Finance Act 2006

Use of Tax Reliefs by High Income Taxpayers

New measures to limit a taxpayer’s ability to significantly reduce their tax bill were announced. These changes have effect from 2007.

The measure broadly envisages restricting the amount of specified reliefs (such as property based incentives and artists exemption) which a person can use to reduce their tax liability in any one year to 50% of the person’s income.

The specified reliefs are listed in the Finance Act .

Where the individuals Adjusted Income (i.e. income before deducting the reliefs) is greater than a high income threshold of €250,000 then the aggregate deduction for specified reliefs will be restricted to 50% of the Gross Income.

The new system contains a taper relief for income between €250,000 and €500,000 – for example a person with an Adjusted Income of €350,000 with restricted reliefs of a similar amount will be subject to tax in the normal manner on the excess over €250,000.

Specified reliefs not used in a particular year can be carried forward to the next year, subject to the same rules being applied in that following year.

Individuals affected by the restriction should examine their situation to see what action they could take so as to minimise the impact on their tax position.