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Budget 2013
Minister for Finance Mr Michael Noonan TD
announced Budget 2013 earlier today.
Budget 2013 was the sixth austerity Budget in
a row and introduced spending cuts of
€2.25bn and tax increases of €1.25bn.
Budget 2013 will be remembered as the
Budget that introduced the new Local Property
Tax. As expected, the Local Property Tax was
introduced at a rate of 0.18%, with an
increased rate of 25% for houses with a value
of over €1m. The new tax will come into effect
on 1 July 2013 on a half yearly basis with full
year payments required in 2014.
As one would expect with the introduction of
any new tax, there will be some teething issues
initially, particularly on valuation. The Revenue
Commissioners, who have been given the task
of administering the tax, will publish guidelines
in 2013 on valuations.
The Government used the Budget to announce
a 10 Point Tax Reform Plan aimed at helping
small businesses. While the measures are
unlikely to have a huge impact, the measures
are welcome nonetheless.
The Government also reiterated its
Corporation Tax Strategy (referred to as the
3Rs) by maintaining its commitment to the
12.5% rate, enhancing the R&D credit regime
and Irelands reputation internationally by
extending its Treaty network.
At a local level, the proposed introduction of
accelerated capital allowances on the
construction of certain aviation specific
facilities is welcome particularly in the light of
the Shannon Airport announcement earlier in
the week.
We have analysed in this Newsletter the
changes announced in the Budget and we
await the detailed legislative provisions of
the Budget in the Finance Bill in January
2013.
If you would like to discuss the impact of the
Budget changes on your business and
personal affairs, please feel free to contact
us.
Regards
Fergal
New Offices from 14 December
Suite 2, Aras Smith O’Brien
Bank Place
Ennis
Co. Clare
Telephone & e-mail as before
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Personal Tax
Income Tax
Budget 2013 made no significant changes to income tax for 2013. Accordingly, there will be no
change to the following:
Income Tax rates will remain at 20% and 41%.
Personal tax credits and Standard Rate Tax bands will remain the same.
However, maternity benefit will be subject to income tax from 1 July 2013 onwards (where
previously it was exempt). Maternity benefit will continue to be exempt from the Universal Social
Charge (“USC”).
The Minister also announced changes to benefit in kind chargeable on loans provided by an
employer to an employee. The specified interest rate on such loans has increased from 12.5% to
13.5% in respect of preferential loans and the interest rate has reduced from 5% to 4% in respect
of home loans.
PRSI
The minimum PRSI charge for self-
employed earners has been increased from
€253 to €500.
The weekly PRSI allowance of €127 for
employees is to be removed from 2013.
PRSI has been extended to “unearned
income” on income such as rental income,
dividends and deposit interest income for
modified rate payers from 2013 and for all
others from 2014.
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Income Tax Reliefs
Top Slicing Relief, which is claimed in respect of tax on an ex gratia lump sum paid in connection
with the termination of employment, will no longer be available from 1 January 2013 in respect
of lump sums of €200,000 or more.
Income Tax relief on charitable donations has been amended to a blended rate of 31% where
previously relief was granted at the individuals marginal rate of tax (i.e. 20% or 41%). This will
take effect from 1 January 2013. There have also been considerable other reforms made to the
scheme of tax relief for donations to charities and other Approved Bodies, to simplify and reduce
the administration associated with such donations for the charitable bodies.
The Employment and Investment Incentive (EII) which was introduced in last year’s Budget and
was due to expire at the end of 2013 has been extended to 2020 (subject to EU State Aid
Clearance). This replaced BES from 31 December 2011.
Income tax relief on investment in qualified films has been extended to 2020. This relief provides
income tax relief at the marginal rate on film investments of up to €50,000 in a tax year. This
scheme is also to be reformed, with relief being granted by way of tax credit from 2016 onwards,
with a view to easing the financing of investment in such films for the taxpayer.
The Employment and Investment Incentive (EII) which was introduced in last year’s Budget and
was due to expire at the end of 2013 has been extended to 2020 (subject to EU State Aid
Clearance). This replaced BES from 31 December 2011.
