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Net Relevant Earnings (ROI)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Net Relevant Earnings (ROI)

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by Tax Tutor.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 26, 2013 at 1:16 am #143717
    mefinyapascal27
    Member
    • Topics: 4
    • Replies: 6
    • ☆

    The computation of net relevant earnings for pension determination is made by deducting earned income from the difference between (charges, maintenance, other reliefs such as capital allowances and non relevant income such as rents and interest). The maximum pension contribution is then determined based on the age of individual.
    The complexity of the problem arises when the charge is a restricted covenant. The maximum covenant may be restricted to 5% of total income, which in turn is obtained after deducting pension.

    Therefore we need to know the pension to determine the level of covenant to use to determine pension
    that is to say that
    we can’t have pension without knowing what the convenat is and we can’t have convenant without knowing what the pension is
    is there any rule if such situation arise?

    October 26, 2013 at 4:01 pm #143780
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    I regret that there is no meaning in the statements you have made, within the UK tax system. I suggest you read the course notes and listen to the relevant lectures for chapter 10 to understand what we need to know for our exam.

    October 27, 2013 at 12:54 am #143813
    mefinyapascal27
    Member
    • Topics: 4
    • Replies: 6
    • ☆

    in the Republic of Ireland the total income tax is gross income less pension and charges such as Covenant. If the covenant is restricted the maximum limit will be 5% of total income before deducting the covenant. The pension will be deducted from gross income before we get the figure of total income to compute the maximum limit for covenant. The maximum pension allowabe for individual every year is a certain percentage of his/her Net Relevant Income. The net relevant income is earned income less charges such as covenant. Therefore pension computation is a function of covenant and covenant computation is a function of pension.
    The question is how to determine the maximum covenant allowable per year for indivual that makes pension contribution
    to illustrate my question we have this: Gross income xx
    less pension ( xx)
    Total income xx
    maximum covenant allowed 5% Total income xx

    Now Earned income (Trade, or employment) xx
    Charges: covenant xx
    Less investment income (xx) (xx)
    Net Relevant income xx
    Maximum pension allowable 30% Net Relevant income
    As you can see to know the the maximum pension contribution allowable covenant is used in the formula and to know the maximum covenant allowable Pension is used in the formula
    What can do if such situation arises

    October 27, 2013 at 8:29 am #143822
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    Now I understand what the ROI stands for!! I regret however that I have no knowledge of the Irish tax system and am not able to advise you on this subject, If you post your query on the general student forum there may be a fellow Irish student who is able to assist. Good luck and best wishes in your studies!

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