Budget 2018 Highlights

Personal Tax

  • Cuts to the two middle rates of Universal Social Charge – 2.5% rate cut to 2%; 5% rate cut to 4.75%.

  Incomes of €13,000 or less are exempt from the USC. Otherwise, rates are as follows:

Income €                      Rate

0- 12,012                          0.5%

12,012 – 19,372               2%

19,372 – 70,044               4.75%

70,044 +                            8%

Self-employed income in excess of €100,000 at 3%.
The USC relief for medical card holders is being extended fro another two years. Medical card holders and individuals aged 70 years and over whose aggregate income does  not exceed €60,000 will now pay maximum rate of USC of 2%.
Marginal tax rates on incomes up to €70,044 reduced from 49% to 48.75%.

  • Income Tax Bands – the threshold which an individual will pay tax at the 40% rate of income tax will rise from its current level of €33,800 by €750 to €34,550.
  • The Home Carer Tax Credit will increase from €1,100 to €1,200.
  • The Earned Income Credit will increase from €950 to €1,150.
  • There will be a tapered extension to mortgage interest relief for remaining recipients – owner occupiers who took out qualifying mortgages between 2004-2012. 75% of the existing relief will be continued into 2018, 50% in 2019 and 25% in 2020. The relief will cease entirely from 2021.
  • A new deduction for pre-letting expenses of a revenue nature incurred on a property that has been vacant for a period of 12 months is being introduced. The cap on the expenditure is €5,000 per property and the relief will be subject to a clawback if the property is withdrawn from the rental market within 4 years. The relief is available for qualifying expenses incurred up to the end of 2021.
  • A share based remuneration incentive – Key Employee Engagement Programme (KEEP) is being introduced to facilitate the use of share based remuneration by unquoted small to medium enterprises to retain key employees. Gains arising to employees on the exercise of KEEP shares will be subject to capital gains tax as opposed to the current liability to income tax, USC and PRSI on exercise. This incentive will be available for qualifying share options granted between 1 January 2018 and 31 December 2023.

VAT

  • Standard rate of VAT will remain at 23%.
  • The reduced 9% rate of VAT for the tourism and hospitality sector, introduced in 2011, will remain.
  • The rate of VAT on sun-bed services is being increased from 13.5% to 23% from 1 January 2018 in line with the government national cancer strategy.
  • A charities VAT compensation scheme is being introduced in 2019 in respect of VAT expenses incurred in 2018. Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive.

Stamp Duty

  • The rate of stamp duty on non-residential property will increase from 2% to 6%.
  • In relation to commercial land purchased for the development of housing, there will be the introduction of a stamp duty refund scheme. The refund will be subject to conditions, including a requirement that developers will have to commence the relevant development within 30 months of the land purchase.
  • Consanguinity stamp duty relief at 1% for inter-family farm transfers is extended for a further three years.
  • The exemption for young trained farmers from stamp duty on agricultural land transactions continues.
  • The vacant site levy will increase from 3% to 7% in the second and subsequent years. In practical terms, the owner of a vacant site on the register who does not develop their land in 2018 will pay the levy of 3% in 2019 and then become liable to the increased rate of 7% from 1 January 2019.

Capital Gains Tax and Capital Acquisitions Tax

  • There is a change to the 7-year CGT relief that will allow the owners of qualifying assets to sell those assets between the fourth and seventh anniversaries of their acquisition and still enjoy full relief from CGT on any chargeable gains.
  • The leasing of agricultural land for solar panels is to be classified as qualifying agricultural activity for the purposes of CAT agricultural relief and CGT retirement relief. This initiative is subject to the panels no more than covering 50% of the total farm holding.
  • The life time thresholds for capital acquisitions tax remain unchanged.

Corporation Tax

  • Confirmation of the 12.5% rate of tax.
  • The deduction for capital allowances for intangible assets, and any related interest expense, will be limited to 80% of the relevant income arising from intangible assets in an accounting period.
  • Accelerated capital allowances for energy efficient equipment is being extended until the end of 2020.