4
Universal Social Charge
The rates and thresholds for USC remain the same in 2013 with the exception of persons aged 70
or over and medical card holders, who will be liable to USC at the standard rate where their
income exceeds €60,000. Accordingly, from 2013 onwards the rates of USC for persons in receipt
of income in excess of €10,036 will be as follows:
Aggregate Income USC
(Individual <
70 & no med
card)
USC (Individual
< 70 & full med
card)
USC (Individual
≥ 70 in tax
year)
USC (Individual
≥ 70 / Full
medical card &
income > €60k)
First €10,036 2% 2% 2% 2%
Next €5,980 4% 4% 4% 4%
Balance (up to
€100k)
7% 4% 4% 7%
Excess over €100k* 10% 4% 7% 10%
* Up to 2014 only
The USC is in the main levied on income before taking a deduction for capital allowances and
other specified reliefs (subject to a number of exceptions such as wear and tear on plant and
machinery).
Deposit Interest Retention Tax
Deposit Interest Retention Tax (“DIRT”) on deposit interest and exit taxes on Life Assurance Policies
have been increased from 30% to 33%, with effect from 1 January 2013. The rate of DIRT on long
term deposits, where payments are made less than annually, has increased from 33% to 36%.
The increase in the rate of DIRT over the past number of years can be summarised as follows:
Date Rate
1 Jan. 2002 – 31 Dec. 2008 20%
1 Jan. 2009 – 7 April 2009 23%
8 April 2009 – 31 Dec. 2010 25%
2011 27%
2012 30%
2013 33%
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Business Taxes
Corporation Tax Strategy
With the continued Euro crisis and the prospect of increased fiscal unity in the Euro zone, attention
of late has turned to Irelands Corporation Tax regime.
The Government has used Budget 2013 to emphasise its Corporation Tax Strategy. The Minister
talked about the three key components to Ireland’s Corporation Tax Strategy (“the 3 Rs”):
Rate – The Government reiterated in definite terms that there will be no change to the
12.5% Corporation Tax Rate
Regime – This refers to the additional elements of Ireland’s broader Corporation Tax
Strategy including the R&D Tax Credit regime
Reputation – The Budget emphasises that Ireland offers a transparent Corporation Tax
regime with a growing access to Double Taxation Treaties and full exchange of tax
information
6
Capital Allowances
Aviation Sector
In the past week, the Government announced the separation of Shannon Airport from the Dublin
Airport Authority. In effect Shannon Airport will have full independence and will merge with a
restructured Shannon Development to form a new, publicly-owned, commercial entity in 2013. The
plans also include the establishment of an International Aviation Services Centre with ambitious job
creation targets. The Budget includes provisions which should benefit Shannon Airport in pursuing
its goals and objectives.
The Budget provides for an accelerated capital allowance scheme on the construction of certain
aviation-specific facilities. While details of the scheme are awaited in the Finance Bill, the Budget
provides for the following headline issues:
Capital allowances will be available over seven years. If the new incentive follows the pattern
of other capital allowances, it is expected that the capital allowances would be at a rate of
15% per annum in the first 6 years and 10% in the final year.
The new scheme will operate for a period of 5 years from commencement of the scheme.
The Budget indicates that restrictions will be imposed on the setting of unused capital
allowances sideways against other income.
Finance Act 2012 provided for the phasing out of certain property tax incentives at the end
of 2014. Under these provisions, capital allowances and losses will not be available for carry
forward after the end of the tax life of the property or at the end of 2014 if earlier. The new
aviation-specific capital allowance scheme will also be affected by the Finance Act 2012
provisions. Therefore, capital allowances will not be permitted to be carried forward after
the end of the tax life of the building where the investor is in receipt of rental income from
the facilities or is not an active partner or active trader.
While the Budget details did not make reference to the High Earner’s Restriction, it is
assumed that the new capital allowance scheme will be affected by the restriction. The High
Earner’s Restriction applies where claims for certain specified reliefs exceed €125,000 per
annum and effectively restrict the capital allowance claims to €80,000 per annum where the
provisions apply.
