Annex 1: Minor changes in the law made by the Act: Change 154: Certain pension income from the Republic of Ireland: basis of calculation: paragraphs 606 to 609 of Schedule 1(sections 575, 613, 631 and 635 of ITEPA)
This gives a 10% deduction in calculating the amount of certain pension income arising in the Republic of Ireland regardless of whether it is the income of a person who could make a claim for the remittance basis.
Section 68 of ICTA provides the basis for calculating the amount of income chargeable under Schedule D Cases IV and V where that income arises in the Republic of Ireland. It provides rules which are in part equivalent to those provided by section 65 of ICTA where such income arises in any other country outside the United Kingdom. The basis provided by section 68 of ICTA (disregarding some obsolete material on averaging) is the amount of income arising in the tax year. Section 68 of ICTA does not include an equivalent of the remittance basis, which is made available by section 65 of ICTA to those who fall within the terms of section 65(4) of ICTA.
Sections 65 and 68 of ICTA are applied by sections 575, 613, 631 and 635 of ITEPA to the pension income charged as a result of those sections. Section 68(5) of ICTA provides that, in calculating the amount of any income which arises in the Republic of Ireland from a pension, a deduction of 10% of the amount of the pension income may be allowed. This is equivalent to the deduction provided by section 65(2) of ICTA for other foreign pension income charged on the arising basis. However, section 68(5) of ICTA adds a condition which denies the deduction where the pension income is “the income of a person falling within section 65(4)”, that is a person who has claimed the remittance basis for his non-Irish income.
In practice, the Inland Revenue do not apply that condition. Accordingly, in the amendments made by paragraphs 606 to 609 of Schedule 1 to this Act to the provisions in sections 575, 613, 631 and 635 of ITEPA that contain the basis for the calculation of the pension income charged under that Act as a result of those sections, no distinction is drawn between income charged on the basis of the amount arising in the Republic of Ireland and income charged on the basis of the amount arising in any other country outside the United Kingdom. The 10% deduction is made a part of the basis of calculation for all the income.
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice.