Retirement Annuity Contracts

The legislation governing income tax relief for retirement annuity contract premiums is covered in section 787 Taxes Consolidation Act 1997. Generally, relief is given by way of deduction from an individual’s relevant earnings (income from non-pensionable office or employment or from a trade or profession) for the year of assessment in which the premium is paid.

However, section 787(7) provides that a premium paid after the end of the year of assessment but on or before the return filing date may be treated as paid in the preceding year of assessment if the individual so elects on or before the return filing date.

The legislation is specific with regard to the time limit for making an election. It allows almost ten months after the end of the year of assessment for individuals to finalise their accounts, make a decision on whether to take out a retirement annuity for the preceding year, and to make a timely election to have the premiums treated as having been paid in the preceding year of assessment if they so wish.

In view of :

• Revenue’s waiver of the requirement to submit RAC certificates in support of claims, (see Tax Briefing, Issue 29) and
• the period available between the end of the year of assessment and the return filing date in which a taxpayer may make RAC contributions and an election to treat the premiums as paid in the preceding year of assessment if he or she so wishes,

tax practitioners and taxpayers are reminded that Revenue apply the election requirement strictly. Under no circumstances will an election made outside the prescribed time limit be admitted.