Budget 2013 - Cahill Taxation Services · Budget 2013 Minister for Finance Mr Michael Noonan TD announced Budget 2013 earlier today. Budget 2013 was the sixth austerity Budget in

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

2

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.

3

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%

5

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.

8

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.

9

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]

mailto:[email protected]

Documents

Budget 2013 - Cahill Taxation Services · Budget 2013 Minister for Finance Mr Michael Noonan TD announced Budget 2013 earlier today. Budget 2013 was the sixth austerity Budget in