BUDGET HIGHLIGHTS 2014
We have set out below the more relevant items that were outlined yesterday in the Budget and hope you find the information useful and informative.
INCOME TAX:
INCOME TAX
Income Tax rates, credits and bands have remained unchanged.
A new two-year income tax exemption for trading income of up to €40,000 per annum will be available for individuals who set up a qualifying unincorporated business where they have been unemployed for a period of at least 15 months prior to establishing the business.
A new single person child carer tax credit will be introduced to replace the existing one-parent family tax credit with effect from 1 January 2014. There is no change to the value of the tax credit but the new child carer tax credit will only be available to the principal carer of the child.
Tax relief for annual medical insurance premia will be restricted to the first €1,000 per adult insured and the first €500 per child insured from 16 October 2013.
Top slicing relief will cease to be available from 1 January 2014 in respect of all ex-gratia lump sum payments.
The Employment and Investment Incentive will be removed from the high earners’ relief restriction for a period of three years. This will apply to share subscriptions made on or after 16 October 2013 and on or before 31 December 2016.
DIRT
From 1 January 2014, a flat DIRT rate of 41% will apply to interest payments and deemed payments.
The rate of exit tax applicable to life assurance policies and investment funds will also increase to 41% on the same basis.
The favourable DIRT treatment of special term accounts will cease to apply to such accounts opened after 16 October 2013.
PENSIONS
The key changes to pensions are as follows:
From 2014, tax relief will not be available for pension schemes providing over €60,000 in annual income.
The Standard Fund Threshold (SFT) will be reduced from €2.3m to €2m from 1 January 2014.
Where an individual’s pension rights exceed the new lower SFT on 1 January 2014, they can protect those rights by formally applying for a Personal Fund Threshold (PFT) of up to €2.3m (unless the individual already has an existing PFT). The notification process will be outlined in the Finance Act.
PROPERTY TAXES:
A new Home Renovation Incentive has been announced. Tax relief at a rate of 13.5% will be available for qualifying expenditure incurred on home renovations and improvement work carried out on an individual’s principal private residence in 2014 and 2015. Qualifying works include extensions, renovations, window-fitting, plumbing, tiling and plastering. The tax credit will be granted in respect of expenditure over €5,000 up to a maximum of €30,000. The relief will be granted over the 2 year period following the year in which the work is carried out. The contractor must be tax compliant.
The property regeneration programme, which previously applied only to Limerick and Waterford, will be extended residential properties constructed before 1915 and to properties in Cork, Galway, Kilkenny and Dublin.
The investment options under the Immigrant Investor Programme will be extended to include investments in Real Estate Investment Trusts in Ireland, subject to conditions relating to the minimum level of investment and withdrawal of funds.
The incentive relief from CGT (in respect of the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2013 (introduced in Budget and Finance Act 2012) is being extended to include properties bought up to 31 December 2014.
FARMING TAXATION:
The farmers’ flat-rate addition is being increased from 4.8% to 5% with effect from 1 January 2014.
CGT retirement relief is being extended to disposals of leased farmland in circumstances where, among other conditions, the land is leased under a minimum lease of 5 years, and the subsequent disposal of the farmland is to a person other than a child of the individual disposing of the land.
The eligibility for Young Trained Farmers relief is being extended by adding three more qualifying courses to the list of relevant qualifications required for the 100% rate of stock relief and for the Stamp Duty relief for the purchase of agricultural properties.
The Department of Finance and the Department of Agriculture, Forestry and the Marine will conduct an independent review of the agri-food and fishery sector in 2014 “to ensure that tax reliefs are focused on those areas where they are needed most”.
CAPITAL TAXES:
The CGT exemption for real estate will be extended to commercial property acquired in 2014.
A reduced effective rate of capital gains tax relief will be available to entrepreneurs who re-invest disposal proceeds, on which CGT was paid, in assets for use in productive trading activities. The CGT payable on the disposal of the new investment will be reduced by the lower of the CGT paid on an earlier disposal in the period from 1 January 2010 and 50% of the CGT due on the disposal of the new investment. The relief will apply where the investment is made between 1 January 2014 to 31 December 2018, provided the entrepreneur does not dispose of the investment within three years.
BUSINESS TAXATION:
Minister Noonan emphasised again Ireland’s commitment to the 12.5% corporate tax rate. “We are 100% committed to the 12.5% corporation tax rate. This will not change.”
He also announced the publication of an “International Tax Strategy Statement”.
A key element of this year’s Budget was a “Tax Package Building Business & Creating Jobs”. The business tax elements of this Package included improvements to the R&D credit.
R&D CREDIT
The changes to the R&D credit are as follows:
The R & D outsourcing limit will be increased from 10% to 15% of qualifying expenditure
The annual limit for the alternative volume basis for relief will be increased from €200,000 to €300,000, and
the provisions which permit the tax efficient sharing of the R&D tax credit with key employees will be subject to minor enhancement.
INDIRECT TAXES & EXCISE DUTIES:
VAT
The Minister confirmed that the reduced 9% rate of VAT for the tourism and hospitality sector will be retained. There will be no changes to the reduced VAT rate of 13.5% or the standard VAT rate of 23% in 2014.
A number of measures were announced to combat VAT fraud including a proposal that businesses which have not paid for supplies (in full or part) within a six month period will be required to repay the VAT claimed on those supplies.
The VAT cash receipts basis will be increased from the current threshold of €1.25 million to €2 million with effect from 1 May 2014.
EXCISE DUTIES
Duty on a packet of 20 cigarettes will be increased by 10 cents (including VAT) from midnight tonight with a pro rata increase on other tobacco products.
Duty on a pint of beer and cider and a standard measure of spirits will also be increased by 10 cents (including VAT) from midnight tonight.
Duty on a 75cl bottle of wine will be increased by 50 cents (including VAT) from midnight tonight.
OTHER MATTERS:
A reform of the role, functions and structure of the Office of the Appeal Commissioners, and of the tax appeals system, will take place in 2014.
The Minister has confirmed the rate of Air Travel Tax will be reduced to zero from 1 April 2014.
