Budget 2018

Budget 2018 has been announced by Finance Minister Paschal Donohoe.

Is this a Boom and Bust budget as called by the Opposition or a budget safeguarding the recovery progress made to date as claimed by Government ministers?

The self employed will pay €200 less in taxes and USC each year, however in direct economic terms, Budget 2018 will have limited short term effect.

There is €2bn support for infrastructure but is this enough funding to help those most in need of housing, healthcare and education?

Budget 2018 download available here in PDF format

 

Guaranteed Irish Relaunch/Return of the GI

We were delighted to attend the relaunch of the Guaranteed Irish brand with An Taoiseach Enda Kenny and Board members and supporters of Guaranteed Irish. GI members support 30,000 jobs in Ireland, contribute to their community and have a positive long term interest in Ireland. As members of GI we connect businesses all over Ireland and Irish communities across the world.

If you wish to join Guaranteed Irish contact Anthony Casey  and we will be delighted make the introduction.

 

Ireland – a magnet for UK firms looking beyond Brexit

Motivated by worries about tariffs and a potential risk to their overseas sales in the post-Brexit era, many UK firms see Ireland as a better option than mainland Europe. Paul Brown, a tax partner at Manchester accountancy firm HURST, said Ireland’s low tax rates – corporation tax is 12.5 per cent – along with state support for overseas companies, a similar business culture to the UK and a common language are key factors behind the surge in interest. In addition, Ireland has a similar business law system and an economy which is not overburdened by regulation, he said.

HURST is advising a number of  businesses in partnership with Noone Casey, a Dublin-based accountancy firm. Both practices are members of the PrimeGlobal association of independent accounting firms. Anthony Casey, a partner at Noone Casey, said: “We’re advising  companies which trade within the EU and see Ireland as the optimum location for ensuring this continues profitably. “They are planning for the medium to long-term, as it could be several years before Brexit happens. “Having a sales operation in Ireland means they will already have employees and an infrastructure within the EU which they can ramp up when the time comes.

“If they wait until afterwards, their business continuity could suffer. “In a sense it’s an insurance policy, as no-one knows for certain what the trading and commercial outcome of Brexit will be. “However, there is a likelihood of turmoil in the market concerning trade agreements, and smart companies are assessing the risks and taking steps to mitigate the impact of Brexit.” Paul said: “As the prospect of Britain being outside the single market following Brexit becomes more likely, having an operation in Ireland becomes a more attractive proposition.

“A lot of people are talking to us about it and thinking of taking action. “I expect a number of early adopters to follow this path, with others waiting to see how things work out for them.” However, he had words of caution for those looking to do so. “Companies need to think carefully. From a tax point of view, there has to be a business of substance, not just a brass plate on a building. It has to be done correctly, with careful planning,” he said. “If a company transfers part of its future profits into an Irish company outside the UK tax net, there’s a good chance that HMRC will tax it as if it had sold that part of the business to a third party. “While a company could make savings when it comes to tariffs, it could cost them more in the short term.”

Finance Bill 2016

The Institute of Taxation has published a very good summary of the Provisions of the Finance Bill 2016. Do not hesitate to contact Anthony Casey if you have any queries about the Finance Bill or other taxation matters.

Property

Confirmation of measures announced in Budget 2016

Help to Buy

Section 8 introduces the new “Help-to-Buy” scheme for First Time Buyers (FTB) of new homes announced on Budget day. The scheme provides for a refund of income tax (including DIRT) paid over the previous four years. The maximum refund is 5% of the purchase price of a new build or self-build up to a value of €400,000. The maximum refund will also be available for new homes valued between €400,000 and €600,000.

The Bill contains very detailed information on the operation of this regime. Points of note include:
•    Applicants must take out a mortgage of at least 70% of the purchase price. This is a change from the Budget, which had specified an 80% loan to value ratio was required to be eligible for relief.
•    Each applicant involved in the purchase must be a FTB.
•    To claim relief, the FTB must have filed a tax return and paid the tax due for the preceding four years.
•    Contractors wishing to participate in the incentive will need to be registered with Revenue.
•    There are two stages to the process of claiming relief, an application and a claims stage. Both stages will be completed online. The Bill outlines the information that must be provided to Revenue at each stage.
•    There are a number of provisions governing the clawback of the refund in certain circumstances for example, if the FTB does not occupy the home as their sole or main residence for five years, if a self-build home is not completed within two years etc.

Rent-a-room relief

Section 12 confirms the Budget announcement of an increase in the annual income limit for Rent-a-Room relief from €12,000 to €14,000 for 2017 and subsequent years.

