Relief for Service Charges

Introduction

Section 7 Finance Act 1995 introduced income tax relief for service charges paid by individuals. The relief will be available for 1996/97 and subsequent years for service charges paid in full and on time in the preceding calendar year. The maximum relief in any tax year is ₤150 at the standard rate (27% for 1996/97).

Service Charges Qualifying for Relief

All service charges paid to:-

• local authorities for the provision of domestic water supply, domestic refuse collection and domestic sewage disposal,
• independent contractors for domestic refuse collection,
• group water schemes for domestic water supply

Qualifying Individuals

An individual (or his/her spouse) who is liable for and pays the service charge will qualify for the relief.

Alternatively, an individual who pays the service charge (although not liable for it) and lives, on a full-time basis, in the house which is the subject of the charge can also qualify for the relief.

This latter category is intended to cover situations such as a son or daughter paying a service charge on behalf of an elderly parent. Any claim to relief by the son/daughter must be accompanied by a disclaimer (Form SC1) completed by the liable individual.

Local Authority Service Charges Arrears

An individual with arrears can only qualify for relief for service charges in 1996/97 if at least 20% of the arrears are paid in addition to the 1995 service charges. The arrears do not qualify for relief.

Amount of Relief

The amount which qualifies for relief under all headings is the lower of ₤150 or the amount paid (net of any discount and arrears).

The relief is calculated by reference to the following:

Actual amount paid to:-

• local authorities for the domestic services described above
• group schemes for domestic water supply.

Flat rate of ₤50 for:-

• payment of a specified annual charge to independent contractors for domestic refuse collection and
• purchase of “tags” for domestic refuse collection by local authorities or independent contractors.

How tax relief is granted Local Authority Service Charges

The legislation requires each local authority to submit computerised returns for each calendar year to the Revenue Commissioners detailing all cases who have met the necessary conditions (set out below). Returns must be submitted by 31 January (i.e. within one month of the year end). Where the first return is incomplete a supplementary return must be made within a further month.

To be included in the computerised return an individual must have fulfilled all of the following conditions:

• all service charges must be paid in full and on time (i.e. the 1995 services charges must be paid in full and on time to qualify for relief in 1996/97)
• arrears from earlier years must be cleared over 5 years. Accordingly, at least 20% of any arrears, in addition to the 1995 service charge, must be paid before an individual can qualify for relief in 1996/97
• the local authority must be advised of the RSI number of the individual liable for the service charge.

Where a PAYE taxpayer has supplied his or her RSI number in sufficient time to be included in the local authority return the relief, where due, has been automatically incorporated into his or her 1996/97 TFA certificate.

Claims for Relief directly to Tax Offices

Taxpayers who have not advised the local authority of their RSI number (or who have not done so in sufficient time to be included in a local authority return) will not be granted relief automatically.

In such cases relief will be granted on due claim from the taxpayer.

Independent Contractors and Group Water Schemes

Independent contractors and Group Water Schemes are not obliged to submit computerised returns. Relief will be granted on due claim by the taxpayer. It will not normally be necessary to provide a receipt.

“Tag” system

A variety of domestic refuse collection “tag” systems are operated throughout the country by both local authorities and independent contractors. The “tags” can be purchased from normal retail outlets as well as directly from the service provider. Claims for relief for the cost of “tags” can be made directly to the Tax Office. Receipts will not normally be required.

Non PAYE Taxpayers

Non PAYE taxpayers must claim the relief at year end in their tax return.

Holiday Homes

Relief is not limited to a principal private residence. Accordingly, it may be claimed in respect of more than one domestic residence subject to the overall limit of ₤150.

Business expense

Relief is not available on any amount claimed as a business expense. For example, where one supply is used for both domestic and business purposes, relief is not available on the portion claimed as a business expense.

General

A percentage of all claims will be checked with the Local Authority to confirm their validity.