BES Tax Relief Calculation

[Globetrotter]

Hi there, I've been looking into making a BES investment and am trying to figure out how much tax I can claim back. I've spoken to a few people, including the revenue commissioners, and I'm afraid I just get more confused each time. I'd appreciate it if someone culd explain to me how the calculation is made.

This year I will earn just under 100k and will pay Income Tax of ca. 24k. If I make an investment of 80k, can I claim the full 24k back and get the rest back next year ? Or in order to fully benefit should I invest less ?

I know there are other threads on this, but none actually deal with how to calculate the tax relief due back.

Thanks
Globetrotter

 

[deadlyduck]

See [broken link removed]
It seems that you can carry forward the unused proportion to later years but take note of the detailed conditions the document outlines.

 

[The_Hustler]

What would there be to carry forward? I'm not sure what you mean by getting the rest back next year.

It's a relief against total income. So if you earn 100k, then your 80k investment will relieve total income to 20K.

If you have no other relief then tax at 20% of 20k is 4k less whatever tax credits you have for the year. If the credits bring your tax to 0 then you'll get a refund of the 24k tax you paid.

I'd like somebody to correct me if I'm wrong about how the relief works, but it's not as straight forward as the investment at 41%.

 

[deadlyduck]

Sorry- I may have originally reversed your earnings and investment.

You deduct the investment as a relief so the remaining income will be taxed at 20%. You'll get a refund of whatever tax you've paid to bring down your ultimate liability to the revised amount. here's a simplified example:

Taxable income before investment: 100000
Tax on this (assume single person's SRCOP): 36400 @ 20%
Balance of income @ 41%: 63600 @ 41%
Total tax due: 33356

Situation after €80K investment is made:
Taxable income 20000 [all taxed at 20%] => revised liability is now 4000

This revised liability [4000] will be compared to what you've actually paid [33356] and you can get a refund of the excess- at least that's my understanding of how the system works!