150)
Single Carer Tax Credit €1,650
Widowed Parent Tax Credit (2014) €2,250
Total €5,550

PAYE Tax Credit

Previously, we outlined that Schedule E income is subject to PAYE system and includes:
• Employment Income (Salary)
• Pension Income
• Taxable benefits from Department of Social Protection
• Directorship Income <15% shares
• Directorship Income >15% shares*

All these Schedule E incomes (with exception to Directorship Income>15%*) can attract PAYE Tax Credit representing 20%
of Schedule E income subject to a maximum tax credit limit of €1,650.

Example 1
Eileen has widow’s pension income of €12,500. What is her maximum PAYE tax credit?
Schedule E PAYE Tax Credit Tutorial Note
Eileen €12,500 €1,650 [You cannot grant greater than €1,650]

Example 2
Connor has employment income of €6,000 and he is single. What is his maximum PAYE tax credit?
Schedule E PAYE Tax Credit Tutorial Note
Connor €6,000 €1,200 [Students often mistakenly grant €1,650]

Graphical Representation:

|---------------------------1000----------------------------------Schedule E Income ---------------5000----------------------------------------|

€0 €8,250

|---------------------------200------------------------------------PAYE Tax Credit -------------------1000----------------------------------------|

€0 (max) €1,650

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Proprietary Directors are directors with shareholding > 15% and as such are considered to have significant influence on
company policy.
• They are not deemed to be employees and therefore they are not entitled to PAYE Tax Credit.
• They are deemed to be self-employed owners and they are entitled to the Earned Income Tax Credit.
Stephen Fennell B.Sc. M.Phil. ACCA ©
Earned Income Tax Credit
Self-employed individuals with Schedule D Case I/II income are not entitled to the PAYE Tax Credit because their income
source is Non-Schedule E. Although proprietary directorship income is under Schedule E, the directors are not entitled
to the PAYE Tax Credit. In 2016, a new Earned Income Tax Credit was introduced to compensate these individuals with
the medium-long term view to equalise the self-employed and employed in terms of tax credits.

For tax year 2018, maximum Earned Income Tax Credit is €1,150.

Graphical Representation:
|-------------------------------------Schedule D Case I/II Income --------------------------------------------------------|
€0 €5,750
|--------------------------------------Earned Income Tax Credit ---------------------------------------------------------|
€0 (max) €1,150

This means that Earned Income Tax Credit is 20% of Schedule D Case I/II income subject to €1,150 limit which represents
€5,750 Schedule D Case I/II income. Therefore, Schedule D Case I income > €5,750, we cap Earned Income tax credit to its
maximum of €1,150.

Example 1:
George (single) had rental income of €10,000 and €7,000 trade income. What are his available tax credits?

Solution: Tax Credit Schedule E income Schedule D income

Single €1,650
PAYE €0 €0
Earned €1,150 (€7,000 x 20%) restricted to €1,150

Example 2:
Regina (single) had rental income of €20,000. What are her available tax credits?

Solution: Tax Credit Schedule E income Schedule D income Case I/II

Single €1,650
PAYE €0 €0
Earned €0 €0

Example 3:
Terry (single) had rental income of €50,000 and €2,000 professional Case II income.

Solution: Tax Credit Schedule E income Schedule D income Case I/II

Single €1,650
PAYE €0 €0
Earned €400 (not €1,150) (€2,000 x 20%)

Earned Income Tax Credit and PAYE Tax Credit relationship

The introduction of the Earned Income Tax credit was to compensate individuals that are not entitled to PAYE Tax Credit.
It is possible for an individual to have Schedule E income and Schedule D Case I/II income such as a medical consultant
with Schedule D Case II income and he/she is also employed by HSE with Schedule E income.

In this scenario, it is important to note that the combined PAYE Tax Credit and the Earned Income Tax Credit can never
exceed €1,650 because the Earned Income Tax Credit is a compensatory tax credit. If an individual has both Schedule E
income and Schedule D Case I/II income sources, the best procedure is to deal with Schedule E income first.

