Insights From the FMco Team

Donation of a Heritage Item - tax credit under section 1003

Section 1003 offers relief on the donation of a heritage item by treating the relief as a “payment on account of tax”. The relief is equivalent to 80% of the market value of the donation.

1. Section 1003 offers relief on the donation of a heritage item by treating the relief as a “payment on account of tax”. Donation must be to an approved body and subject to third party valuation.

2. The relief is equivalent to 80% of the market value of the donation. Minimum value of the donation(s) must be €150,000.

3. This payment can then be set against tax due with the exception of liabilities due under RCT and PAYE.

4. VAT is not seen as a liability of tax [entities collect VAT on behalf of Revenue and repay through VAT returns].

5. Subsection 9 specifically disallows a refund of tax in respect of a payment on account. In essence the scheme is meant to set the credit against tax liabilities due (e.g. income tax, corporation tax and CGT/CAT) and any excess is then carried forward.

In summary

• Donation made by a corporate entity - utilise against Corp tax or CGT.

• Donation made by a private Irish tax resident - utilise against Income Tax, CGT/CAT

Relief against PAYE

6. There is no specific exclusion for the relief to be claimed by an individual liable under Schedule E however given the nature of the operation of Schedule E, this would give rise to a refund as the PAYE would already have been paid by the employer.

7. It would seem reasonable therefore that relief should be available against income chargeable to schedule E and therefore a repayment of the PAYE already deducted provided to the employee. This refund would be limited to the PAYE deducted and paid by the employer and any excess carried forward.

8. This interpretation is confirmed in the Revenue Tax and Duty manual Part 42-05-01, under para 5. In this section it provides for the granting of relief to Schedule E individuals, but places a cap on the relief at the amount of PAYE actually paid by the employer. Any excess will then be carried forward.

9. The claim for this PAYE offset should be made in the year of the application for the heritage relief as the relief is initially offset against tax arrears and then current tax.

10. Subsection 5 states that the relief becomes available once the individual submits the tax certificate (obtained when the gift is confirmed as qualifying) to Revenue. Care must be taken therefore that the PAYE paid by the employer against which the relief is sought is not deducted from Schedule E in a year prior to the granting of the relief as Revenue will not backdate the claim.

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