Hi,
I've been looking at this for a while now but I cant find a satisfactory resolution. My understanding from the revenue website (ht p://w w.revenue.ie/en/tax/it/leaflets/it1.html#section9 , you'll have to fill in the blanks on this link as the board wont allow me to post links) is that if you pay tax at the higher rate and you use some of your salary to pay a medical insurance premium then you are entitled to a tax credit to the value of 20% of the premium. So if my salary was suddenly increased by 1k, (assuming standard rate 20%, higher rate 41% and ignoring PRSI,levies etc and a premium of €1k for simplicity) then the calculations would be:
Salary+1k => pay 410 more tax
Claim 200 back (relief at standard rate)
=> Net result:
Me -210 (= -410+200)
Revenue +210 (=+410-200)
If on the other hand this 1k is not paid to me in cash but rather added to my paycheck as a BIK the numbers would be the same. My problem however is that on my P60 the BIK value is listed as the full premium value ie. 1k so I pay an extra 410 tax however the VHI receipt says that the NET amount (= €800) has been paid by my employer on my behalf => presumably VHI must get the other 200 from revenue => the calculations work out as:
Me: -210 (= -410+200),
Revenue: +10 (=+410-200-200), the first -200 being the 200 the revenue pays to the VHI to make up the full 1k premium, and the second is the 200 I claim back.
Clearly from my perspective this is fine as in either case I pay an extra €210 but the revenue are now only getting €10 extra tax so this cant be correct. If I didn't claim back the 200 then the revenue value would be correct (+210 tax) however I would not have the relief that the above link says I am entitled to. So can anyone figure out what is wrong here? I'm beginning to think that the numbers on either my P60 or the receipt from VHI must be wrong, but I'm not sure which, can anyone suggest an alternative explanation, that would make sense of this ?
Thanks,
Usjes.
I've been looking at this for a while now but I cant find a satisfactory resolution. My understanding from the revenue website (ht p://w w.revenue.ie/en/tax/it/leaflets/it1.html#section9 , you'll have to fill in the blanks on this link as the board wont allow me to post links) is that if you pay tax at the higher rate and you use some of your salary to pay a medical insurance premium then you are entitled to a tax credit to the value of 20% of the premium. So if my salary was suddenly increased by 1k, (assuming standard rate 20%, higher rate 41% and ignoring PRSI,levies etc and a premium of €1k for simplicity) then the calculations would be:
Salary+1k => pay 410 more tax
Claim 200 back (relief at standard rate)
=> Net result:
Me -210 (= -410+200)
Revenue +210 (=+410-200)
If on the other hand this 1k is not paid to me in cash but rather added to my paycheck as a BIK the numbers would be the same. My problem however is that on my P60 the BIK value is listed as the full premium value ie. 1k so I pay an extra 410 tax however the VHI receipt says that the NET amount (= €800) has been paid by my employer on my behalf => presumably VHI must get the other 200 from revenue => the calculations work out as:
Me: -210 (= -410+200),
Revenue: +10 (=+410-200-200), the first -200 being the 200 the revenue pays to the VHI to make up the full 1k premium, and the second is the 200 I claim back.
Clearly from my perspective this is fine as in either case I pay an extra €210 but the revenue are now only getting €10 extra tax so this cant be correct. If I didn't claim back the 200 then the revenue value would be correct (+210 tax) however I would not have the relief that the above link says I am entitled to. So can anyone figure out what is wrong here? I'm beginning to think that the numbers on either my P60 or the receipt from VHI must be wrong, but I'm not sure which, can anyone suggest an alternative explanation, that would make sense of this ?
Thanks,
Usjes.