7
Relief for Start-up Companies
This scheme provides relief from Corporation Tax on
trading income (and certain capital gains) for new start-
up companies in the first 3 years of trading. The relief is
available in the form of a tax credit against Corporation
Tax and is linked to the level of Employer’s PRSI payable
by the company.
This relief is being extended to allow any unused relief
arising in the first 3 years of trading due to insufficiency
of profits to be carried forward for use in subsequent
years.
This is subject to the maximum amount of relief in any
one year not exceeding the eligible amount of
Employers’ PRSI in that year.
Amendment to Close Company
Surcharge
As part of the Government’s 10 Point Tax Reform Plan to
help small businesses, the Budget made changes to the
Close Company Surcharge provisions. The Surcharges
apply to certain service companies (at a rate of 15% on
50% of the retained service income) and also applies to
close companies with undistributed investment and
rental income (at a rate of 20%).
The de minimis amount of undistributed investment and
rental income which may be retained by a close
company without giving rise to a surcharge on such
income is being increased from €635 to €2,000. A
similar increase is being made in respect of the
surcharge on undistributed trading or professional
income of certain service companies.
This measure is aimed at assisting
cash-flow of companies by increasing
the amount of income which a
company can retain for use as
working capital without giving rise to
the surcharge.
R & D Tax Credit
The R&D Tax Credit regime provides
for a 25% tax credit for incremental
expenditure on certain research and
development (R&D) activities over
such expenditure in a base year
(2003). In Finance Act 2012, changes
were made to provide that the first
€100,000 of qualifying R&D
expenditure would benefit from the
tax credit without reference to the
2003 threshold. This measure, which
effectively applies the R&D credit on
a volume basis was in particular
focused on the SME sector. The
volume based regime is now further
enhanced by increasing the €100,000
threshold to €200,000 in 2013.
The Budget also announced a review
of the R&D Tax Credit regime will be
carried out in 2013.
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The Agreement is aimed at
combating international tax evasion.
The early conclusion of the
Agreement will provide certainty and
clarity to Irish financial institutions
and assist them in preparing to meet
their compliance obligations. It is
intended that accompanying
legislation will be published in the
Finance Bill.
Agreement between
Ireland and the
United States of
America
As part of the Governments “3 Rs” Corporation Tax
Strategy, the Government is constantly adding to
Ireland’s Tax Treaty network and maintains full
transparency with regard to exchange of information.
As part of this strategy, Ireland has become one of the
first countries to conclude an Intergovernmental
Agreement with the United States to improve
international tax compliance and implement FATCA.
The Agreement provides for automatic reporting and
exchange of information between the Irish and U.S. tax
authorities in relation to financial accounts held in Irish
Financial Institutions by U.S. persons, and the reciprocal
exchange of information regarding U.S. financial
accounts held by Irish residents.
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Real Estate
Investment
Trusts (REITs)
The Budget provides for the introduction of
Real Estate Investment Trusts (REITs). A
REIT is a well established, internationally
recognised model for collective property
investment. REITs are already established
in many developed economies including
the US and the UK.
In the case of many individuals, acquiring
property directly is not option. This may
down to the lack of a cash deposit and loan
finance, particularly in the current banking
climate. The idea behind a REIT is to allow
individuals to invest in property on a
collective base and to provide an after-tax
return for investors similar to that of a
direct investment in property.
REITs are listed companies which qualify for
an exemption from corporation tax at the
level of the REIT company.
Therefore, the common disadvantage of the
double layer of tax through investing in
property via a company is avoided by
exempting the REIT from corporation tax.
Instead, the REIT is required to distribute
profits annually to investors which profits
would be liable for taxation at investor level.
REITS will be governed by specific rules with
regard to liquidity levels, gearing levels and
distribution requirements.
Full details of the REITs will be contained in
the Finance Bill. It is expected that the new
legislation will include features to maintain
taxing rights in Ireland over Irish immoveable
property.
10
Local Property Tax
Budget 2013 will most likely be remembered for the introduction of a new property tax. The
new tax, Local Property Tax (“LPT”), will come into effect from 1 July 2013 with a half year
charge applying for 2013. As expected, the LPT will be administered and collected by the
Revenue Commissioners which is in contrast to the Household Charge which was
administered by local authorities.