Other Measures

  • The excise duty on a packet of 20 cigarettes is being increased by 50 cents with a pro-rate increase on other tobacco products, and an additional 25c on roll your own tobacco. This will take effect from midnight on 10 October 2017.
  • A sugar tax is to be introduced on the 1 April 2018. A tax of 30c will apply to drinks with a sugar content of 8 grams or more per 100ml. A tax of 20c will apply to drinks with a sugar content of between 5 grams and 8 grams per 100ml. These levels are consistent with the rates being introduced in the UK in April 2018 and Ireland’s sugar tax will commence at the same time as the UK.
  • A 0% benefit-in-kind (BIK) is being introduced for electric vehicles for a period of one year. Electricity used in the workplace for charging vehicles will also be exempt from benefit in kind.
  • State Pension will rise by €5 per week with effect from the last week in March 2018.
  • All other weekly social welfare payments to increase by €5 per week, including the carer’s allowance, disability allowance and jobseeker’s benefit and allowance.
  • Prescription charges are to be reduced for everyone with a medical card under the age of 70 from €2.50 to €2 per item and the monthly cap for prescription charges decreased from €25 to €20.
  • There will be a reduction in the threshold for the Drugs Payment Scheme from €144 to €134.
  • In order to assist small and medium businesses prepare for Brexit, a Brexit Loan Scheme will be introduced. A loan scheme of €300m, will be available at competitive rates to SMEs, to assist them with short term working capital requirements.

If you would like further information, please contact our Tax Team.

View our Budget 2018 Analysis

Download a PDF of the key highlights from Budget 2018

 

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Our Analysis of Budget 2018

 

 

Budget 2018 was delivered by Minister Donohoe in the continuing context of an Irish economy in good shape and with strong and sustainable future growth predicted.  However, with potential Brexit headwinds forecast and being mindful of not returning to the days of giveaway budgets (remember them?), he delivered a constructed ‘balancing act’ that didn’t significantly affect many.

So how does this budget affect your disposable income?

The reductions in the rates of the USC will benefit everyone with particular focus on middle incomes. The point at which the marginal tax rate kicks in was increased by €750 to €34,550. For the self-employed, the earned income credit increases from €950 to €1,150.

Pensioners and those in receipt of social welfare payments will also benefit with an increase of €5 from March 2018. The Christmas bonus for social welfare recipients has remained at 85%.

Prescription charges are further reduced to €2 and this charge now applies to medical card holders of all ages.

However, if you are partial to a cigarette whilst sipping your fizzy drink, then prepare from tomorrow to pay an extra 50c on a pack of 20 cigarettes and to start paying Sugar Tax of 20c/30c per litre from April 2018.

Housing and other matters

With the Minister noting the “corrosive impact of homelessness” on the State in his speech, he announced an allocation of €1.8 billion for housing next year, which he said would help to fund the building of 3,800 new social homes next year.

Other measures to increase the supply of housing/land, include the tax deductibility of pre-letting expenses, the reduction of the CGT ‘hold period’ from 7 years to 4 years and the increase vacant site tax rate from 3% to 7%.

However, the rationale of raising the Stamp Duty rate three-fold to 6% on commercial property, apart from funding many other tax cuts/spending increases, appears to fly in the face of the residential property ‘supply measures’.

The Budget also continues the commitment to repair the State’s public services with increases in the number of teachers and guards, and significant additional funding being made available for education and health. The litmus test will be whether anyone will experience a notable improvement in services during 2018.

The tourism sector will continue to benefit from the reduced rate of VAT at 9%. The agri-food sector, in particular, will benefit from the introduction of a Brexit Loan Scheme.

Foreign Direct Investment

The Minister took the opportunity to reaffirm Ireland’s corporation tax rate at 12.5%. This is and will remain the central plank of Ireland’s FDI offering. However, restricting the deduction for capital allowance and interest on Intangible Assets to 80% of relevant income is a backwards step.

Overall, Budget 2018 is the final (Balancing) Act in Ireland achieving a projected deficit by end of 2018 at near 0% of GDP.

It may take you until then though to have worked out if this was a good Budget for you or your business!

Edward Murphy
Partner and Head of Tax Services
edward.murphy@crowleysdk.ie

 

 

 

If you would like further information, please contact our Tax Team.

