Stamp duty

As announced in the Budget:

• The rate of stamp duty on non-residential property is 2% from 7th December 2011;
• Consanguinity relief will not be available on the transfer of non-residential property from 31st December 2014;
• Transitional relief applies to deeds signed before 1st July 2012 if there was a pre-budget contract.

Capital Gains Tax

Retirement relief from CGT on disposals of business or agricultural assets has been amended. The ceiling for relief will remain at €750,000 for those aged between 55 and 65 years. However for disposals made on or after 1st January 2014 by taxpayers who are aged 65 or more, the ceiling will be reduced to €500,000 (with provision for marginal relief).

CGT new property relief

The relief announced in the Budget for gains on disposal of properties acquired between 7th December 2011 and 31st December 2013 has been introduced.

The relief applies to land or buildings in the EEA (including Ireland) where the property is owned by the purchaser for at least 7 years from the date of acquisition.

The relief exempts the portion of the gain for 7 years from CGT. So for example, if a property is held for ten years, then 7/10 of the gain will be exempt. Anti-avoidance provisions have been included to prevent arrangements which are made solely to secure a tax advantage.

Capital Acquisitions Tax

Rates and thresholds

The CAT rate is 30% from 7th December 2011.

The class (a) threshold has been significantly reduced while the other two thresholds have been slightly increased.

Indexation has been abolished from 2012.

Changes have been made to the effective date of creation of discretionary trusts.

A loan associated with the purchase, repair or improvement of an off-farm main residence may now be deducted when establishing whether agricultural relief is available.

A claw-back of agricultural relief will no longer apply if the beneficiary ceases to be resident in Ireland.

The CAT filing date has been changed to 31st October, to bring it into line with other forms of taxation.

Student fees

Tax relief for fees paid for third-level education has been reduced.

The first €2,250 (previously €2,000) of fees paid for full-time courses is now disregarded while for part-time courses the first €1,125 is disregarded (previously €1,000).

5% charge for certain property investors

As announced in the Budget, a 5% charge has been introduced for large-scale investors (those with total income of €100,000 or more) by way of an additional USC charge on the amount of aggregate income which has been sheltered by a “specified property relief”.

New capital allowance provisions apply to passive investors (i.e. not active partners or traders).

Where the tax life has already ended, capital allowances can continue to be claimed until the end of 2014 and will then be lost. If the tax life ends in 2015 or later years the capital allowances cannot be claimed after the year in which the tax life ends. Unused capital allowances can be offset against any subsequent balancing charge.

Mortgage interest relief

A new rate of mortgage interest relief of 30% has been introduced for first-time buyers who purchased their homed between 2004 and 2008 (inclusive). The relief can be claimed even if the property has been replaced by a second home.

Business Development Initiatives

Research and development

As announced in the Budget, and R&D credit will now be available on the first €100,000 of relevant expenditure without reference to a 2003 base year. Relief on expenditure over €100,000 will continue to be calculated by reference to the 2003 base year. The definition of expenditure on R&D has been amended to ensure that the activities are carried on by the company itself. Where a company which was claiming an R&D credit ceases to trade and another company in the same group takes over the trade, the successor company can now claim any previously unused credits.

BRICS foreign earnings deduction

Where an individual is carrying out duties of an office or employment in Brazil, Russia, India, China or South Africa and is present for a total of at least 60 days in any 12 month period (counting only days which form part of a visit of 10 days or more) they can claim an income tax deduction of a proportion of their income from that employment, up to a maximum deduction of €35,000. The deduction will be restricted where a double tax agreement claim (DTA) is also made.

Special assignee relief

The relief has been introduced for employees who are assigned to work in Ireland by an employer company located in a State which has a double tax agreement with Ireland. The employee is allowed to deduct up to 30% of their remuneration, subject to a maximum deduction of €127,500. The employee must have worked outside Ireland for the foreign employer for at least 12 months, must not have been resident in Ireland in the previous five years, and the assignment to Ireland must be for at least 12 months.

Key R&D employees’ relief

Key employees may receive income tax relief where they are engaged in R&D work. The employer company must surrender its right to claim the equivalent R&D credit. The employee can then claim an income tax deduction, which is capped to ensure that the employee pays a minimum income tax rate of 23%.

VAT

From 1st May 2012 a connected party in receipt of construction services must account for the VAT.

