787 Nature and amount of relief for qualifying premiums

Summary

This section sets out the manner in which relief under the Chapter in respect of qualifying premiums is to be given and how the amount of the relief is to be computed. The relief is given as a deduction from or set-off against relevant earnings for the year of assessment for which the premiums are paid. Depending on the age of the individual, relief is allowable up to the following percentages of the individual’s net relevant earnings for that year —

Individual who, at any time during the tax year, is aged 30 or over and less than 40	20%
Individual who, at any time during the tax year, is aged 40 or over and less than 50	25%
Individual who, at any time during the tax year is aged 50 or over and less than 55 (or who is less than 55 but whose relevant earnings for the year were derived wholly or mainly from a sporting occupation specified in Schedule 23A)	30%
Individual who, at any time during the tax year is aged 55 or over and less than 60	35%
Individual who, at any time during the tax year is aged 60 or over	40%
All other cases	15%

There is an upper “earnings limit” of €115,000 (see section 790A) by reference to which allowable retirement annuity contributions will be calculated. Any excess of contributions over the allowable contributions may be carried forward to subsequent years.

Details

Definition of relevant earnings and net relevant earnings

(1) The amount of the “relevant earnings” or “income” of an individual from a particular source is to be taken to be the amount of the profits or gains arising in the relevant basis year. In other words, deductions for losses and capital allowances are not to be taken into account in arriving at the amount of an individual’s “relevant earnings”.

(2) The “net relevant earnings” of the individual are to be arrived at by taking the amount of the individual’s relevant earnings for the year of assessment and then deducting from that amount the deductions which, in computing the individual’s total income for tax purposes, would be made from those relevant earnings in respect of –

• payments made by the individual (that is, payments which the individual is entitled to deduct in computing his/her total income (for example, payments such as annuities paid under deduction of tax or maintenance payments to a separated or former spouse), and
• losses and capital allowances relating to a source of relevant earnings of the individual or the spouse or civil partner of the individual.

(2A) & (2B) For the purposes of the relief, an individual’s net relevant earnings are not to exceed the “earnings limit” currently €115,000 (see section 790A).

(5) Relief given under this section in respect of a qualifying premium does not reduce the net relevant earnings.

Treatment of losses, etc

(3) Where the whole or a part of a loss or allowance relating to a source of relevant earnings is, for the purpose of computing liability to income tax for a particular year, set off against income which does not rank as relevant earnings, the amount so set off is to be treated as reducing the individual’s net relevant earnings of subsequent years, being deducted as far as possible from the relevant earnings of the immediately following year, whether or not relief under the section is claimed or allowed for that year, and so on for the following years. The full loss or allowance, taking one year with the next, will reduce the amount of relief available under this section.

(4) Where an individual has relevant earnings and other income, deductions (that is, in respect of losses or payments) which could otherwise be treated as reducing the relevant earnings or the other income are, so far as possible, to be treated as reducing the relevant earnings in so far as they are deductions in respect of losses sustained in a source of relevant earnings of the individual (or of his/her spouse or civil partner), and that otherwise they are to be treated as reducing the other income.

Method of giving relief

(6) In general, relief is to be given for qualifying premiums by deducting them from the individual’s relevant earnings for the year of assessment in which they are paid.

(7) Where a qualifying premium is paid after the end of a year of assessment but on or before the return filing date for that year, an election may be made to have the premium treated as if it was paid in that year.

For the year of assessment 2010, the earnings limit is, by virtue of section 790A(5), deemed to be €115,000 for the purpose of determining how much of a premium paid by an individual in the year of assessment 2011, is to be treated as paid in the year of assessment 2010.

(13) Where the “net relevant earnings” as determined for a year are subsequently adjusted, any relief granted on the basis of the unadjusted earnings is also adjusted as necessary.

(14) Where relief is granted under the section in respect of a qualifying premium, relief is not available under any other provision of the Income Tax Acts in respect of any other premium or consideration for an annuity under the same contract.

Amount of relief

(8) The amount of premiums (including premiums on a contract approved under section 785) which may be deducted or set off in any year of assessment is as follows —

Individual who, at any time during the tax year, is aged 30 or over and less than 40	20%
Individual who, at any time during the tax year, is aged 40 or over and less than 50	25%
Individual who, at any time during the tax year, is aged 40 or over and less than 50	25%
Individual who, at any time during the tax year is aged 50 or over and less than 55 (or who is less than 55 but whose relevant earnings for the year were derived wholly or mainly from a sporting occupation specified in Schedule 23A)	30%
Individual who, at any time during the tax year is aged 55 or over and less than 60	35%
Individual who, at any time during the tax year is aged 60 or over	40%
All other cases	15%

Specified individuals

(8A), (8B) & (8C) A “specified individual” is an individual whose relevant earnings for a year of assessment are derived wholly or mainly from one of the occupations or professions listed in Schedule 23A viz. various sporting activities. The Minister for Finance may, in consultation with the Minister for Tourism, Sport and Recreation, extend or restrict, by regulation, the meaning of specified individual by adding or deleting one or more occupations or professions to the list of specified occupations or professions in that Schedule. Any such regulations will not be effective until approved by resolution of Dáil Éireann.

Carry-forward of relief

(10) & (11) Where, because of an insufficiency of net relevant earnings, full relief cannot be given for a year of assessment in respect of premiums paid in that year, the unrelieved amount may be carried forward to the next or succeeding years and treated as a qualifying premium paid in that or those years.

Claims and appeals

(15) & (16) The amount of relief due is, on due claim, to be determined by the inspector. The inspector’s determination may be appealed by notice in writing to the Appeal Commissioners. An appeal must be made within 30 days after the date of the notice of the determination. The appeal is heard and determined in the manner provided for in Part 40A.

Relevant Date: Finance Act 2019