Finance Act 2013 ? DBASS News

What does it mean for you and your business?

The Finance Bill 2013, containing draft legislation to give effect to the measures announced in last December?s budget, was published on 13 February 2013 by the Minister of Finance, Michael Noonan. The Bill confirms the measures announced in the budget together with any amendments and this year, we also see the introduction of a number of new measures including:

• Changes to the tax treatment of ?key employees? for R&D. Currently, a ?key employee? must spend 75% of their time working on R&D in order for their employer to qualify for R&D tax credit. This has been reduced to 50%.
• An extension to excise duty relief on fuel to private sector passenger transport operators which will come into effect in July 2013.
• The abolition of Foreign Service Relief meaning termination of payments for employees that have been on Foreign Service during employment is no longer exempt from tax.
• An extension to the Employment and Investment Incentive and Seed Capital Schemes from 2014 to 2020, and to include the hospitality sector.

In publishing the Finance Bill, Minister Noonan said that the ?..SME sector will be the driver of the economic recovery across the country.? He added, ?This Government is committed to supporting this key sector and each of the measures included in Finance Bill 2013 are designed to help this critical sector to trade, to grow into new products and markets, to sustain existing and to create new jobs.?

There are some practical measures included in the 10 Point Plan (plus 2) that should help SMEs. The increase in the VAT cash receipts threshold should bring some relief to cash flow to those businesses whose turnover is over ?1 million. The changes to the tax treatment of ?key employees? for R&D should also provide incentive to SMEs to invest in R&D. For the property sector, the Real Estate Investment Trusts (REITs) is a positive move and should help to stimulate overseas investor interest in the Irish property market.

If you have any questions relating to the measures introduced, please contact ?a member of the DBASS team, we would be happy to advise you.

Here is a summary of the key measures set out in Finance Bill 2013.

PERSONAL TAX

Film relief

The Bill confirms that tax relief on film investment will no longer be available to individual investors. Instead, a single rate of tax relief at 32% will apply and the payment of the tax relief directly to the film production company.

Charitable donations

As announced in the Budget, with effect from 1 January 2013, individuals will no longer be able to claim tax relief on donations to approved charitable organisations. Instead, tax relief will be payable to the relevant charitable organisation at a single rate of relief at 31%. Donations are limited annually to ?1m.

EMPLOYMENT TAX

Termination Payments

Top slicing relief will no longer be available on ex-gratia lump sum payments from 1 January 2013 where the non-statutory element of an employee?s redundancy or termination payment is more than ?200,000.

The Bill also extends to limit the tax exempt payment amount to ?200,000 to include ex-gratia payments on the termination of employment upon death or disability of an employee.? Any excess will be taxed in full.

In addition, the Bill provides for the abolition of the Foreign Service Relief.

PENSIONS

Withdrawal from Additional Voluntary Contributions (AVCs)

As announced in the Minister?s Budget speech, the Bill introduces a new section whereby an individual who has made AVCs (including additional voluntary PRSA contributions to an AVC PRSA) to an approved scheme or statutory scheme will be allowed to exercise a once off option to withdraw up to 30% of the accumulated value of the AVCs. The provision will be available for a period of three years from the date of passing of the Finance Act 2013.

Approved Retirement Funds (ARFs)

Finance Bill 2013 withdraws two provisions introduced in the Finance Act 2011 in respect of ARF options & Vested PRSAs, they are:

• The increase in the minimum guaranteed pension income i.e. Specified Income from ?12,700 per annum to 1.5 times the State Pension (Contributory), currently ?18,000 and;
• The maximum ?set aside? amount required to be placed in an Approved Minimum Retirement Fund (AMRF) from ?63,500 to 10 times the rate of the State Pension (Contributory), currently ?119,800.

BUSINESS TAX

Employment and Investment Incentive Scheme

The Bill introduces an extension to the Employment and Investment Incentive tax relief scheme from 2014 to 2020. The qualifying activities eligible under this scheme have also been extended to include operating hotels, guest houses, self-catering accommodation or similar establishments for a limited period of time. The extensions are subject to EU approval.

R&D tax credits

As announced in the budget, the Research & Development (R&D) tax credit is being enhanced by increasing the eligible expenditure from ?100,000 to ?200,000. Under the ?key employee? provision of the R&D regime, the ?key employee? must spend 75% of their time working on R&D. This is being reduced to 50% in order to assist SME?s.

Corporation Tax relief

The Bill confirms a three-year relief for start-up companies is being extended to allow any unused credit arising in the first three years of trading to be carried forward for use in subsequent years. The relief is still capped to the amount of Employer PRSI paid in a year.

Intangible assets

The claw-back period of capital allowances in respect of expenditure incurred on intellectual property is currently 10 years. The Bill introduces a reduction in the claw-back period if the assets are disposed or cease to be used in the trade to 5 years.