A security deposit may be required for fiduciary taxes by the Collector General from a person carrying on business, where they had a previous business which ceased to trade, owing taxes.

Stamp duty

The rate of stamp duty applicable to non-residential property purchases will be 2% and consanguinity relief on such property is only to apply until 31st December 2014.

A new stamp duty exemption has been introduced for company mergers.

Stamp duty will be on a self-assessment basis at a future unspecified date. The adjudication process will be abolished, a penalty of €3,000 will apply for failure to make a return and a surcharge of 5%/10% will apply for failure to make a return.

Pensions – ARFs

The annual imputed distribution applying to the assets in an approved retirement fund (ARF) has increased from 5% to 6% in respect of ARFs with asset values in excess of €2 million.

The rate of income tax applying to a “post-death” distribution from an ARF to a child is to be increased from 20% to 30%.

DIRT

The rate of DIRT increased to 30% (33% for long-term savings) from 1st January 2012.

Deposit interest from EU countries will be taxed at 30% if the income is returned on time or 41% if returned late.

A taxpayer earning deposit interest from non-EU countries will pay tax at 41% unless they are a standard rate taxpayer and the interest is returned on time, in which case the rate will be 30%.

Health insurance

An increased levy of €285 (adults) and €95 (under-18) applies to all health insurance contracts with effect from 1st January 2012.

Other measures

Exit tax: The rate for investment funds and similar products has been increased by 3%;

USC:      The level at which USC applies increased from €4,004 to €10,036 with effect from 1st January 2012;

PRSI:      Employer’s PRSI relief of 50% on employee pensions has been abolished;

                PRSI will be charged on unearned income (rent, investment income) from 2013.

Domicile levy:   The levy will apply to all tax exiles, not just Irish citizens.

CT relief for start-up companies:              The relief has been extended to 31st December 2014.

VAT:      The standard rate of VAT increased from 21% to 23% from 1st January 2012

Related posts:

1. Finance Act 2010
2. Companies Bill 2012
3. CGT and CAT Planning

Until now, the credit amounted to 25% of the qualifying expenditure on “incremental” research and development during the accounting period. For 2012, the credit, up to a maximum of €100,000, will be allowed against all expenditure. Above €100,000 the incremental basis will still apply. The credit is in addition to the 12.5% corporation tax relief, thus bringing the total tax relief on expenditure up to €100,000 to 37.5%.

Where there are insufficient profits in the current year to absorb the expenditure, the credit may be offset against the prior year’s liability. Any excess which is still unutilised may be carried forward indefinitely against future profits. Alternatively, the unused credit may be repaid over a period of three years.

Where expenditure is sub-contracted outside the company to an unrelated third party, the credit is currently restricted to 10% of total costs, or 5% if sub-contracted to a third-level institution. The Budget proposes to increase this to the greater of 10%/5% respectively, or €100,000. This will assist SMEs in particular, as they are less likely than large companies to have in-house R&D expertise.

It is also proposed to introduce a scheme to facilitate making tax-free payments to company employees. Details are not yet available.

The Finance Bill will contain the proposed legislation to give effect to the measures announced in the Budget. Commentators have suggested that, while the above changes are welcome, we are still behind other countries in our incentives for research based activities. It is suggested that the €100,000 cap should be removed altogether, so that the 2003 base expenditure no longer has to be exceeded before expenditure (in excess of €100,000) qualifies.

 Research and development expenditure may seem irrelevant to most entrepreneurs, but the definition includes “systematic, experimental or investigative activities directed at producing new or improved materials, products, devices, process systems or services” can qualify for the tax credit.

It may be worthwhile for company directors to review their activities in the light of this legislation, as the benefits may be considerable. Long & Company will be happy to have an initial meeting to discuss whether your company’s activities include eligible research or development costs, on an obligation-free basis.

Related posts:

1. Finance Act 2010
2. CGT and CAT Planning
3. Pensions and Saving Tax

Related posts:

1. Unannounced Revenue Visits
2. Pensions and Saving Tax
3. Retirement Annuity Relief

The household charge is not an allowable expense against rental income.

Related posts:

1. Non-Principal Private Residence
2. Expenses for Self Employed and Employees
3. Share Schemes – An Overview

http://www.revenue.ie/en/practitioner/tax-briefing/2011/no-052011.html

If you have any queries regarding the above please let us know.

