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Budget 2022 was delivered by Minister for Finance, Paschal Donohoe and Minister for Public Expenditure, Michael McGrath today. Below we highlight the main changes that could affect you.

COVID-19 Support Measures

  • The EWSS will remain in place until 30th April 2022 in a graduated form. The scheme will close to new entrants on the 31st December 2021. Those in the scheme at the end of December may continue to avail of the supports until the end of April. A two-rate structure of €151.50 and €203 per week will apply for the months December, January and February. For the final two months of the scheme a flat rate of €100 will apply however the reduced Employer’s PRSI rate will not apply in these two months.
  • The 9% VAT rate for the hospitality and tourism sector will remain in place to the end of August 2022.
  • The waiver from Commercial Rates for those in the Arts, Hospitality and Tourism sectors will apply for Q4 2021.
  • The tax debt warehousing scheme will be expanded to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their Schedule E income from that employer company.

Climate and Environmental Measures

  • A Carbon tax yearly increase of €7.50 until 2030, equivalent to about 2c per litre for Petrol and 2.5c per litre for Diesel.
  • From the 1st January 2022 a revised 20 band VRT table will come into effect. 1% increase for vehicles between bands 9-12, 2% increase for bands 13-15 and 4% increase for bands 16-20.
  • The €5,000 VRT relief for battery electric vehicles to continue until the end of 2023.
  • Accelerated Capital Allowances scheme for Energy Efficient Equipment extended for gas vehicles and refuelling equipment for 3 years.
  • Accelerated Capital Allowances scheme for Energy Efficient Equipment will not be available where the equipment is directly operated by fossil fuels.
  • An exemption from Tax on the sale of surplus electricity to the National Grid, limit of €200, by households.
  • Commencing in 2023 the BIK exemption for batter electric vehicles will be extended out to 2025 with a tapering effect on the vehicle value. The original market value of the vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.

Housing Measures

  • Introduction of a new Zoned Land Tax based on the market value of the land and outset rate of 3% to encourage house building. However, there is a two-year lead-in time for land zoned before January 2022 and a three-year lead-in time for land zoned after January 2022. It will replace the current 7% vacant site levy but unlike the levy there will be no minimum site size.
  • The relief for landlords for pre-letting expenditure will continue for a further 3 years.
  • Help to Buy Scheme will be continued in 2022 in its current form.

Business Measures

  • For the vast majority of companies, the 12.5% trading rate will remain. The increased 15% will apply only to those large multinational companies with turnover greater than €750m.
  • A refundable Digital Gaming Tax Credit for expenditure incurred on the design, production and testing of a game. The relief will be available at a rate of 32% on eligible expenditure of up to a maximum limit of €25m per project.
  • Extension of 3 years to the Employment Investment Incentive Scheme (EIIS) – wider range of investment funds and the 30% expenditure rule will be removed, to make it more attractive and accessible for investors and start-up businesses.
  • The relief from Corporation Tax for start-up companies will be amended such that the relief will be available for up to five years rather than three.
  • Threshold for the higher rate of Employers’ PRSI will increase from €398 to €410.

Personal Tax

  • Income tax standard band increase by €1,500 to €36,800 (single) and €73,600 (married).
  • Increase Personal, Employee and Earned Income Tax Credit by €50 to €1,700.
  • The Dependent Relative Credit will increase from €70 to €245.
  • Tax relief for remote working from home of 30% of vouched expenses for heat, electricity and broadband.
  • Small change to the second rate-band of Universal Social Charge which will increase from €20,687 to €21,295.
  • Amendments are proposed to be announced in the Finance Bill to s.127B TCA’97 which covers the taxation of international air crews to exclude non-resident air crew.

 Anti-Avoidance

  • Introduction of new Interest Limitation Rule will see a limit on deductible interest expenses of 30% of EBITDA for companies within scope of the Anti-Tax Avoidance measures. Disallowed interest may be carried forward and may be deducted in future years if the company has sufficient interest capacity.
  • Finance Bill 2021 will introduce a new anti-reverse-hybrid rules which will bring certain tax transparent entities within scope of Irish tax where the entity is 50% or more owned/controlled by entities resident in a jurisdiction that regard it as tax opaque and, as a result of this hybridity, double non-taxation occurs.

