Simplifying Tax Relief- Accounts exempt from DIRT

The Minister for Finance, in his 2007 budget speech, announced that the Revenue Commissioners would take measures to simplify the way in which certain tax allowances and tax credits were being granted. These initiatives may be categorised under three broad headings:

• IT- Related initiatives
• DIRT Exemption at source
• Third Party Information

1. IT-Related Initiatives

1.1 Automatic Age-related credits

With the development of the new PAYE IT system, Revenue is now in a position to automatically grant age-related tax credits. These include the increased rent allowance for those reaching the age of 55, and also the increased exemption limit - as well as the annual age tax credit - for those reaching the age of 65. This development will be released before the end of 2007.

1.2 BIK Medical Insurance credit

Tax relief on medical insurance is granted at source on all premiums. Where an employer pays medical insurance as a benefit-In-kind [BIK], the employer pays the lower premium and repays the tax credit to Revenue through the Corporation Tax return/payment. The employee, whose medical insurance has been paid by the employer, must then claim the tax credit individually. To encourage employees who are taxed on the BIK to claim the appropriate tax credit, the P35 form for 2007 will include a new field to allow employers to notify Revenue of the amount of medical insurance paid as a BIK. Revenue will process this information and grant the appropriate tax credit to the individual employee in 2008.

2. Accounts exempt from DIRT

This exemption at source scheme is now live and grants exemption from DIRT for taxpayers or their spouse, who are 65 years of age or over and whose total income is below the annual exemption limit. The scheme also applies to those or their spouse who are permanently incapacitated and whose total income is below the relevant annual exemption limit.

• Broad guidelines on the operation of the scheme have been agreed with the financial institutions.
• Application forms and information leaflets for those over 65 are now available from all Revenue offices, financial institutions and Post Office Savings Bank. The completed application forms should be returned to the financial institutions.
• Application forms and information leaflets for permanently incapacitated have been distributed through the disability organisations, as well as being available from any Revenue office.
• Application forms for permanently incapacitated should be returned to the tax office, who will notify the appropriate financial institution to allow exemption on the nominated account.

3. Third Party Information

Revenue will work with certain organisations and agencies to collect details of expenditure which qualifies for tax relief, and will process this data for tax refund purposes as though it had been submitted by the taxpayer. Qualifying expenditure includes the following:

3.1 Trade Union Subscriptions

Revenue is working with the Trade Union movement to collect the PPS numbers from employers who operate deduction at source for Trade Union subscriptions. This is expected to commence later this year, when the data will be processed by Revenue and the tax credit granted.

3.2 Drugs Payment Scheme

The Health Service Executive holds expenditure data at individual level on prescribed drugs under the Drugs Payment Scheme. This data will be processed by Revenue and, where appropriate, a tax refund will issue. This element is expected to commence towards the end of 2007.

3.3 Tuition Fees

Revenue are working with third level colleges to collect data on those paying tuition fees in respect of qualifying courses. This is expected to commence in 2008.

3.4 Non Reimbursed Medical Costs from Medical Insurance Companies

Revenue will work with medical insurance companies who can supply data on qualifying expenditure for in-patient and out-patient costs not covered by medical insurance and, where appropriate, a refund will issue. This element is expected to be available in 2008.

3.5 Nursing Homes

Discussions have commenced with a view to details being supplied by nursing homes concerning the net charges paid to them, along with details of those making the payments. It is hoped that the new system will become operational in 2008.