1. Income tax refund
If you are entitled to a refund of income tax, the claim must be made within four years of the end of the year in which the refund arises. For instance, if you are due a tax repayment in respect of the 2017 tax year, the claim must be made by 31 December 2021. Typical examples of expenses that may result in a tax refund are medical expenses and college fees. There have been many Tax Appeals Commission cases that have stated that the 4-year time limit for obtaining a tax refund is “written in stone” so if the claim is not filed within the time limit the refund is lost.
2. Additional pension contributions
If you have not done so already, you may wish to consider maximising the allowable pension contributions to your personal pension fund before 31 December 2021. If you are a business owner employing staff with an accounting year-end of 31 December, then pension contributions must be paid before the year-end to get a deduction in the 31 December 2021 accounts.
If you employ your spouse in your business, you can make an employer contribution for him/her.
3. Small gift exemption
The small gift exemption allows you to provide a gift of up to €3,000 to any individual tax-free in any year without reducing their tax-free threshold for gift tax purposes. For example, you could gift each of your children €3,000, gift your grandchildren €3,000, gift your siblings €3,000 each and gift your siblings’ spouses €3,000 each in any given year. There is no gift tax on these payments, and their tax-free thresholds remain intact.
4. Income tax surcharge
Your 2020 tax return was due for filing by 31 October 2021. If it has not yet been filed, you have until 31 December 2021 to submit the return and incur a 5% surcharge. If filed after 31 December 2021, the surcharge doubles to 10%. In the case of proprietary directors, please note that the surcharge is based on your income tax liability before credit for tax paid under the PAYE system.
5. Defer a capital gains tax (CGT) liability
Where possible one should consider deferring a sale of an asset until after the New Year. CGT payable on a gain arising on disposal in the period 1 January to 30 November 2021 is due on 15 December 2021. For disposals that occur in December 2021, the CGT is due on 31 January 2022. If the gain is realised say in January 2022, then the CGT is not payable until 15 December 2022. Also, for any assets which are “underwater”, you may wish to crystallise the loss before 31 December 2021 so that the loss will be allowed against 2021 gains. Certain rules apply regarding the generation of artificial losses, so care needs to be taken in this regard.
6. Small non-cash benefit
If you are an employer, you can provide your employees with a once-off gift or voucher up to €500 per annum, which is not subject to PAYE, USC or PRSI.
7. Loan from company
In situations where employees or directors have an outstanding loan from a company at the end of the year, the company may be required to pay income tax to the Revenue Commissioners at a rate of 20% of the amount of the loan that is owed at 31 December. If the loan is repaid to the company, the company receives a refund of the income tax paid.
If you are in a position where you have a company loan, it may be worth considering paying back the loan before the year-end to avoid the company having to pay the 20% income tax.
8. Claiming losses
If you incurred a trading loss, you could elect to have the trading loss offset against other income earned in the year, and if applicable your spouse’s income. However, there is a two-year time limit to claim such loss relief. For trading losses incurred in 2019, the claim for the loss relief against other income must be submitted to the Revenue Commissioners by 31 December 2021.
9. Artist exempt income
If you receive income in 2021 and the income qualifies as artist exempt income, an application should be made to the Revenue Commissioners by 31 December 2021. If the claim is not submitted by the end of the year, you could lose out on the exemption for 2021.
Conclusion
If you wish to discuss any of the pre-year-end action points applicable to you, feel free to contact any member of our Private Client Division. If you feel you may be entitled to a tax refund due to unclaimed tax credits, our tax compliance team would be more than happy to review your position and assist in submitting any claim to the Revenue Commissioners.
If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client team below:
December 2021
Workers travelling from one EU member state, the UK, Iceland, Norway, Liechtenstein or Switzerland and "posted" to another of those countries on a temporary basis need to carry an A1 Certificate. The obligation covers any economic activity, even if only for a short duration.
Section 18 introduces a change to the taxation of non-resident corporate landlords, by applying corporation tax at the higher rate of 25% to such income. Section 29, exclusion of certain Irish distributions from the anti-avoidance provisions of section 129A TCA 1997. Section 34 enhancement of relief for certain start-up companies, and extension by a further 5 years.
Finance Act 2019 provided for an exemption to transfer pricing rules for certain domestic non-trading transactions.
Finance Bill 2021 sees Ireland formalise its transposition of Article 4 of the EU Anti-Tax-Avoidance Directive (ATAD) into Irish tax legislation through the introduction of interest limitation rules (ILR). The ATAD ILR aims to limit base erosion by restriction of interest deductions.
Ireland reached a political agreement with the OECD on the introduction of a minimum effective tax rate of 15%. The longstanding 12.5% rate will however continue to apply to many other companies.
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