Saturday 21 July 2018

Your Questions Answered: Can child get glasses under PRSI scheme?

 

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Barry Flanagan - Tax Director, Taxback.com

Q My teenage daughter needs glasses. I understand that PRSI now covers free glasses under the Treatment Benefit scheme. Can my daughter get free glasses under the scheme based on the social insurance contributions which my husband and I have both paid? Sorcha, Sligo Town

The Treatment Benefit Scheme provides dental, optical and aural services to qualifying people and, in certain circumstances, their dependent spouse, co-habitant or civil partner. This particular scheme does not usually extend to dependent children.

As children are classified as dependants, they would otherwise have the same entitlement to health services that their parents enjoy (excluding the aforementioned scheme). This means that if your parents have a medical card, you are included as a dependant on that card and are entitled to the same range of services as your parents.

In addition, there is a range of services specifically for children provided free of charge, even if their parents do not have a medical card. These services are generally provided as part of maternity and infant welfare services, health services for pre-school children and school health screening services. Children are also entitled to vaccination and immunisation services free of charge.

Problems identified at school health screenings are treated free of charge, if the child attends as a public patient at an out-patient hospital departments. Any subsequent treatment (whether out-patient or in-patient) arising from this initial referral is free of charge as a public patient.

Tax back on maintenance

Q Recently my ex-wife and I divorced. As part of the settlement, I agreed to pay a weekly maintenance to her and also to pay a large lump sum. There are no children involved so the maintenance is to her only. As I'm now divorced, are the maintenance payments tax deductible? Also, can I claim tax back on the lump sum payment? Finally, could my ex pursue me for additional payments in the future? John, Co Cork

A Firstly, check to see if you are entitled to a little know relief known as "year of separation" relief. Assuming you are the assessable spouse (for tax purposes), you would be entitled to the married person's tax credit and double rate bands for the full year in which you separate. While you would be taxed on your own income for the full year, you would be taxed on your spouse's only up until the date of separation.

For the non-assessable spouse, the relief can be even more valuable, as they will be taxed on their own income only from the date of separation. They will be entitled to the full single person's tax credit and taxed under the single rate bands.

The tax treatment of settlement payments, whether lump sum or periodic, depends on whether the settlement is legally enforced (that is, court ordered) or voluntary.

If the maintenance payments are voluntary, these payments are ignored for tax purposes - so you would not be entitled to a tax deduction for the payments made and your ex-spouse will not be taxable on the payments received. However, if you wholly or mainly maintain your ex-spouse, you will be entitled to claim the married person's tax credit and the single person's rate band.

If the payments were legally enforceable (that is, were made under a court order, deed of separation, trust or covenant), you are entitled to tax relief on the payments made and your ex-spouse is taxable on the payments received.

If there are legally enforceable maintenance payments and you both remain resident in Ireland, then you do have the option to instead agree to continue to be taxed as a married couple. The couple must submit a joint election in writing if they wish to avail of this option.

In general, any clause in a separation agreement stating that a spouse will not seek maintenance in the future or seek increased maintenance is unenforceable. The spouse can apply for a maintenance order and a court will consider this application, particularly if the circumstances of the parties have changed or the spouse who executed the agreement did not have legal advice at the time. A divorced spouse can also apply to a court for a maintenance order or a variation of a maintenance order after the divorce decree has been granted. However, this is only possible where the spouse applying for the order has not since remarried.

CGT and lien on mortgage

Q If I sell a house at a gain which has a lien on its mortgage, will I be liable for Capital Gains Tax (CGT) even if the mortgage company insists that I must pay the gain to reduce the mortgage on the second property in which the lien refers to? Richard, Drogheda, Co Louth

A A disposal for CGT takes place when there is a transfer of the beneficial ownership of an asset from one person to another.

Even if the person is required to lodge the titled deeds to a property with a lender, or to grant legal rights over the property to the lender as part of a mortgage, any disposal of the property is deemed to be a disposal by the owner of the property and not by the lender. This would imply that the owner's gain is subject to CGT, regardless of the intention or obligations arising for the proceeds of the sale. The bank should be aware of your taxation obligations in respect of CGT and of the fact that this tax must be paid.

Airbnb tax

Q I have a cottage rented as a holiday let on a full-time basis with various online companies, including Airbnb. They're all short-term lets. I understand that the tax-deductibility of expenses isn't as straightforward for Airbnb as it is for long-term lets. Am I right? What expenses can I claim against tax? Thomas, Ennis, Co Clare

A The tax treatment of short-term lets varies greatly from that of long-term lets. While the latter is classed as 'Case V Rental' income, the former is usually classed as 'Case I Trading' income and is subject to different rules.

For example, rent-a-room relief is available for the former only, and not for Airbnb type lettings. If you are deemed to be trading, you potentially have a wider range of tax deductions available. You can claim for certain pre-letting expenses and also for the full mortgage interest paid, while a long-term letting can only claim a proportion (80pc in 2016) of the mortgage interest paid.

In respect of a Case V Rental, the cost of renovating prior to first let would not be deductible. However, it is less clear-cut for an Airbnb type letting. It could be argued that these renovations constitute a pre-trading expense and are allowable, provided that they are in line with current legislation, which disallows "any sum expended for repairs of premises occupied ... for the purposes of the trade or profession, over and above the sum actually expended for those purposes".

When computing your trading profit, include any expenses you've incurred, as these can reduce your tax bill. According to Revenue, expenses incurred directly in the provision of the accommodation can be deducted when calculating the taxable profits. Such expenses would include the cost of cleaning the accommodation, any food provided, laundry, commission payments to a third-party including Airbnb, additional insurance purchased, electricity, gas and heating costs associated. In addition, a wear and tear or capital allowances charge may be deducted.

Barry Flanagan is tax director with Taxback.com

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