Ellen has a chargeable excess tax liability of €78,000 arising from her retirement benefits. Which of the following can she offset against this liability?

Ellen has a chargeable excess tax liability of €78,000 arising from her retirement benefits. Which of the following can she offset against this liability?

• A. Any income tax deducted from pension lump sums she has taken before 1 January 2014
• B. Any amount transferred to an AMRF from her retirement benefits
• C. Any standard rate income tax deducted from pension lump sums she has taken after 1 January 2011
• D. Any amount from her retirement benefits which was used to purchase a taxable annuity

Answer: (C)

The key idea is that the chargeable excess tax on retirement benefits can be reduced by tax that has already been paid on those benefits, but only certain tax payments qualify as offsets. In this scenario, the eligible offset is the standard-rate income tax that has been deducted from pension lump sums taken after 1 January 2011. This is the form of tax relief that the rules allow to be credited against the excess. Why this one fits best: post-2011 lump sums had tax deducted at the standard rate and, when you have a chargeable excess, you’re entitled to offset that specific tax against the liability. The other options don’t provide a qualifying offset against the excess: tax deducted on older lumps (before 2014) isn’t eligible for this offset, transfers to an AMRF don’t create an offset against the excess, and tax used to purchase a taxable annuity isn’t an offset against the excess liability.

The key idea is that the chargeable excess tax on retirement benefits can be reduced by tax that has already been paid on those benefits, but only certain tax payments qualify as offsets. In this scenario, the eligible offset is the standard-rate income tax that has been deducted from pension lump sums taken after 1 January 2011. This is the form of tax relief that the rules allow to be credited against the excess.

Why this one fits best: post-2011 lump sums had tax deducted at the standard rate and, when you have a chargeable excess, you’re entitled to offset that specific tax against the liability. The other options don’t provide a qualifying offset against the excess: tax deducted on older lumps (before 2014) isn’t eligible for this offset, transfers to an AMRF don’t create an offset against the excess, and tax used to purchase a taxable annuity isn’t an offset against the excess liability.