Tag Archive for: Tax tip

Changes to CGT Retirement Relief for Individuals

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CGT Retirement Relief

Retirement Relief provides relief from CGT on the disposal of trading assets or shares in trading companies. To qualify for this relief, the main conditions are that the individual must be aged 55 or over and must be disposing of or transferring qualifying business assets. In addition, the individual must have been a working director of the company for 10 years and a fulltime working director for at least 5 of the years prior to the transfer.

The latter condition can be a stumbling block for many individuals seeking to claim this relief. For example, an individual may be a director of more than one company and therefore may not meet the full-time working director requirement.

The Finance Bill 2023 introduced changes on the restrictions that apply on retirement relief. These changes will come into effect from 1 January 2025.

Disposals to Children

At present, if the individual disposing of the qualifying assets is aged between 55 and 65 years of age and the disposal is to a child, full relief may be claimed.  From 66 onwards the relief is restricted to €3 million. The changes will now restrict relief available for individuals between 55 and 69 to €10 million. From 70 onwards the relief will be restricted to €3 million.

Disposals to Persons other than a Child

Under the current rules, there is full relief on disposals of qualifying assets up to a value of €750,000 where the disposal is made between ages of 55 and 65. From 66 onwards the cap is reduced to €500,000. The new rules will extend the €750,000 relief up to the age of 69. Similarly the €500,000 cap will be from the age 70 and onwards.

The table below summarises the new rules:

Disposal to: Current Rules: Changes – effective 1 January 2025:
Child
  • Unrestricted relief up to 65 years
  • From 66 years onwards relief restricted to €3m
  • Up to 69 years relief restricted to €10m
  • From 70 years onwards relief restricted to €3m
Person other than a child
  • Full relief on disposal of qualifying assets of up to €750k up to the age of 65
  • From 66 years onwards the cap is reduced to €500k
  • €750k is extended to 69 years
  • From 70 years onwards cap is reduced to €500k

Please contact us if you have any queries in relation to the changes to CGT Retirement Relief for Individuals.

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Share Options: New PAYE Withholding Requirements from 1 January 2024 – How does this Impact Employees?

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Share Options: New PAYE Withholding Requirements from 1 January 2024 – How does this Impact Employees?The shift of share options from the Irish self-assessment system to PAYE withholding from 1 January 2024 is a significant change arising from Finance (No. 2) Bill 2023. Prior to this, employees were required to report and remit taxes within 30 days of exercising an option on Form RTSO1.  Additionally, they were required to file an income tax return for the relevant year.

The changes set out in the Finance Bill outline that under the new system, employers are now required to report and make withholdings under the PAYE system on any gains arising after 1 January 2024 on the exercise, assignment or release of share options by employees.

What do employees need to be aware of?

  • The self-assessment regime continues to apply to gains arising on or before 31 December 2023, as does the obligation to register for Relevant Tax on Share Options (RTSO).
  • Share option gains is an area of focus for Revenue, therefore employees should ensure that their tax filings (Form RTSO1 and Income Tax returns) and payments in relation to relevant tax on share option exercises are up to date.
  • Failure to submit an income tax return in any year will result in a surcharge being applied by Irish Revenue. The surcharge is as follows:
    • 5% of the tax due up to a maximum of €12,695 where the income tax return is made within 2 months of the return filing date, or
    • 10% of the tax due up to a maximum of €63,485 where the return is made more than 2 months after the return filing date.

How can Crowleys DFK help?

Our tax team can support employees with preparing and filing income tax returns and RTSO1 returns in respect of share options exercised. Please contact us for assistance.

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Preliminary Tax Obligations for Income Tax & Corporation Tax

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Preliminary Tax Obligations for Income Tax & Corporation Tax

Individuals who file income tax returns and companies who file corporation tax returns have an obligation to pay preliminary tax:

1. Individuals

Preliminary tax is your estimate of the Income Tax, PRSI and USC that you expect to pay for a tax year. You must pay this by 31 October of the tax year in question.

