Re: Non Contributory and VHI - Newbee
Sorry Anthony but you are dead wrong, once again.
1/. Wouldn't it make sense as I mentioned above to set up an occupational scheme?
2/. Even if they didn't, the Employer could indeed make PRSA contributions on behalf of the individual and indeed that would be treated as a BIK.
BUT, the crucial; thing in these circumstances is this:
From www.revenue.ie also:-
Contributions made by an employer to a PRSA on behalf of an employee are aggregated with their own contributions for the purpose of calculating the maximum tax-relieved contribution. They are treated for relief purposes as contributions made by the taxpayer.
Technically the employee is chargeable to benefit in kind on the contribution made by the employer. However, if the aggregate contributions (i.e. employee and employer) are within the limits for tax relief purposes the benefit on kind charge is negated by the tax relief due on the employer's contribution.
In a small number of cases where aggregate contributions made by the employee and employer exceeds the limits for tax relief purposes in the tax year, the excess may be carried forward and relieved against future year subject to overall relevant limits in each year.
In a very small number of cases (where the employer pays the full or substantial part of the contributions to the employee's PRSA and the aggregate contributions exceed the age based limits) a benefit in kind charge may arise in the tax year but the amount brought into charge will be available for relief in future years subject to the overall relevant limits in each year.
What all this means is in the case of an Employer making a 25% of salary contribution to an Employees PRSA, an offset bik/tax relief siuation occurs. Employee is charged, but get immediate relief as he is treated for income tax purposes as having made the payment in to the PRSA himself.
A problem would arise if the Employee was making a further PRSA contribution elsewhere, as the 30% of income rule might be broken. In that case the excess Employer contribution over the 30% limit (depending on age) would give rise to a bik with no tax relief available in that year, although it could be carried forward.
To summarise:
Employer gets tax deduction against profits for PRSA contrib.
Employee should end up in a tax neutral position. Charge and relief are identical.
Which by some strange coincidence is exactly the same as it would have been had an Employers Revenue Approved Occupational Scheme have been used as I suggested above.
Sorted.