I propose to take Questions Nos. 111, 122 and 123 together.
The Social Welfare Consolidation Act 2005 provides for the payment of an increase in the amount of weekly state pension where the beneficiary has a qualified adult dependent.
Section 126 of the Taxes Consolidation Act (TCA) 1997 deals with the tax treatment of certain benefits payable under the Social Welfare Acts.
By way of context, I am advised by Revenue that although the qualifying adult portion of a pension is paid directly to the qualified adult, this payment is premised on there being an entitlement to the pension in the first instance. As stated in section 112 of the Social Welfare Consolidation 2005 Act, the qualified adult portion is an “increase” in the pension and is payable in respect of a spouse/civil partner/cohabitant who is being financially maintained and whose income is not greater than a specified amount. Finance (No.2) Act 2013, inserted subsection (2B) into section 126 with effect from 1 January 2014. Subsection (2B) provides that for all the purposes of the Income Tax Acts, any increase in the state pension in respect of a qualified adult dependent is treated as if it arises to and is payable to the beneficiary of the pension, that is, the person who qualifies for the pension. The intention behind the change to s. 126 in s. 12 of Finance Act (No. 2) 2013 was to put beyond doubt that the beneficiary of a Department of Social Protection pension is assessable on the aggregate of the pension and the amount by which the pension is increased for a qualified adult. Consequently, for the tax years 2014 onwards, one employee (PAYE) tax credit only is available in respect of the pension, including the qualified adult dependent increase, and there is no entitlement to any increase in the amount charged to income tax at the standard rate as a result of the qualified adult dependent increase.
In the details supplied, the Deputy refers to the ruling of the High Court on 26 June 2018, which determined that (prior to the enactment of Finance (No.2) Act 2013) a qualified adult dependent for the purposes of the old age contributory pension was beneficially entitled, in his or her own right, to the amount of the increase of the pension payment. The High Court case in question was a Case Stated of a determination of the Tax Appeals Commission which found in favour of the taxpayer’s claim that an additional, second employee (PAYE) tax credit and extended standard rate income band were due to the taxpayer for 2012 and 2013 in relation to the receipt of the qualifying adult dependent increase in the pension.
I am informed by Revenue that there was a review of Revenue’s systems for the relevant years prior to 2014 to identify valid claims for refunds. In accordance with Section 865 of the TCA 1997, a valid claim is made where a person furnishes a statement or return within a period of four years following the tax year to which the claim relates. Some 370 cases with valid claims were identified in respect of the issue determined by the High Court. The cases in question were reviewed and refunds of the order of €0.7m, including interest, were processed. A small number of cases are still being finalised.