RYAN & HICKEY

CHARTERED ACCOUNTANTS & REGISTERED AUDITORS

What was in the Finance Bill 2013

 

 

The Finance Bill 2013 was published on February 13th. It confirms certain changes set out in the December 2012 budget, puts meat on the bones some of the policies outlined in the budget and introduces new measures not previously mentioned in the budget.

 

Here is our guide to some of the more important measures relevant to our clients.

 

Changes to Rates of Tax:

 

Confirmation of the following as outlined in the December 2012 budget:

 

  • an increase in the rates of CGT & CAT from 30% to 33% w.e.f. 05/12/2012

  • 10% reduction in CAT group thresholds

  • an increase in the rate of DIRT from 30% to 33% w.e.f. 01/01/2013

  • a reduction in the farmer’s flat rate addition from 5.2% to 4.8% w.e.f. 01/01/2013

  • increases in the rate of VRT and Motor Tax across all bands w.e.f. 01/01/2013

  • The interest rates for preferential loads to employees have been changed as follows:

    • Home loans – reduced to 4% w.e.f. 01/01/2013

    • Other loans – increased to 13.5% w.e.f. 01/01/2013

Pre-Retirement Access to Pensions

The Finance act has confirmed that limited pre-retirement access to pension funds will be available for certain individuals. Individuals will be allowed to access 30% of the value of AVC’s (Additional Voluntary Contributions) in their pension fund on a one off basis. This AVC withdrawal option will be available for three years after the Finance Bill 2013 has been passed. Any AVC’s withdrawn will be subject to tax at the individual’s marginal rate of tax.

SME Tax Reform Plan

The SME 10 point tax reform plan announced in the budget was published as proposed in the Finance Act. A reminder of the measures included:

  1. The extension of the corporation tax start-up exemption to allow unused relief arising in the first three years to be carried forward to subsequent years. The maximum relief available is limited to eligible employer PRSI

  2. The de minimis level for the application of the Close Company Surcharge has been increased from €635 to €2,000.

  3. The amount of expenditure qualifying R&D relief has been increased to €200k (up from €100k) without reference to the base year 2003

  4. The annual threshold for the application of the Cash Receipts basis of VAT has been increased to €1.25m (up from €1m)

  5. The Foreign Earnings Deduction for work related travel has been extended to eight African countries ( DR Congo, Egypt, Nigeria, Algeria, Ghana, Kenya, Senegal & Tanzania)

  6. Extension of the Employment and Investment Incentive Scheme to 31/12/2020, subject to EU State Aid approval

  7. The general rate (25%) of stock relief for farmers has been extended to 31/12/2015. The 100% relief rate for young trained farmers (under 35’s, holding a relevant qualification) has also been extended until the end of 2015 but is subject to a ministerial commencement order. The definition of registered farm partnerships has been amended to include beef or sheep farm partnerships. This will allow them to avail of 50% stock relief but this measure is subject to EU State Aid approval.

  8. CGT relief for farm restructuring will be introduced in the form of rollover relief where the proceeds from the sale of farmland are re-invested in other farmland and the relevant sale and purchase happen within 2 years of each other. Land swaps that are certified by Teagasc will qualify for the relief. This relief applies to the years 2013, 2014 & 2015 but is subject to EU State Aid approval before a commencement order can be drawn up.

  9. The provision of a favourable rate of CGT to apply to certain venture fund managers on “carried interest” on their investment.

  10. A public consultation process between Revenue, the Dept. of Finance on the taxation of small business aimed at reducing compliance costs for these businesses.

Other Tax Relief Measures

Living City Initiative

This is a new measure, not previously contained in the December budget. It will be introduced subject to a commencement order and EU State Aid approval. It is targeted at regenerating Georgian residential and commercial buildings within certain cities, or particular areas in those cities. Details of the applicable areas have yet to be announced, but judging by research undertaken by Pobal on urban deprivation that is referred to in the government information relating to the initiative, Waterford, Limerick and Cork cities look most likely to benefit.

The relief will be granted by means of a deduction against taxable income of 10% over 10 years in relation to the cost of undertaking approved refurbishment works to residential buildings. For commercial buildings, the relief will be granted over a 7 year period.

Changes to R&D Tax Credit

In a measure aimed at improving the access of SME’s to the R&D Tax Credit, the requirement that a “key employee” (as defined) must spent 75% of their time on research activities has been reduced to 50% with effect from 01/01/2013.

Other points to note:

Maternity Benefit

Maternity benefit was previously exempt from income tax, USC or PRSI. With effect from July 1st 2013, maternity benefit will be subject to income tax (but will continue to exempt from USC and PRSI). This will affect those employees in receipt of maternity benefit whose employers maintain their salaries whilst on maternity leave. Previously, they would have taken home more money (up to c. €2,800) whilst on maternity leave by means of the maternity benefit being exempt from income tax.

USC

Previously, the USC was capped at 4% for the over 70s and medical card holders earning €60,000 or more. With effect from January 1st 2013, this cap has been removed and the standard rates of up to 7% (with surcharge of 3% for individuals who have non-PAYE income of over €100,000 p.a.) will apply

Tax Relief on Third Level Education Fees

The threshold for tax relief on third level fees has being increased to €2,500 for 2013, €2,750 for 2014 and €3,000 for 2015. These increases are in line with the ‘student contribution’ increases announced in the budget.

Revenue Job Assist Scheme

The Revenue Job Assist scheme will be replaced by a new “Plus One” Scheme. This will also replace the Employer (PRSI) Job Incentive Scheme. This will be confirmed by ministerial order.

The information contained in this article is purely informative and should not be taken as professional advice from Ryan & Hickey. Please refer to our website Terms & Conditions.

If you would like specific advice on any of the areas mentioned in this article, please contact us