Close company surcharge

The exemption amount which can be retained by a close company without giving rise to a close company surcharge is being increased from ?635 to ?2,000.

Auto diesel excise duty relief

The Bill also gives effect to the auto-diesel excise duty relief for licensed and tax compliant hauliers that the Minister announced in his Budget speech. The relief will be extended to the licensed passenger transport sector. The relief will take effect from 1 July 2013 and the amount of relief will be linked to the price of auto-diesel. The maximum amount of relief will be 7.5 cents per litre.

VAT cash receipts threshold

The threshold VAT on cash receipts will increase from ?1m to ?1.25m with effect from 1 May 2013.

Public bodies

The Bill amends the list of goods and services chargeable at the 13.5% VAT rate to include non-member and member owned golf courses from 1 January 2013. The services threshold of ?37,500 for VAT purposes also applies to certain public bodies engaged in the supply of certain sporting and physical education activities.

PROPERTY

Urban renewal initiative

The Bill introduces a scheme for the refurbishment of Georgian buildings built between 1714 and 1830 in certain urban areas and will be piloted in Limerick and Waterford. It will apply to owner-occupied properties and also to the refurbishment of certain retail and other commercial properties. The scheme will be commenced by Ministerial Order and will apply to qualifying expenditure incurred within a five-year period of that date.

Stamp Duty ? resting on contract

The Bill brings into force previously announced anti-avoidance provisions aimed at schemes enabling the transfer of interests in land where no stamp duty was payable due to an absence of a stampable document. For contracts entered into after 13 February 2013 and where 25% or more of the consideration has been paid, a charge to stamp duty will arise.

Real Estate Investment Trusts (REIT)

A Real Estate Investments Trust (REIT) is being introduced to attract foreign investment capital to the Irish property market. REITs are listed companies which are exempt from corporation tax on income and gains from rental investment property, provided the profits are distributed.

Dealing in or developing land

With effect from 13 February 2013, the release of debts attributable to loans borrowed to acquire land held as trading stock will be treated as an income receipt in the year of release.

Provision is made to ensure that the amount is chargeable even where the trade has ceased before the time of the release of the debt. Release of a debt refers to any form of debt forgiveness.

Losses will be restricted to the amount of interest actually paid or the decline in land value that has actually been realised by way of a disposal of the land. The provisions apply to any interest expense incurred or any write-down in land value which takes place on or after 13 February 2013.

Young trained farmers

The relief on transfers of agricultural land to young trained farmers has been extended to 31 December 2015.

CAPITAL TAXES

Capital Acquisitions Tax

The Bill confirms the increase in the CAT rate from 30% to 33% effective from 6 December 2012. It also confirms a 10% reduction in the CAT-free thresholds for gifts and inheritances taken on and after 6 December 2012.

Capital Gains Tax

The rate of capital gains tax has increased from 30% to 33% in respect of disposals made on or after 6 December 2012.

CGT on disposal of agricultural land

A once-off relief from capital gains tax on disposals of farm land for farm restructuring purposes will apply in respect of transactions from 1 January 2013 to 31 December 2015. Relief is available where the proceeds are reinvested for the same purpose. The sale and purchase of the farm land must occur within 24 months of each other. This relief is subject to obtaining EU State Aid approval.

Flat-rate farmers

The unregistered farmer?s flat rate addition will be reduced from 5.2% to 4.8% with effect from 1 January 2013.

LOCAL PROPERTY TAX

The Finance (Local Property Tax) Act 2012 which was enacted in December 2012 is to be amended by the Finance Local Property Tax (Amendment) Bill 2013. Read our Local Property Tax ? Your Questions Answered for more information about the new tax and how it will be administered. Finance Bill 2013 confirmed the following amendments:

• To provide an exemption for residential properties which have been damaged by pyrite, are used by charities for recreational activities or which are occupied by incapacitated individuals and the property was acquired due to its suitability or has been modified for the individual. The chargeable value of the property can be potentially reduced where the property has been adapted for disabled persons.
• For the first valuation period (2013-2016) only the chargeable value of properties owned by local authorities and approved housing bodies will be deemed to fall into the lowest valuation band. In addition, the 2013 payment will be payable by 1 January 2014.
• The property tax will also have to be returned and paid in order to receive a tax clearance certificate.

The Finance Bill 2013 is still subject to amendment before enactment.

For further information:

Budget 2013: The main points from Budget 2013

Budget 2013: Download our Budget 2013 highlights

Budget 2013: Read our summary of Revenue?s FAQs to help you better understand the Local Property Tax

Finance Bill 2013: Download documentation on the Finance Bill 2013 on the Department of Finance website

Source: http://www.dbass.ie/blog/finance-act-2013/

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