VAT

  • 9% rate to cease at the end of August 2022.
  • Farmers’ Flat Rate Addition is reduced from 5.6% to 5.5%.

 Agri Measures

  • Stock relief to end of 2024.
  • Young Trained Farmer Stamp Duty relief continue to end of 2022 at 1%.

 Other Matters

  • No changes to Capital Gains Tax or Capital Acquisitions Tax.
  • The State Pension (Contributory) will increase from €248.30 to €253.30 per week from 2022.
  • Public Consultation to be launched in coming weeks to inform Commission on Taxation and Welfare.
  • The Finance Bill is due to be published on the 21st October.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

Edward Murphy, Partner and Head of Tax Services, gives his analysis of Budget 2021.

When Minister Donohue delivered his Budget 12 months ago, he told us that we had to be safe and cautious due the possibility of a no-deal Brexit. One year on, Brexit uncertainty is ever more present, but we now also have the monumental pressure of a pandemic. Budget 2021 is a €17.75bn package, the largest in the history of the State. Minister Donohue has attempted to strike a balance between the country’s longer-term financial position and supporting those out of work and those businesses who are struggling to stay alive.

We will dip into our emergency rainy day fund this year for €1.5bn as the Government expects to have to borrow almost €20bn in 2021 to deal with the shortfall in tax receipts and the required significant spending on various Covid-19/Brexit supports and on our health system and infrastructure costs. EU financial supports expected in 2021 on both the Covid-19 and Brexit fronts will be welcomed.

The Minister took the opportunity to again re-affirm Ireland’s commitment to its 12.5% Corporate Tax rate and to acknowledge Corporate Ireland’s significant contribution to the Country’s national tax purse.

The large spending amounts announced on housing, infrastructure, defence, health and education would in any other Budget be seen as stand-out, but in Budget 2021 they are in the shadow of the even larger Covid-19 crisis supports that the government is committing to support businesses.  Targeted sector supports to tourism, hospitality, arts/entertainment and other businesses affected by Covid-19 are aimed at preserving existing jobs or keeping some of the businesses in these sectors on life-support. Employment is the key to survival and recovery. Indeed the ‘green’ initiatives of increasing Carbon Tax to help to fund making homes more energy efficient, appear incidental.

The sheer scale of the challenges facing Ireland may have in one sense helped the Government Partners to agree to Budget 2021’s size and approach.  However, this ‘’borrow now, pay later’’ Budget has moved the relatively recent promise of tax decreases to more now the question of who will pay for this in the longer term?

To see how the budget affects you, you can read our Budget 2021 Highlights.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

Budget 2021 was delivered by Finance Minister Paschal Donohoe today. Below we highlight the main changes that could affect you.

Personal Tax

  • Small change to the second rate-band of Universal Social Charge which will increase from €20,484 to €20,687.
  • Income tax bands and rates remain unchanged.
  • The Dependent Relative Credit will increase from €70 to €245.
  • The Earned Income Credit will increase from €1,500 to €1,650.
  • Help to Buy Scheme July Stimulus measures to be extended to the end of 2021.

VAT

  • Re-introduction of the 9% VAT rate for the hospitality and tourism sector from 1st November 2020 and will remain in place for all of 2021.

Corporation Tax

  • Confirmation of the 12.5% rate of tax, but challenges lie ahead in the area of tax digitalisation.
  • All Intangible assets acquired from 14th October 2020 will be within the scope of balancing charge rules.
  • As part of the EU ATAD, 2021 will see the introduction of interest limitation and anti-reverse-hybrid rules.
  • Technical adjustment to Exit Tax rules in respect of the operation of interest on instalment payments.
  • Knowledge Development Box relief extended until end of 2022.
  • Digital Gaming Tax Credit to encourage growth in this sector is likely to be introduced in 2022.
  • Section 481 Film relief amended to provide for an additional year at its peak rate of 5% until 31 December 2023.

