Missing out? The top five tax reliefs not being claimed
Millions of euro in tax refunds are being left unclaimed by a significant amount of taxpayers and businesses every year due to unclaimed tax reliefs.
For the most part, the majority of taxpayers are due a refund from Revenue as a result of overpaid tax stemming from an entitlement to claim tax reliefs and tax credits.
The main reason for this is clearly that many individuals are unaware of their full tax entitlements.
The Irish Taxation Institute (ITI) conducted a survey amongst taxpayers which identified that confusion and ignorance over tax relief entitlements is commonplace among taxpayers with one in two PAYE workers (circa 1million people) not understanding the tax system at all.
Furthermore, the survey highlighted that the overwhelming majority of taxpayers are too intimidated to discuss their tax affairs with Revenue, while a significant amount don't understand tax documents at all.
It is undoubtedly true that many individuals find the process of completing a tax return a daunting task which is not surprising given that the standard income tax return is 26 pages long. This can mean that due to uncertainty, and in some cases apathy, an amount of tax credits and tax reliefs are being left unclaimed by the individual.
In recent years Revenue has significantly reduced the reliefs available to taxpayers, however the reliefs which have been cut such as charitable donations and refuse collection charges, may still be claimed for prior years. Revenue operates a four-year look back period.
Generally speaking, the most commonly omitted tax reliefs are medical expenses, home carer's credit, third level fees, pension payments, and flat rate expenses. Taken together, these tax reliefs can result in significant annual tax savings for most individuals.
Tax relief is available for expenditure incurred by an individual for themselves or family members which have not been fully reimbursed by a private health insurer or Local Authority. Relief is granted at the standard rate of tax, currently 20pc. Expenditure for GP and Consultant’s visits will qualify for relief as will expenditure on prescription drugs. Given that it is estimated that 1/100 people currently suffer from coeliac disease it is worth noting that expenditure on gluten free food items also qualifies for relief. Other items of expenditure such as physiotherapy, dental and optic treatment and may also qualify. Relief for Nursing home costs is available at 41pc tax rate.
Home Carer’s Allowance
The home carer’s tax credit may be claimed by a couple where one spouse/civil partner cares for one or more children or elderly incapacitated persons. Only one tax credit is due irrespective of the number of persons being cared for. The maximum relief is €810 and to qualify for the maximum credit, the carer’s income must be €5,080 or less. A reduced tax credit is available where the income is between €5,080 and €6,700.
Third Level Educational fees
Tax Relief is available for ‘qualifying fees’ paid to approved third level institutions for approved courses. Relief is granted at 20pc of the total fees paid, to a maximum of €7,000 per course. ‘Qualifying fees’ means tuition fees (including the Student Contribution), but not examination, registration or administration fees. Furthermore, the relief does not apply to the first €2,000 of qualifying fee.
Amounts contributed to a pension can be deducted from gross income before that income becomes liable to tax, subject to certain limits. In effect, tax relief is given at the individual’s marginal rate of tax to a maximum percentage of that individual's net relevant earnings.
Flat Rate Expenses
Tax relief is available for expenses incurred in the performance of the individual’s duties of employment. A standard flat rate expenses allowance is set for various classes of employee eg. bar trade employees are allowed a flat rate expense of €93. It is worth consulting the Flat Rate Expenses list on Revenue’s website www.revenue.ie to see if you are entitled to any flat rate expense for any of the current or 4 prior tax years.
Colin Kennedy is a tax adviser with Grant Thornton.