The Return of Income and Gains for all Chargeable Persons is due by 31st October for people who file their Return of Income in paper format, writes Pat Keegan of Baker Tilly Ryan Glennon.

The vast majority of people now file their Return electronically and the due date for those taxpayers, returning the 2014 Income and CGT Tax Return due date is extended to 12th November 2015.

It should be noted that in order to be entitled to avail of this extension, the payment of taxes must also be made electronically. The majority of Chargeable Persons are either self-employed people or company directors who own more than 15% of a company.

There are steps that people can take now that will help to reduce their liability for 2014 and I have set out below a number of the more common issues that taxpayers ought to be aware of. It may help to prompt people to address issues that they may otherwise not have fully dealt with.

This is not an exhaustive list and people should seek professional advice where they are unsure of the appropriate tax treatment of income or reliefs in their own specific circumstances.

In Association with

Maximising Tax Relief & Credits
The first steps to take are to ensure that you have established and quantified all of the reliefs to which you are entitled for 2014. The number of reliefs has reduced significantly over the past few years. Some, like Health Insurance and Mortgage Interest are now relieved at source so no specific claims is necessary.

There are still some reliefs however where a specific claim is needed. The most common one is health expenses. These are available at the 20% standard rate but Nursing Home fees and the costs of employing a person to care for an incapacitated person in their home are relieved at the taxpayer’s marginal relief rate.

Not all medical and dental expenses are relieved however and those that do not qualify tend to relate to routine dental and ophthalmic cost as well as certain cosmetic surgery costs. Ensure that you can produce evidence of the expenses claimed if called upon to do so by the Inspector of Taxes. They do not need to be submitted with the Return but are expected to be available if selected for verification by The Inspector of Taxes.

Pension Contribution
Payments to personal pensions or PRSA’s that are made by the due date for filing the 2014 tax return (31st October or 12th November) can be relieved against the 2014 income tax liability.

The amount of the total contributions that will qualify for Income Tax relief is capped in a number of ways but the most common cap is based on a percentage of earnings for the year of claim. This cap increases, depending on the age of the taxpayer, incrementally from 15% for people under 30 to 40% for people of 60 and over.

Pension contributions are a very effective tax saving mechanism and it is also a very wise financial move to provide for retirement. There are many reports and surveys which highlight the relatively poor amount of provision that people in Ireland have made for retirement and the Income Tax Relief is intended to encourage people to make adequate provision.

The relief is at the Taxpayer’s marginal rate of tax and is particularly valuable where tax is saved at 40%.

Payment of LPT by the due date for filing Income and CGT Returns
Taxpayers should be aware that there is a provision for applying a surcharge to the Income Tax liability for 2014 where LPT is unpaid by the time the 2014 Tax Return is submitted. This can be very expensive and the surcharge will be up to 10% of the Income Tax and Capital Gains Tax liability for 2014, irrespective of the actual LPT liability.

The surcharge will be revised when the LPT is paid after the Return Filing date. An LPT surcharge will still apply but this will be limited to the amount of the LPT liability. This provision makes the non-payment of LPT potentially very costly and LPT penalties for late filing of the LPT return itself will apply as well as the surcharge consequences as set out above.

Third Level Fees
Tuition fees for third level courses will qualify for Income Tax relief at the standard rate of tax on most full-time and part-time courses. The relief is only available on the excess over €3,000 for full-time courses and €1,500 for part-time courses.

In general, this has the effect of allowing relief on the tuition fees on the second or later children. Where fees for the 2014/2015 academic year are paid by instalments, the fees can be claimed in 2014 even where some of the instalments are in 2015. The taxpayer has the option of deciding which year to make the claim i.e. either in the year of payment or the year of commencement of the course.

Capital Gains Tax Compliance
There is always a risk that the 2014 Capital Gains Tax details could be overlooked when completing the Return of Income and Gains for 2014. This is due to the fact that the liability would have been calculated and discharged in December 2014/January 2015 but the actual details of the gain are only due to be submitted in October 2015.

Taxpayers may believe that the matter had been fully dealt with on payment of the CGT. If the details are omitted from the 2014 Return of Income and Gains, then a surcharge will apply to the Capital Gains Tax liability even when the tax was fully paid and on time.

Capital Acquisitions Tax
Although CAT is dealt with separately under a different tax return, the due date for submitting the IT38 form for Capital Acquisitions Tax is also 31st October and extended to 12th November for electronic filing. The year to 31st August 2015 is the year to which the 31st October return relates.

Other Administrative Issues
Ensure the return is submitted on time as the surcharge for late submission is 5% of the tax liability up to 31st December 2015 and 10% thereafter.

Preliminary Tax for 2015 is also due by the filing date. This should represent 100% of the 2014 liability or 90% of the eventual liability for 2015. Underpayment of Preliminary tax will result in a possible charge for interest on the extent of the underpayment.

Care should be taken in cases where large amounts of unused capital allowances are still unclaimed by 31st December 2014 for tax based investments. Many of these were guillotined and unavailable for carry forward into 2015. Where this applies then the amount of Preliminary Tax for 2015 should reflect this fact.

A Fellow of the Institute of Chartered Accountants, Pat Keegan has been a practising Chartered Accountant since 1983 and is based in Baker Tilly Ryan Glennon's Portlaoise office. Keegan is a Chartered Taxation Adviser having qualified as a member of the Institute of Taxation and provides general professional services to a wide range of clients.