Related posts:

1. Professional Subscriptions – Employees and Office Holders
2. Reduction in VAT rate for certain goods and services
3. CGT and CAT Planning

Under the new system all contacts between principals and Revenue will be conducted through an on-line process. Principals will need to be registered for the Revenue Online Service (ROS) before the new scheme is introduced. Revenue will however accept paper RCT35 forms for periods up to 31 December 2011.

Under the new scheme the standard rate of RCT will be 20% however there are cases in which a rate of 0% or 35% may be applied.

As more information becomes available we will keep you updated.

Related posts:

1. Reduction in VAT rate for certain goods and services
2. Resources
3. Professional Subscriptions – Employees and Office Holders

• Debts owing to Revenue amounted to €2.1 billion at end-March 2011;
• Tax debt write-offs increased by 72% in 2009, compared with 2008 and a further increase of 35% was recorded in 2010;
• The largest amount written off in a single case was €3.8 million.
• Most write-offs resulted from business failure or insolvency

CAT filing deadline 30th September

As previously noted, the pay and file date for CAT returns is this Friday, 30th September. Our experienced staff are available to help, even at this late stage!

Related posts:

1. Tax Update Sept 2011 – CAT and Civil Partnerships
2. Tax update 5th October 2009
3. Revenue Chairman comments on “shadow economy”

In her opening statement before the Public Accounts Committee last Thursday, Revenue Chairman Josephine Feehily spoke about the shadow economy. She commented that the shadow economy grows in times of recession “as people look for ways to replace lost income or profits”. In 2010 Revenue “placed great emphasis on tacking cash economy risks by a combination of risk analysis, intelligence collation, assurance checks and outdoor operations including audit and investigation” this emphasis is continuing in 2011 and while focussing on specific sectors, Revenue has already this year:

• made over 4,700 cold calls or site visits and nearly 3,200 assurance checks;
• completed over 1,200 audits in the construction sector with a combined yield of €37 million;
• closed 1,400 audits with a yield of €50 million in the wholesale, retail, restaurants and pubs trades combined;
• selected over 21,000 PAYE cases for intervention, yielding over €13 million and disallowed credits valued at nearly 25 million.

She referred to lower tax yields, higher tax debt, and liquidity issues facing businesses in the current economic environment and acknowledged Revenue’s responsibilities which include making repayments quickly and working with viable businesses that need time to pay.

Related posts:

1. Unannounced Revenue Visits
2. Revenue Investigations

This position has been filled

An immediate vacancy has arisen for a chartered accountant in Iraq.

The placement will be for a period of between one and two months.

The successful candidate will ideally have construction industry experience, as the assignment
involves the research and finalisation of a construction industry contractor’s account.

Court proceedings may arise, depending on the outcome, so prior forensic experience would be a
distinct advantage. Candidates need to be pro-active in finalising this assignment quickly and
accurately.

Applicants should be aware that Iraq is still classified as a Category 1 Conflict Zone.

The assignment is based at an international oil company camp in the Burgesia desert in Southern
Iraq. Temperatures here can approach 50 degrees centigrade during the day.

Candidates are expected to work long hours – 9 to 12 hours per day, seven days per week, for the
duration of the assignment.

Compensation is generous, return air fares will be provided, as are meals and accomodation.

Depending on the residence status of the successful candidate, payment will be subject to Irish
taxation.

If interested, please send your cv to Declan Long (Declan@longaccounts.ie).

Related posts:

1. Jobs

The filing date for returns to Revenue in respect of 2010/2011 is 30th September 2011 – a matter of days away. Gifts and inheritances received during the year ended 31st August 2011 must be declared by 30th September if interest on late payment is to be avoided. Failure to file on time will also result in a surcharge if CAT is payable. It is quite likely that CAT and CGT rates will be increased in the December Budget, so proper planning in relation to capital transactions may save tax. Please contact Sinead Murphy ACA AITI if you have any questions concerning this or other tax
matters.

Civil Partnerships and Cohabitants

Reliefs in the form of exemptions from tax for registered civil partners were introduced in the Finance (No 3) Act this year, to take effect from 1st January 2011. The existing favourable tax treatment of spouses has been replicated for registered civil partners. Transfers between cohabitants under a redress order are benefit from tax exemptions.

Related posts:

1. Employment Initiative July 2011
2. Tax update 5th October 2009