The fact that thousands of PAYE workers have not claimed all their tax credits and reliefs has received enormous coverage in the media recently. Unclaimed medical expenses, service charges etc cost millions in unnecessary taxes. The Revenue Commissioners have made it known that they encourage taxpayers to claim their full entitlements. But it is important not to wait too long. Applications for tax refunds must be made within 4 years of the end of the tax year concerned. For example, an application in respect of 2003 must be submitted to Revenue by 31 December 2007.
The following areas are among the most common sources of tax refunds:
Please note that nursing home bills re elderly relatives are also claimable.
If the cost is re-imbursed by the State or medical insurance, that element cannot be claimed for tax purposes. Payments into pension schemes are also tax-deductible, subject to limits depending on the age of the taxpayer. For example, if you are aged 50 to 54 years (inclusive), you may claim up to 30% of your earnings. It is also possible to obtain tax relief if you enter into a Deed of Covenant with an elderly relative. This has the effect of transferring income from you to the other party.
Employees should be aware of the tax liability arising if they have personal use of assets belonging to their employers. Company cars are the usual source of "benefits - in - kind", but these can also arise if you live in a house belonging to your employer or where he pays your rent. Other examples include loans from your employer at below prescribed rates - 4.5% for home loans, and 12% for other loans. It can be preferable for employees to use their own cars on employer’s business, and claim expenses at prescribed rates per kilometre.
In some cases, it may be arguable that an employee is operating more as a contractor. This might be so if he uses his own equipment or machinery, and effectively decides himself how the work is done. If this case, it may be more tax-efficient for the individual to become self-employed for tax purposes, as he / she can claim more tax-deductible expenses. It may also suit the employer, as it is saved employer’s PRSI.
On cessation of employment, the employer may make a tax-free termination payment to the employee. The size of the payment will vary depending on the length of service of the employee.