Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

787B Relevant earnings and net relevant earnings

Summary

This section defines the expressions “relevant earnings” and “net relevant earnings”, sets out the treatment of losses etc. in the calculation of relevant earnings and imposes an “earnings limit” (currently €115,000 – see section 790A) on the amount of relevant earnings that qualify for relief in any one year.

Details

Relevant Earnings

(1) “relevant earnings” means either —

  • income from employment,
  • income from property attached to or forming part of the emoluments of that employment, or
  • income from a trade or profession.

but does not include income from an employment with an investment company of which the recipient is a proprietary director or proprietary employee.

(2) The relevant earnings of a person are not to be regarded as that of his/her spouse or civil partner, even if they are jointly assessed for tax purposes (under section 1017 or 1019). This allows the person to claim relief in his/her own right in respect of contributions paid to a PRSA which he/she has established.

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

Net relevant earnings

(4) The “net relevant earnings” of an 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 or former civil partner)), and
  • losses and capital allowances relating to a source of relevant earnings of the indi-vidual or the spouse or civil partner of the individual.

Treatment of losses, etc.

(5) 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.

(6) 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.

(7) Allowances given in respect of contributions do not reduce the net relevant earnings.

Limit on relief

(8) For the purposes of the relief, an individual’s net relevant earnings are not to exceed the “earnings limit” (currently set at €115,000 – see section 790A) but this limit is not to apply in relation to additional voluntary PRSA contributions. AVC PRSA contributions will be added to any relief granted under the main scheme via the net pay arrangement for the purposes of calculating whether the amounts exceed the age percentage limit and the earnings limit.

Relevant Date: Finance Act 2019