Climate Change Measures

  • A Carbon tax increase of €7.50 per tonne will be applied to auto fuels from midnight tonight and all other fuels from 1st May 2021. This will bring Carbon tax to €33.50 per tonne/CO2 with the goal to achieve €100 per tonne by 2030.
  • VRT – transition from CO2 based system to new Worldwide Harmonised Light Vehicle Test Procedure (WLTP) emissions test system from 1st January 2021. Used imports will have CO2 values adjusted to WLTP equivalent.
  • Motor Tax – rates will remain unchanged for all cars in the engine size regime and all but the most pollutant cars in the post 2008 regime. Third table based on WLTP system from 1st January 2021.
  • VRT Relief for Plug-in Hybrid Electric Vehicles and hybrids will expire.
  • NOx surcharge bands to be adjusted so higher NOx emitting vehicles pay more.
  • Accelerated Capital Allowances scheme for Energy Efficient Equipment extended for further 3 years. Categories of equipment to be updated.

Agri Measures

  • Consanguinity relief of 1% Stamp Duty rate on the transfer of Agricultural Land between family members is extended until 31 December 2023.
  • The 1% Stamp Duty rate on farm consolidations is extended until end of 2022.
  • Farmers’ flat VAT rate increase from 5.4% to 5.6% from 1 January 2021.

Capital Gains Tax and Capital Acquisitions Tax

  • Capital Acquisitions Tax and Capital Gains Tax remain at 33%.
  • No change in Capital Acquisitions Tax thresholds.
  • CGT – Entrepreneur Relief ownership test slightly changed so that the shares must be held for a continuous period of any three years prior to disposal. Previously it was 3-year continuous period in the 5 years immediately prior to disposal.

COVID-19 Support Measures

  • Covid Restrictions Support Scheme (CWSS)  for businesses significantly impacted (at least 20% reduction on corresponding period in 2019) or temporarily closed and where Level 3 or above restrictions prohibit or restrict access by customers. Cash payment from Revenue Commissioners as an advance credit for trading expenses for the period of restrictions. Payments will be calculated based on 10% of the first €1m of turnover and 5% thereafter, based on the average ex VAT Turnover for 2019. The maximum weekly payment will be €5,000. Scheme will run until 31 March 2021.
  • Self Employed may avail of the Debt Warehousing provisions to defer payment of their 2019 Income Tax balance and preliminary tax for 2020. Payments are deferred for a year without interest applying and at a rate of 3% interest thereafter and will attract no surcharge.
  • EWSS, or similar type scheme, likely to continue beyond March 2021.
  • Commercial rates waived.
  • New European investment fund to be established to invest in domestic, high innovation enterprises.

Other Measures

  • In addition to the change in USC rate band, the weekly threshold for the higher rate of employers’ PRSI is to increase from €394 to €398.
  • Excise duty on Tobacco products to increase by 50 cents.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services. You can view Eddie’s Analysis of Budget 2021 here.

Analysis of Budget 2020

Minister Donohue delivered his “no surprises” Budget 2020 in the shadow of Brexit. Despite our economy being in a strong position and with a general election on the horizon, this was no give-away Budget. Both Minister Donohue and the Taoiseach had managed expectations in advance with talk of “safe choices in relation to taxation” and “modest, targeted welfare increases”.  Prudence seemed to be the order of the day.

There will be no deposit to our rainy day fund this year as the Government expects to have to borrow in 2020 to deal with a potential hard Brexit. A package of over €1.2 billion, excluding EU funding, was announced in the Budget to respond to Brexit.

Climate change was the other main influencer of Budget 2020. Increased carbon tax and other changes to vehicle-related taxes were all designed to support our transition to a low carbon economy. The balancing act for the Government was to ensure that the cost of these changes was distributed fairly. An increase to the weekly fuel allowance and allocations of €3 million to pilot new Agri-environmental schemes and €2.7 billion to the Department of Transport, Tourism and Sport in 2020 were some of the responses to this.