The amount of preliminary tax for a year must be equal to, or more than, the lowest amount of the following:

  • 100% of the tax due for the immediately previous tax year
  • 90% of the tax due for the current tax year

It is necessary that you make a sufficient preliminary tax payment based on the above rules, as we have seen Revenue impose interest on underpayments.

As income tax returns are filed a year in arrears, i.e. your 2023 tax return will be due in October 2024, it is important to note that if you do not make a preliminary tax payment for the year in question, interest at a rate of 0.0219% will be incurred from the date that the payment was due.

For example, your 2023 tax return is due for filing on 31 October 2024. Your preliminary tax payment would have been due for payment on 31 October 2023. If you did not make the payment on 31 October 2023, Revenue may impose interest from 31 October 2023 when you file your return in 2024.

2. Companies

Irish resident companies and non-resident companies must pay Corporation Tax on taxable profits if:

  • a resident company trades in Ireland
  • a non-resident company trades in Ireland through a branch or agency
  • from 1 January 2022, a non-resident company is in receipt of profits or gains in respect of rental property in Ireland.

The rules of when a company should make their preliminary tax payment depends on whether they are classified as a Small Company or Large Company.

Small Companies

A small company is a company whose CT liability is not above €200,000 in the previous accounting period.

Small companies can base their preliminary tax for an accounting period on:

  • 100% of their CT liability for the previous accounting period
  • 90% of their CT liability for the current period (and there is provision for a top up payment to be made).

This must be paid on the 23rd of the eleventh month after the accounting period ended. For example, if the company’s year end is 31 December 2024, preliminary tax is due by 23 November 2024.

Large Companies

Large companies can pay their preliminary CT in two instalments when their accounting period is longer than seven months. The first instalment is due on the 23rd of the sixth month of the accounting period. The amount due is either:

  • 50% of the CT liability for the previous accounting period
  • 45% of the CT liability for the current accounting period.

The second instalment is due on the 23rd of the eleventh month. This will bring the preliminary tax up to 90% of the final tax due for the current accounting period.

For example, if the company’s year end is 31 December 2024, and they are a large company, the first instalment of preliminary tax is due on the 23rd of June and the 2nd instalment is due on the 23rd of November.

If preliminary tax isn’t paid by the above dates, interest is due at a daily rate of 0.0219% on late payments or payments that are not made in full. The interest is calculated by multiplying together the:

  • amount of tax underpaid
  • number of days the tax is late
  • interest rate.

If you have any queries about your preliminary tax obligations, please contact us.

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Share Options: New PAYE Withholding Requirements from 1 January 2024 – What does this mean for Employers?

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Share Options - PAYE Withholding Requirements

The shift of share options from the Irish self-assessment system to PAYE withholding from 1 January 2024 is a significant change arising from Finance (No. 2) Bill 2023. Prior to this, employees were required to report and remit taxes within 30 days of exercising an option on Form RTSO1.  Additionally, they were required to file an income tax return for the relevant year.

The changes set out in the Finance Bill outline that under the new system, employers are now required to report and make withholdings under the PAYE system on any gains arising after 1 January 2024 on the exercise, assignment or release of share options by employees.

While employees are certain to welcome this change, companies have been given a limited time frame to implement additional procedures to ensure they are compliant with the new obligations.

What should employers do to prepare for the upcoming change in employer reporting obligations?

  • It is advisable that employers communicate this change in the tax treatment to their employees. Companies should also update their share option plan documentation in light of this change.
  • Employers will need to review the share option plan documentation in the context of funding the liabilities. This is because employees will need to be able to fund the tax liability collected through the PAYE system. A number of shares (received from the exercise) may need to be sold under a ‘sell to cover mechanism’ to ensure the necessary funds are available. This is particularly important for companies that allow previous employees to exercise their share option after their employment has terminated.
  • Employers should also ensure accurate records are maintained on an ongoing basis for all share option grants. With regards to mobile employees, employers will also need to monitor both Irish and worldwide workdays during the grant to vest period. This is required to calculate the Irish taxes due on the date of the exercise of the options. Furthermore, a process must be in place to determine whether the gain is subject to PRSI or exempt.
  • Employers will need to ensure that the process for reporting the gains arising from the exercise of share options is completed within the required timeframe. Gains arising from the exercise of share options are regarded as notional payments. Therefore, they must be reported on or before the exercise of the option.

