In Budget 2011, it was proposed that investors could only use the section 23 relief against the section 23 property itself and not as previously against their other income. Similarly the accelerated capital allowances could only be used against the property the capital allowances relate to.
The investors who bought them did so for the purpose of using the reliefs available to cover rental profit on other properties. The sudden withdrawal of the tax break would have lead to severe difficulties for some of these investors possibly pushing them to bankruptcy. Numerous submissions were made to the Department of Finance leading the proposal to be shelved for a year while a review was done.
Mr Noonan said in his Budget day 2012 speech: ” My Department has undertaken an Economic Impact Assessment of the measures proposed by the previous Government. It is quite clear that these proposals were unworkable and would have done significant and lasting damage to an already distressed property market, creating real difficulties for many ordinary people. The report also highlights the vulnerability of small investors to insolvency if they lose the reliefs”
The Economic Impact Assessment report concluded that small scale investors should not be restricted whereas large scale investors should make more of a contribution.
Mr Noonan announced that a property relief surcharge of 5% would be levied on investors who have a gross income over €100,000. This would apply on the amount of income sheltered by property reliefs in a given year.
This surcharge is essentially a higher rate of USC.
Gross income is the same as adjusted income for the purposes of the higher earners restriction.
Example (taken from Revenue website)
Taxable income (say) €80,000
Add back:
Taxable income (as above) €80,000 plus add backs equals Gross Income
Accelerated Capital Allowances
Investors in accelerated capital allowance scheme will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after 1st January 2015. Where the tax life of the scheme has ended before 1st January 2015 no carry forward of allowances into 2015 will be allowed.
Full details will be contained in the Finance Bill.
This article looks at how Budget 2012 affects farmers in Ireland.
In his Budget Day speech, Mr Noonan said ‘Active ,energetic and profitable farming is fundamental to the agri-food sector.’
The main taxation changes that affects farmers and their families are:
INCOME TAX
CAPITAL TAXES
Full details of these measures will be set out in the Finance Bill
6th December 2011
Mr Michael Noonan announced details of tax adjustments.
Corporation Tax
Income tax
Universal Social Charge
Illness Benefit
Stamp Duty
Capital Gains Tax
Capital Acquisitions tax
VAT
DIRT
Property legacy reliefs
More detailed explanations of the above will be published in the Finance Act
5th December 2011
Brendan Howlin the Minister for Public Expenditure and reform has announced the spending measures the Government plan to cover for 2012
Here are some of the measures:
Child Benefit:
Back to school Clothing and Footwear Allowance
Jobseekers Benefit
Farm Assist
Redundancy and Insolvency Scheme
Fuel Allowance
Household benefits
Late claims
Drug payments scheme
One Parent Family
Rent Supplement
Mortgage interest supplement
2011 is nearly finished. Before the year is out, the following deadlines should be considered to ascertain whether they are applicable to your particular circumstances.
INCOME TAX
-Medical Expenses
-Bin Charges
-Charitable Donations
-Tax Credits
CAPITAL GAINS TAX
If you have disposed of any chargeable assets in the period 1st January 2011 to 30th November 2011, the Capital gains tax thereon is due to be paid by 15th December 2011. For any disposals in December 2011, the capital gains tax is due by 31st January 2012. Some examples of chargeable assets include land,property and shares.
PENSION CONTRIBUTIONS
An additional voluntary contribution can be made by 31st December 2011 and tax relief at source can be claimed which will save tax at the taxpayers top rate of tax. The tax relief is capped at €115,000 multiplied by the relevant age based percentage of earnings. Ordinary contributions made during the year for which relief has already been claimed must be deducted from this. The additional voluntary contribution is restricted to the balance.
SMALL BENEFITS EXEMPTION
An employer can provide an employee with a single tax free benefit in 2011 not exceeding €250. The benefit must be in the form of a voucher or hamper. It must not be cash. There will be no PAYE,PRSI or USC.
The Revenue has been cracking down over the last few years on the criteria for being self employed.
This has led to workers who had been self employed all along suddenly finding they must go on the payroll as the Revenue has determined they do not fit the criteria for being considered self employed.
This means a big change for the worker involved but it also has implications for the employer.