Example 4:
Ben (single) has Schedule E income of €4,000. Schedule D Case I/II of €18,000. What are his available tax credits?
Solution: Tax Credit Schedule E income Schedule D income Case I/II
Single €1,650
PAYE €800 (€4,000 x 20%)
Earned €850 (not €1,150) (€18,000 x 20%) =€3,600 restricted to €950 max (1)
Restricted (2) to €850 because PAYE + Earned ≤€1,650
Example 5:
Orla single has Schedule E income of €2,000. Schedule D Case I/II of €20,000. What are her available tax credits?
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Solution: Tax Credit Schedule E income Schedule D income Case I/II
Single €1,650
PAYE €400 (€2,000 x 20%)
Earned €1,150 (€20,000 x 20%) =€4,000 restricted to €1,150 max (1)
No Further restriction
Stephen because
Fennell B.Sc. PAYEACCA
M.Phil. + Earned
© ≤€1,650
Age Tax Credit
If an individual is aged 65 or over in the tax year, the taxation system considers them ‘old’ and they gain further assistance
in the form of an Age Tax Credit. If an individual becomes age 65 in 2017 (at any point) or is older than 65 in 2017, then
the age tax credit is granted. There are no conditions.

Individual Marital Status Age Tax Credit

Tom (66) Single €245
Mary (70) Widowed €245
Michael D Higgins (75) & Sabina (73) Married €490
*Donald Trump (70) & Melania (17) Married €490

*This example show that only one spouse is required to be 65 or older in order to be granted the married age tax credit
of €490 (age rules for civil partnership as married couples).

Blind Tax Credit

An individual who is blind at any time during the tax year receives a blind tax credit of €1,650. A certificate from an
Ophthalmic Surgeon confirming; Degree of Blindness and the nature of its permanency, may be required (i.e. poor eye-
sight would not qualify as blind).

The tax credit is not due in respect of blind children. In such cases, the more valuable €3,300 ‘Incapacitated Child Tax
Credit’ may be claimed.

An individual who is regarded as being blind at any time during the tax year and maintains a trained Guide Dog may apply
for a Guides-Dog Tax Credit. The individual must hold a letter from 'Irish Guide Dogs for the Blind' (in respect of each dog
maintained) confirming that they are a registered owner. The tax credit is €165.

Dependent Relative Tax Credit

Any individual who maintains a relative at his/her own expense can claim dependent relative tax credit of €70 If more
than one claimant, the tax credit is apportioned based on the amount each contributes in maintenance.

Individual must have a relative who:

• Is incapacitated by old age/infirmity from maintaining him/herself OR
• Or is a widowed father or mother or widowed father or mother in-law of individual with income less than
approximately €13,500 in 2017.

The Dependent Relative Tax Credit can also be claimed by an individual who maintains, at their own expense, a son or
daughter or a child of your civil partner who resides with them and on whose services they are compelled to depend due
to infirmity.

However, if the infirmity is of a permanent incapacity nature to a child, it is preferable for the individual instead to claim
the incapacitated child tax credit of €3,300.

Incapacitated Child Tax Credit

The tax credit can be claimed where an individual proves that he or she has living at any time during the tax year ‘any
child’ who is permanently incapacitated either physically or mentally from maintaining himself/herself.
The child must be either:
• under 18 years of age and permanently incapacitated either physically or mentally, or

• If over 18 years of age is permanently incapacitated either physically or mentally from maintaining himself or
herself and had become so permanently incapacitated before reaching 21 years ,or

• had become so permanently incapacitated after reaching 21 years, but while he or she has been in receipt of full-
time education at any university, college, school or other educational establishment, or while training full-time
for a trade or profession for a minimum of two years, or

• is any child for whom the claimant has custody of and maintains at his or her own expense and who is permanently
incapacitated.

Where more than one child is permanently incapacitated, a tax credit may be claimed for each child.

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The tax credit is €3,300 – this can be split between two individuals if both care in proportion to the maintenance paid by
each individual.