View the key highlights from Budget 2018

Download a PDF of our Budget 2018 Analysis

 

 

 

 

 

 

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Rent a Room Relief

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Are you aware of the rent a room relief? If you let a room in your home, the income you receive may be exempt from tax.

If your gross rental income does not exceed the exemption limit below, you do not pay Income Tax, Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) on the rent you receive.

If it does exceed the limit, then you are liable to income tax, PRSI and USC on the profit from renting the room. This relief can only be claimed by individual taxpayers. It cannot be claimed by companies.

Annual exemption limit for Rent a Room Relief
Year Income amount exempt
2013 €10,000
2014 €10,000
2015 €12,000
2016 €12,000
2017 €14,000

What type of residence qualifies?

Sole or main residence

Your main residence is your home for most of the year and where friends would expect to find you. You do not have to own the property to claim relief.
The room or rooms must be in a residential property that is located in Ireland. You must use it as your main residence during the tax year.

Self-contained unit

The rented room or rooms can be a self-contained unit within the house, such as a basement flat or a converted garage. If this unit is not attached to the property it cannot qualify for the relief.

Business use or guest accommodation

Your tenants must use the room on a long-term basis. You cannot claim relief on rooms that are used for business purposes. Short-term stays provided through bed and breakfasts, a guesthouse or online booking sites do not qualify for relief.

You cannot claim the relief against income received for the use of the room(s) from:

• your child or civil partner
• an employer
• an employee
• short-term guests, including those who book accommodation through online booking sites.

There is a four-year time limit to claim relief. This is important if you have been paying tax on rental income which should have been exempt.

Please contact us if you require assistance with the above.

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VAT Treatment of Education and Vocational Training

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Finance Act 2015 amended the VAT treatment of education and vocational training. The amendment was to ensure that Irish VAT legislation reflects judgements of the Court of Justice of the European Union.

The wording of the amended legislation caused uncertainty for many training providers in the private sector as it stated that only training or retraining services provided by a “recognised body” could continue to be exempt from VAT. The definition of “recognised body” made it difficult for many private sector training providers to qualify.

If a supply if not exempt, VAT is chargeable on that supply.

Revenue did comment at the time of Finance Act 2015 that it did not believe that the changes would lead to divergence from existing practices but there was no written guidance from Revenue on the subject to give training providers comfort.

Thankfully, this uncertainty has now been resolved with Revenue’s recent e-Brief on the subject.

Revenue confirm that vocational training and retraining services continue to be exempt from VAT where certain conditions are met. They confirm that where each of the conditions (listed below) are met, there is no requirement that the provider must be a “recognised body”.

They list these conditions as:

  • The training must be vocational in nature; that is, it must be directed towards an occupation and its associated skills.
  • It must be provided to improve the vocational rather than the personal skills of the trainee.
  • The vocational skills that the trainee acquires can be transferable from one employment to another, or to self-employment.
  • The training will generally be provided by means of a structured programme, have concise aims, objectives and clear anticipated outcomes.
  • There should be a clear trainee/trainer relationship between the student and the teacher or instructor.

Where any of the above conditions are not met or the course is primarily directed towards personal development or undertaken for recreational purposes, the course will be subject to VAT at the appropriate rate.

This is a very welcome clarification for training providers in the private sector who now have written guidance from Revenue to assist in deciding if their supplies are subject to VAT or exempt.

It is also useful for Irish businesses and public bodies who receive education and training services from abroad. The responsibility for correctly self-accounting for VAT on the receipt of these services falls on the Irish recipient and there is now written guidance from Revenue to assist in deciding whether to self-account for VAT at the appropriate rate or whether the receipt of the service is exempt from VAT.

Please contact us if you require assistance with the above.

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New income tax exemption for Irish resident non-executive directors

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Finance Act 2016 introduced an income tax exemption in respect of certain expenses of travel and subsistence of an Irish resident non-executive director of a company.

The expenses must be incurred solely for the purpose of attendance by a non-executive director, in his or her capacity as a director, at a “relevant meeting”.

The exemption applies to expenses incurred on or after 1 January 2017.

