Revenue Note for Guidance

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Revenue Note for Guidance

477 Relief for Service Charges

Summary

This section provides tax relief in respect of service charges to take account of the introduction of the “Pay by Use” principle for Local Authority Waste Charges. The relief is granted by reference to expenditure incurred in the previous financial year.

It provides for a general upper limit of €400 per annum expenditure on which relief can be claimed irrespective of how the charge is determined. At the standard rate of tax this will equate to a maximum tax credit of €80. This change took effect from 1 January 2006 in respect of charges paid in the financial year ended 31 December 2005.

A transitional arrangement applied in respect of those taxpayers who paid fixed charges in excess of €400 during 2005, granting them tax relief for 2006 on the full amount paid in 2005. In all cases the maximum ceiling of €400 applied for 2007 onwards.

The section has effect for years of assessment 2006 to 2010 inclusive.

Details

Definitions and construction

(1) “Appropriate percentage” is a percentage equal to the standard rate of income tax for any given year of assessment

“Claimant” has the meaning assigned to it by subsection (2).

“Financial year” is a calendar year.

“Group water scheme” is defined by reference to the Regulations in which such schemes are referred to, that is, the Housing (Improvement Grants) Regulations 1983 (S.I. 330 of 1983).

“Service” specifies the types of service charges which qualify for relief and mean the provision, by or on behalf of the local authority, of:

  • domestic water supply,
  • domestic refuse collection, and
  • domestic sewage disposal.

“Service charge” is defined by reference to the statutory provisions under which a charge is imposed, that is —

“Specified amount”, for the purposes of the relief, is the general cap of €400 or the lesser amount actually incurred for the year of assessment 2006 and subsequent years. An exception is made in cases where there was a fixed charge in excess of €400 paid in the financial year ended 31 December 2005. In that instance, that higher fixed charge will be allowed for 2006.

(2) For a year of assessment where an individual proves that for the preceding financial year he or she has paid service charges, relief will be granted to the individual for that year of assessment in an amount that reduces the tax he or she would otherwise be liable to pay by the lesser of —

  • the appropriate percentage of the amount paid, and
  • the amount that reduces his or her tax to nil.

Excluded from the individual’s liability to tax for this purpose is tax which the individual is liable for under section 16(2). This is tax which the individual is obliged to deduct on payment from, for example, annual payments, and account to Revenue for it.

(3)(a) There is provision for relief in joint assessment cases. In the case of a married couple or civil partners taxed jointly on their incomes under section 1017 or section 1031C, the allowance is given whether the service charges are paid by either the husband or wife or either of the civil partners.

(3)(b) Where service charges are paid on behalf of the person liable for them by another person who resides in the premises, the relief may be disclaimed by the person so liable in favour of the individual actually paying the charges.

(4) A claimant is entitled to relief in respect of the amount of service charges paid to a person or body of persons (i.e. a private contractor) other than a local authority for the provision of refuse collection or disposal services. The conditions that apply are that such a person or body of persons has —

  • notified its provision to the local authority in whose functional area such service is provided, and
  • furnished to that local authority such information as the local authority may from time to time request concerning that person or body of persons.

If these conditions are satisfied then the service provided is be deemed to have been provided on behalf of the local authority and a payment in respect of such a service will qualify for relief as if the payment had been made to the local authority itself.

(5) The section provides that payments to persons under group water schemes also qualify for relief under this section. Payments by individual members under such schemes are treated as payments of service charges to a local authority.

(6) The Revenue Commissioners may require an individual who has made a claim for relief to provide them with details of the local authority, or other person who has provided a service in place of the local authority, and a breakdown of how the service charge was determined i.e. by way of fixed charge, tags, or any other method.

(7) A person is prevented from obtaining double relief (for example, as a deduction in arriving at taxable profits) in respect of the same payment of service charges.

(8) This section ceases to have effect as respects service charges paid in the financial year 2011 for that financial year and subsequent financial years for those financial years.

Relevant Date: Finance Act 2021