Virtual Lecture 1 27.09.20 Advanced Taxation 27.09.20 Virtual Lecture 1 Content / agenda 1. Welcome 2. Overview Weeks 1 ‐ 4 covering 1. Taxation system 2. Income tax computations 3. Schedule E 4. Passive/Investment income 1
Virtual Lecture 1 27.09.20 Welcome Advanced Taxation – delivered by Stephanie Walshe – Overview of 6 Virtual lectures during the year Date Lectu Covering Topic re 27/09/ 1 1 ‐ 4 IT Tax bands,(SRCOP) credits, allowances, sources of 20 income, PRSI/USC for EE 01/11/ 2 5 ‐ 8 IT Married couples, assessable Case1/11, PRSI/USC for 20 S/E 29/11/ 3 9 ‐ 11 IT Capital allowances and losses 20 03/01/ 4 12 ‐ 16 Basic right through to more advanced computations 21 CGT 07/02/ 5 17 ‐ 21 Basic to more advanced computations, capital 21 CT allowances, loss relief Lecture 1 – overview 1.Taxation system Chapter 1 from your manual (Revision of types/classification/exempt income) Other detail covered in classes/virtual tutorials 2.Income Tax computations Chapter 2 – Revision of Standard Rate of Tax, Tax Credits, Allowances, Reliefs, Tax Relief at source, Relief for charges 3.Schedule E Chapter 3 – Section 3.1 – Income from Irish Employment 4.Passive/Investment income Chapter 3 – Section 3.2 – Schedule D Case III/IV/V and Schedule F 2
Virtual Lecture 1 27.09.20 Taxation system Types of Taxation Income Tax * Charged on individuals income earned Corporation Tax * Charged to companies on profits earned Capital Gains Tax Charged on capital profits arising on the * disposal of assets Capital Charged on individuals on gifts or Acquisition Tax inheritances received Value Added Tax Charged on the sale of goods or services * Stamp Duty Charged on documents transferring assets – property or shares * Examinable in Advanced Taxation Customs Duty Charged on importation of goods into the EU (ROI) Excise Duties Charged on the importation of goods into the EU Classification Schedule Income source Case I Income from a trade Case II Income from a profession Case III Investment income not subject to tax at source Foreign income – foreign employments, foreign rental income Case IV Irish Deposit Interest subject to DIRT Covenant income received Other miscellaneous income Case V Irish rental income Schedule E Irish employments, pensions and directors fees Schedule F Dividends from Irish resident companies 3
Virtual Lecture 1 27.09.20 Exempt Income Certain income is exempt from Income tax • An individual or married couple whose total income is within certain specified exemption limits • Social Welfare Child Benefit • Statutory Redundancy payments • Lottery and Betting winnings • Life Assurance Proceeds • Interest paid on An Post Saving Certificates and Instalment Saving Scheme • Qualifying Artists Income up to a certain limit, €50,000 • Income from Childcare Services up to €15,000 • Rent a room relief (€14,000 gross income) Preliminary Tax Payments 1. PAY Preliminary Income Tax for the CURRENT tax year • Preliminary Tax is an ADVANCE payment of the tax liability for the CURRENT tax year which must be paid by the 31st October each year. • A taxpayer has 3 options available to calculate the preliminary Income Tax payment for the CURRENT tax year. • 90% of the CURRENT year’s (2020) final income tax liability (based on an estimate) • 100% of the PREVIOUS year’s (2019) final income tax liability. • 105% of the PRE ‐ PRECEDING (2018) year’s final income tax liability. • This option can only be availed of if the Direct Debit payment option is used and it cannot be used if the tax liability for the pre ‐ preceding tax year was NIL. • Where the payment fails to satisfy one of the 3 options above or is made after the 31st October, an interest rate of 0.0219% per day applies (effectively based on an annual rate of 8%). 4
