ISME call for PAYE credits & PRSAs to be scrapped

Just to clarify what is proposed

http://www.rte.ie/business/2007/1015/isme.html

Small business group ISME has called for PAYE allowances to be scrapped and replaced with a doubling of the personal tax credit.

ISME says the PAYE allowance change would 'offset the current discrimination' which does not allow company directors or the self-employed to claim the tax credit.

.....

On pensions, it calls for PRSAs to be scrapped and replaced by an structure modelled on the SSIA special savings scheme. ISME also urges a review of the current retirement age
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As a self-employed person, I think scrapping the PAYE credit and increasing the personal allowance is a great idea! But that is naked self-interest.

Giving tax relief based on savings worked for the SSIA, so it could work for pensions. It would also enable those without income to save for a pension and get relief at a generally agreed rate. Top rate tax payers would always prefer pensions, I would guess, as the relief on an SSIP scheme would be at the lower rate?
 
The PAYE credit is available to offset the current benefit that the self-employed have in respect of allowable expenses. There is a lot less scope for a PAYE worker to claim tax deductible expenses so an additional allowance seems fair.
 
Nige said:
The PAYE credit is available to offset the current benefit that the self-employed have in respect of allowable expenses.
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Have you any evidence to support this theory? I don't think it is correct.

My understanding that its original purpose was to compensate PAYE workers for the fact that they paid income tax & PRSI on income as it was earned, while self-employed taxpayers paid their tax liabilities in the following year. This obviously is a thing of the past at this stage.

The notion that "there is a lot less scope for a PAYE worker to claim tax deductible expenses" is hardly sustainable any more given that the tax-free mileage & subsistence allowances for civil servants, other employees and company directors, are not available to the self-employed. The notion that self-employed people should be discriminated against because their turnover tends to exceed their taxable profits is an outdated one imho.
 
The self-employed can claim any expenses incurred wholly and exclusively for the purposes of the trade, whereas an employee can only claim expenses incurred wholly, exclusively and necessarily for the purposes of their job.
 
So? That, while true in theory (if largely moot in practice), does not mean that the PAYE credit exists for that reason.
 
This is an excellent proposal.

Not all companies directors are rich, driving around in expensive cars etc... The current system penalises people who try to set up their own companies. Many directors are on the breadline, living off of debt.
 
leghorn said:
The current system penalises people who try to set up their own companies.
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Are there not other benefits available to the self employed that are not available to PAYE employees - e.g. on the pensions front?
 
Are there not other benefits available to the self employed that are not available to PAYE employees - e.g. on the pensions front?
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This benefit is of no use if you can't afford to contribute to a pension scheme. I can't afford one.

I would be genuinely interested to hear of any other benefits available.
 
The PAYE Credit was introduced in 1979 following the White Collar Workers Strike over pay.
 
ClubMan said:
Are there not other benefits available to the self employed that are not available to PAYE employees - e.g. on the pensions front?
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The options on this front that are available to self-employed taxpayers are also available to PAYE taxpayers who make AVCs.
 
Just came across this link which might be of interest in this context:
Personal taxation: is the denial of PAYE credit over the top?

The denial to certain directors and employees of credit for PAYE deducted from their remuneration is so widely drafted in the Finance Act that it may well be unconstitutional writes Robert Dowley in this month's KPMG Tax Monitor. And not only that, but It may well also be in breach of the Human Rights Act. However, he adds that the affected directors and employees, are unlikely to be able to afford the luxury of a trip to the High Court or the Supreme Court to establish that decision.

...
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ubiquitous said:
The options on this front that are available to self-employed taxpayers are also available to PAYE taxpayers who make AVCs.
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I thought that the limits on pension funding were more flexible and higher for self-employed (certain types of directors or something?) than for PAYE workers?
 
ClubMan said:
I thought that the limits on pension funding were more flexible and higher for self-employed (certain types of directors or something?) than for PAYE workers?
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Perhaps so for high earners afaia but certainly not to the extent that they would commonly affect the vast majority of taxpayers in both categories.
 
this part is also interesting;

The group says public sector pay needs to be 'reined in' and warns that current levels of public spending are 'unsustainable'.
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I suppose we can only dream...
 
Limits are identical, the limits are governed by what type of Pension you have, i.e Occupational or Personal. What you can take out is also identical.

What is different is that Class I/II earners cannot obtain PRSI relief and Directors with 5% shareholding or above can choose to go down the Finance Act 1999 route when taking benefits. Self Employed however can manipulate their salary easier than the PAYE worker which can have an effect on their pension benefits.
 
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