If the Revenue determine one of their workers should have been classified as employed rather than self employed they are liable for:
Most recently the Revenue issued a e-brief with regard to locum doctors who must now be treated as employees. The doctors who employed them were advised to issue supplementary P35s to cover all outstanding tax due for 2009 and ensure the position is regularized by the time the 2010 P35 is submitted.
What are the criteria to assess whether a worker is employed or self employed:
There are additional factors to consider but each case should be considered on their own points. If in doubt, professional advice should be sought.
1) At present transfer of assets by gift or inheritance are liable to:
2) Reliefs available at present:
a) Gifts if the transferor is over 55 years and has owned the asset for 10 years
b) All inheritances
3) Commission on Taxation recommendations:
4) Fine Gael proposed in their election manifesto:
5) Labour also proposed increasing yield from capital taxes.
So if you are planning to transfer assets, it would be prudent to consider doing it soon, as there is no doubt that the relevant tax rates are on the way up, the relevant thresholds are being reduced and certain reliefs and exemptions are being curtailed.
It is worth noting that asset values are at an all time low which means that the market values assessable to tax are substantially reduced. This is another reason to act now if you are considering a transfer
For more information please contact us
The biggest stumbling block when setting up a new business is finance. Banks are trying to repair their own balance sheets, and therefore are not helping new businesses like they used to. So you should check if grants or tax reliefs are available.
If you have a business start up idea, you may qualify for funding from Enterprise Ireland or the County and City Enterprise Boards.
There are tax incentive schemes which may also help:
1) SEED CAPITAL SCHEME
Who can avail of it: PAYE workers and persons made redundant recently who want to set up their own business.
What does this scheme offer:
What are the conditions for the investor:
In the twelve months before your first investment ,you cannot have held more than 15% of the share or loan capital/voting power of any other Company unless
Any business transactions with your former employer must be on normal business terms and with no special arrangements.
What are the conditions for the Company:
2) EMPLOYMENT and INVESTMENT INCENTIVE SCHEME
The existing Business Expansion Scheme has been reformed to focus on job retention and job creation. Investors will be encouraged to invest in a broad range of companies that did not have access to BES funds. However there will be a list of excluded trades.
External investors invest money in your company and can get tax relief on their investment. EII/BES is a specified relief for the purposes of the high earners restriction.
What are the conditions for the investor:
Use of the BES money invested:
Tax relief
3) CORPORATION TAX EXEMPTION
Recently a new provision under Section 486C of the Taxes Consolidation Act 1997 provides relief from corporation tax for start up companies in their first three years of operation.
Trades that do not qualify:
Claims for this relief are made on the annual CT1 form
Professional advice should be sought before relying on the above outline.
There has been significant changes made to the Relevant Contracts Tax scheme. The new measures were announced on Budget day 7th December 2010.
The Finance Act 2011 provides the legislative back up. What are these changes?
Three rate withholding scheme:
Monthly returns will be replaced with an annual return and offset system.
Revenue is still working on the finer details of the scheme but it is a major change from the old system.
The budget for 2011 was held on 7th December 2010 and announced huge changes for investors with regard to section 23 property reliefs and accelerated capital allowances. The Finance Act 2011 has since been published and has announced that the changes proposed had been put on hold for a year to assess their impact. These changes do not affect owner occupiers.
From 1st of January 2011, investors can only use the section 23 relief against the section 23 property itself and not as previously against their other income. Similarly the accelerated capital allowances can only be used against the property the capital allowances relate to.
Despite the National Recovery Plan stating that there would be a phased abolition of the property reliefs, the measures taken in the budget mean for a lot of investors that they have being withdrawn with immediate effect. This is because the Section 23 properties in most cases had substantial mortgages against them and did not make a profit. The investors who bought them did so for the purpose of using the reliefs available to cover rental profit on other properties. The sudden withdrawal of the tax break would lead to severe difficulties for some of these investors possibly pushing them to bankruptcy. The bigger investors used all their reliefs in the first year but it is the smaller investors who were planning to use them over the full ten years that are most affected by the current proposals.
There have been numerous submissions to the Department of Finance on this issue. As reported in the Sunday Business Post on 2nd January 2011 the Chairman of the Oireachtas Finance Committee said he was confident that there would be an amendment to the bill before it comes before the Dail. It is proposed that there would be a gradual reduction in the percentage of reliefs allowable or a set amount each year to be used against other income.