The principle features of the tax are as follows:
1. Liable Persons
The LPT will operate on a self-assessment basis with persons liable including:
Owners of residential properties, including rental properties.
Tenants in the case of long leases (over 20 years) or life tenancies.
Co-owners will be jointly and severally liable for the tax.
2. Rates
As expected, for the first 18 months of the LPT (up to 31 December 2014) the national
central tax rate will be 0.18% up to €1 million and 0.25% on the excess value over
€1 million.
From 1 January 2015 local authorities will have discretion to vary the LPT rates by +/-
15% of the national central rate. The national central rate will not be increased for
the lifetime of the current Government.
3. Valuing Property
As set out above, the LPT will operate on a self-assessment basis. Liable persons will
therefore have to self-assess the market value of their property. Revenue will issue
guidance to liable persons on how to value a property. Where Revenue guidance on
valuing a property is followed, property valuations will not be challenged by the
Revenue Commissioners.
The initial valuation will remain valid up to and including the year 2016.
11
4. Basis of Assessment
The LPT will be levied on the market
value of residential properties. A
system of market value taxable
bands will apply with an initial band
of €0-€100,000 and in bands of
€50,000 thereafter up to €1,000,000.
The LPT liability will be calculated by
applying the tax rate to the mid-
point of the band.
For example, an individual with a
house valued at €210,000 would pay
LPT on a value of €225,000 giving
rise to an LPT of €202.50 in 2013
(€405 in 2014). Similarly, an
individual with a house valued at
€245,000 would pay the LPT based
on a value of €225,000.
Houses valued over €1m will be
chargeable to LPT on their market
value, with no banding applied.
5. Payment Methods
The LPT may be paid in full by a
Bank Single Debit Authority or by
Debit/Credit Card i.e. similar to the
payment methods available for the
self-employed via ROS.
Alternatively the LPT may be paid by
instalment through deduction at
source, direct debit or by cash
payments.
Where the deduction at source method is applied,
the LPT can be deducted from salary/occupational
pensions or certain payments from the Department
of Social Protection and the Department of
Agriculture, Food and Marine.
6. Compliance
The Revenue Commissioners are currently
developing a comprehensive register of residential
properties in the State which is expected to contain
approximately 1.9 million properties. During March
2013, information will be sent by the Revenue
Commissioners to liable persons advising them of
their obligations in relation to the LPT and how to
comply. In the absence of a return, the Revenue
Commissioners will pursue collection of an
estimated amount of LPT, which will have been
notified to the taxpayer.
Normal self assessment enforcement procedures will
apply to the LPT. For example, in the absence of a
return or an election by the taxpayer for a particular
method of payment, as far as possible, deduction at
source will be the default means of collection. In
the case of the self-employed, tax clearance
certificates will not issue where there is unpaid LPT.
Late delivery of an LPT return will be linked to the
filing of an income tax return, thus exposing a self-
employed taxpayer to the penalty of an income tax
surcharge.
Where LPT remains outstanding, a charge will attach
to that property. This charge will have to be
discharged on the sale or transfer of the property.
12
7. Exemptions
There are a number of exemptions from the LPT which largely correspond to exemptions
from the Household Charge. The exemptions include:
Newly constructed but unsold residential property.
Accommodation provided to people with special housing needs such as the elderly
or people with disabilities.
Where a principal private residence is unoccupied by reason of long term mental or
physical infirmity.
Mobile home, vehicle or a vessel.
Property fully subject to commercial rates.
Houses in certain unfinished developments as prescribed by law.
Properties enjoying protection in other legislation – diplomatic or similar property.
However, local authority housing and social housing will not be exempt unless it is
provided to people with special housing needs such as the elderly or people with
disabilities. Liability will rest with the local authority or social housing organisation as
owner.
8. Additional Exemptions
Interestingly, the new LPT also provides a number of additional exemptions which are
presumably aimed at stimulating the residential property market in 2013:
New and previously unused properties that are purchased between 1 January 2013 and the
end of 2016 will be exempt until the end of 2016.
Second-hand property purchased by a first time buyer between 1 January 2013 and 31
December 2013 will be exempt until the end of 2016.
