on use of Tax Reliefs by Taxpayers with Higher Incomes
measures aimed at limiting a taxpayer’s ability to significantly
reduce their tax bill were introduced with effect from 2007.
restriction when introduced potentially applied only to individuals
with income in excess of €250,000. The provisions restricted
the amount of specified reliefs (such as property based incentives
and patent exemption) which a person can use to reduce their
tax liability in any one year to 50% of the person’s
income or €250,000 – whichever is higher. Tapering
relief applied for incomes between €250,000 and €500,000.
When the full restriction applied (on incomes in excess of
€500,000) the individual had an effective tax rate on
their total income of approximately 20%. The specified reliefs
are listed in the Tax Act.
the start of 2010 these restrictions have been tightened further
so as to achieve an effective tax rate of c.30% where the
full restriction applies. With effect from 1 January 2010
the restriction will potentially apply to individuals who
have income in excess of €125,000 and the full restriction
will apply to incomes in excess of €400,000. For 2010
et seq the amount of specified reliefs which a person can
use to reduce their tax liability in any one year will be
limited to 20% of the person’s income or €80,000
– whichever is higher. Tapering relief will apply for
income between €125,000 and €400,000.
reliefs not used in a particular year can be carried forward
to the next year, subject to the same rules being applied
in the following year.
further tightening of the restriction for 2010 et seq will
mean that these provisions will now impact on a much broader
range of taxpayers. In many cases some action can be taken
to reduce the impact of the restriction. Individuals likely
to be affected should examine their position now and consider
what action can be taken to alleviate the impact of these
provisions on their tax position.