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What Is The Tax Break For Child-Minding?


Revenue issued an e-brief this week, asking child-minders to familiarise themselves with their filing requirements. Tax relief is available for eligible child-minders whose income from the service does not exceed €15,000 in a tax year.

 

According to Taxback.com, many child-minders across the country who are entitled to exemption from income tax in respect of their income from childcare services may not be aware of their tax filing obligations.

The tax experts say that even if child-minders have no other income, they may need to register for self-assessment and submit a tax return. If they have other income (e.g. investment income), this could impact on their PRSI position too.

Tax Relief
Christine Keily, senior tax consultant with www.taxback.com, says: “Any income an individual receives is, in the first instance, taxable, i.e. this would include payment for babysitting, minding neighbour's children, cleaning etc.

“There is, however, a specific relief available to child-minders, once certain conditions are satisfied and the child-minding income does not exceed €15,000 in a tax year (this limit refers to receipts from the activity rather than profits). If the income exceeds €15,000, no relief is available under this provision.”

Keily adds that, in order for the relief to apply, the child-minder is required to tell the local city or county childcare committee that the services are being provided on or before the filing date for the tax return for the relevant year. Child-minders must also make an election to claim the relief, which is done via submission of a tax return.

Additional Relief
Income qualifying as above is exempt from income tax and USC, but it is not exempt from PRSI. However, if the income is less than €5,000 per tax year, no PRSI charge will arise. Individuals claiming this relief may continue to claim mortgage interest relief as an owner occupier of the property, even though it is used partially for business purposes.

Similarly, the availability of principal private residence relief at disposal of the property is unaffected, i.e. no apportionment is required in order to establish the portion of the gain relating to private and business usage at disposal. In addition, the income qualifying under this section is not taken into account in determining an individual's entitlement to home carer's credit.

Says Keily: “[The Revenue's] e-brief basically reiterated the fact that people claiming this relief are chargeable persons and therefore must submit an annual tax return (Form 11). If such individuals have not yet registered for self-assessment, they should do so now. Revenue may have issued this reminder as they became aware that people claiming the relief were not taking these actions.”

Careful Consideration
Taxback says that, for any individual in these circumstances, it may be worth first examining your personal circumstances in order to determine whether or not it is beneficial for you to claim this exemption. For example, if your net annual non-PAYE income (i.e. income less allowable expenses) chargeable to tax is less than €3,174, you may be able to arrange to have this income coded into your tax credit certificate and avoid the need to register for self-assessment.

Depending on your level of income via the PAYE system, this income may not actually result in any additional tax charge, even if the above relief is not claimed. Each individual should carefully review their circumstances in respect of this and seek advice if necessary before registering for self-assessment.

“The fact that Revenue issued this reminder would suggest that they do intend to clamp down on individuals who have been availing of this relief, but not meeting their obligations under self-assessment. For any individual in these circumstances, we would suggest that they reconcile their position without delay,” says Keily. (07/03/14)

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