Employer Annual Share Reporting

Employers are still obliged to file an RSS1 return by 31 March following the calendar tax year to report the grant, exercise, assignment, or release of an option.

If you require assistance with the annual share reporting return for share options, please contact us.

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Benefits in Kind: Small Benefit Exemption

Benefits in Kind: Small Benefit Exemption

Employers will be familiar with the Small Benefit Exemption (SBE) which is a Revenue concession in respect of non-cash benefits/vouchers provided to employees. Finance Bill 2022 announced the extension of the SBE to allow for up to two vouchers/benefits to be granted by an employer in a year, with an increase in the annual exemption from €500 to €1,000 in aggregate.  These changes were applicable from the 2022 year of assessment.

Benefit for Employees:

Employees are not liable for PAYE, USC and PRSI on value of award.

Benefit for Employers:

Employers are not liable for employer PRSI (11.05%) on value of award.

Conditions for SBE to apply:

  • The award must be a “qualifying incentive” which is a non-cash incentive and:
    • in the case a single benefit is provided, the value does not exceed €1,000.
    • where two benefits are provided, the cumulative value of the first and second benefit does not exceed €1,000.
  • Where any award exceeds €1,000 in value the full value of that award is subject to PAYE, USC and PRSI.
  • If more than two benefits are given in a year, only the first two may qualify for tax free status.
  • Tax-free vouchers/benefits can be used only to purchase goods or services. They cannot be redeemed for cash.
  • The voucher or benefit must not form part of a salary sacrifice arrangement.

To maximise the tax efficiency of the SBE and avoid subsequent awards being liable to tax, some companies use a ‘recognition and rewards’ system which allows employees to accumulate points over the course of a year.  This minimises the tax liability where employees are recognised multiple times in a year.

Please see below some examples to further explain the SBE:

Example 1

Company A awards a voucher of €500 in February and a €500 voucher in December to an employee.

Tax Treatment

The employee can avail of the SBE and as the two vouchers do not exceed the annual exemption of €1,000, both vouchers can be provided to the employee tax free.

Example 2

Company B awards an employee a voucher worth €500 in January, a hamper in July worth €50 and a €500 voucher at Christmas.

Tax Treatment

The first two awards, which total €550 will be covered by the SBE, but the third award will be fully liable to PAYE, USC and PRSI. The value of the third voucher (€500) should be processed through payroll in the month the award is made i.e. the December payroll.

Had Company B awarded the second €500 voucher before the €50 hamper, the employee would have maximised the full benefit of SBE and only €50 would be subject to tax.

Example 3

Company C awards an employee a voucher worth €500 in April and another voucher in December worth €600.

Tax Treatment

Where two vouchers exceed €1,000 in value, the full value of the second voucher is subject to tax. The value of the second voucher (€600) should be processed through the December payroll and the relevant withholding taxes applied.

If you have any queries about the small benefit exemption, please contact Ciara Colbert, Senior Manager in our Tax Services’ Department.

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Non-Resident Landlord Withholding Tax (NLWT) System

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Non-resident landlords may have received a letter from Revenue advising of upcoming changes to the administration of withholding tax for non-resident landlords. Up to now, non-resident landlords had two options to report rental profits to Revenue:

  1. Non-resident landlords asked their tenant to withhold 20% of the rent and to pay this to Revenue on their tenant’s personal income tax return. The tenant should have given the non-resident landlord a Form R185 (certificate of income tax deducted) so that a credit could be claimed for the tax deducted when submitting a personal income tax return.
  2. Non-resident landlords appointed a Collection Agent, who registered for Income Tax on their behalf using a Collection Agent Income Tax Registration Form. Their Collection Agent was responsible for reporting the non-resident landlord’s rental profit for the year by filing an income tax return and paying any liability to Revenue on behalf of the non-resident landlord.

