Home Carer's Tax Credit

L

Lincoln

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Hi

My question please - what is Revenue's definition of income in the Home Carer's tax credit threshold in the case of a self employed individual - as in "The home carer’s income is not in excess of €5,080" ( Tax year 2012)? Is it the net profit per acounts, the tax adjusted profit or the taxable profit after deducting any capital allowances or losses from another trade that may be due ( i.e. losses in the same year)?

Take for eg an individual who is self employed ( part time basis) and has a net profit in 2012 of €4,500, adjusted profit for tax of €6,000 and capital allowances of €1000.
The taxable profit / income (net of capital allowances) is therefore €5,000 which is obviously under the home carer's income threshold of €5080 but the tax adjusted profit is €6000 which is in excess of the home carer's income threshold. Which of these figures is the relevant "income" figure re. the home carer's threshold?

Thanks in advance
 
Hi Lincoln,

I'm fairly sure it would be taxable income after deducting capital allowances and presumably losses from other trades. Net profit per accounts isn't really relevant for tax at all.

I would suggest to claim it anyway and it will only be allowed if you qualify. It isn't disallowed anyway over €5080, just restricted. I assume the computers at Revenue still automatically calculate it.

Also, if the non-home-caring spouse is paying tax at the higher rate it is more beneficial to claim the increase in rateband instead. Again, Revenue will allow whichever is most beneficial.

Here is Revenue's guide.
 
The relevant section in the Act is S.466A, and it refers to "total income" of the spouse qualifying for the credit, rather than taxable income.

Total income is the income before deduction of capital allowances, so in the example given by the OP above the relevant amount for the purpose of calculating the Home Carer Credit would be the €6,000.
 
Thanks for your response Mandelbrot

After posting my query I used the sample numbers on a ROS Offline Form 11 return (2012) to see if the ROS calculation would indicate what the relevant income figure is (if that makes sense)

I entered a net profit in 2012 of €4,500, adjusted profit for tax of €6,000 and capital allowances of €1000.
Entered 1 dependent child and claimed €810 home carer's tax credit

I entered salary income for spouse of €25000 (just for completeness).

The above gives a full Home carer's of €810 under the Calculate function.

I then changed the figures to a net profit of €5,500, adjusted profit for tax of €7,000 and capital allowances of €1000. The home carer's credit per the Calculation is now reduced to €350 which presumably is calculated as follows (taxable profit after cap all = €6000-5080 (threshold) = 920/2 = 460. Home Carer's tax credit is reduced by this amount = €810-460 =€350.

I would therefore appear (from the ROS calculation) that the relevant income figure is the taxable profit after deducting cap allowances (as suggested by Mrs Vimes) rather than total income?
 
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