13
9. Deferrals
The Budget measures also include a system of
voluntary deferral arrangements for owner-
occupiers. These measures will be implemented
to address cases where there is an inability to pay
the LPT where the following conditions apply:
Firstly, gross income must not exceed
€15,000 in the case of a single person and
€25,000 in the case of a couple.
For income stressed owner-occupiers who
have an outstanding mortgage, an adjusted
gross income limit will apply. Where the
gross income less 80% of mortgage interest
falls below the €15,000/€25,000 thresholds
above, a deferral option will be available up
to the end of 2017 (when mortgage interest
relief also ends).
Marginal relief will apply for owner-occupiers
where the income or adjusted income is
€10,000 above the relevant income limits
where deferrals of up to 50% would be
permitted.
Interest will be charged on deferred amounts
but at a lower rate (i.e. 4% per annum) than
the rate charged in default cases (i.e. 8% per
annum). The deferred amount, including
interest, will be a charge on the property and
therefore would need to be discharged on
the sale/transfer of the property.
10. Interaction with Household
Charge
The Household Charge will not apply in 2013.
However, in the case of arrears of the
Household Charge for 2012, the outstanding
arrears will be capped at €130 if paid to the
Local Government Management Agency before
30 April 2013.
If the Household Charge is paid from 1 May to
30 June 2013, normal Household Charge
collection, late payment fee and interest
procedures will apply. The cap of €130 will no
longer be available.
From 1 July 2013, any outstanding Household
Charge will be increased to €200 and added to
the Local Property Tax due on the property. In
effect, the arrears of the Household Charge will
be converted into LPT and collected through
the LPT system.
The Revenue Commissioners will pursue this
additional liability when the LPT system is fully
operational. Interest and penalties under the
LPT system will apply to the additional €200.
11. Interaction with Non-Principal
Private Residence Charge
The annual NPPR charge of €200 will apply for
2013 and the NPPR will be abolished
thereafter.
Similar provisions as will apply for arrears of
the Household Charge will be put in place for
the collection of any arrears of NPPR
14
Capital Taxes
Capital Acquisitions Tax
The rate of Capital Acquisitions Tax (“CAT”) will increase from 30% to 33% in respect of gifts or
inheritances taken after 5 December 2012. The Group A threshold has been reduced
considerably by approximately 59% from its peak of €542,544 in early 2009 to €225,000 from 6
December 2012 onwards. CAT on the excess over this threshold has also increased from a rate
of 22% in early 2009 to a rate of 33% from 6 December 2012.
Group Threshold 01/01/2009 –
07/04/2009
€
07/12/2011 -
05/12/2012
€
Post 5 December
2012
€
Decrease from
2009 to 2012
%
(A) 542,544 250,000 225,000 58.53%
(B) 54,254 33,500 30,150 44.43%
(C) 27,127 16,750 15,075 44.43%
There were no changes to either Business Property Relief or Agricultural Relief for CAT
purposes. Both reliefs, where available, result in a reduction of 90% of the taxable value of
qualifying gifts and inheritances.
Similarly there was no change to Dwelling House relief, which exempts a person from CAT in
respect of a gift or inheritance of a house which the individual has lived in as their principal
residence for the previous 3 years.
15
Capital Gains Tax
The Minister announced an increase in the rate of Capital Gains Tax from 30% to 33% in respect of
disposals made after 5 December 2012. This represents an increase of 13% since 19 November 2008,
when CGT was at a rate of 20%.
There was no change announced to Retirement Relief from CGT, which continues to exempt an
individual aged over 55 from CGT on the disposal of business assets. However, taxpayers should be
mindful that the restrictions announced previously for persons aged over 66 will take effect from 1
January 2014. These restrictions provide that where an individual aged over 66 disposes of business
assets to a family member, there is a limit of €3m. and no Retirement Relief is available on the
excess. There is also a restriction on disposals by a person aged over 66 to a third party member.
Currently where an individual aged 55 or over disposes of business assets to a third party and the
proceeds of sale do not exceed €750,000, the gain is exempt from CGT due to Retirement Relief.
