I've been carrying out some (amateurish and self-interested!) research on this issue and, if I'm right on it, it's seriously inequitable.
It seems certain PAYE pension contributors can claim 47% relief on pension contributions for a given year: 41% (if paying tax at top rate) + 4 % PRSI relief on the contributions + 2 % health levy relief on the contributions.
However, it's only if you get tax relief at source e.g. paying into a PRSA, that you get the full 47% relief. This is because tax/PRSI/health levy is only taken from income less the monthly pension contribution.
But thereafter the system becomes discriminatory.
The first category of people discriminated against are PAYE contributors who make a lump sum pension contribution outside of the "tax relief at source" system. There's no problem claiming the first 41% relief by applying to revenue the end of the tax year with your P60 and evidence of the amount of the pension contribution. Once you've secured the 41% relief, you have to fill out the revenue's "Application for PRSI Refund in Respect of Pension Contributions" form [broken link removed] and bang it off in order to get the next 4%. But if you squeeze that out of the revenue, it seems you can go no further. It seems there is no mechanism or "form" for claiming back the 2% health levy. So such a PAYE contributor can claim a maximum of 45% relief.
And then we come to the chumps who are apparently left on a maximum relief of 41% - the self-employed. The aformentioned "PRSI refund" form explicitly excludes the relief where it is claimed against Schedule D (self-employed) income as opposed to Schedule E income (earnings from an employment).
So I decided to look at the governing legislation. I think there are two key provisions. First:
S.11 Social Welfare (Miscellaneous Provisions) Act 2002 http://www.irishstatutebook.ie/2002/en/act/pub/0008/sec0011.html
This is the provision that first provided for PRSI relief on pension contributions. The interesting thing is that it provides for the making of regulations that would give relief to PAYE workers AND self-employed workers.
And some relevant regulations came along in 2003 in the form of:
S.I. No. 698/2003 - Social Welfare (Consolidated Contributions and Insurability (Amendment)(No. 1) (Refunds) Regulations 2003 http://www.irishstatutebook.ie/2003/en/si/0698.html
I found the regulations to be fairly impenetrable but I have to say (having read them about 10 times) that I think they provide for PRSI relief for PAYE workers AND self-employed workers on any pension contributions made since Jan 1 2003.
However, the revenue's interpretation of them can be seen in the aforementioned "PRSI refund" form i.e. relief is apparently only available on a contribution made out of Schedule E income.
So where does that leave things?
I think there must be plenty of people out there who would prefer 47% relief to 41% relief on their pension contributions, particularly in the current climate. Of note is that the PRSI relief (if not the health levy relief) can be claimed on pension contributions made since Jan 1 2003.
The 2002 legislation doesn't appear to discriminate as amongst tax payers and yet the 2003 ministerial regs (or at least the revenue's interpretation of them in the magic "PRSI refund" form) doesn't let you claim the relief if your are self employed. What's with that for God's sake?
I appreciate this is going to be a niche interest post (or maybe not) but it would be great if any interested reader would take the time to look at the relevant legislation/prsi refund form to see if I'm missing anything e.g. amending legislation/statutory instruments that alter the picture further.
If I'm right on this, I might consider launching a petition/harassing my local politicians (I'm only half joking!)
It seems certain PAYE pension contributors can claim 47% relief on pension contributions for a given year: 41% (if paying tax at top rate) + 4 % PRSI relief on the contributions + 2 % health levy relief on the contributions.
However, it's only if you get tax relief at source e.g. paying into a PRSA, that you get the full 47% relief. This is because tax/PRSI/health levy is only taken from income less the monthly pension contribution.
But thereafter the system becomes discriminatory.
The first category of people discriminated against are PAYE contributors who make a lump sum pension contribution outside of the "tax relief at source" system. There's no problem claiming the first 41% relief by applying to revenue the end of the tax year with your P60 and evidence of the amount of the pension contribution. Once you've secured the 41% relief, you have to fill out the revenue's "Application for PRSI Refund in Respect of Pension Contributions" form [broken link removed] and bang it off in order to get the next 4%. But if you squeeze that out of the revenue, it seems you can go no further. It seems there is no mechanism or "form" for claiming back the 2% health levy. So such a PAYE contributor can claim a maximum of 45% relief.
And then we come to the chumps who are apparently left on a maximum relief of 41% - the self-employed. The aformentioned "PRSI refund" form explicitly excludes the relief where it is claimed against Schedule D (self-employed) income as opposed to Schedule E income (earnings from an employment).
So I decided to look at the governing legislation. I think there are two key provisions. First:
S.11 Social Welfare (Miscellaneous Provisions) Act 2002 http://www.irishstatutebook.ie/2002/en/act/pub/0008/sec0011.html
This is the provision that first provided for PRSI relief on pension contributions. The interesting thing is that it provides for the making of regulations that would give relief to PAYE workers AND self-employed workers.
And some relevant regulations came along in 2003 in the form of:
S.I. No. 698/2003 - Social Welfare (Consolidated Contributions and Insurability (Amendment)(No. 1) (Refunds) Regulations 2003 http://www.irishstatutebook.ie/2003/en/si/0698.html
I found the regulations to be fairly impenetrable but I have to say (having read them about 10 times) that I think they provide for PRSI relief for PAYE workers AND self-employed workers on any pension contributions made since Jan 1 2003.
However, the revenue's interpretation of them can be seen in the aforementioned "PRSI refund" form i.e. relief is apparently only available on a contribution made out of Schedule E income.
So where does that leave things?
I think there must be plenty of people out there who would prefer 47% relief to 41% relief on their pension contributions, particularly in the current climate. Of note is that the PRSI relief (if not the health levy relief) can be claimed on pension contributions made since Jan 1 2003.
The 2002 legislation doesn't appear to discriminate as amongst tax payers and yet the 2003 ministerial regs (or at least the revenue's interpretation of them in the magic "PRSI refund" form) doesn't let you claim the relief if your are self employed. What's with that for God's sake?
I appreciate this is going to be a niche interest post (or maybe not) but it would be great if any interested reader would take the time to look at the relevant legislation/prsi refund form to see if I'm missing anything e.g. amending legislation/statutory instruments that alter the picture further.
If I'm right on this, I might consider launching a petition/harassing my local politicians (I'm only half joking!)
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