Finance Bill 2022: unlimited employer contributions to PRSAs permitted from 2023?

[ClubMan]

Okay, my mistake, 10m then.

But I thought the maximum SFT is about 2m, so how can an employer make a 10m contribution to one employee's pension fund?

The SFT doesn't prevent such a contribution. It simply dictates the level at which chargeable excess tax will apply. And the SFT is increasing by €200K p.a. between 2026 and 2028 at which point it will be €2.8M.

Chargeable excess tax

This page describes chargeable excess tax

www.revenue.ie

Plans for Standard Fund Threshold to rise to €2.8m

The Government has announced plans to increase the amount of money high earners can have in their pension pot without facing a significant tax bill.

www.rte.ie

 

[Gordon Gekko]

T

Okay, my mistake, 10m then.

But I thought the maximum SFT is about 2m, so how can an employer make a 10m contribution to one employee's pension fund?

They could do €1bn if they liked. But what’s the point? Unless someone was terminally ill.

 

[tropez3]

I hope the problem was eejits creating fake employments for their spouses or children and their companies then they making huge PRSA contributions.

Versus, say, people just organising big contributions generally and Revenue not liking that.

I just came across this story on RTÉ. I’m curious what action Revenue might take in these cases. Could they prevent companies from deducting excessive PRSA contributions from their corporate tax bills, as outlined in the income tax manual regarding bona fide payments and excessive remuneration? Or might they target individuals under Section 811 for avoided BIK?

 

[ClubMan]

Couldn't they do both?

 

[user180224]

When does this take effect?

Guessing it's 1st Jan? So for 2025 salary and pension must be equal or the latter lower?

 

[ClubMan]

When does this take effect?

Guessing it's 1st Jan? So for 2025 salary and pension must be equal or the latter lower?

You mean this?

Changes to PRSA funding limits

From 1 January 2025, the cap on employer paid PRSA contributions is capped at 100% salary. Any payments over this amount is treated as BIK. The unlimited contribution rule lasted just 2 years but greed took over for a small number of people (both advisors and their clients) who pushed things...

www.askaboutmoney.com

From 1 January 2025, the cap on employer paid PRSA contributions is capped at 100% salary. Any payments over this amount is treated as BIK.

 

[user180224]

You mean this?

Changes to PRSA funding limits

From 1 January 2025, the cap on employer paid PRSA contributions is capped at 100% salary. Any payments over this amount is treated as BIK. The unlimited contribution rule lasted just 2 years but greed took over for a small number of people (both advisors and their clients) who pushed things...

www.askaboutmoney.com

Yes - I'm surprised the payroll software doesn't take it into account when calculating tax

 

[Towger]

Yes - I'm surprised the payroll software doesn't take it into account when calculating tax

They can't, pension limits are not hard rules. Revenue can issue dispensations to the limits.

 

[C_Pike]

TheStory.ie got details of a paper on this through an FOI request - sorry I can't link but it's a few stories down on their front page.

Some interesting details that speak to questions in this thread:

• Revenue did a review, honing in on 125 cases where contributions exceeded €100,000 in 2023
• These represented 0.3% of PRSA cases and 20% of the total PRSA contributions paid in 2023
• There were 17 cases where contributions exceeded €500,000 versus 9 such cases in 2022 and 7 in 2021
• The largest contribution was €1.3 million.
• Of the 125 cases, 76 was the owner of the business. 15 the spouse of the employer. 7 child or parent of the employer - 98/125 were the owner or a close relation.
• In 13 cases, the recipient only started work in 2023.

It's interesting that both Revenue and external tax advisors were running up a flag on this - Deloitte apparently was in touch with revenue raising serious concerns about specific cases they were being asked to offer second opinions on.

It seems like some advisors and their clients went wild on this, and the practical limit was probably cash available to pour in.

 

[ClubMan]

TheStory.ie got details of a paper on this through an FOI request - sorry I can't link

Probably because of this:

Key Post - New users must wait one hour between posts and cannot put links in posts

Spammers flood askaboutmoney with posts with links To prevent that we have some limits on new users 1) They must wait an hour between posts. 2) They cannot put links in posts These restrictions are lifted, when you become an established poster. An established poster must have at least 10...

www.askaboutmoney.com

but it's a few stories down on their front page.

Revenue pension loophole inquiry found companies transferring upwards of €500,000-a-year into funds for owners, their spouses, children or parents – TheStory.ie

 

[GSheehy]

The largest contribution was €1.3 million.

"and in the (number redacted for whatever reason) cases with the largest contributions (>€1.3m each), the level of salary and service suggests that these contributions would not have exceeded Revenue maximum funding limit had they been made to occupational pension schemes (though, the tax deduction would likely have been taken over a number of years rather than in one year."

In 13 cases, the recipient only started work in 2023

I'd say the advisors will be handing back the commission on some of these.


Gerard

www.prsa.ie

 

[ClubMan]

Another article here but paywalled...

The PRSA loophole report that brought Revenue chief Niall Cody concern - The Currency

Sitting before the Oireachtas finance committee last May, Niall Cody, chair of the Revenue Commissioners expressed his concern over recent pension tax reform. Specifically, he was concerned with the reform of tax on personal retirement savings accounts (PRSA) brought in at the end of 2022 via...

thecurrency.news