From 1 January 2014, where such an individual is aged over 66, this limit is reduced to €500,000.
A new relief from CGT has also been introduced in respect of disposals of farm land for farm
restructuring purposes, with effect from 1 January 2013 to 31 December 2015 (Subject to EU State
Aid approval). This relief will be available where the proceeds of the sale of farm land are reinvested
in further farm land, provided the sale and purchase of farm land occur within a period of 24 months
and the initial sale or purchase occurs between 1 January 2013 and 31 December 2015. This relief
will also apply to farm land swops (subject to Teagasc certification). Further details will follow in the
Finance Act.
Stamp Duty
No changes were introduced to stamp duty, which remains at 1% on share transactions and 2% on
non residential property. Consanguinity relief, which reduces the level of Stamp Duty payable on
qualifying intra-family transfers of non-residential property by 50%, remains available until 31
December 2013.
The rates of Stamp Duty on residential property also remain unchanged, being chargeable at a rate
of 1% on transactions up to and including €1m and 2% thereafter.
16
Indirect Taxes
Excise Duty
There have been no increases introduced on excise duty on petrol and diesel.
Excise duty on a packet of 20 cigarettes is being increased by 10 cent from 6 December 2012 and an
increase of 50 cent is being applied to 25g packets of tobacco.
Excise duty on a pint of beer or cider or on a measure of spirits is being increased by 10 cent and
excise duty on a 75cl. bottle of wine is also being increased by €1 from 6 December 2012. A pro rata
increase will also apply to other alcoholic products.
Carbon Taxes
Carbon tax will be extended to solid fuels on a phased basis, applying at a rate of €10 per tonne from 1
May 2013 and increasing to a rate of €20 per tonne from 1 May 2014.
Motor Tax & Vehicle Registration Tax
Motor tax and Vehicle Registration Tax (“VRT”) are to increase across all categories with effect from 1
January 2013. Motor tax for cars in band A is to rise from €160 to rates of €120 to €200 while motor
tax for cars in band B is to increase from €225 to rates of €270 to €280. These are generally the two
biggest categories of cars for motor tax in Ireland. These rates relate to cars registered after 1 July
2008. There have also been increases announced on motor tax for cars registered before 1 July 2008,
ranging from a rise from €278 to €299 for a 1 litre car to an increase from €843 to €906 for a 2 litre car
and similar increases for engines of different engine capacities. Motor tax on electric cars has been
reduced to €120.
VRT is also being increased from 1 January 2013, based on CO2 emission bands. This results in an
increase in VRT from a rate of 14% on cars in band A to rates ranging from 14% to 17%, depending on
CO2 emission bands. Similarly, VRT on cars in band B will increase from a current rate of 16% to rates
ranging from 18% to 19% depending on the cars emission bands. The top rate of VRT, on cars in band
G, remains at 36%.
VRT Relief currently in place for electric vehicles, plug-in hybrid electric vehicles, and hybrid and
flexible fuel vehicles are being retained until 31 December 2013.
17
Dual Registration Period
A dual registration period for vehicles is
being introduced such that from 1 January
2013 to 30 June 2013, cars will carry a
registration tag of 131, while from 1 June
2013 to 31 December 2013, cars will carry a
year registration of 132. The aim of such a
dual registration system is to boost the
motor tax industry and to generate an
additional sales peak in the second half of
each year.
Value Added Tax
There has been a reduction in the farmer’s
flat rate addition from 5.2% to 4.8%,
effective from 1 January 2013
This scheme compensates unregistered
farmers for VAT incurred on farm
purchases.
The second reduced rate of VAT (mainly
related to tourism) of 9%, which was
introduced from 1 July 2011, has been
retained and will continue throughout
2013. There were also no changes
introduced to the standard rate and the
reduced rate of VAT, which remain at 23%
and 13.5% respectively.
.
With effect from 1 May 2013, the
annual VAT cash receipts basis
threshold for small and medium
businesses has been increased from
€1m to €1.25m. Accordingly, from May
2013 where a trader either has annual
turnover which does not exceed
€1.25m. or where his supplies are
almost exclusively to customers who
are not registered for VAT or not
entitled to a VAT deduction, that trader
may operate VAT on the cash receipts
basis such that he will only be liable to
account for VAT when payment is
actually received (rather than when an
invoice is issued).
