Budget 2012 was announced in December 2011 over two days. Last week, Minister for Finance Michael Noonan published Finance Bill 2012 which begins the process of legalising the proposed taxation changes. Members of the Oireachtas will consider the following measures over the coming weeks, before President Michael D. Higgins signs the Bill into law. Michael Noonan said the objective of the Bill was ?to take our very limited resources and apply them to areas where there is the best employment potential?.
Universal Social Charge (USC)
330,000 people may be taken out of the Universal Social Charge net by the proposed increase in the exemption threshold from ?4,004 to ?10,036.
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Special Assignee Relief Programme (SARP)
Many multinationals here are having difficulty attracting skilled Irish workers with the exact experience they require. IDA Ireland have advised the Government of the need for such a scheme in order to attract further investment.
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It is hoped that for every one highly skilled worker brought in, multinationals may hire up to thirty Irish people to work on teams headed up by these skilled people. The Netherlands have operated a similar scheme with much success. An exemption from income tax on 30% of salary between ?75,000 and ?500,000 will be provided for employees who are assigned to Ireland for a minimum of one year and a maximum of five years.
Foreign Earnings Deduction (FED)
Due to limited domestic demand for products and services, Irish companies are seeking growth further afield. A Foreign Earnings Deduction (FED) will help companies considering expansion into markets such as South Africa, China, India, Brazil and Russia. The amount of income that may be deducted will be capped at ?35,000 per annum and will end in the 2014 tax year.
Deposit Income Retention Tax (DIRT)
The DIRT rate has been increased to 30% and some long-term savings products have been increased to 33%.
Retirement Relief
Retirement relief for business and farming assets disposed of within the family will be capped at ?3m, where the individual transferring the assets is over 66 years. This will apply for people aged 66 or who will be 66 before December 31st, 2013.
Capital Gains Tax
Any properties bought between the date of Budget 2012 and December 31st 2013 will benefit from a Capital Gains Tax relief. If you hold such a property for more than seven years, the gains attributed to the seven years will not be liable for CGT.
Capital Acquisitions Tax
The rate of tax on gifts and inheritances has increased from 25% to 30% with effect from December 7th, 2011. No significant changes have been made to business and agricultural relief. It is a good time to consider passing on assets to the next generation.
Property
? mortgage interest relief
It is proposed that mortgage interest relief be increased to 30% for first-time buyers who took out a mortgage between 2004 and 2008. The Bill provides that mortgage interest relief of 25% be available to first time buyers getting on the property ladder in 2012. Relief of 15% has been proposed for non first-time buyers in 2012.
? Property Surcharge
As was indicated in the Budget, the Finance Bill introduces a new property surcharge from 2012 onwards, by means of an extension of the Universal Social Charge.
It applies once certain conditions are satisfied:
- Where an individual?s ?aggregate income? (i.e. employment income and self-employment/investment income) exceeds ?100,000 per annum
- The individual is claiming certain ?specified property reliefs?
Once the above conditions are fulfilled, the 5% additional USC applies to the amount of the specified reliefs that an individual uses to shelter his/her income.
? Legacy Property Reliefs
It had been proposed to reduce Section 23 relief and curtail some capital allowances. Following an Impact Assessment, it looks likely that these plans will be shelved. This will provide a brief respite to many investors who may have faced insolvency.
Another area of action for Finance Bill 2012 is the carrying forward of capital allowances. Currently, individuals with unclaimed capital allowances from an investment can carry allowances forward against future rental income until they are used up.
Allowances impacted:
- Industrial buildings
- Tourist infrastructure, childcare facilities and third level institutions
- Area-based capital allowances
The new restriction will prevent the carry-forward of unused capital allowances. No unused capital allowances can be carried forward beyond the end of the tax life of a building. If the tax life of a building has already ended or will end before December 31st 2014, the unused allowances must be carried forward for relief by December 31st, 2014.
? Stamp Duty
The rate of stamp duty for non-residential property has been reduced to a flat 2%.
Approved Retirement Funds
The annual imputed distribution on the value of assets in an approved retirement fund (ARF) will be increased from 5% to 6% if the fund has asset values exceeding ?2 million. The tax rate on the transfer of ARF assets on the death of an owner to a child over 21 will be increased from 20 to 30%.
Relevant Contracts Tax (RCT)
A penalty of ?5000 for every payment made by a Principal Contractor without first obtaining a Deduction Authorisation has been proposed. RCT at the applicable rate will also be due.
Start-up Corporation Tax Relief
Relief for start-ups from corporation tax and other gains is being extended for all start-up companies commencing a trade in 2012, 2013 or 2014.
Carbon Tax
This tax will rise from ?15 to ?20 with effect from December 6th, 2011 for petrol and car diesel. May 1st will be the date for other mineral oils and natural gas.
Farming Taxation
Farmers are entitled to a double deduction when calculating their taxable profits for the increase in the rate of carbon tax on farming diesel.
If you are an individual, farming through a partnership, enhanced stock relief of 50% is available. For young, trained farmers, this relief increases to 100%.
Minister for Finance, Michael Noonan claimed that the Finance Bill is ?a further step towards economic recovery and regaining our fiscal autonomy.?
If you have any questions about Finance Bill 2012, please do not hesitate to contact me.
DBASS Chartered Accountants are a progressive firm of chartered accountants serving Dublin and the surrounding area.
Michael Byrne FCA
M: 086 602 6667
P:?? 01 849 8800
Source: http://www.dbass.ie/blog/finance-bill-2012/
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