Is maintenance payment liable to PRSI deduction?
Q&A: There has been considerable coverage on the extension of PRSI to other forms of income recently. Since 2003 I have been trying to find out the statutory basis for having to pay PRSI on the maintenance I receive from my ex-husband.
I understand that maintenance is taxed but my ex-husband’s solicitor has said more than once I shouldn’t be hit for PRSI on it as well. I have phoned the Revenue several times and have written to the PRSI office in Pearse St but have been sent from pillar to post.
I have always paid the tax and PRSI shown on the assessments, which includes PRSI on the maintenance, but a taxpayer should be able to get a straight answer on a simple question, albeit from a Government department, in less than a decade.
Ms G McL, Dublin
Your husband’s solicitor is incorrect. Revenue is quite clear that maintenance payments are subject to both income tax and PRSI.
Where the solicitor may be getting confused is in relation to a change in the rules in 2000. Until that time, PRSI was payable by both the person making “legally enforceable” maintenance payments and the person in receipt of such payments. The change took place under section 23 of the Social Welfare Act 2000 and entitled the person making the payments to return of PRSI paid on that money.
That aside, the tax provisions for maintenance payments appear to be covered under the general provisions of income tax legislation – most recently the Taxes Consolidation Act 1997.
As far as I can determine, the relevant sections are 1025 and 1026 of that Act (see irishstatutebook.ie). The related PRSI provisions are gathered in the Social Welfare (Consolidation) Act 2005.
The bottom line is that this is taxable income from the outset. If it remained with your former husband, it would be taxed at source, or under provisions relating to the self-employed. As he has transferred this income under a legally enforceable maintenance arrangement to you, the tax liability also transfers.
If you are already taxed under the PAYE system, it is possible the Revenue will adjust your tax credits to reflect this income. More likely – and as seems to be the case here – you will be treated for tax purposes as a self-employed person.
Specifically in relation to PRSI, Class S contributions – which are deducted at 4 per cent and which apply to the self-employed – also cover “people with income from investments, rents or maintenance payments”. The Department of Social Protection offers some guidance for PRSI on self-employed persons at iti.ms/WnDQly.
I have used “legally enforceable” on several occasions above: they are key qualifying words. My understanding is that in the case of voluntary maintenance arrangements, the liability to income tax and PRSI would remain with the spouse making the payments.
Interestingly, the same is not true for child maintenance payments. In that case, the income remains liable to tax and PRSI for the person making the payment – ie, the former spouse – even though the payment is passed on for the benefit of the child(ren).
Finally, in relation to your pursuit of a categoric answer to what is a straightforward query, it is not unreasonable to expect that from either the Revenue or the PRSI section of the Department of Social Protection. It is an indictment of both that you have got little enlightenment from either over the course of a decade.