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info@eastcorkjournal.ie East Cork Business Post Is The October Self-Assessment Deadline Important For Pensions?
1. Tax relief on contributions You can get
by GERARD O’BRIEN Is the October self-as-
sessment deadline impor- tant for pensions? Pension tax relief
makes it more attractive to save for your retirement by giving you generous tax breaks on the money you place in your pension; and the 2017 deadline for completing tax returns is 31 October for postal re- turns and 14 November for online returns. Essentially, your tax re-
lief is provided in three phases; • Tax relief on contri-
butions • Tax relief on invest-
ment return • Tax free lump sum at
retirement
€10,000. These
tax relief
on your pension contri- butions up to the relevant age-related
percentage
limit of your earnings in any year. This relief is only from the employment in respect of which the con- tributions are made. Sample Tax relief: Pen-
sion of €100 per month: Tax Band 40% 20% Tax Relief
€20.00 You only pay
€40.00 €60.00
€80.00 The age-related earn-
ings percentage limits are: • under 30: 15% • 30-39: 20% • 40-49: 25% • 50-54: 30% • 55-59: 35% • 60 or over: 40%. For example, an em-
ployee who is aged 42 and earns €40,000 can get tax relief on annual pen- sion contributions up to
limits include
any employee/AVC con- tributions you might be making to company pen- sions. They also include the total employee and employer contributions to PRSAs and Personal Pen- sions. So, any employer contributions over these limits will result in a Bene- fit in Kind liability for the employee. Tax relief is not availa-
ble on earnings which are more than €115,000. NOTE: Tax relief is not guaranteed. To claim tax relief, you need to apply to your local Inspector of Taxes to adjust your tax credits. Contributions deducted from salary will however receive immedi- ate tax relief.
2. Tax relief on investment return Once you place your
funds into your pension, whether that
be on a
monthly or annual basis, your contributions are invested in Irish pension funds, which are exempt from Irish Tax. This means that your pension investments grow free of income, capital gains and dividend withholding tax. These exemption’s also
mean pension funds ben- efit from being able to reinvest
your non-taxed
returns to generate higher future returns for your re- tirement.
3. Tax free lump sum at retirement. Under current rules, at
your retirement date, you might be entitled to take 25% of your accumulat- ed pension fund tax free, subject to a total limit of €200,000. The remainder of the fund can be used to either purchase an an- nuity or invest in an Ap- proved Retirement Fund (‘ARF’). ARFs are special invest-
ment funds which can give you increased flexibility in terms of how you use your pension fund after retire- ment. With an ARF you manage and control your pension fund. You can be happy in the knowledge that you can withdraw as much of this as you wish, should you ever need to. One of the rules govern- ing ARFs is that tax, Uni- versal Social Charge and PRSI, if applicable, must be deducted as if income were taken, even if no in- come is taken in a particu- lar tax year. Below I explain how
this is applied to an ARF. • From the year you
turn 61, tax is payable on a minimum withdrawal on the 30 November each year of 4% of the value of the fund at that date. • This withdrawal is li-
able to income tax, Uni- versal Social Charge and PRSI, if applicable. From
Transfer Farm – Joint Names by KAREN WALSH Edward called in to
me in the office the oth- er day. He had intentions of transferring the farm over to his son Sean for the past few years but just had not ‘got round to it’. It was something he didn’t think much about as everyone in the family always assumed that Sean would be given the farm but he kept leaving it on his ‘to do list’ and now he was afraid it was too late. He wanted to transfer the farm to Sean during his lifetime and did not wish for it to pass in his Will. He was worried over the amount of stamp duty Sean would have to pay on foot of the transfer.
Sean had his Teagasc Green Certificate and was forty years of age. Sean was helping on the farm and did not work off the farm. Edward is 63 years of age. After some discussion
about his circumstances and his personal and fam- ily’s goals for the future I advised Edward that by virtue of the fact
that
Sean is over the age of 35 years of age (despite having his Teagasc Green Certificate), he would not qualify for Young Trained Farmer Relief, and there- fore would not be exempt from Stamp Duty. In the case of non-res-
idential property, stamp duty is payable at
half
the normal rate applica- ble if there is a transfer of property to certain relatives, for example, a child, niece or a nephew. This relief is known as consanguinity relief. It is proposed that this will be
abolished at the end of
2018 and it only applies where the transferor or transferors are under the age of 67 years at date of
the transfer. So
if Edward transfers the farm to Sean before 31st December 2018 Sean will be liable for stamp duty at a rate of 1% of the value of the lands and if after the said date Sean will be liable at a rate of 2% stamp duty on the value of the lands. So let’s say the land is
worth €1,000,000 and Edward transferred the farm in its entirety to Sean now into his sole name Sean would be lia- ble for stamp duty in the sum of €10,000 if the transfer took place before the 31st
December 2018.