If the incapacitated child tax credit is claimed for a child, a dependent relative tax credit for same child cannot also be
claimed. Stephen Fennell B.Sc. M.Phil. ACCA ©
Rental Tax Credit

Rental tax credit abolished in 2018. No tax credit available in 2018 for tenants who rent.

3rd Level Tuition Fees Tax Credit

Tax credit at the standard 20% rate is available to an individual who pays fees of any person for approved 3rd Level
Education Tuition. The tax credit is based on Tuition fees (including Student contribution fees.) Administration fees such
as examination fees or registration fees must be discounted.

The allowable tax credit is restricted to a maximum limit of €7,000 and with a maximum family disregard of €3,000.
The disregard to be applied is as follows:

No. Students Part-Time course Full-Time Course Disregard to be applied

1 1 - €1,500
1 - 1 €3,000
2 2 0 €3,000
2 1 1 €3,000
4 etc 2 2 €3,000
Example:
As outlined below, Mary pays college fees for:
• her son Peter
• her daughter Niamh and
• her friend’s son Thomas
Requirement: Calculate Mary’s tuition fees tax credit assuming they are all full time courses:

Person Peter Niamh Thomas

Relationship Son Daughter Friend Son
Allowable Yes Yes Yes
Tuition Fee €3,200 √ €4,000 √ €5,000 √
Student Contribution €3,000 √ €2,700 √ €3,000 √
Admin / Exam Fees €250 x €400 x €250 x
Allowable €6,200 €6,700 €8,000
Restricted (max, €7,000) €6,200 €6,700 €7,000
Total allowable tuition fees €19,900 (6,200 + 6,700 + 7,000)
(Less Maximum Disregard) (3,000)
16,900

3rd Level Fees Tax Credit (20%) €3,380

Fees paid for training courses

Tax credit is available to an individual who pays fees of any person for approved training courses in the areas of
information technology and foreign languages. To qualify for the tax credit, the person must complete the course and
receive competency confirmation of completion. Tax credit may be claimed at the standard 20% rate in respect to fees
paid between €315 and €1,270 for the individual paying the fees. There is no other threshold restriction.

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 Stephen Fennell B.Sc. M.Phil. ACCA ©

Medical Expenses
Tax credit at the standard 20% rate is available to an individual who pays allowable medical expenses of any person.
Allowable medical health expenses are for the purposes of ‘health care’ such as the prevention, diagnosis, alleviation and
treatments. Typical allowable health expenses include:
• Prescriptions
• Hospital bills
• X-rays, diagnostic procedures
• Psychological assessments
• Services of a practitioner
• IVF treatments
• Non-Routine Dental treatments

Health expenses that are not allowable include:

• Routine Dental expenses such as scaling, polishing and cleaning.

• Routine eye-testing
• Cosmetic treatments for personal enhancement (not as a result of a personal injury), e.g. a cosmetic nose job,
Botox etc….
• Payments to VHI / BUPA / Medical Insurance Providers*

Example:
Tina has the following medical expenses: Visits to the Doctor €220
Hospital Bills €500
Physiotherapist Bills €600
IVF treatment €4,000
Root-canal teeth €825
Dental Cleaning €50
Botox injection to enhance her cheeks €650
Total €6,845

Tina received €3,000 from VHI, her medical insurance provider to compensate her medical expenses.
Tina paid €1,500 to the VHI for her annual premium. Calculate Tina’s medical expenses tax credit.

Solution: €
Total Medical Expenses 6,845
(Less non-qualifying) (700) (Dental & Botox)
(Less VHI received) (3,000)
Net payment 3,145
Medical Expenses credit (20%) 629

Note: VHI premium payment that Tina pays is a net premium payment. She receives tax relief at source from the medical
insurance provider and it is not claimable as a tax credit.

Medical Expenses paid outside of the State

Tax credit at the standard 20% rate is available to an individual who pays following medical expenses of any person outside
of the State.
• Registered Doctors costs
• Registered Dentists costs
• Registered Hospitals / Nursing Homes

If qualifying health care is only available outside of the State, such as specialised new medical care in USA, reasonable
travelling and accommodation expenses are also allowable for the patient plus an accompanying adult.

