Widow has to pay tax on welfare pension payments

A widow who receives a contributory social welfare pension for herself and her five dependent children has been told by the Supreme…

A widow who receives a contributory social welfare pension for herself and her five dependent children has been told by the Supreme Court that she is liable for tax on the entire amount.

The court reversed a High Court decision which had supported the view of a Revenue Appeal Commissioner that the widow, Mrs Bridget Neenan, a secondary school teacher of Ballyhaunis, Co Mayo, was not liable to income tax on pension increases paid in respect of her children.

The decision could have a knock-on effect for a substantial number of people in the State. It will not affect certain civil organisations, such as the Garda which has its own regulations specifying that the children's portion of a garda's pension be "applied for the benefit of children".

Delivering yesterday's Supreme Court judgment, Mr Justice Murphy said its decision would not mean a tax liability in every case. Increases in a widow's contributory pension in respect of children were matched by increases in the small incomes exemption threshold for taxation, so that in many cases no liability for tax would arise.

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However, where the widow had, as in the present case, an income in addition to the social welfare payment, the threshold would be exceeded, and unfortunately tax would be payable.

The Appeal Commissioner had held a pension increase for the children was the children's property but given in trust to the mother. The High Court had agreed with the commissioner's decision, and the Revenue authorities appealed the decision to the Supreme Court.

Mr Justice Murphy said the Social Welfare (Consolidation) Act, 1981, contained no words of trust in favour of all or any of the children, nor was there a specific indication that any part of a pension increase should be applied for their benefit.

He said the Garda pensions scheme expressly identified what was described as a contributory pension for a garda's children and not merely an increase in a widow's pension as defined under the social welfare scheme.

In his view the increase in a basic pension paid by reference to the number of qualified children residing with a widow was an increase in the widow's pension. He believed the widow in the present case was entitled to the full amount.

As a result the full amount was liable to tax. For the year ended April 1990, Mrs Neenan received payments totalling £6,482 for herself and her children, which had been described by the Appeals Commissioner as a "widow's contributory social welfare pension".