A recent appeal case highlighted the tax treatment of maintenance payments made on foot of a separation/divorce agreement.

Here’s a summary:

• A divorced parent claimed income tax relief on maintenance payments made in 2024, resulting in a PAYE underpayment when the relief was disallowed.

• Irish tax law (s.1025 TCA 1997) allows relief only for maintenance paid for the benefit of a former spouse – payments for the benefit of children are expressly excluded.

• The appellant argued that Revenue had itself granted the tax credit and should not be permitted to claw it back; Revenue contended the credit had been granted on foot of an erroneous declaration by the appellant.

• The Commissioner upheld Revenue’s assessment: the maintenance was for the children, the legislation admits no discretion, and the underpayment arose from the appellant’s own error.

Revenue opened a compliance intervention. On a telephone call on 15 January 2025, the appellant confirmed to Revenue’s caseworker that the maintenance had in fact been paid entirely for the benefit of the children. Revenue disallowed the relief and issued an assessment showing a PAYE underpayment.

The appellant’s case, presented without legal representation, was essentially one of legitimate expectation and administrative fairness. The appellant argued that Revenue had asked for proof of the maintenance payments, the proof was provided, the tax credit was granted, and it was therefore inequitable for Revenue to reverse course and demand repayment of the resulting benefit plus interest. The appellant stressed confusion about the complexity of the process and the absence of any explanatory correspondence from Revenue at the time the credit was granted.

Revenue’s position was straightforward. When the appellant made the MyAccount claim, the appellant had ticked a box confirming that the maintenance amounts excluded any payments for the benefit of children – a declaration that was factually incorrect.

The Commissioner dismissed the appeal. Applying well-established principles of statutory interpretation – that plain words bear their ordinary meaning, and that exemptions from tax must be expressed in clear and unambiguous terms (Revenue Commissioners v Doorley [1933] IR 750) – she found that section 1025(4) TCA 1997 unambiguously excludes from relief any maintenance paid for the benefit of a child.  

This issue arises with regularity, perhaps some education from Revenue in this area would be timely.