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Annual Report of the Ombudsman 2008 (text version)

4.2.2 Selected Cases - Revenue Commissioners’ decision not to allow tax relief on voluntary pension contributions in the same year revised

I received a complaint against the Revenue in relation to tax relief on additional voluntary pension contributions (AVCs). The complainant stated that he had invested in AVCs with the intention of having the tax relief due refunded from his 2006 tax payments. However, the Revenue refunded the tax from the tax he paid in 2007, thereby preventing him from making a claim for a similar investment for the 2007 tax year. He planned to retire in August 2008.

In 2007, the complainant had invested two sums of €13,000 each in personal retirement savings accounts (PRSA) with two prominent PRSA vendors. He purchased these two AVCs with a view to having the relevant tax refunds due processed in relation to his 2006 tax. He concluded that this appeared to be possible from the information given in "A Guide to Personal Retirement Savings Accounts", an information guide published by the Revenue on their website. In paragraph 2.7 of the guide it states: "For example, contributions paid by 31 October 2003 may be claimed for the tax year 2002". The complainant pointed out that there is no final date mentioned for notifying the Revenue of AVC investments, regarding the year in which they may be claimed.

The complainant had personally delivered the two AVC certificates to the Revenue requesting that the tax relief be allocated to tax year 2006. In response, he received a PAYE Balancing Statement for 2006 but was only allowed tax relief for one of the AVCs. It subsequently emerged that at the time the Revenue had assumed that the two certificates related to the same AVC investment. He queried this and was requested to provide his P60 form for 2007, so that the relief on the second AVC could be given against his 2007 tax paid. The Revenue also said the decision to grant relief in respect of one AVC for 2006 was an error and withdrew the relief. He was advised that, because he notified the Revenue about the two AVCs after 31st October 2007, the tax relief due must be granted in tax year 2007 because his claim was made after the relevant date to allow it to be claimed against 2006 tax.

The complainant believed that he should be given the benefit of any doubt, as the Revenue Guide to PRSAs does not include any mention of the requirement to notify the Revenue by a specific date in relation to making an AVC refund claim retrospectively against the previous year's tax. He contended that if the two AVCs were allowed against his tax paid for 2006, it would have been possible for him to make a similar tax refundable AVC investment for his 2007 tax year.

Following a request for a report on the case by my Office, the Revenue reviewed the matter and agreed to allow the two AVCs to be set against the complainant's 2006 tax bill, thus freeing him to make a similar AVC related claim for the 2007 tax year.

In another welcome development, the Revenue also agreed to amend the wording of the guide to AVCs. They agreed to clarify the position in relation to the requirement to claim the appropriate relief on or before 31st October in the year following that to which the claim relates, so as to avoid any future confusion among their taxpayers and avoid the same problem recurring.

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