Catherine McGovern, tax partner at PKF, gave an excellent Tax overview on ETF's, Pensions, how to reduce your tax liability on Employment income, Investment Property Taxation and Tax Reliefs for Business Owners for the Smart Money Series.
1. PAYE: As a PAYE tax payer, you can claim for medical expenses provided that you haven’t already claimed these back through your health insurer. There's an income tax credit at 20% of the cost of qualifying medical treatment. Nursing home expenses can be claimed at the highest rate of income tax.
2. Pensions: The contribution you put into a pension is tax deductible up to a limit. So if you are a higher rate taxpayer paying €200 per month into your pension, it will save you income tax of €80 per month. Pensions are a double whammy of paying less tax and lining up more tax efficient reserves for the future as Pensions funds are exempt from Income Tax and Capital Gains Tax.
3. E.I.I.S: EIIS is a tax relief which aims to encourage individuals to provide equity based finance to trading companies.
You can claim tax relief on your investment when certain conditions are met. As always with investments there are risks with this investment that you may not get back the amount you investing. More information can be found on the revenue site here.
4. Retirement relief: If you are 55 or older, you might be able to claim Retirement Relief. This is a relief on CGT when disposing of any part of your business or farming assets. Although this is referred to as Retirement Relief, you do not need to retire from the business or farming. More information on retirement relief can be found here.
5. Entrepreneurs relief: This relief gives a CGT rate of 10% on gains from the disposal of qualifying business assets. This is reduced from the normal rate of 33%. The rate is 20% for disposals from 1 January to 31 December 2016.
There is a lifetime limit of €1 million on the gains that you can claim relief on. Only gains on disposals made on or after 1 January 2016 are counted in the limit. You must have owned the business assets for a continuous period of three years. The three years must be in the five years immediately prior to the disposal. The business asset must be used for a qualifying business. More information can be found here on what is and isn't a qualifying business.
6. Tax on Investment Property: Catherine discussed how individual, company and group structures can impact the level of taxation paid on rental income. Below demonstrates how a group structure can impact a tax bill. Please contact Catherine for more details on how this operates and can be established.
7. Inheritance tax: a gift of €3k can be given by each parent, this can also be given to the spouse of that child or a grandchild, thus over time this can add up to a significant amount of wealth transferred tax free.
8. Transfer of property: as detailed by Catherine's slide below, the Parents will have a capital gains tax liability if the market value at the time of transfer is greater than their acquisition cost. There is a tax relief that provides that the child can reduce their Gift tax (on receipt of this property) by the Capital Gains Tax paid by their parents on the transfer. However the child must retain the property for two years to retain this offset relief.
9. ETF's: the rate of taxation on ETF's depends on where they are domiciled. Irish and European domiciled funds are subject to 41% tax on exit, while US/OECD/EEA domiciled ETF's are subject to income tax at marginal rate up to 55% and CGT at disposal of 33%.
These are some very brief notes on some elements of the tax strategies which Catherine and her team at PKF O'Connor Leddy Holmes can create. Please contact Catherine to discuss in more detail some of the above strategies and mechanisms.
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As always these are not recommendations and please do your own research. I am not a financial advisor.