What are the upcoming changes?

A new Non-Resident Landlord Withholding Tax system is expected to go live from 1 July 2023 which will see changes to the obligations of tenants, collection agents and non-resident landlords.

  1. Tenants will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform. They will not be responsible for paying the 20% tax deducted on their personal income tax return.
  2. Collection Agents will no longer be responsible for filing an income tax return. A Collection Agent will be required to withhold and pay to Revenue 20% of the rent by making a rental notification through the new withholding tax platform.
  3. Non-Resident Landlords will be responsible for filing their personal income tax returns. A credit will be allowed for the tax withheld in the new system.

What actions are required by non-resident landlords?

If you are a non-resident landlord whose tenants already withhold 20% of the rent or if you have appointed a Collection Agent, there are no actions required by you at this time.  Further information will be released by Revenue shortly and a new Tax and Duty Manual will be published in due course.

All other non-resident landlords must now decide whether they want their tenants or a collection agent to withhold and pay to Revenue 20% of the rent under the new Non-Resident Landlord Withholding Tax system and take action accordingly.

Please contact us if you have further queries on this.

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Tax Treatment of Unapproved Share Option Schemes

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tax treatment of unapproved share option schemes

Employee share incentive schemes can be an effective way of offering tax savings to employees in addition to encouraging employee participation and loyalty. One type of share incentive scheme is an unapproved Share Option Scheme. We have set out below some frequently asked questions on the tax treatment of unapproved Share Option Schemes:

What do I receive when I am granted a share option by my employer?

When your employer grants you a share option, you receive the right to acquire shares in the company at a future specified date at a pre-determined price.  You must actually exercise the option in order to take beneficial ownership of the shares.

What information will I get from my employer when I am granted a share option?

Your employer will generally issue documentation covering:

  • The number of shares that you can acquire,
  • The price that you have to pay for the shares (“Option Price”),
  • The dates from which, and by which you can exercise your option (“Exercise Period”), and
  • The conditions regarding the right to exercise the option, which may include good leaver and/or bad leaver provisions.

What is meant by “date of exercise”?

The “date of exercise” is the date at which the employee takes up their right to acquire shares.

Must I pay to acquire the shares under a share option?

The shares may be at no cost to the employee (nil option) or at a predetermined price that the employer has set. In some cases, the employee will have to pay something for the option itself.

Are there different types of unapproved share option schemes?

There are two types of share options for tax purposes:

(a) a ‘short option’ – which must be exercised within seven years from the date it is granted; and

(b) a ‘long option’ – which can be exercised more than seven years from the date it is granted.

There are tax implications for employees participating in unapproved share option schemes and reporting obligations for both employers and employees:

Tax Implications for Employees

Date of grant

There is no tax or reporting obligations due at the grant of short options. Where a share option is a long option, a charge to income tax may arise on both:

  1. The grant of the share option (where the option price is less than the market value of the shares) and
  2. The exercise, assignment or release of the share option.

Credit is given for any income tax charged on the grant of the share option against the income tax due on the exercise, assignment or release of the share option.

Date of exercise

When an employee exercises his/her right to the share options and acquires the shares at the pre-determined price, the difference between the price paid to acquire the shares (the exercise price) and the market value of the shares at the date of exercise of the option is called the share option gain. The share option gain can be reduced by any payment made by the employee for the initial grant of the option.

Where an employee exercises a share option he or she must pay what is referred to as “Relevant Tax on Share Options” (RTSO) in respect of any income tax due on any gain realised on the exercise of the share option.  The relevant tax at 40% is calculated on the share option gain as well as universal social charge (USC) at 8% and PRSI at 4% (unless you have advance approval from Revenue to pay at a lower rate).  RTSO is payable within 30 days of an option being exercised.

Example

Stock Option Exercise
Exercise of Shares
Market Price @ date of purchase $100
Purchase price $85
$15
Number of shares 10 shares
Total exercise price $150
FX rate at date of purchase 1.1014
Share Option Gain €136
Tax on exercise
Gross Gain €136
Income tax @ 4% €54
USC @ 8% €11
PRSI @ 4% €5
Total liability €71
Net Gain €65

 Sale of Shares

An employee who acquires shares by the exercise of a share option is chargeable to capital gains tax (CGT) on any chargeable gain realised on the subsequent disposal of those shares.

