Income is charged under four Schedules: Schedule C, Schedule D, Schedule E and Schedule F (s 12).

Schedule D

Schedule D is the heading under which business income is charged to tax. It has five Cases (s 18).

Cases I and II

Case I charges the profits of a trade (s 2) and Case II charges the profits of a profession (s 3). Employment grants are not regarded as trading income (s 223-226).

In computing your trading or professional profits, you may deduct legitimate business expenses, including:

(a) expenditure on trademarks (s 86), and know how (s 768),

(b) pre-trading expenditure (s 82), and pre-commencement staff training costs (s 769),

(c) the cost of establishing an approved savings-related share option scheme for employees (s 519B).

You may be entitled to a double deduction for wages paid to a previously unemployed person (s 88A).

You may not deduct private expenditure, capital expenditure (s 81) or entertainment expenditure (s 840).

Trading and professional profits for tax purposes are generally based on the profits of the accounts year ended in the tax year (s 61), with special rules for commencement (s 66) and cessation (s 67) years and short-lived businesses (s 68).

Land-dealing and farming

Profits you make from dealing in land are charged under Case I as trading profits (s 640, 641). Capital profits realised by a landholder are charged under Case IV (s 643).

Cases III, IV, V

Case III charges untaxed interest and income from foreign property.

Case IV charges miscellaneous income not falling under any other heading.

Case V charges rental income. In computing your net rental income, you may deduct legitimate property-related expenses, including, since 1 January 2002, interest in relation to residential property (s 97). Premiums and disguised premiums are partly taxed as rental income (s 98-100), and may be regarded as deductible rental (s 102) or business (s 103) expenses of the payer.

Profits under Case III-V for tax purposes are the actual profits arising in the tax year (s 70, 74, 75).

Schedule E

Schedule E is the heading under which employment income is charged to tax (s 119). The PAYE system obliges an employer to deduct tax at source from the wages and salaries of his employees (s 985, 986).

As an employee, you are not entitled to any deductions in computing your employment income, unless the expenditure is incurred wholly, necessarily and exclusively in the performance of the duties of the employment (s 114).

A termination payment is subject to tax (s 123), but the first €10,160 plus €765 for each year of service may qualify for exemption. Furthermore, if you are made redundant, you can receive as part of your redundancy package up to €5,000 of retraining costs tax-free (s 201).

A payment under an agreed pay restructuring agreement (s 202) may also qualify for exemption, depending on the size of the percentage pay cut, as follows:

(a) Where the pay cut is 20% or more, €10,160 plus €765 for each year of service,

(b) Where the pay cut is 15%-20%, €7,620, plus €635 for each year of service, and

(c) Where the pay cut is 10%-15%, €7,620, plus €255 for each year of service.