Payments to which the exemption applies may not exceed the Civil Service approved rates for mileage and subsistence as set down by the Minister for Public Expenditure and Reform. See details of the current Civil Service Rates for Travel and Subsistence.

Payments which come within the term of the exemption are also exempt from USC and PRSI.

Definitions

“Relevant director”, in relation to a company, means a person holding office as a non-executive director of that company –

  1. who is resident in the State, and
  2. whose annualised amount of emoluments from the office for the year of assessment 2017 and for each subsequent year in which the person is a director of the company does not exceed €5,000.

“Relevant meeting” means a meeting in the State attended by a relevant director in his or her capacity as a director for the purposes of the conduct of the affairs of the company.

“Travel” means travel by car, motorcycle, bus, rail or aircraft.

For more information please contact us.

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Taxation of Exam Setters, Invigilators and Correctors

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With third level exams completed and State Examinations drawing to a close, Revenue has received a number of queries as to whether exam setters, invigilators and exam correctors can be engaged as “self-employed” individuals and paid gross or whether they should be engaged as “employees” with payments to them subject to deductions under the PAYE system.

In their recently published eBrief No. 48/17, Revenue have confirmed that whilst the facts of each case will determine whether an individual is self- employed or an employee, Revenue’s view is that exam setters, exam correctors and invigilators engaged by the State sector, private colleges or associations are, in general, likely to be employees and, therefore, deductions (tax, PRSI and USC) under the PAYE system should be made from the emoluments paid to them.

This is an important clarification for any educational establishment that engages individuals to set, invigilate or correct exams. It places responsibility for correctly deducting tax from payments to these individuals on the employer establishment and means that these individuals must be put on payroll even if they are engaged on an ad hoc basis or for a short period of time.

For more information please contact us.

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Crowleys DFK boosts its leadership team

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Crowleys DFK is delighted to announce senior promotions in our Tax, Public Sector and Practice Development Departments.

The partnership will be enhanced with the promotion of Siobhán O’Hea to Tax Partner

Pictured (l-r): Siobhán O’Hea, Partner Tax Services and Edward Murphy, Partner and Head of Tax Services

A highly-experienced tax practitioner, Siobhán has over 12 years’ experience in the areas of corporate tax compliance and planning, business re-structuring and the taxation of international businesses operating in Ireland. With specialist knowledge of all aspects of VAT-related taxes, Siobhán has particular expertise in domestic, cross border and e-commerce VAT as well as VAT on property.

According to Edward Murphy, Partner and Head of Tax Services, “Siobhán is a great addition to our partner group.  Her promotion further strengthens our tax practice across a range of sectors and markets. I see an exciting future ahead for our Tax Department.”

 

David Coombes is promoted to Director of the firm’s Public Sector Department

Pictured (l-r): David Coombes, Director Public Sector Services and Vincent Teo, Partner and Head of Public Sector Services

David joined the firm in 2006 and has extensive experience leading public sector financial and business advisory assignments in areas such as financial reporting framework implementation, management information system design, strategic finance support, risk management and governance compliance.

According to Vincent Teo, Partner and Head of the Public Sector Department, “David is highly regarded by our clients in the public sector for his exceptionally high standard of sector specific knowledge and expertise.  I look forward to working with David to broaden our value added solutions and help our clients navigate the increasing demands on financial reporting and internal control compliance requirements.

 

Kim McCarthy is promoted to Director and Head of Practice Development at the firm

Kim McCarthy, Director, Practice Development

A qualified marketing and business development professional, Kim has over 16 years’ experience working within the professional services and business-to-business sectors. She will be responsible for building and delivering the growth strategies of the firm.

She will lead a team of professionals who will support the partner group in building strong and trusted client relationships through innovative business development and marketing programmes.

“Kim has played a central role in the growth and expansion the firm has experienced in recent years.  We are excited about the new initiatives Kim and her team are conducting this year aimed at strengthening our presence and growing our business in core sectors as well as developing new growth areas.” Managing Partner, James O’Connor stated.

James continued, “These new leadership appointments are very exciting for the firm. Not only will they help drive our continued growth in a changing marketplace, they are also richly deserved.  All three have played key roles in our growth, and they have demonstrated incredible commitment to the firm.  Well-deserved congratulations to Siobhán, David and Kim.”