Where due, CGT must be paid to Revenue within the following deadlines:

Date of Disposal Payment Due
1 January – 30 November By 15 December the tax year
1 December – 31 December By 31 January in the following tax year

An individual must file a return by 31 October in the year after the date of disposal. A return is required even if no tax is due because of reliefs or losses. An individual must file a Form CG1 if not usually required to submit annual tax returns; Form 12 if a PAYE worker or a Form 11 if considered a chargeable person for tax purposes.

Reporting obligations for Employees

The employee must submit a Form RTSO 1 within 30 days from the date of exercise of the share option. A payment of Relevant Tax on Share Options must also accompany the submission.

Employees liable to pay RTSO must then submit an income tax return, containing details of all share option gains in a tax year, by 31 October following the year in which the gains are realised. The income tax return must be filed for the relevant year in addition to the form RTSO1.

Reporting obligations for Employers

The employer will have to complete and file a Form RSS1 by 31 March following the year of exercise.

Please contact us if you require assistance with the above.

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Vacant Homes Tax & Pre-Letting Expenses

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Vacant Homes Tax

A new Vacant Homes Tax (VHT) was introduced in Budget 2023. The primary objective of this is to increase the availability of housing, but landlords need to be aware of the restrictions on allowable pre-letting expenses when calculating their rental profits.

Vacant Homes Tax (VHT)

VHT applies to residential properties which have been occupied for less than 30 days in a chargeable period.

VHT is calculated at three times the residential property’s local property tax (LPT) liability.

The following will be exempt from the VHT:

  • Properties recently sold or listed for sale or rent.
  • Properties vacant due to illness or long-term care of the occupier.
  • Properties which were the principal residence of a deceased chargeable person in either the chargeable period or in the 12-month period prior to the commencement of the chargeable period.
  • Properties which were the principal residence of a deceased chargeable person where a grant to administer the estate issues in the chargeable period and for any chargeable period following such a grant, where the administration of the estate has not yet completed.
  • Properties which are vacant due to significant refurbishment work.

The first chargeable period runs from 1 November 2022 to 31 October 2023.

A VHT return will be due by 7 November 2023, with the tax payable by 1 January 2024.

Pre-Letting Expenses

In determining the taxable rental profits from the letting of residential property, a landlord may claim a deduction for the following expenses:

  • Private Residential Tenancies Board (PRTB) registration.
  • Insurance premiums.
  • Maintenance & repairs – e.g., cleaning, painting and decorating, general property maintenance.
  • Property fees – e.g., management fees, letting advertising, legal or accountancy fees.
  • Costs not repaid by tenant – e.g., light & heat costs.
  • Capital allowances on qualifying capital items – e.g., furniture, white goods.

However, with the exception of property-related fees such as letting or legal fees incurred on the first letting, a deduction is not permitted for expenses incurred prior to the first letting of the property.

The Finance Act 2017 sought to address the above and introduced an allowable deduction of up to €5,000 for certain pre-letting expenses incurred on vacant residential properties. From 1 January 2023, this cap on the authorised deduction has been increased to €10,000 and the specified period for which the property was vacant has been reduced from twelve to six months. The landlord must incur the expenditure during the twelve months prior to first letting the property.

If the landlord ceases to let the property within four years, the deduction for the pre-letting expenses will be clawed back in the year in which the property ceases to be let as a residential property. Importantly, a clawback will be triggered if there is a change of use from residential or if the property is sold.

If you need any assistance with VHT or Pre-Letting Expenses, please contact Niall Grant, Partner in our Tax Services’ Department.

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Cash Equivalent of Company Cars Explained | New BIK Rules 2023

cash equivalent of company cars

Where an employee is provided with a company car by their employer, a value, called the cash equivalent, is put on the benefit, and the employee is taxed on it via payroll.