If it takes place after the said date Sean would be liable for stamp duty at a rate of 2% amounting to €20,000 (assuming the value of the land and rate
the
of stamp duty stays the same). After advising Edward
on other various options I also advised him that he could also consider trans- ferring the
farmlands
into the joint names of himself and Sean. There are of course advantages and disadvantages to do- ing this. It would reduce
the
stamp payable by Sean as he would be paying stamp duty on the value he was getting i.e. one half of the value of the farm. The farm would be placed in joint names. This means that when one party dies the property automatical- ly vests in the surviving owner and in some cir- cumstances there will be no necessity to extract a Grant of Probate. Joint tenancy is a way of own- ing property in the names of two or more people. When one person dies, the survivor becomes the
Tel: 021 463 8000 • Email:
info@eastcorkjournal.ie • Web:
www.eastcorkjournal.ie
sole owner. Both parties have equal responsibility for the farmland. In oth- er words, they both enjoy its positive attributes and share in the
liabilities
equally. It would allow Edward
to retain control over the land until he passes away. It can also be beneficial in the event of the untimely death of Sean, where he predeceases Edward, the land would revert to Ed- ward in its entirety. Let’s say all of the lands were transferred to Sean and Sean subsequently passed away the land would pass according to Sean’s will or the rules of intestacy in the event that Sean did not leave a will. Before Edward consid-
ers transferring the land in his sons sole name or their joint names, both parties need to consult with their tax consultant and/or accountant and Teagasc advisor to en-
the year you turn 71 the minimum withdrawal is increased to 5%. • Where the fund value
is greater than €2 million the minimum withdrawal will be 6%. If you have more than one Approved Retirement Fund (ARF) and these are with differ- ent managers then you must appoint a nominee Qualified Fund Manager (QFM) who will be re- sponsible
for ensuring a
withdrawal of 6% is tak- en from the total value of your ARFs. • It is your responsibility
to let your ARF providers know if you have other Approved Retirement Funds and Vested Person- al Retirement Savings Ac- counts with a total value of greater than €2 million. Personal Pension Con-
tributions or Additional Voluntary Contributions (AVC) are still one of the most efficient ways to save for your retirement and to
sure that there wouldn’t
be any adverse effects for either of them in relation to tax, farm entitlements etc. Edward should also consult with the Depart- ment of Social Protection in relation to his pension entitlements. Practical- ities and daily
life should also be taken into account. important
It also
farming is
for Edward
to be aware that as he would be a joint owner of the farmland this would be taken in account in an application for relief in relation to state support or ancillary state support for nursing home expens- es when assessing his as- sets and means. It is also important to
review and update your Will after any transfer of farmland. Transferring the farm into the joint names of a parent and child might
suit some
people, but both parties circumstances would have to be closely looked at before any deed is exe- cuted. One thing for sure
eastcorkjournal
help reduce your income tax bill. It is important you consider these benefits be- fore the next tax return deadline in October. Gerard O’Brien LL.B LL.M CFP® QFA is a Certified Financial Plan- ner and the Owner of Heritage Wealth Manage- ment, a Financial Plan- ning practice based at 27 Cook Street, Cork. For more
information, con-
tact Gerard at gerard@
heritagewealth.ie www.
heritagewealth.ie Disclaimer: All data and information provid- ed within this article
is
for informational purpos- es only. Heritage Wealth Management
Limited
makes no representations as to accuracy, complete- ness, suitability, or validity of any information and will not be liable for any errors, omissions or delays in this information or any losses, injuries, or damag- es arising from its use.
is it is best not to rush into things in the last few weeks of this year. After all, the decisions made today will determine how tomorrow will be. Karen Walsh, from a
farming background, is a solicitor practicing in Walsh & Partners, So- licitors, 17, South Mall, Cork
and author of
and the Law’. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law. Email: info@walshan-
dpartners.ie Web: www.walshand-
partners.ie Disclaimer: While
every care is taken to en- sure accuracy of infor- mation contained in this article, solicitor Karen Walsh does not accept re- sponsibility for errors or omissions howsoever aris- ing, and you should seek legal advice in relation to your particular
circum-
stances at the earliest pos- sible time.
@eastcorkjournal / #eastcorkjournal
Thursday, 28th
September 2017
(021-4270200), ‘Farming
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