 

 

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Changes to requirement to submit income tax returns

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A chargeable person is defined as a person who is chargeable to tax on that person’s own account or on another person’s account in respect of a chargeable period.

There is an exception to this definition in which some conditions must be met. It is these conditions that from today, 19 May 2017, Revenue have amended and the amendments as outlined below will be applicable from 2016 onwards.

The exception to a “chargeable person” definition is that an individual is not a chargeable person for a tax year where, for that year, they were in receipt of:

  • PAYE income only, or
  • PAYE income and non-PAYE income (rent or investment income…etc) where the total non-PAYE income assessable to tax-
    • does not exceed €5,000 (this was previously €3,174 for 2015 and previous years), and
    • is taken into account in determining the individual’s tax credits and standard rate cut-off point or is taxed at source under section 261 TCA 1997, i.e. deposit interest subject to D.I.R.T.

Revenue may take account of an individual’s gross income from non-PAYE sources in considering whether non-PAYE income should be taxed under the PAYE system.

In this regard, an individual whose gross non-PAYE income from all sources exceeds €30,000 (this was previously €50,000 for 2015 and previous years) is regarded as a chargeable person notwithstanding that his or her assessable income from non-PAYE sources does not exceed €5,000 (this was previously €3,174 for 2015 and previous years).

The exception to this rule is that this does not apply to directors of trading companies or to their jointly assessed spouses or civil partners.

In the case of married couples or civil partners who are jointly assessed, the income thresholds are applied to the joint non-PAYE income of both spouses or civil partners. In the case of married couples or civil partners who opt for separate assessment or single treatment, the thresholds are applied separately to each spouse or civil partner.

Note: An individual whose non-PAYE income (rent or investment income…etc) is nil due to an allowance which reduces his or her taxable profits to zero is a chargeable person, as nil profits cannot be taxed through the PAYE system.

For more information, please contact us.

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Tax Relief for Assistance Dogs

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Tax relief at 20% has now been made available by the Revenue Commissioners in respect of Assistance Dogs which are supplied and trained by an organisation accredited by Assistance Dogs Europe (ADEu). Assistance Dogs Europe (ADEu) are the European chapter of Assistance Dogs International (ADI), a worldwide coalition of non-profit programmes that train and place Assistance Dogs. The tax relief may be claimed in the following two situations:

Blind Person’s Guide Dog

Where a blind person maintains a trained guide dog, supplied by an organisation accredited by the Irish Guide Dog Association, an agreed sum of €825 may be claimed as a health expense by that person (i.e. total tax credit of €165).

For an individual to be eligible to claim this relief they must be entitled to the Blind Person’s Tax Credit and provide written confirmation from the Irish Guide Dogs Association that he/she is the registered owner of a trained dog.

A letter from the organisation which supplied the dogs confirming that the claimant is the registered owner of a guide dog should be submitted with the first claim and the relief will be granted for each year thereafter during which the person maintains the dog.

Assistance Dogs for Disabled Individuals including Children with Autism

If a person maintains a trained Assistance Dog, a sum of €825 may be claimed as a health expense by that person (i.e. total tax credit of €165).

To qualify for this relief an individual must prove that he/ she maintains a trained dog which has been supplied by an organisation accredited by the Assistance Dogs Europe. A statement from the organisation which supplied the dog will be sufficient for the first claim and the relief may be granted each year thereafter during which the individual maintains the dog.

Assistance dogs are trained to meet specific needs of their owner which can include the following:

  • Help their owner stand and walk by providing a stable base and forward motion
  • Provide warning of an approaching seizure or a fall in blood sugar levels, to allow the owner to take preventive action
  • Alert a deaf owner to a variety of sounds
  • Help a person dress/undress
  • Bark to raise the alarm in an emergency e.g. in the case of a fall/seizure
  • Retrieve items such as telephone/keys/a bag
  • Help the person/child to get out and about more easily and have a calming effect, especially for children
  • Detect danger or certain medical symptoms that the person may develop and give warning

For more information on the new tax relief available for Assistance Dogs, please contact Siobhán O’Hea, Partner in our Tax Services.

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