Virtual Lecture 1 27.09.20 Preliminary Tax Payments 2. PAY the balance of Income Tax for the PREVIOUS tax year • The taxpayer must calculate their total Income Tax liability for the PREVIOUS tax year and pay any balance by the 31st October e.g. the balance of Income Tax for 2020 tax year must be paid by the 31st October 2021. 3. FILE the Income Tax Return (Form 11 or Form 12) for the PREVIOUS tax year A chargeable person must file the Income Tax Return (Form 11 of Form 12) by the 31st October following the end of the year of assessment e.g. the Income Tax Return for 2020 tax year must be filed by the 31st October 2021. Example given page 19 ‐ 20 Surcharges Surcharge for late filing of returns: 5% of the tax liability if filed within 2 months (subject to a max of €12,695) 10% of the tax liability if filed more than 2 months late (subject to a max of €63,485) Example page 22 5
Virtual Lecture 1 27.09.20 Income Tax computations View template – or computation on page 36 SRCOP Personal circumstances Tax year 2020 Single, widowed or a surviving civil €35,300 @20% partner without qualifying children Balance@40% Single, widowed or a surviving civil €39,300 @20% partner qualifying for Single Person Child Balance@40% Carer Credit Married or in a Civil partnership – one €44,300 @20% spouse or civil partner with income Balance@40% Married or in a Civil partnership – both €70,600 @20% spouses or civil partners with income (with a max increase of €26,300) Examples page 39 Balance@40% 6
Virtual Lecture 1 27.09.20 Tax Credits Non ‐ refundable tax credits Tax year 2020 Single 1,650 Married/Civil partners 3,300 Widowed parent with dependent 1,650 child(ren) Widowed person without dependent 2,190 children Home Carer 1,600 Employee (PAYE) Tax Credit 1,650 Earned Income Credit 1,500 Age Credit Single/Married 245/490 Incapacitated Child Credit 3 300 Personal Tax Credits Every individual is entitled to a personal tax credit as follows: Single €1,650 Married/Civil Partnership €3,300 Widowed (no dependent children) €2,190 Single Person Child Carer + €1,650 Single Person Child Carer Credit (more detail page 41) Claimed by the parent the qualifying child resides with for all or greater part of the year This parent, Primary claimant (PC) must be the child’s parent or person responsible for caring for child PC is only entitled to claim one credit in respect of all qualifying children with his care PC may surrender the SPCCC to the Secondary Claimant (SC). However the SC must meet qualifying criteria and the child must reside with the SC for at least 100 days in the year. PC (or SC if credit is surrendered) must be single. hild b d i f ll i d i l 7
Virtual Lecture 1 27.09.20 Personal Tax Credits Additional Widowed Parent Credit – Page 42 A widowed person is entitled to additional tax credits following the year of bereavement Tax credits in the year of bereavement – will be covered in Chapter 4 A widowed or surviving spouse/civil partner who has NO qualifying children is entitled to €2,190 A widowed or surviving spouse/civil partner who has qualifying child(ren) is entitled to a single personal tax credit plus an additional credit is available for the 5 years following the year of bereavement where the following conditions are satisfied • Widow has at least one qualifying child residing with them • They have not remarried before the start of the year of assessment • They are not cohabiting with another individual Additional credits are a follows: Bereaved in 2019 €3,600 Bereaved in 2016 €2,250 B d i 2018€3 150 B d i 2015€1 800 Personal Tax Credits Home Carer Tax Credit – Page 43 Credit available to a married couple/civil partnership who are jointly assessed and one spouse/partner works at home to look after young children or a dependant person, referred to a home carer. The home carer may earn some income outside of the home and still qualify for the credit or part of the credit Conditions • Married and jointly assessed • Home carer must care for at least one dependent person • Child • Person over 65 • Person permanently incapacitated • Home carer must have income of less than €7,200 to qualify for full credit (€1,600), over €10,400, no credit, however income between € 7,200 and € 10,400 the credit is restricted: Formula : €1,600 less {(Income ‐ €7,200) X ½} • If home carer is in receipt of additional income, they must choose the tax di ddi i l SRCOP 8
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