This Budget must have been a difficult one for the Government and partners to agree upon. It makes no moves towards the Taoiseach’s pledge to raise the 40% tax rate threshold to €50,000 and contains minimal social welfare increases. It looks like the possibility of a no-deal Brexit will haunt Irish politicians on the doorsteps long after Halloween and the current proposed Brexit date has passed!

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

Highlights from Budget 2020

Budget 2020 was delivered by Finance Minister Paschal Donohoe today. Below we highlight the main changes that could affect you.

Climate Measures and Carbon Tax

  • Benefit-in-kind on commercial vehicles to be linked to emissions from 2023.
  • Emissions thresholds in respect of capital allowances and VAT reclaim on commercial vehicles to be reduced.
  • 0% benefit-in-kind on electric vehicles will be extended until the end of 2020.
  • A Carbon tax increase of €6 per tonne likely to result in an increase of about 2c per litre of petrol and diesel immediately and about €15 per tank of home heating oil from May 2020.
  • Relief to be provided to hauliers through the Diesel Rebate Scheme for the increased cost of fuel.
  • A new nitrogen oxide (NOx) surcharge will replace the 1% diesel surcharge and will apply to all passenger cars registered from 1 January 2020.
  • VRT relief for hybrid vehicles will be extended until the end of 2020.
  • The weekly fuel allowance will increase by €2.

Brexit Package

  • A package of over €1.2 billion announced, excluding EU funding, to respond to Brexit. This includes:
    • €220 million immediately on October 31st if a no-deal Brexit occurs.
    • €110 million for the agriculture sector
    • €40 million for the tourism sector
    • €365 million for extra social protection expenditure in the event of a rise in unemployment
    • €390 million for Brexit contingency expenditure

Personal Tax

  • The reduced rate of Universal Social Charge for medical card holders to be continued until the end of 2020.
  • Income tax bands and rates remain unchanged.
  • The Home Carer Credit will increase from €1,500 to €1,600.
  • The Earned Income Credit will increase from €1,350 to €1,500.
  • Help to Buy Scheme will be extended until the end of 2021.
  • Living City Initiative will be extended until the end of 2022.

Corporation Tax

  • Confirmation of the 12.5% rate of tax.
  • Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction will be extended until the end of 2022.
  • Enhancements to the Key Employee Engagement Programme (KEEP) and Employment and Investment (EII) programme announced.
  • For micro and small companies:
    • R&D Tax Credit to increase from 25% to 30%.
    • R&D Tax Credit will now be available for certain pre-trading expenditure.
  • The qualifying spend limit for R&D outsourced to third level institutions to be increased from 5% to 15% for R&D Tax Credit purposes.
  • New Anti-Hybrid Rules will be introduced, in line with the Anti-Tax Avoidance Directive (ATAD).
  • Transfer Pricing rules to be brought in line with OECD standards with effect from 1 January 2020.
  • Anti-avoidance measures to be introduced to the IREF and REIT regimes with immediate effect.

Agri Measures

  • Farm Restructuring Relief will be extended until the end of 2022.

Capital Gains Tax and Capital Acquisitions Tax

  • Capital Acquisitions Tax and Capital Gains Tax remain at 33%.
  • The threshold for capital acquisitions tax that applies to children receiving gifts or inheritances from their parents will increase by €15,000 to €335,000.

Other Measures

  • The rate of stamp duty on non-residential property will increase from 6% to 7.5%.
  • A new stamp duty charge of 1% will apply where a scheme of arrangement, in accordance with Part 9 of the Companies Act 2014, is used for the acquisition of a company.
  • The rate of Dividend Withholding Tax to be increased from 20% to 25% from 1 January 2020 with further changes to the DWT regime to follow from 2021.
  • The excise duty on a packet of 20 cigarettes is being increased by 50 cents with a pro-rata increase on other tobacco products.
  • A new relief from betting duty and betting intermediary duty up to a limit of €50,000 per calendar year to be introduced.

