Revenue Note for Guidance
531AM Charge to universal social charge
This section contains the main charging provisions for USC. It sets out the types of income that are chargeable and any exemptions and reliefs that apply. To be chargeable to USC, a person’s chargeable income must exceed a threshold of €13,000.
(1) Subsection (1) contains the main charging provision and describes USC as a tax. The income specified in paragraphs (a) and (b) of the Table to this subsection is chargeable to USC.
(1)(a) Paragraph (a) of the Table to subsection (1) describes “relevant emoluments” as all income that is subject to the PAYE system (i.e. to the provisions of Chapter 4 of Part 42). Such income is chargeable without allowing certain deductions that are allowed for income tax purposes or where it is exempted from income tax. Thus-
- (1)(a)(i) any permanent health insurance and pension contributions that are deductible under Regulation 31 of the Income Tax Regulations,
- (1)(a)(ii) the initial market value (within the meaning of section 510(2)) of any shares that are appropriated to the participants of an approved profit sharing scheme, except, in the case of shares that are appropriated to an approved profit sharing scheme from an employee share ownership trust (ESOT), where those shares were held in the ESOT before 1 January 2011,
- (1)(a)(iii) the market value (determined in accordance with section 548) of the right to acquire shares in an approved savings-related share option scheme (section 519A(1)) or share option scheme (519D(1)), and
- (1)(a)(iv) any gain exempted from income tax in respect of an approved savings-related share option scheme (section 519A(3)) or share option scheme (519D(3)), after deducting the chargeable value of the right that has already been charged to USC by subparagraph (a)(iii) from the chargeable value of the gain, and
- (1)(a)(v) the income exempted from income tax (the “specified amount” in section 825C) under the ‘special assignee relief programme’ (SARP),
are included in the amount of the relevant emoluments to be charged to USC.
Other types of income are excluded from relevant emoluments and are thus not chargeable to USC. These are-
- (1)(a)(I) payments made under the Social Welfare Acts and similar type payments made by other government bodies (definition of “similar type payments), both Irish and foreign,
- (1)(a)(II) income that has been gifted to the Minister for Finance under section 483 (definition of “excluded emoluments”),
- (1)(a)(III) emoluments that an employer has been authorised to disregard following receipt of a notification issued by an inspector under section 984(1) (this notification is commonly referred to as a PAYE exclusion order),
- (1)(a)(IV) payments made on termination of an office or employment to the extent that they are covered by the basic and increased exemptions and relieving provisions of the Standard Capital Superannuation Relief as set out in section 201(5)(a), and paragraphs 6 and 8 of Schedule 3,
- (1)(a)(V) payments of an amount paid under the pre-retirement access to Additional Voluntary Contributions (AVCs) arrangements, as provided by section 782A(3), or.
- (1)(a)(VI) emoluments in the nature of a contribution by an employer to a PRSA (within the meaning of Chapter 2A of Part 30).
(1)(b) Paragraph (b) of the Table to subsection (1) describes “relevant income” as income from all sources as estimated in accordance with the Tax Acts before deductions that are usually allowed when calculating either total income or taxable income for income tax purposes. From this broad starting point, paragraph (b) then goes on to exclude certain types of income and to allow certain deductions. Excluded are-
- (1)(b)(i) & (ii) income referred to in paragraph (a). Thus “relevant emoluments” are not charged to USC twice,
- the emoluments and reliefs that are specified in subparagraphs (I) to (V) of paragraph (a) in relation to describing what constitutes “relevant emoluments”,
- (1)(b)(iii) certain types of investment income listed in clauses (I) to (VII). These are-
- deposit interest subject to DIRT (Chapter 4 of Part 8),
- dividend payments by Credit Unions (Chapter 5 of Part 8),
- deposit interest from EU and non-EU sources (Chapter 7 of Part 8),
- income from certain foreign life assurance policies (Chapter 5 of Part 26),
- income from certain investment vehicles (Chapter 1A of Part 27),
- income from certain offshore funds (Chapter 4 of Part 27),
- (1)(b)(iv) the amount by which a person’s total income is reduced where section 825A applies and a relief known as ‘transborder relief’ is given for a year of assessment,
- (1)(b)(v), (va) & (vb) the amount of a legally enforceable maintenance payment made under section 1025 to a separated spouse, under section 1031J to a separated civil partner or under section 1031Q to a qualifying cohabitant provided there has been no claim for joint assessment under section 1026 or section 1031K.
- (1)(b)(vi) the amount of an unrelieved loss from a trade or profession that is carried forward to a later year of assessment under section 382 that is actually used in that later year against the profits from that trade or profession. This subparagraph allows the loss and section 531AU(1) quantifies the allowable loss,
- (1)(b)(vii) the amount of certain capital allowances that are actually used in a year of assessment by a person carrying on a trade or profession. The allowances actually used in a year of assessment can include both current year and carried forward allowances. No deductions are allowed in the case of capital allowances given for leased plant and machinery or buildings or to an individual who is not an active partner in a trade (as defined in section 409A). This subparagraph allows the deduction and section 531AU(2) quantifies the allowable deduction. The capital allowances referred to are-
- wear and tear allowances for plant and machinery (section 284),
- annual writing-down allowances for industrial buildings and structures (section 272),
- farm buildings and structures allowances (section 658),
- farm buildings and pollution control allowances (section 659).
(1)(b)(viii) the rental income deemed to be received under section 372AP(7) (i.e. the ‘clawback‘ mechanism for section 23 relief) where section 23 relief is claimed after the introduction of USC on 1 January 2011. Such relief would not have been deductible when charging USC. However, USC is charged on deemed rental income received by an individual who claimed section 23 relief before the introduction of USC.
Included are –
- (1)(b)(I) the income from certain sources that are exempt from income tax. This is done by treating the relieving sections as if they didn’t exist. These sections are-
- section 140 – distributions out of profits or gains from stallion fees, stud greyhound services fees and occupation of certain woodlands,
- section 141 – distributions out of income from patent royalties,
- section 142 – distributions out of profits of certain mines,
- section 143 – distributions out of profits from coal, gypsum and anhydrite mining operations,
- section 195 – exemptions of certain earnings of writers, composers and artists,
- section 232 – profits from occupation of certain woodlands,
- section 234 – certain income derived from patent royalties, and
- section 664 – relief for certain income from leasing of farm land.
- (1)(b)(II) the amount of the deduction allowed for income tax purposes, but not for USC, in respect of -
- (1)(b)(III) the amount of any balancing charge on an asset where capital allowances would have been treated as a deductible amount for USC purposes.
(2) USC is not payable for a year of assessment where the individual proves to the Revenue Commissioners that his or her aggregate income for that year does not exceed €13,000. Where this amount is exceeded, the full amount, and not just the excess, is chargeable to USC.
Relevant Date: Finance Act 2020