PAYE workers could be missing out on tax refunds

THERE are 2.9 million PAYE taxpayers in the country and yet only 790,000 of them filed a tax return for 2020. This means that a large number are paying more tax than they actually have to.

A recent survey confirms that Ireland’s taxpayers are not that proactive when it comes to seeking tax refunds. The Taxback.com Taxpayer Sentiment Survey found that 40% of people cited lack of awareness of the availability of tax reliefs as the biggest reason for unclaimed tax refunds.

Some 19% said they were reluctant due to a fear of dealing with the taxman. The same proportion said they believed the process was too complex and/or time-consuming.

Taxback.com asked more than 1,200 taxpayers their views both on why so few people claim what they are entitled to, and whether or not they planned to take part in a public consultation on taxation and welfare.

The Commission on Taxation and Welfare is a forum for people to submit their experiences and perspectives on the tax system, social welfare, pensions and other topics, in order to influence public policy on these topics in the coming years.

The public consultation was launched last October and closed on January 17. The Taxback.com survey, it should be noted, was completed before the public consultation period had ended.

Barry Cahill, director at Taxback.com believes that more needs to be done to get people on board with tax affairs.

“There aren’t many instances in life that people tend to decline free money,” he points out.

He concedes that not everyone will be owed a refund from last year, while others may be allowing the reliefs to build up for the allowable four years before claiming.

“Notwithstanding those considerations, the fact remains that tens, if not hundreds, of thousands of people, fail to claim what they’re owed.”

He believes that the inertia stems from either insufficient information and awareness around entitlements or difficulty in interpreting the language of tax.

“As practitioners, we must highlight these issues, but the government must also engage people and possibly do more to spark people’s interest at a state level and to really communicate to them how important their input is and how much it is valued.”

The survey found that just 16% of us were open to talking to the government’s Commission on Taxation and Welfare.

“There’s a dearth of interest and awareness among the public on the topic of taxation and personal finance, at both the personal level and in terms of interest in the state coffers and how they should be used. The Commission’s public consultation is an interesting one as it gave us all the chance to have our say on an area that will no doubt have a sizeable impact on most of us.

“You certainly don’t need to be an expert on tax or welfare policy for your opinion to be valued in these processes — indeed the point of these exercises is very much to gather everyday opinion and experiences, and so the ‘average’ taxpayer’s viewpoint would be very helpful.”

There are a wide range of tax reliefs that you don’t get automatically, but must take action to claim, whether or not you’re a PAYE worker.

Nursing homes are of course very expensive, costing upwards of €1,000 per week. These fees are paid in a variety of ways, including through the Fair Deal scheme. Operated by the HSE, the scheme aims to provide financial support to people who need long-term nursing home care.

Under Fair Deal, you make a contribution towards the cost of the care and, if your accessed contribution is less than the amount of the fees, the HSE will pay the rest. While you can claim tax relief on the contribution you make, you can’t claim any relief on the contribution made by the HSE.

It can frequently happen of course that nursing home costs end up being borne by family members.

Everyone who contributes is entitled to claim, and the refunds due can be significant. Full payment of fees for a nursing home start at €50,000 a year at least, so even tax relief at the lower rate that would entitle the payer to €10,000 in tax relief, which is €5,000 more than the average refund paid out to Taxback.com clients.

Many nursing home fees are paid by the children of the occupants, or are spread across siblings, some of whom could be paying tax at the higher rate and who would therefore be eligible for an even-greater relief of up to €20,000 on fees of €50,000.

We also know that third level tuition fee payers are missing out on very significant refunds. Tax relief is granted at the standard rate of tax, currently 20%, and there is a limit of €7,000 per course on which you can claim relief.

There is also a ‘disregard amount’, which stands at €3,000 for a full time course and €1,500 for a part time course. This figure is deducted from your total qualifying fees — but it’s only taken away once per year, no matter how many students you’re claiming for.

So which courses qualify? The vast majority of them, it seems. All courses in Ireland that are provided by publicly funded universities, colleges and institutes of higher education are approved for tax relief. Nor is the relief restricted to Ireland.

Courses provided by publicly funded or accredited universities and institutions in other EU member states are also approved, whether you’re studying at a distance or attending in person.

You can choose to claim relief on your tuition fee installments either in the tax year that the academic year began or in the tax year in which you paid the installment. Note too that while you can claim relief on the student contribution, there are some third level fees for which you can’t claim. These include capitation fees, registration and admin fees.

If you’ve changed job during the year, or if your employment record is punctuated by periods of unemployment, there could well be tax reliefs due to you. Similarly, if you or your spouse has been made redundant during the tax year, you might not be getting the full benefit of the transferability of allowances. Take the time to sit down and review your affairs and make sure everything is in order and up to date.

Of course the opposite case could also be true. You may not be paying all you should be paying. Revenue issues tax credits on the basis of the information they have.

If that information has changed, it’s quite possible that Revenue might not have updated their records to reflect that.

Suppose for example you’re claiming the home carer’s credit, then you return to employment. It may take Revenue some time to adjust your tax status to reflect that, which may result in a significant adjustment in your allowances within the tax year.

Save yourself a nasty shock and let them know in advance.