25% of lump sum tax free ??

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facetious

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I cashed in a personal pension in 2015 but in my tax returns for that year did not allow for the 25% tax free amount. I am now trying to get this back from Revenue.ie.

They have stated the following in a reply:
"As stated in our reply to you dated 12/04/18, we are not aware of any such "25% tax allowance" when a pension is drawn down. If you wish to pursue the matter, the documentation requested from you is any written evidence of this relief."

Am I missing something? I have found several threads on AAM which mention the 25% tax free amount.

Or will I have to employ an accountant?
 
Was the lump sum not paid out to you directly by the pension company, e.g. Irish Life, Zurich Life etc.? Usually they would pay out the lump sum - typically 25% of the fund - as a lump sum directly to you and would not deduct any tax. Did you declare it as income later on a tax return after the end of the tax year? (If so that would have been an error as it's not income for that purpose.)
 
Thanks LDF for your reply.

This was a UK private pension that I had which I cashed in in its entirety (thank you UK for changing the law to allow this) - about £30,000. Tax was deducted in the UK which I am trying to claim back as I am an Irish resident for tax purposes.

Yes, I did declare it as income when I filled out my tax returns - I didn't notice any place to declare it as a pension cash-in.

Is it my best bet to employ an accountant to sort this out as I have been unable to get any joy from Revenue.ie. Unfortunately, Revenue.ie system of not providing any staff to talk to in my local tax office does not help - "you need to use the phone". This system is definitely not user friendly.

The fact that Revenue don't know of any "25% tax free" is alarming if they are incorrect.
 
It sounds like a misunderstanding on Revenue's part, to be honest. The basic taxation rule on lump sums from Personal Pensions in the UK is the same as here in Ireland: 25% of the fund can be withdrawn as a tax-free lump sum. There are different options in the UK as to how you can draw the remaining 75% of the fund but again the same basic taxation principle applies - withdrawals from the remaining 75% would be taxable if you're in the tax net.

I was going to suggest that you write to Revenue clarly stating your case, but on reading over your earlier post again, I see that you already have written to them. Perhaps a reply pointing them to their own Pensions Manual https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-21.pdf and in particular paragraph 21.5 where it speaks of the 25% being tax-free. Obviously this is the Irish manual. I only work in Ireland and so I'm not familiar with the UK manual, but I hope that this might cause someone to have a Eureka moment.

I'm not an accountant so perhaps one of the accountants on Askaboutmoney might give you a better answer. It would strike me as frustrating to have to employ an accountant just to sort out what appears on the face of it to be a Revenue error.

Cheers, Liam
 
Like Liam, I'm not an accountant, so not qualified to advise. As an interested layman, however, my 10 cents worth. You probably declared your 2015 pension via Form 11 and put the whole of your cash - in sum as taxable overseas pension income. This is what needs to be corrected. From the Irish Revenue tax manual, mistakes arising in tax paid as a result of submission errors any time after 31/12/14 can only be corrected by submitting a revised tax return. You have a 4 year window to achieve this, so should be in time. What I suspect you need to do is submit a revised Form 11 for 2015, this time showing 25% of your cash - in value in the lump sum tax free "box". (And I don't know what "box" this would be). I believe there is an opportunity to add some narrative along with the revised return explaining the reasons.

Good luck.

Paul
 
Thanks Liam and Paul.
I suppose that if I got an accountant to sort this out, his/her charge should be tax deductible so it might not be so so bad.

Again, thanks to you both and perhaps I can quote pensions/chapter 21 para 21.5.

I sent Revenue the P45s from the two pension companies which clearly indicate that the income was from a pension cash-in. They obviously do not really read what is sent to them;possibly unless it is on their required form.

Revenue have been somewhat abrupt in their last reply:
If you wish to pursue the matter, the documentation requested from you is any written evidence of this relief, not P45s or anything already submitted.
In the meantime, you will receive no further correspondence from Revenue on the matter. I hope this clarifies the situation.
Regards,

Again, many thanks for your help.

George
 
I wonder if your age is one of the issues with Revenue here? The same paragraph 21.5 states you must be over 60 or in certain occupations with approval over 50.

The other possible issue is that this paragraph states that the balance, after the tax free lump sum, is used to purchase an annuity or for one of the options under approved retirement funds, presumably these do not include cashing the pension in. Tax treaties and EU regulations may be relevant here.

With regard to Revenue not knowing about the "25% tax-free" lump sum your quote from them regards a "25% tax allowance", I'd expect that their view is that the two terms are different. It's a pity that they could not have been more helpful in their responses so as to point you in the right direction. Like the previous two contributors I am not an accountant and would agree that you should seek advice.
 
facetious said:
Thanks Liam and Paul.
I suppose that if I got an accountant to sort this out, his/her charge should be tax deductible so it might not be so so bad.
Click to expand...

Their charges are unlikely to be tax deductible based on what you've posted here. You will probably need a specialist tax consultant rather than an accountant as your query is highly technical in nature.

For what it's worth, I don't think the 25% tax free lump sum amount is the real issue here.
 
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Thank you llgon and T McG for your input. I am moving house on Tuesday but won't be in my new property until probably July or maybe August. As I am packing everything away now, I shall have to wait until I unpack again and get myself on my feet.

Again, many thanks to all contributors.
 
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