Income Tax Filing Deadline
It is a busy time around the country for accountants and tax practitioners as we approach the income tax filing deadline. Income tax returns for 2016 must be filed by 31 October 2017 (14 November 2017 when paying and filing online through ROS). Failure to submit on time may result in interest and surcharges arising, so we would encourage our clients to consider their income tax position as soon as possible.
Discussed below are some topics which we consider may be of note to practitioners and taxpayers when preparing 2016 income tax returns.
Tax Credits & Reliefs
While many tax credits have been phased out in recent years, there remain some tax credits and reliefs worth considering when filing personal income tax returns. Some of the credits and reliefs introduced in recent budgets are as follows:
- Earned Income Credit: Self-employed persons are entitled to an Earned Income tax credit since 1 January 2016. The amount of this credit in 2016 was €550. This is separate to the PAYE tax credit. Where the taxpayer qualifies for a PAYE credit and an Earned Income credit, the combined value cannot exceed the PAYE credit.
- Start your own Business Relief: Where an individual has been long-term unemployed (at least 12 months) and then starts their own business, they may qualify for tax relief on the profits from their business for the first two years. This is subject to a limit of €40,000 per year and the relief can only be claimed once. This scheme is due to end on 31 December 2018.
- Help to Buy Incentive: Certain first time property buyers, who bought or built their home since 19 July 2016, are entitled to a refund of Irish income tax and DIRT paid over the previous four years, subject to a maximum of €20,000.
Some of the other credits and reliefs of note when preparing tax returns are set out in the attached Tax Credits & Reliefs Help Sheet.
Reminder of “Guillotine” Provisions
The capital allowance “guillotine” provisions were introduced with effect from 1 January 2015. These provisions provide for a termination of the carry-forward of unused capital allowances after the tax life of the property in question has ended. Certain allowances are permitted to be carried forward to 2016 and beyond until the tax life of the property expires.
When self-assessing whether the “guillotine” provisions apply when preparing 2016 tax returns, we recommend that a review is carried out to determine the nature and content of capital allowances and losses forward to 2016. Reliefs such as Section 23-type-relief and Section 50 relief are not affected by the “guillotine” provisions so it is vital that the content of losses forward is reviewed. We have found that the review can be a fruitful exercise for clients as it can result in the preservation of allowances and losses that were thought to have been lost by the guillotine provisions. In addition a review can also highlight where allowances are no longer available, thereby preventing interest and penalties from arising as a result of incorrect claims.
We should also point out that allowances that were previously “restricted” as a result of the application of the High Earners Restriction are not affected by the “guillotine” provisions. These allowances are attractive as they are available against total income. These allowances (known as Section 485F allowances) should therefore be separately identified in the Form 11 for 2016 in order to ensure maximum relief is claimed.
If you require assistance when filing your own or your clients’ tax returns please feel free to contact us.