Budget 2013

BUDGET 2013 HIGHLIGHTS

We have set out below the more relevant items that were outlined yesterday and hope you find the information contained herein to be useful and informative.

INCOME TAX:

INCOME TAX

• Income Tax rates, credits and bands have remained unchanged.
• Maternity Benefit will be taxable with effect from 1 July 2013 but will remain exempt from USC.
• Increase from 12.5% to 13.5% in the specified interest rate used in calculating the taxable benefit in kind from preferential loans, other than home loans. The specified rate for home loans is decreased from 5.0% to 4.0%.
• From 1st January 2013, “Top Slicing Relief” will no longer be available on ex-gratia lump sums in relation to terminations and severance payments where the non-statutory payments are in excess of €200,000.
• Donations from all individuals will be treated in the same manner, with the tax relief in all cases being repaid to the charity. Self-assessed taxpayers will no longer be able to claim a deduction for donations. Tax relief on charitable donations will be available at a blended rate of 31% for 2013 regardless of the marginal rate of the donor. There will be an annual donation limit of €1m per individual.

USC

• From 1st January 2013, the standard rates of USC will apply to those aged 70 years of age and over and medical card holders (PAYE/self-employed income earners) earning €60,000 and above.

PRSI

• PRSI will be extended to cover “unearned income” such as rental income, dividends, interest income on deposits and savings for modified rate PRSI contributors from 1st January 2013 and for all other persons from 1st January 2014.
• The minimum level of PRSI contributions by self-employed individuals will increase to €500 from €253.
• The weekly PRSI allowance of €127 will be removed for employees.

DIRT

• The rate of retention tax that applies to deposit interest, together with the rates of exit tax that apply to life assurance policies and investment funds, are being increased by 3% from 30% to 33% for payments made annually or more frequently and 36% for payments made less frequently than annually. The increased rates will apply to payments, including deemed payments, made on or after 1 January 2013.

PROPERTY TAXES:

LOCAL PROPERTY TAX

• From 1st July 2013, a local property tax on residential properties will be introduced. The main features of the tax is as follows:
• Local Property tax will be levied at 0.18% on the market value of the property for the first €1m and 0.25% thereafter.
• The Revenue Commissioners will collect the Property tax.
• The market value of the property will be assessed by the owner. Valuation guidance will be issued by the Revenue Commissioners, or taxpayers can use a valuer.
• Properties with a value of more than €100,000 and less than €1m will be assessed at the mid-point of valuation bands of 50,000 in width.
• From 1st January 2015 local authorities will have discretion to vary the local property tax rates by +/- 15% of national central rate.
• Voluntary deferral will be available for property tax for low income earners. Interest will be charged on the deferred amount.
• Certain properties will be exempt from assessment. These exemptions largely correspond to exemptions from the Household Charge. If you require further details in relation to the exemptions, please do not hesitate to contact me.

HOUSEHOLD CHARGE & NON-PRINCIPAL PRIVATE RESIDENCE

• The Household Charge will cease with effect from 1 January 2013. The Non-Principal Private Residence(NPPR) Charge will cease with effect from 1 January 2014.

PENSIONS:

Pre-retirement access to funded Additional Voluntary Contributions

• Individuals will be allowed a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions made to supplement retirement benefits. Withdrawals will be liable to tax at an individual’s marginal rate. The option to withdraw will be available for 3 years.

Changes to the maximum allowable pension fund

• From 1st January 2014, tax relief will not be available for pension schemes providing over €60,000 in annual income.
• Tax relief on pension contributions will continue to be available at the marginal rate of income tax.

FARMING TAXATION:

STOCK RELIEF:

• The general 25% rate and the special 100% rate of stock relief for qualifying young trained farmers Stock Relief will be extended for a further three years to 2015. Subject to EU State Aid clearance.

VAT CHANGES:

• From 1st January 2013, the farmers flat rate VAT addition will be reduced from 5.2% to 4.8%.

CAPITAL TAXES:

Changes have been made to CGT and CAT as follows:

CGT:

• The rate of CGT has been increased from 30% to 33% in respect of disposals made after 6th December 2012.

CAT:

• The rate of CAT has been increased from 30% to 33% with effect 6th December 2012.
• There will be a 10% decrease in the CAT thresholds from 6th December 2012.

BUSINESS TAXATION:

The Minister announced an SME 10 Point Tax Reform Plan aimed at helping small businesses and boosting employment in the domestic sector. Details of the 10 tax measures are as follows:

Reform of the start-up exemption for Corporation Tax:

• The scheme to provide relief from corporation tax for start-up companies has been extended to allow unused relief arising in the first 3 years of trading (due to insufficiency of profits), to be carried forward. The maximum relief in any one year is capped at eligible employer’s PRSI.

Close Company Surcharge:

• The minimum amount of undistributed investment and rental income which may be retained by a close company without giving rise to a surcharge on such income will be increased to €2,000. Under current legislation a close company surcharge does not apply where the undistributed investment and rental income of a close company is less than €635.
• This threshold will also apply in calculating the surcharge on undistributed trading or professional income.

R&D Tax Credit:

• Finance Act 2012 provided that the first €100,000 of R&D expenditure would qualify for a tax credit, without reference to the base year of 2003. This figure is being doubled to €200,000.

VAT:

• The annual VAT cash receipts basis threshold is being increased from €1m to €1.25m from 1st May 2013.

Extension of FED:

• The Foreign earnings deduction for work-related travel to the BRICS will be extended to 8 African countries, including the Democratic Republic of Congo, Egypt, Nigeria and Algeria.

Extension of the EII (Employment and Investment Incentive) Scheme:

• The EII scheme will be extended from 2014 to 2020 subject to EU state Aid approval.

Extension of the stock relief for Farmers (as mentioned above)

CGT relief for farm structuring

• CGT rollover relief will be available where the proceeds on disposal of farmland are reinvested in farmland and the sale and purchase occur within 24 months of each other. The initial sale or purchase must occur between 1st January 2013 and 31 December 2015 to qualify for relief. EU approval is required prior to introduction of this relief.

Public consultation on the taxation of micro enterprises

• A public consultation is to take place on the taxation of micro enterprises with a view to reducing compliance costs.

REAL ESTATE INVESTMENT TRUSTS(REITs):

An established, internationally recognised model for property investment – REIT – is to be introduced.

REITs are listed companies, used to hold rental property, which provide a return for investors similar to that of direct investment in property.

Qualifying income and gains of a REIT will be exempt from corporation tax at the level of the REIT company. Instead, the REIT is required to distribute profits annually, for taxation at investor level. Full details of the measure will be contained in the Finance Bill.

INDIRECT TAXES & EXCISE DUTIES:

VAT:

• The second reduced rate of VAT of 9% applicable to the tourism sector will continue at 9% in 2013.

CARBON TAX:

• The carbon tax will be extended to solid fuels on a phased basis. A rate of €10 per tonne will apply from 1st May 2013 and a rate of €20 per tonne will apply from 1st May 2014.

VRT & MOTOR TAX:

• The rates of both VRT and motor tax across all categories will increase from 1st January 2013. Revised structures for both VRT and Motor tax for vehicles taxed on the basis of CO2 emissions are also being implemented. Band A will be split into 4 sub-bands and Band B will be split inot 2 sub-bands.
• A dual registration period will also be implemented in 2013. In 2013 vehicles registered from 1 January will carry a year tax of 131 and vehicles registered in the second half of the year will carry a tag of 132.

Please do not hesitate to contact us if you have any queries regarding the above.