There are no further changes to the Rent-a-Room relief in this Bill.

Rental income – allowable interest

Section 15 gives effect to the restoration of 100% mortgage interest relief on rental properties over five years (an increase from the current 75% deduction). This begins with an increase to 80% for 2017.

Entrepreneurs

New measures announced in Finance Bill 2016

Employment and Investment Incentive

Section 19 of the Bill makes two small amendments to the legislation on the Employment and Investment Incentive (“EII”);
•    In Budget 2014, the first tranche of the EII tax relief was removed from the High Earners’ Restriction until 1 January 2017. Section 19 of the Bill permanently removes this from the High Earners’ Restriction.
•    Section 507 has been amended to broaden Revenue’s power to publish certain information about companies who raise investments under the EII. This is to ensure compliance with EU regulations.
Confirmation of measures announced in Budget 2017

Revised Entrepreneur Relief

Following the announcement in last week’s Budget, Section 25 of the Bill confirms that a new preferential rate of CGT of 10% will apply to disposals which qualify for Revised Entrepreneur Relief under Section 597AA.

The 10% rate applies to disposals made on or after 1 January 2017. No other changes have been made to the regime.

Income Tax and Pensions

New measures announced in Finance Bill 2016

Sportspersons’ Relief

Section 6 of the Bill extends the scope of Sportspersons’ Relief (Section 480A) to ensure that contributions to Personal Retirement Savings Accounts (“PRSAs”) can also qualify for the relief.

Personal Retirement Savings Accounts

Section 13 of the Bill makes a number of amendments to Part 30 of the Taxes Act which will impact the taxation of PRSA benefits. The amendment provides that the vesting of the PRSA, as a result of the PRSA contributor turning 75 years old, will now be regarded as a Benefit Crystallisation Event (BCE) and subject to Chargeable Excess Tax (CET) i.e. the chargeable excess is subject to income tax under Case IV of Schedule D at the marginal rate of 40%.

Confirmation of measures announced in Budget 2017

Income Averaging

In the Budget, the Minister announced the introduction of an option for farmers to “step out” of the income averaging regime for a single year of low income and instead pay tax based on the actual profits for the year. Section 17 provides that the tax deferred i.e. the difference between the tax due under income averaging and the tax based on actual profits, must be paid in equal instalments over a four year period.

As announced in the Budget, this option can be availed of for 2016.

DIRT

As announced by the Minister in the Budget, the rate of DIRT will be reduced from 41% to 39% in 2017. Section 20 gives effect to this change. The Bill also confirms that the DIRT rate will reduce by an additional 2% in each of the next three years until it reaches 33%.

Section 20 also makes a small amendment to Section 267M of the Taxes Act. It provides that where tax due on deposit interest received from EU and foreign financial institutions, which would otherwise be taxed at the DIRT rates above, is not returned by the due date, it will instead be subject to tax at the higher income tax rate of 40%.

Section 110 Companies and Irish Real Estate Funds

New measures announced in Finance Bill 2016

Section 110 Companies

Section 21 of the Bill makes a number of changes to Section 110 of the Taxes Act. Minister Noonan published a draft legislative amendment to this section in September but a number of changes have been made to the original draft in the text published today.

The Bill introduces a new subsection, 5A, which provides that profits arising to a Section 110 company from its specified property business shall be treated as a separate business (although this is subject to a number of exemptions for certain transactions).

The subsection provides that, in calculating the profits of the specified property business, the interest on profit participating loans will not be deductible unless it is paid to certain persons (such as persons within the charge to Irish income tax / corporation tax, Irish or EEA* pension funds or other EEA* citizens / companies who will pay tax on the receipt of the interest).

The Bill also provides that all Section 110 companies must, within a period of eight weeks of acquiring the relevant assets (i) notify Revenue of their intention to be a Section 110 company and (ii) provide Revenue with certain prescribed information.

The changes apply to accounting periods commencing on or after 6 September 2016. For accounting periods beginning before 6 September 2016 (and ending after that date), that accounting period must be divided into two parts for the purposes of this subsection.

*Although EEA state is defined in the Bill as “…not being a Member State or the State” we assume that the intention of the legislation is to include EU Member States and that this matter will be clarified in due course.

Irish Real Estate Funds

Section 22 of the Bill introduces a new chapter, 1B, into Part 27 (Sections 739K to 739P) of the Taxes Act. This chapter lays out a new set of rules for the taxation of Irish Real Estate Funds (“IREF”) which hold Irish real estate.

