Revenue has published a Guidance Document which deals with the application of the High Income Individuals’ Restriction for the tax year 2010 and subsequent years. The document includes points to remember for agents and taxpayers when considering both the application and calculation of the restriction.

The Guidance Document outlines the effect of the changes which were introduced under Finance Act 2010. As readers will be aware, individuals who are fully subject to the restriction, are liable to pay an annual effective rate of income tax of approximately 30 per cent, with effect from the tax year 2010. An effective rate of income tax of approximately 20 per cent applied for the tax years 2007, 2008 and 2009.

Readers should note the need to take account of the changes that were made to the restriction by Finance Act 2010 when making preliminary tax payments for the tax year 2010. Where preliminary tax payment for 2010 is based on 90% of the tax payable for 2010, the increased tax due as a result of the restriction must be taken into account. If the preliminary tax payment for 2010 is by reference to either the 100% or 105% rule, this could result in a significant balance of tax to be paid in October 2011 as a result of the revised application of the restriction in 2010.

The full text of the Guidance Document is available at http://www.revenue.ie