Many employees got an unwelcome shock when they received their first payslip of 2023, as the tax on their company vehicles had increased significantly.

As part of measures to assist families dealing with the cost of living challenges, the Government yesterday announced a temporary relief on how the benefit of having a company car is calculated. This relief is included in Finance Bill 2023, which will be published in the coming days.

This change will see some welcome, albeit temporary, reductions in the tax employees pay on their company cars.

Q: How do I calculate the Cash Equivalent of my Company Car?

A: You need to know the original market value of the car i.e. the list price of the car on the date of first registration. This applies even if your employer bought the car second-hand or is leasing it. If your car is in vehicle CO2 categories A – D, you can now reduce this value by €10,000, thanks to the Finance Bill 2023 changes.

You also need to know the annual business mileage you drive and from 2023 onwards, you need to know the vehicle’s CO2 emissions. These determine the cash equivalent percentage for your car.

The annual Cash Equivalent of your car = Original Market value – €10,000 (if your car is in categories A – D) x Cash Equivalent Percentage.

Q: What qualifies as Business Mileage?

A: Business mileage means the total number of kilometres you are necessarily obliged to travel in the vehicle in the performance of your employment duties. Travel to and from work is generally regarded as private travel rather than business travel.

Q: What vehicle CO2 category applies to my car?

Vehicle Category CO2 Emissions (CO2 g/km)
A 0g/km up to and including 59g/km
B More than 59g/km up to and including 99g/km
C More than 99g/km up to and including 139g/km
D More than 139g/km up to and including 179g/km
E More than 179g/km

Q: What cash equivalent percentage is applicable to me?

A: The cash equivalent percentage depends on your Vehicle C02 Category and the amount of Business mileage you have during the year. This table has also been updated by Finance Bill 2023 to reduce the upper limit in the highest mileage band to 48,001 (previously 52,001):

Lower  Limit Upper Limit A B C D E
Km Km % % % % %
— 26,000 22.50 26.25 30 33.75 37.5
26,001 39,000 18 21 24 27 30
39,001 48,000 13.50 15.75 18 20.25 22.50
48,001 — 9 10.50 12 13.5 15

Q: What has changed to the BIK rules in 2023?

A: Previously, the benefit of having a company car was calculated by taking the annual cash equivalent of the company car at 30% of its original market value. Where business mileage exceeded 24,000km, the cash equivalent was reduced by a percentage which ranged from 6% to 24% based on the number of business kilometres travelled.

From 2023 onwards, the cash equivalent of a company car depends on both the business mileage and the vehicle’s CO2 emissions.

 Example:

Pre 2023:

An employee drives a Category B car (CO2 Emissions More than 59g/km up to and including 99g/km) with an original market value of €35,000. The employee drove 45,000 business km in the year. The annual benefit on which the employee was taxed was €4,200 (€35,000 x 12%).

If paid monthly, this was additional taxable income of €350 per month (€4,200 / 12 months), on which the employee was taxed.

2023 Onwards:

In 2023 the benefit of having the same car and doing the same mileage is €3,938 (€35,000- €10,000 x 15.75%).

If paid monthly, this is now additional taxable income of €328 per month (€3,938 / 12 months), on which the employee is taxed.

Q: What reliefs if any can I avail of? 

A: If you travel less than 26,000 business km in a year, the cash equivalent of your car may be reduced by 20% if you satisfy all the following conditions:

  1. You work an average of 20 hours per week,
  2. You have business mileage of at least 8,000km per annum,
  3. You spend at least 70% of your working time away from your employer’s premises, and
  4. You retain a log book with details of your business mileage and work purposes.

Example:

Your company car has an original market value of €35,000 and a CO2 emissions of 95g/km. All running costs are paid by your employer. You work full time and travel 15,000 km per year for work related purposes. You spend more than 70% of working time away from your employers premises and keep a log book.

With Relief                                                                                         Without Relief

(€35,000 – €10,000) x 26.25%      €6,563                                     (€35,000 – €10,000) x 26.25% = €6,563

Less reduction of 20%                   (€1,313)

Annual Benefit                                 €5,250

Q: What has changed in relation to my van?

