Definition of a “Chargeable Person”

Amended definition of “chargeable person” - Section 14 Finance Act 2005

Introduction

Section 14 FA 2005 amended the definition of a “chargeable person” for Self-Assessment purposes. The legislation now permits Revenue the discretion to look at an individual's gross non-PAYE income when deciding on assessment status.

For the year of assessment 2005 and following years, an individual with PAYE income who also has substantial gross income from a non-PAYE source(s) (but where this income has been reduced to NIL or to a negligible amount because of deductions, losses, allowances and other reliefs) is regarded as a “chargeable person” and is required to make a return under the Self-Assessment system.

Individuals with non-PAYE income

Individuals with PAYE income who also have income from a non-PAYE source(s) can be divided into the following categories:

Non-PAYE income in excess of €50,000 gross

An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of substantial gross income from other sources, such as trading, professional or rental income, which is covered or largely covered by losses, capital allowances and other reliefs will now be regarded as a “chargeable person” within the Self-Assessment system.

For the 2005 tax year and subsequent years of assessment, substantial gross income is defined as gross non-PAYE income of €50,000 or more, e.g. Gross Income from a Trade or Profession, Gross Rental Income, Other Schedule D Income, Dividends and Distributions or Foreign Income.

The €50,000 limit applies to gross income from all sources and not from each separate source. An individual may have non-PAYE income from a number of sources and all sources should be added together when determining this €50,000 threshold.

An individual becoming a “chargeable person” under Section 14 FA 2005 continues to be a “chargeable person” for future years, as long as the source(s) of the non-PAYE income continues to exist, irrespective of the amount of the annual gross income.

Individuals with gross non-PAYE income of €50,000 or more (even if the non-PAYE income is reduced to NIL for tax purposes) are required to prepare and deliver, on or before 31 October each year, a Form 11 tax return for the previous year ended 31 December. Where a return is submitted after 31 October the individual will be subject to the late filing surcharge on the same basis as all other “chargeable persons”.

In these cases, the non-PAYE income can not be coded against tax credits.

Non-PAYE income less than €50,000 gross

An individual who is in receipt of income chargeable to tax under the PAYE system but who is also in receipt of income from other non-PAYE sources will not be regarded as a “chargeable person” if the total gross income from all non-PAYE sources is less than €50,000 and the net assessable income is less than €3,174 and the income is coded against PAYE tax credits.

There is no change to the current practice in relation to individuals who fall within this category, provided they have assessable non-PAYE income of less than €3,174. These individuals can continue to have the liability on such income effectively assessed within PAYE by means of coding in the income against their tax credits.

Assessable non-PAYE income of €3,174 or more

An individual with assessable non-PAYE income of €3,174 or more for any year is regarded as a “chargeable person” for Self-Assessment and must file a Form 11 for that year.

Proprietary Directors

A proprietary director is a director of a company who is the beneficial owner of, or is able either directly or indirectly to control more than 15% of the ordinary share capital of the company. All proprietary directors are “chargeable persons”; where Joint Assessment applies, the spouse of such Directors are also brought within the Self-Assessment provisions

Exceptions

Excluded from the definition of “non-PAYE income” for the purpose of this section are:

• Social Welfare Payments and Pensions
• Legally enforceable maintenance payments received

Where the above sources of income can be accommodated by coding against the individual's tax credits the individual will not be deemed to be a “chargeable person” for Income Tax Self-Assessment.