18
Farmer Taxation
Stock Relief
The general rate of stock relief at 25%, which was due to expire on 31 December 2012, has
been extended for a further 3 years to 31 December 2015. The Young Trained Farmer rate of
stock relief of 100% has also been extended to 2015 (Subject to EU State Aid Clearance).
In addition, the definition of “registered farm partnership” for the purposes of the 50% rate
of stock relief has been extended to include additional production partnerships not
previously included, such as beef production partnerships (Also subject to EU State Aid
Clearance).
A new relief from CGT has also been introduced in respect of the disposal of farm land for
farm restructuring purposes in the period 2013 to 2015, which is set out in more detail
above.
Capital Gains Tax
A new relief from CGT has also been introduced in respect of disposals of farm land for farm
restructuring purposes, with effect from 1 January 2013 to 31 December 2015 (Subject to EU
State Aid approval). This relief will be available where the proceeds of the sale of farm land
are reinvested in further farm land, provided the sale and purchase of farm land occur within
a period of 24 months and the initial sale or purchase occurs between 1 January 2013 and 31
December 2015. This relief will also apply to farm land swops (subject to Teagasc
certification). Further details will follow in the Finance Act.
19
Pensions
While the Budget maintained tax relief on pensions at the marginal rate of income tax and
also maintained the earnings cap of €115,000, a number changes were made to Pensions:
1. 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 of the AVCs will be liable to tax at an individual’s marginal rate.
The option to withdraw will be available for 3 years from the passing of Finance Bill
2013.
2. Changes to the maximum allowable pension fund
Changes will be put in place in 2014 to the maximum allowable pension fund at
retirement for tax purposes (the Standard Fund Threshold). The current Standard Fund
Threshold is €2.3m.
The Budget also flagged other possible changes to pensions in the future aimed at
giving effect to the commitment in the Programme for Government to cap taxpayers’
subsidies for pension schemes which deliver pension income of more than €60,000.
20
Appendix 1 – Income Tax Credits
Tax Credits from 1January 2012 Existing Proposed
€ €
Employee Tax Credit 1,650 1,650
Personal Tax Credits - single 1,650 1,650
- married 3,300 3,300
Widowed person bereaved in year of
assessment
3,300 3,300
One Parent Family Tax Credit 1,650 1,650
Home Carer Tax Credit 810 810
Dependent Relative Tax Credit 70 70
Incapacitated Child Tax Credit 3,300 3,300
Blind Persons Credit - single 1,650 1,650
- married
(both
blind)
3,300 3,300
Additional credit for certain widowed persons 540 540
Widowed Parent Tax Credit - year 1 3,600 3,600
- year 2 3,150 3,150
- year 3 2,700 2,700
- year 4 2,250 2,250
- year 5 1,800 1,800
Age Credit - single 245 245
- married 490 490
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21
Appendix 2 – Tax Bands & Exemption Limits
Standard Rate Bands from 1 January 2012 Existing Proposed
€ €
Single/Widowed 32,800 32,800
Married One Income 41,800 41,800
Married Two Incomes 65,600 65,600
One parent/widowed Parent 36,800 36,800
Age Exemption Limits from 1 Jan 2012 Existing Proposed
€ €
Single 18,000 18,000
Married 36,000 36,000
Disclaimer
This information is designed to remind/inform readers of important issues and deadlines, and to provide
information of recent developments in the taxation sector in general. Please note that this leaflet is intended to be
a brief outline of the issues involved and should not be regarded as a comprehensive guide. In all cases only a
summary of the main points are included and you should contact us if you wish to discuss any of these matters
in more detail. The emphasis is on clarity so some items may be over-simplified. While every effort has been
made to ensure that the information contained therein is correct, Cahill Taxation Services do not accept any
responsibility for loss or damage occasioned by any person acting, or refraining from acting, as a result of this
information. Should you have any queries regarding any of the issues raised above, please do not hesitate
to contact us as 065 6840630 or at [email protected]