The target of the Irish Budget 2012 was to get at least €3.5 billion in savings in a combination of cuts to spending and in increased taxation. Minister for Finance, Michael Noonan, opened his speech by saying the government wanted to give the small to medium enterprise sector a ‘helping hand’. New measures were introduced but with the Minister himself accepting they were ‘modest’ the effects are unlikely to make massive differences to small business owners. Here are the main points summarised by our accountants Quinn Meehan Chartered Accountants. Also find attached for download some comprehensive summaries from our old friends in Tax and Legal (Tax and Legal Budget 2013 – .PDF / 1.2 MB) and our new friends in PWC (PwC Budget 2013 – .PDF / 493KB).
- The minister announced a “10 point plan” aimed at helping small businesses:
- The 3 year corporation tax exemption for certain new companies is being formed to allow any unused credits to be carried forward beyond the 3 years. This relief is subject to the maximum amount of relief in any one year not exceeding the eligible amount of employers’ PRSI in that year.
- The Employment and Investment Incentive Scheme (EIIS – previously the BES relief) will be extended to 2020.
- The Revenue are to consult with the Department of Finance to see how costs can be reduced for micro enterprises i.e. businesses with turnover of less than €75,000.
- The de-minimus level at which the Close Company Surcharge applies has been increased from €635 to €2,000.
- The R&D relief has been extended. From 1 January 2013, the first €200,000 of R&D expenditure will qualify for a tax credit without reference to the base year of 2003.
- The annual VAT cash receipts basis threshold is being increased from €1 million to €1.25 million.
- The Foreign Earnings Deduction relief is extended to include employment in certain African countries.
- The current 25% general rate of stock relief and the 100% rate for young trained farmers are to be extended to 2015.
- A form or roll-over relief for CGT will be available where the proceeds on disposals of farmland are reinvested in farmland and the sale and purchase occur within 24 months of each other. The initial sale must occur between 1 January 2013 and 31 December 2015. Land swaps certified by Teagasc will qualify for the relief. This provision is subject to EU approval.
- Section 541C TCA 1997 provides for a favourable rate of CGT to apply to certain venture fund managers on “carried interest” (profit shares) on their investment. The Minister proposes to review these provisions.
Other Business issues
- With effect from January 2013 the existing 15% rebate of statutory redundancy payments that a company can claim is being removed.
- The 12.5% Corporation Tax rate has been confirmed.
- Ireland and The USA have agreed to share information on residents of both jurisdictions who hold bank accounts in the other jurisdiction. This will cause concern for individuals who have undeclared income in either US or Irish bank accounts.
- The rate of Capital Acquisitions Tax (Gift Tax & Inheritance Tax) is being increase from 30% to 33% with effect from 6th December 2012.
- From 6th December 2012, the life-time tax free thresholds are being reduced by 10% i.e. Group A threshold (mainly for benefits received by children from parents) is being reduced to €225,000. The Group B threshold is being reduced to €30,150 and the Group C threshold is being reduced to €15,075.
- The rate of Capital Gains Tax is increased to 33% from 30% with effect from 6th December 2012.
- The exemption from CGT for property purchased between now and the end of 2013 was reconfirmed.
- A form or roll-over relief for CGT will be available where the proceeds on disposals of farmland are reinvested in farmland and the sale and purchase occur within 24 months of each other. The initial sale must occur between 1 January 2013 and 31 December 2015. Land swaps certified by Teagasc will also qualify for the relief. This provision is subject to EU approval.
- The Local Property Tax (LPT) will come into effect from 1 July 2013.
- LPT will apply at a rate of 0.18% on the value of property up to €1m and a rate of 0.25% will apply to the value in excess of €1m. Local authorities have the discretion to vary the rates by 15%.
- Some exemptions apply. In addition owner occupiers whose income does not exceed €15,000 (single) and €25,000 (married/civil partners) can defer the payment. Interest at 4% per annum will apply to the deferral.
- The Household charge will cease from 1 January 2013.
- The “second home charge”, (the NPPR charge) will cease from 1 January 2014.
- Unpaid arrears of the household charge and the NPPR charge will be converted to the LPT charge and collected through that process, the full details of which have yet to be announced.
- The LPT will be charged based on the value of your property. The market value of the property will be divided into bands with the initial band covering €0 to €100,000. Thereafter bands of €50,000 will apply up to €1m. The LPT will apply by applying the tax rate to the mid-point of the band.
- Newly constructed but unsold residential property, mobile homes, vessels, houses in certain unfinished estates and unoccupied residences by reason of long term mental illness or infirmity will be exempt from the LPT.
- No changes to the main VAT rates.
- The farmer’s flat rate addition, which compensates farmers for VAT incurred is being reduced from 5.2% to 4.8% with effect from 1 January.
- Cash receipts basis threshold is being increased to €1.25m.
- Increases to duty on alcoholic products were announced.
- VRT rates were increased.
- Motor taxes were increased.
- Tax relief for pensions will continue to be available at the marginal rate. However, from 2014 no relief will be available for pension schemes providing income of over €60,000. The mechanics of how this will be implemented are to be finalised after consultation in 2013.
- Individuals will be allowed to withdraw up to the value of 30% of heir AVCs in their existing pension funds. This withdrawal will be subject to the marginal rate of tax.
- The pension levy will not be renewed after 2014.
- No changes to Standard Income Tax Rates or Tax Credits.
- Deposit Interest Retention Tax (DIRT) is increased from 30% to 33% with effect from 1 January 2013. Exit tax that apply to life assurance policies and investment funds is also increased to 33% for payments made annually or more frequently and is increased to 36% for other payments.
- Maternity benefit will be taxable with effect from 1 July 2013.
- Top Slicing Relief (a relief on termination payments) will no longer be available from 1 January 2013 where the non-statutory termination payment is €200,000 or over.
- Foreign Earnings Deduction (relief for earnings from employment related travel in certain overseas countries) has been extended to include certain African countries.
- From 1 January 2013, tax relief on charitable donations will be repaid to the Charity at a blended rate of 31%.
- With effect from 1 January 2013 the standard rate of USC will apply to those aged 70 years of age or over and earning €60,000 or more. Previously such individuals received preferential treatment.
- The minimum PRSI contribution for self-employed has been increased from 1 January 2013 from €253 to €500. This will effect self-employed with very low income levels.
- The PRSI employee €127 weekly allowance has been abolished.
- With effect from 1 January 2014 PAYE employees will be subject to PRSI on unearned income, such as rent and deposit interest. This brings employees to a par with self- employed individuals.