Social Welfare

  • The 100% Christmas bonus will be paid out in 2019.
  • The Living Alone Allowance to be increased by €5 in 2020. Increases announced in the Qualified Child Payment of €3 for over 12s and €2 for under 12s.
  • Free GP care will be extended to under-eights and free dental care to under-sixes.
  • Prescription charges for the over 70s are to be reduced from €1.50 to €1 per item.
  • There will be a reduction in the monthly threshold for the Drugs Payment Scheme from €124 to €114.
  • Medical card income threshold for the over 70s to be increased by €50 to €550 for a single individual and by €150 to €1,050 for a couple per week.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

Budget 2019 increased the Home Carer Tax Credit from €1,200 to €1,500 per annum. This tax credit is available to married couples or registered civil partners, where one spouse stays at home to care for a “dependant”.

A dependant can be:
  • a child for whom child benefit is payable;
  • a person aged 65 years or over; or
  • an incapacitated individual.

It does not include a spouse or partner. Often there may be one or more dependants being cared for by the carer spouse. This does not increase the tax credit available.

The Home Carer Tax Credit is often unclaimed as there is a misconception that you must be caring for a sick relative. This is not the case.

Conditions to qualify:
  • You must be jointly assessed for income tax.
  • The dependant person must normally reside with the carer for the tax year. However, if the dependant person is a relative, they can live next door, on the same property or within 2kms of the carer. A relative includes a relative by marriage or a person for whom the claimant is a legal guardian, but not a spouse or civil partner. However, there must be a direct communication link between the two residences such as a telephone or alarm system.
  • The carer spouse must have income of €7,200 per annum or less (excluding any carers benefit or payments received from the Department of Social Protection). If you earn more than €7,200 but less than €10,200 per annum, you may claim a reduced credit:

For example, if the carer spouse earns €8,200 per annum, the maximum tax credit that can be claimed is reduced by the additional earnings as follows €8,200-€7,200=€1,000/2 = €500. The tax credit is reduced by €500 giving a maximum credit of €1,000 available.

If the carer spouse earns €10,200 or above, no Home Carer Tax Credit is available.

This tax credit cannot be claimed alongside the increased standard rate bands for married couples/civil partners. Revenue will grant you the more beneficial option.

Remember; if you qualified for the Home Carer Tax Credit in any of the past 4 tax years (2018, 2017, 2016, and 2015), you can still make a claim to Revenue for it.

If you require any assistance with the home carer tax credit, please contact Michelle Mangan, Manager of Tax Services.

Budget 2019 was delivered by Minister Donohoe, the country’s first balanced Budget in over 10 years. With the Irish economy and the national tax-take set to continue to grow impressively, and with a general election expected in the near-term, it was left to prudence and Brexit to influence the Minister’s Budget restraining measures. With Budget surpluses expected for the next few years, it was confirmed that these would be used to pay down that eye-watering national debt that we don’t really like to talk about.

The Minister kicked-off our rainy day fund with €500m from Corporation Tax we unexpectedly received as a one-off from a small number of multinational companies.  So who gained from this Budget? Everyone, of course!

Continuing the theme of the past few years, Budget 2019 gave a little to employees, social welfare recipients, home carers, back to school-ers, self-employers, educators, farmers, small business owners, social house seekers, rent takers, baby makers…….BUT….would it be better if instead of trying to appease all, the strategy was to target in an even more meaningful way, the homeless/housing issues that are affecting such a large number of people?

The giveaways were funded, in the main from re-instating the 13.5% VAT rate to the Tourism related businesses, small increases in VRT, betting tax and of course from the vast swathe of employees who have their payroll taxes withheld automatically.

Ireland’s annual family finances are in good order, stable and broader-based than in our recent past. Let’s see if the government (whichever one!) can manage to provide the basic services to all of its people and in a timely manner.

 

Edward Murphy
Partner and Head of Tax Services
edward.murphy@crowleysdk.ie

 

 

 

If you would like further information, please contact our Tax Team.


View the key highlights from Budget 2019