Gross Premium
€1,500 Tax relief (€1,000 x 20%) €200 Net Premium €1,300 In this scenario there is no need to contact Revenue as your medical insurance provider will implement the necessary changes to the amount of tax relief due. However, there are certain situations where tax relief at source (TRS) does not apply, and that is when an employer pays the health insurance premiums on behalf of an employee and his or her dependents. In these circumstances a benefit in kind liability arises – PAYE, PRSI and USC are deducted from the earnings of the employee on the value of the benefit that is being provided and paid for. Because the employee has not benefited from the TRS arising on the premium paid by their employer, they are still entitled to the tax relief but in these circumstances it is necessary for the employee to calculate the amount they are entitled to and make a claim directly themselves to their local Revenue office. Example 1 – Single Individual – Employer pays 100% of the premium Gross Premium paid by employer €2,000 Tax relief granted to employer - €1,000 x 20% €200 Net payment made by employer €1,800 Employer payment to Collector General €200 The employer in this instance will calculate the PAYE, PRSI and USC due from the employee on the full €2,000 paid and in turn pays the €200 they receive back in tax relief to the Collector General. As the employee has not benefited from any tax relief and is charged BIK on the €2,000 payment, he or she is entitled to a tax credit of €200 in his/her tax credit certificate. Example 2 – Two adults at €1,200 each and two children at €300 each – employer pays 100% of premiums. Gross Premium paid by employer €3,000 Tax relief granted to employer - €2,600 x 20% €520 Net payment made by employer €2,480 Employer payment to Collector General €520 In this instance the employer is charged BIK on €3,000 and is entitled to a tax credit of €520 in their tax credit certificate. Example 3 - Two adults at €1,200 each and two children at €300 each – employer pays 75% of premiums. Gross Premium is €3,000 Portion of premium paid by employer (75%) €2,250 Tax relief granted to employer - €2,600 x 75% x 20% €390 Net payment made by employer €1,860 Employer payment to Collector General €390 Portion of premium paid by employee €750 Tax relief granted to employee - €2,600 x 25% x 20% €130 In this instance, the employee has received tax relief at source of €130 in respect of the premiums paid by them but they have not benefited from the TRS arising on the portion of the premium paid by their employer and is therefore entitled to a tax credit of €390 in their tax credit certificate. Claiming Relief You can make a claim by either: 1. Phoning your regional PAYE LOCALL service or 2. Complete and submit a claim for Medical Insurance and Age Related Tax Credit to your local Revenue office – a link to the claim form is at the end of this article and can also be found in the My | Resource Library inside My|Money. And don’t forget if you haven’t made a claim in recent years’ there is a 4 year time limit so any claim has to be made within 4 years after the end of the tax year to which the claim relates to. For further information see below...
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September 2015
Liam CrokeManaging Director of Harmonics Financial Categories |