Publication of Finance Bill - 8th February, 2012

The Finance Bill was published today. It contains some new measures which were not announced in the Budget including the following: 

- The Capital Acquisitions Tax Pay & File Deadline is being brought forward from 30 September to 31 October in line with other taxes.

- The current Stamp Duty system is to be modernized. This will include the introduction of a “self-assessment” regime for Stamp Duty in line with other taxes and the removal of the current adjudication procedure. However, no date has yet been set for the legislation to take effect.

- From 1 May 2012, where a person supplies construction services to a “connected person”, the recipient of those services will have to self-account for the VAT under the reverse charge basis.

- The Revenue has been given additional powers to require a person to provide a Statement of Affairs in the prescribed form, where that person has an unpaid tax liability.

- As announced in the Budget, the rate of DIRT is increased by 3% to 30%. Deposit interest earned in another EU State will also be taxed at 30% once it is declared in the person’s annual tax return and this tax return is filed on time.  If the tax return is filed late, the foreign deposit interest will be taxed at 41%.

- The amount of third-level fees ineligible for tax relief is being increased to €2,250 for full time courses and to €1,125 for part time courses.

- Farmers can claim a double tax deduction for the increase in carbon tax on farm diesel.

- Compensation received by turf cutters for giving up rights to cut turf in areas of conservation will be exempt from CGT.

- The Finance Bill also confirmed the following key measures which were announced in last December’s Budget:

Restriction on Property Based Capital Allowances

Investors in accelerated capital allowance schemes will no longer be able to use capital allowances beyond the original tax life of that particular scheme, where that tax-life ends after 1 January 2015. Where the tax life of the scheme ends before 1 January 2015, capital allowances can be used up to the end of 2014 (even if this is after the end of the tax life), but any un-used capital allowances cannot be brought into 2015 and beyond. This restriction only applies to passive investors.

5% Property Relief Surcharge

A 5% surcharge will be applied on the amount of income sheltered by property reliefs in any one year. This surcharge takes the form of an additional USC charge. It will not apply to any individual whose gross income in the year (from all sources) is less than €100,000.

Stamp Duty

The Rate of Stamp Duty which applies to all non-residential property has been reduced from 6% to 2%.

Capital Gains Tax (“CGT”)

The rate of CGT is increased to 30%.

A new relief is introduced whereby if a property is purchased between 7 December 2011 and 31 December 2013, and that property is held for at least 7 years before being sold, the capital gain relating to that 7 year period will be exempt from CGT. The relief also applies to gains made on properties situated in an EU or EEA State.

 Retirement Relief on the disposal of a farm or business by an individual over 55 has been modified. These changes are an attempt to incentivize the transfer of an individual’s farm or business before they reach the age of 66. Full Retirement Relief on intra-family transfers will still be available for individuals aged 55 to 66. However, when an individual is over 66, an upper limit of €3m on Retirement Relief will be introduced. For other (i.e. non-family) transfers, the current limit of €750,000 will remain unchanged when the individual is aged between 55 and 66. However, where an individual is over 66, the limit is reduced to €500,000.

Capital Acquisitions Tax (“CAT”)

The rate of Capital Acquisitions Tax has been increased to 30%.  The Group A tax-free threshold (which applies to gifts/inheritances received by a child from a parent) has being reduced to €250,000. The Group B and Group C thresholds have been rounded up to €33,500 and €16,750 respectively.

Corporation Tax

The existing scheme which exempts new start-up companies from tax on income and gains for the first three years of trading is being extended to start-up companies which commence a new trade in 2012, 2013 or 2014.

The R&D tax credit is being amended so that the first €100,000 of research and development expenditure is allowed on a volume basis (as opposed to an incremental basis as is currently the case). The incremental basis will continue to apply to expenditure in excess of €100,000, using 2003 as the base year.

The scheme of accelerated capital allowances for expenditure by companies on certain energy efficient equipment is being extended for a futher 3 years to the end of 2014

VAT

The standard rate of VAT has be increased by 2% from 21% to 23% with effect from 1 January 2012

Universal Social Charge (“USC”)

The exemption threshold for the USC will increase from €4,004 to €10,036. Hence individuals whose income is less than €10,036 will be exempt from the USC.

Mortgage Interest Relief

The rate of mortgage interest relief is increased to 30% for first time buyers who purchased homes in the period from 2004 to 2008. For other first time buyers, the rate of mortgage interest relief in 2012 will be 25% (reducing to 22.5% in years 3 to 5 and 20% in years 6 & 7) while for non-first time buyers it will be 15%.

Taxation of illness/occupational benefit

The exemption from Income Tax for the first 36 days of illness or occupational benefit has been abolished.

SARP

A Special Assignee Relief Program (“SARP”) is being introduced aimed at attracting key staff to Ireland. This provides a level of tax relief for certain foreign individuals assigned to work in Ireland for a period of between 1 and 5 years. It is hoped that this will make Ireland more competitive on the international stage and will increase its ability to attract foreign investment.

16.02.2012. 14:25