Medical Insurance
We have looked at Medical Insurance in Schedule E Benefit in Kind.

Scenario Tax Credit Tutorial Note

Individual pays net premium to provider 0 Tax Credit granted at source
Employer pays gross premium to provider 20% Subject to restrictions
€1,000 premium per adult and €500 premium per child

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 Stephen Fennell B.Sc. M.Phil. ACCA ©
Home Renovation Incentive (HRI) Tax credit
The Home Renovation Incentive (HRI) was introduced to provide a tax credit for home-owners for qualifying expenditure
incurred on the repair, renovation or improvement work carried out on their principle private residence and any
investment properties. The motivation behind this credit was to incentivise home-owners (who are not VAT registered
persons) to use officially registered contractors (VAT registered persons) to carry out qualifying expenditure incurred on
the repair, renovation or improvement work instead of using non-VAT registered ‘bogey’ contractors.
The incentive involved Revenue Commissioners refunding back the 13.5% VAT paid by the home-owner in the form of a
HRI tax credit, split over the subsequent two years.

The conditions are as follows:

• Homeowners must be LPT compliant.
• The qualifying expenditure must cost a minimum of €5,000 inclusive of VAT.
• The works must have been incurred between 25th October 2013 and 31st December 2018.
• The maximum qualifying works net of VAT is €30,000.
• Scheme must be administered through ROS.
• Registered Contractor must register the details of the works and payments received through ROS.
• Through ROS, homeowners must approve and then claim the HRI tax credit.

How the credit works?

Revenue Commissioners refund 13.5% VAT paid by the home-owner in the form of a HRI tax credit, split over the
subsequent two years as follows:
Year Paid Year 1 Claim Year 2 Claim Tutorial Note
2015 2016 2017 *Not relevant to 2018 Tax Year
2016 2017 2018 Relevant to 2017 Tax Year
2017 2018 2019 Relevant to 2017 Tax Year
2018 2019 2020 *Not relevant to 2018 Tax Year
2019 HRI Tax Credit Abolished

EII scheme
Employment and Investment Incentive Scheme (EII) allows for tax relief for individuals investing in small and medium
enterprise (SME) companies. This typically involves an individual raising equity for the small / medium company through
shares. A qualifying company can only raise funds up to €15Million and this is restricted to a maximum €5Million per
annum.

Tax credit is granted to the individual investor as follows:

|------------------------------|--------------------------------|-----------------------------|------------------------------- |
Year 1 Year 2 Year 3 Year 4
30% tax relief is granted A further 10% tax relief |
is potentially granted
Year 1: 30% tax relief is granted on investment.
End of Year 4: A further 10% is granted on investment if it is shown that either employment has increased or Research
and Development (R&D) investment has increased.

The conditions for an individual to avail of EII scheme are as follows:

• The individual is limited to €150,000 in investment.
• The individual must hold the shares for the relevant 4 year period.
• The individual must not be connected to the company.
• The individual must invest into a qualifying SME company.

The conditions for the company to avail of EII scheme are as follows:
• The company must be incorporated in Ireland or EU
• The company must be resident in Ireland
• The company cannot be quoted company on the stock exchange
• The company must be micro, small or medium enterprise with a maximum of 10, 50 or 250 employees respectively
with a maximum annual turnover of €2M, €10M and €50M respectively.
• The company can raise only a maximum €15M in its lifetime.
• The company can only raise a maximum of €5M per annum.

Help to Buy Scheme

This scheme is open to First Time Buyers who purchase ‘New Builds’ or self-construct a property to occupy as their
principle private residence. No tax credit is available to the First Time Buyer individual for this.
To help First Time Buyers with saving for a deposit, a refund to the contractor is available equal to the lower of:
• €20,000.
• Total income tax (including DIRT) for the previous 4 years prior to 2017.
• 5% of the purchase value of the principle private residence.
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