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Taxman clamps down on child minders

Friday, March 07 13:59:10

The Revenue Commissioners have issued an e-brief outlining the filing obligations for certain child-minders.

Taxback.com say that 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 they 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.

According to Christine Keily, Senior Tax Consultant with www.taxback.com, "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 E15,000 in a tax year (this limit refers to receipts from the activity rather than profits)[1]. If the income exceeds E15,000 no relief is available under this provision."

In order for the relief to apply the child-minder is required to notify 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. In addition, in order to avail of this relief the individual must make an election to claim the relief. This relief is made via submission of a tax return".

Taxback.com say that while income qualifying as outlined above is exempt from income tax and USC, it is not exempt from PRSI. However, if the income is less than E5,000 per tax year no PRSI charge will arise.

This relief is also valuable in that 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.

Christine continued, "Yesterday'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?"