The High Earner’s Restriction was introduced in the 2006 Finance Act with effect from 1st January 2007.  The objective was to limit the use of certain tax reliefs and exemptions and to ensure that high income individuals who were eligible for these “specified reliefs” paid an effective tax rate of at least 20%.

 Changes were introduced by Finance Act 2010 which extended the scope of the restriction to ensure these individuals now pay an increased effective rate of 30%.  From 2010 onwards, the High Earner’s Restriction applies to a much greater number of tax payers which we can see from published figures (*Dáil PQ 25 March 2014)


Year No. of Tax Payers Additional Tax Yield
2010    452 €38.9m
2011                1,544 €80.2m
2012                1,143 €63.6m



To whom does the High Earner’s Restriction apply?

 From 2010 the restriction applies to an individual who meets all three of the following criteria:

  1. The individual’s Adjusted Income (being the Taxable Income before applying the Specified Reliefs) for the tax year is greater than or equal to the “Income Threshold Amount.”  In general this figure is €125,000 but it may be less depending on whether the individual has ring-fenced income (E.g. Irish Deposit Interest that has suffered Deposit Interest Retention Tax; payments and gains relating to certain foreign life policies; certain offshore payments and gains; gross deposit interest arising in an E.U. member state with an Irish tax rate equal to the D.I.R.T. rate, etc.) and
  2. The total Specified Reliefs used by the high earner is greater than or equal to the “Relief Threshold Amount” of €80,000 and
  3. The aggregate specified reliefs used by the individual are less than 20% of the Adjusted Income.


How do we calculate the tax?

  1. Compute the Taxable Income (ignoring the restriction) (T)
  2. Identify any Ring fenced Income (R)
  3. Identify the Specified Reliefs used in the calculation of the Taxable Income (S)
  4. Compute the Adjusted Income (A) using the formula: A = T + S – R
  5. At this point you should check whether you meet all the three criteria necessary for the restriction to apply.  If the answer to one or more questions is NO then the restriction does not apply to the tax year in question.
  6. If the answer to all three questions is YES, compute the “Recalculated Taxable Income” using the formula: T + (S – Y) where Y = the greater of (i) the Relief Threshold Amount of €80,000 or (ii) 20% of the Adjusted Income.

The effect of the High Earner’s Restriction is to increase the individual’s taxable income liable to Income Tax at the normal rates.



Mr A has the following income for 2013:

  • Case I Trading Income                                   €200,000
  • Case V Rental Income                                    €300,000


He also has Section 23 Type Property Relief of €300,000



  1. Calculate the Taxable Income (T) 

Case I Trading Income                                         €200,000

 Case V Rental Income                  €300,000

Section 23 Relief                          (300,000)                   Nil

 Taxable Income (T)                                              €200,000


  1. Calculate (R) – Mr A has no Ring fenced income


  1. The Specified Reliefs (S) = €300,00


  1. The Adjusted Income (A) is calculated using the formula


A = T + S – R              €200,000 + €300,000 – Nil = €500,000


  1. Does the High Earner’s Restriction Apply
    1. Is (A) i.e. €500,00 greater than or equal to €125,000                   – YES
    2. Is (S) i.e. €300,000 greater than or equal to €80,000                    – YES
    3.  Is 20% of (A) i.e. €100,000 less than the Total SpecifiedReliefs i.e. €300,000                                                                              – YES 

      Therefore, the Higher Earner’s Restriction applies.


  2. Recalculate the Taxable Income using the formula T + S -Y where Y = 20% of (A) i.e. €500,000 x 20% = €100,000


(T) i.e. €200,000 + (S) i.e. €300,000 – (Y) i.e. €100,000 = €400,000


  1. The excess specified reliefs of €200,000 (i.e. €300,000 – €100,000) are available to be carried forward to the next tax year.


 Carry Forward of Excess Reliefs (S.485F TCA 1997)

 Any “unutilised reliefs” in the tax year in question can be carried forward for offset against the individual’s total income in subsequent tax years.