An IREF is defined as an investment undertaking (excluding UCITS);
•    in which 25% or more of the market value of the assets is derived from land held in the State by the IREF, or
•    it would be reasonable to consider that the main, or one of the main purposes, of the undertaking is to acquire land in the State or carry on a business of holding or dealing in land in the State (referred to as an IREF business).
Under the new rules, an IREF will be required to withhold tax of 20% broadly on payments arising from profits relating to Irish land, which are made to unit holders who are not subject to Irish tax on this income. Payments made to certain unit holders, such as pension funds, life assurance companies and other collective investment undertakings, are not subject to the withholding tax.

Section 739L of the new legislation provides that an IREF will not be subject to capital gains tax on the disposal of land where it was (i) acquired for its market value, (ii) held for a period of at least five years and (iii) sold to an unconnected party.

This legislation shall apply to accounting periods commencing on or after 1 January 2017. However, where the undertaking’s accounting period was changed after 20 October 2016, the new rules will apply to accounting periods commencing on or after 20 October 2016.

Capital Taxes

New measures announced in Finance Bill 2016

Non-resident Trusts

Section 26 of the Bill makes changes to Sections 579 and 579A which apply in respect of non-resident trusts.

The amendments ensure that these sections will not apply where it can be shown that the settlement was established for bona fide commercial reasons and did not form part of an arrangement of which the main purpose, or one of the main purposes, was to avoid CGT.

These changes have been made to ensure that the sections are compatible with EU law.

Stamp Duty exemption – National Concert Hall

Section 48 provides for a stamp duty exemption on land acquired by the National Concert Hall in connection with its functions under the National Cultural Institutions (National Concert Hall) Act 2015.

Fishing Vessel decommissioning

Section 18 and Section 27 update the legislation relating to the treatment of balancing charges/ allowances and the availability of CGT retirement relief to reflect the latest fishing vessel decommissioning scheme.

Confirmation of measures announced in Budget 2017

CAT thresholds – effective date

The Minister announced increases to the CAT thresholds on Budget Day – as set out in Budget TaxFax. Section 51 confirms that the new thresholds apply to gifts and inheritances taken on or after 12 October 2016.

VAT

New measures announced in Finance Bill 2016

Method of Apportionment

Section 45 of the Bill amends Section 61 of the VAT Consolidation Act 2010 which concerns the apportionment of dual-use inputs.

The amendment in the Bill provides that for the purposes of calculating VAT deductions on those inputs, the taxpayer’s turnover should now be used as the primary method of apportionment. Where this method does not accurately reflect the use of the inputs, the taxpayer may use another apportionment method.

Flat-rate addition

Section 46 of the Bill confirms an increase in the flat-rate VAT addition from 5.2% to 5.4% from 1 January 2017.

The Section also inserts a new section, 86A, which provides that the Minister can restrict the application of the flat-rate addition in certain circumstances.

Revenue Matters

Confirmation of measures announced in Budget 2017

Disclosures in relation to offshore matters

In the Budget, Minister Noonan announced a withdrawal of the benefits of the qualifying disclosure regime for disclosures in relation to offshore matters. Section 54 of the Bill provides that the benefits of a qualifying disclosure will not apply to:

1.    Disclosures made on or after 1 May 2017 which relate directly or indirectly to “offshore matters”, and
2.    Disclosures made on or after 1 May 2017 where:

“in any other case, the person, before the date the disclosure is made, has offshore matters occasioning a liability to tax or duty that are known or become known at any time to the Revenue Commissioners or any of their officers and the person is liable to a penalty other than a specified penalty* in relation to those matters.”

*the tax underpaid is less than 15% of the tax due, the default is within the “careless without significant consequences” category and full cooperation is provided.

The definition of “offshore matters” includes any accounts, income, gains or property held outside the State.

New measures announced in Finance Bill 2016

S1086 – publication of tax defaulters

Section 55 makes a number of amendments to Section 1086 which deals with the publication of tax defaulters.
•    Where a settlement comprises both amounts that have been disclosed under a qualifying disclosure and amounts not subject to a qualifying disclosure, the section confirms that the portion which relates to the qualifying disclosure shall be excluded from publication. The other portion of the settlement will be published if the relevant publication criteria are met.
•    Where a taxpayer has made a settlement but it has not been paid, Revenue may note this fact in the tax defaulters list when the settlement is published.
•    It will no longer be mandatory for the Minister to amend the publication threshold in line with the Consumer Price Index every five years.

PAYE online services and jointly assessed spouses

Revenue is currently upgrading its online PAYE service to enable taxpayers review their tax affairs for the previous 4 years. Section 53 makes a technical amendment to the treatment of jointly assessed spouses to enable either spouse/civil partner use this facility.

 

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