A: From 1st of January 2023, the percentage to calculate the cash equivalent a company van has increased from 5% to 8%. You can reduce the original market value of your van by €10,000 thanks to the Finance Bill 2023 changes. The business mileage driven or the CO2 emissions are not relevant for vans.

Example:

Van with an original market value of €35,000.

Pre 2023: The annual cash equivalent on which you were taxed = €35,000 x 5% = €1,750 (€146 per month if paid monthly)

2023 onwards: The annual cash equivalent on which you are taxed = €35,000 – €10,000 x 8% = €2,000 (€167 per month if paid monthly)

Q: I drive an electric vehicle. Is anything different for me?

A: In 2023 fully electric cars also benefit from the Finance Bill 2023 temporary changes. Now cars with an original market value of €45,000 or less are not taxed. If your fully electric car has an original market value of greater than €45,000, you will be taxed based on the excess value as shown in the example below:

An employee drives a Category A fully electric car (CO2 Emissions of 0g/km up to and including 59g/km) with an original market value of €80,000. The employee drives 40,000 business km in the year.

Taxable original market value = €80,000 – €45,000 = €35,000

Annual Cash Equivalent of use of Electric car = €35,000 x 13.5% = €4,725.

Q: Will the Finance Bill 2023 temporary changes be backdated?

A: Yes, these changes will be back dated to the 1st of January 2023.

If you have any further questions about these new BIK rules, please contact us.

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Rent Tax Credit

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Rent tax credit

Budget 2023 saw the introduction of a new Rent Tax Credit which is available from 2022 to 2025.

The credit is 20% of the rent paid in a year, up to a maximum credit of either €500 for an individual or €1,000 for a couple, for:

  • A person’s principal private residence (i.e. sole place of residence).
  • A person’s ‘second home’ which they use to facilitate their attendance at their employment, office holding, trade, profession or a Revenue approved college course.
  • A property used by a child to facilitate their attendance at a Revenue approved college course.

Qualifying rents are any amounts paid in return for the use, enjoyment and special possession of the property but does not include payments made for security deposits, repairs or maintenance or any other services such as board, laundry, etc.

The main conditions of the relief are as follows:

  • The property must be a residential property located in Ireland.
  • The payment must have been made under a tenancy. Tenancy for rent tax credit purposes must fall under one of the following categories:
    • An agreement or lease which is required to be registered with the Residential Tenancy Board (RTB).
    • A licence for use of a room(s) in another person’s principal private residence. These arrangements are commonly known as “rent-a-room” or “digs”. (No RTB registration is required under these licences).
    • A tenancy for 50 years or more.
    • Tenancies under “rent to buy” arrangements.
  • The landlord and the individual making the claim cannot be parent and child. If they are otherwise related the credit may be available as long as the RTB registrations have been complied by. Therefore, the credit is NOT available where the tenancy is under different arrangements such as “digs” or “rent-a-room”.
  • The individual must not be a supported tenant (in receipt of any State housing supports such as HAP or RAS).
  • The landlord must not be a Housing Association or Approved Housing Body.

You can claim the Rent Tax Credit for rent paid during 2022 by submitting a 2022 Income Tax Return to Revenue.  For 2023 and subsequent years the claim can also be made in-year using Revenue’s Real-Time Credit Facility.

If you are not registered for self-assessment, you can submit your Income Tax Return via Revenues’ MyAccount. By selecting “Review your Tax 2022” and requesting a “Statement of Liability”, you can input the information under the “Tax Credits & Reliefs” page.

The Real Time Credit Facility for 2023 and subsequent years enables you to claim the Rent tax credits in during the year. To claim the credit you must select “Manage your Tax 2023” and “Add new credits”, there it will give you the option to add the “Rent tax credit” and input the relevant information. Once the claim has been processed by Revenue, an amended Tax Credit Certificate is issued, and an amended Revenue Payroll Notification will be made to your employer.

For further information about the Rent Tax Credit, please contact us.

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