The following points should be kept in mind:

  • When the reliefs are carried forward, they are pooled together in a single amount thereby loosing their individual character.
  • The excess reliefs will be subject to the same restrictions in the subsequent tax year.
  • The excess relief can be offset in the next tax year only after relief has been given for other available tax reliefs.
  • Excess specified reliefs will be lost on the death of the individual.
  • From 2010 onwards where the excess relief is carried forward for deduction against total income, the excess relief will not be an allowable deduction for calculating PRSI, the Income Levy (when relevant) or Universal Social Charge.


 What items are included in the list of specified reliefs?

 Appendix 3 – list of Specified Reliefs is available on www.revenue.ie and the full list is set out in Schedule 25B of the Taxes Consolidated Acts 1997.


 Here are some of the items included:

  • Capital Allowances on Buildings
  • Film Relief
  • Artist’s Exemption
  • Student Accommodation Relief
  • Section 23 Type Relief (Property Based Incentives)
  • Patent Royalty Income
  • Patent Distributions


Examples of what’s not included are:

  • Pension Contributions
  • Trade Losses
  • Capital Allowances on Plant & Machinery except in certain situations where they are claimed by passive traders in a leasing trade
  • E.I.I.(Employment Investment Incentive) is no longer a specified relief under Finance (No. 2) Act 2013 where the subscription for eligible shares was made under the scheme between 16/10/2013 and 31/12/2016.
  • Medical Expenses, etc.


What about Double Taxation Relief?

 Finance (No. 2) Act 2013 amended how Double Taxation Relief was calculated for those individuals subject to the High Earner’s Restriction.


The formula to be used is:

 Irish Tax (after applying the High Earner’s Restriction)

                      Adjusted Income (A)               


Previously the credit was calculated before applying the High Earner’s Restriction.

 A repayment of an under claimed foreign tax credit is available for individuals who filed a tax return after 1st January 2008 and who would be entitled to a greater tax credit for double taxation suffered as a result of this new provision than under the pre Finance (No. 2) Act 2013 legislation.


 Compliance Issues

 Any individual subject to the High Earner’s Restriction must file a Form 11 (Self Assessment) and Form RR1 setting out details of the calculations of the H.E.R.


The details to be included in the RR1 Form are:

  • The aggregate of the specified reliefs used by the individual in the tax year.
  • The individual’s taxable income before the H.E.R.
  • The amount of the individual’s recalculated taxable income after the application of the High Earner’s Restriction.

 Following Finance Act 2007, a jointly assessed married couple or civil partnership will be treated as two separate individuals in determining if the restriction applies.

 A single Form RR1 should be completed providing details of the application of the restriction to each spouse or civil partner where relevant.


 Property Relief Surcharge (S.531AAE TCA 1997)

 Finance Action 2012 introduced the 5% Property Relief Surcharge which applies where the individual’s aggregate income (i.e. gross income for Universal Social Charge purposes) is €100,000 pre annum or more and where certain property based incentive reliefs have been claimed in that tax year.

 By property reliefs, we mean Section 23 type reliefs, property based capital allowances, etc.

 The 5% Property Relief Surcharge is collected as additional Universal Social Charge.

 There is an exception to this rule in the case of owner occupiers for residential properties.

 Revenue’s view is that the surcharge does not take into consideration any restriction imposed by the High Earner’s Restriction.  In other words, the surcharge applies to the specific property reliefs which would have been available in calculating the taxable income of the individual had the restriction been ignored.



 Mr A’s income for 2013 was as follows:

 Case V – Rental Income                                 €250,000

 He also has Section 23 Type Relief                €300,000


 The Property Relief Surcharge will be 5% of €250,000 being €12,500

 The surcharge is computed by reference to the S.23 Property Relief used in calculating Mr A’s taxable income before applying the High Earner’s Restriction.



 This is an area currently under scrutiny by the Revenue Commissioners.  If this is something that affects you, it might be worth reviewing the information contained in the previous tax returns you’ve submitted as well as double checking that your 2013Tax Return, which must be filed by 31st October 2014, is accurate and correct in line with Finance Act amendments.



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