Employee Tax Credit and UK occupational pensions

henwats

New Member
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2
I am an Irish citizen who has recently returned to live in Ireland following many years living in the UK.

All my income is currently from a UK occupational pension. I have just completed the necessary process for my UK pension to be paid without deduction of UK income tax. (In case this is of interest this means completing UK HMRC Form IRL-Individual - available on www.gov.uk - sending it to the Irish Revenue for authorisation and then sending the authorised form to HMRC). I will then need to declare my UK income on an annual Irish tax return.

What I hadn't realised until very recently is that because my occupational pension is not taxed through the Irish PAYE system - because it is 'foreign' - I will not be entitled to the Employee Tax Credit (previously known as the PAYE tax credit). If my occupational pension were Irish I would get the Employee Tax Credit. I will get the Personal Tax Credit. Both these credits are €1,650 in tax year 2019.

I have confirmed this with the Revenue over the 'phone. The way it was explained to me is that I am not entitled to the Employee Tax Credit on my UK pension because Ireland did not have the benefit of me working and paying tax in Ireland.

The lack of the Employee Tax Credit means that my income tax in Ireland will be almost twice what it was when I lived in the UK.

The situation is helped somewhat by the fact that my local property tax is considerably lower than my council tax was in the UK.

Anyway, I am flagging this up here because it's not an issue which is made explicit in guidance I have read on www.citizensinformation.ie and www.revenue.ie about 'foreigners' retiring in Ireland - and it makes quite a difference to your income if you have a modest pension.

I have not yet reached state pension age. When I do the situation will improve. Employee Tax Credit is allowed against the UK state pension. When you are 65 and older, €18,000 of your income is also exempt from tax (€36,000 for a couple).

So, if you are retiring early to Ireland on a foreign occupational pension, be aware that you will not get the Employee Tax Credit on that pension.
 

henwats

New Member
Messages
2
I've done some more investigation into the above which suggests that the information I was given by Revenue over the 'phone was incorrect.

Section 4 of the Revenue manual on employee tax credit (retrieved online) states, in part:

"Where a foreign pension is chargeable to tax in the State by virtue of a Double Taxation Agreement, the Employee Tax Credit may be granted."

UK occupational pensions received by an Irish resident are subject to Irish tax under the UK/Ireland double taxation agreement. So, it looks as if I do have a good basis on which to claim the employee tax credit.

This certainly seems a lot fairer to me; otherwise, it would mean that Irish tax residents were being penalised for periods working abroad.

The relevant manual is available at:

 
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