Readers will be aware of the measures introduced by Finance Acts 2006 and 2007, which limited the use of certain tax reliefs and exemptions by high-income individuals with effect from January 2007. The results of the Report published by the Department of Finance on the operation of the restriction for 2008 indicate that the overall number of individuals subject to the restriction in 2008 was 423 and that the additional tax yield for that year was €39.68m.
The objective of the restriction, as provided for under Chapter 2A TCA 1997, was to ensure that individuals with an adjusted income (as defined in section 485C TCA 1997) exceeding €500K, where subject to the full restriction and therefore would pay an effective tax rate of approx 20%. Where adjusted income was less than €500K a tapering approach applied.
The results for 2008 - 423 individuals subject to the restriction and the additional yield was €39.68m, are marginally down on 2007, when the overall number of individuals affected was 439 and the additional yield was €39.99m for that year.
A further analysis of the 2008 figures shows that 189 high-income individuals were subject to the full restriction and paid an average effective rate of 19.86%. 234 individuals with adjusted income of up to €500,000 i.e. where the restriction applies on a tapered basis, paid an average effective tax rate of 13.82%.
The use of different “specified reliefs” and the combined amount of the relief used are also reported on.
Readers should note that further restrictions introduced in this area by Finance Act 2010 are not reported on.
The full report ‘Analysis of High-Income Individuals’ Restriction 2008’ can be accessed here.