Following concerns raised by members regarding the relief calculated by ROS for cases where top up contributions are made in 2011 but claimed for 2010 and taking into account the revised net relevant earnings threshold of €115,000 for 2011 we reviewed the ROS position and engaged in protracted discussions with Revenue. The result is Revenue Tax Briefing Issue 05 which confirms that where relief is claimed for 2010 in respect of RAC premiums paid in 2010 and 2011, ROS is incorrectly calculating the relief in a limited number of circumstances where the net relevant earnings for 2010 is greater than €115,000.

Finance Act 2011 reduced the net relevant earnings limit, which determines the maximum tax-relievable contributions, from €150,000 to €115,000 with effect from 1 January 2011. Section 790A Taxes Consolidation Act 1997 provides for this lower limit. It also provides that, for the purpose of determining how much of a contribution or qualifying premium paid in the year of assessment 2011 is to be treated under the relevant legislation as paid in the year of assessment 2010, the earnings limit for 2010 is deemed to be €115,000.

However, last month we raised a concern with Revenue that for certain cases the ROS calculation (the RAC mini-calc) was not correctly reducing the net relevant earnings limit to €115,000 where contributions were made in 2011 but claimed as paid for 2010.

Revenue has confirmed that where relief is claimed for 2010 in respect of RAC premiums paid in 2010 and 2011, the ROS RAC mini-calc is incorrectly calculating the relief in a limited number of circumstances where the net relevant earnings for 2010 is greater than €115,000.

As Revenue are not in a position to get the 2010 Form 11 corrected in time for the 2010 pay and file deadline of the 31 October 2011 (15 November for ROS customers), taxpayers/agents are advised to claim the RAC relief as PRSA relief to arrive at the correct amount of relief due. Where this manoeuvre was necessary, the approach should be noted in the “additional notes” field in the personal details screen.

Further information is set out in the Tax Briefing Issue 05 which is reproduced on here. The Tax Briefing also sets some useful examples illustrating how the earnings limit should be applied in respect of 2010 and 2011 contributions.