Budget 2012 – More Highlights

The 2012 Summary of 2012 Budget Measures – Policy Changes is now online.

This includes the following points that were not fully addressed in the Minister’s Speech today.

USC Surcharge on ‘Property Reliefs’ income – A surcharge will apply from 1 January 2012 on individuals with gross incomes over €100,000. The surcharge will be 5% on the amount of income sheltered by property reliefs in a given year. This will be operated as a a higher rate of USC and will apply to all ‘high earning’ investors with Section 23 or accelerated capital allowance schemes investments

Investors in accelerated capital allowance schemes will no lose their entitlement to unused capital allowances,  beyond the tax life of the scheme after 1 January 2015.

The new 2% Stamp Duty rate on non-residential property applies from Budget Day, 6 December 2011.

Consanguinity relief from Stamp Duty, which applies on transfers of non-residential properties between blood relatives is to be retained to the end of 2014 but will be scrapped after 1 January 2015. This relief provides for a 50% cut in the standard rate of Stamp Duty on intra-family transactions.

The €100 household charge will be replaced by a full property tax in 2014.

The increases in Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) from 25% to 30% will apply from Budget Day. The cut in the tax-free Group-A CAT threshold (most commonly parent-to-child gifts and inheritances) will cut the maximum tax-free sum from €332,084 to €250,000. This also applies with immediate effect.

A new CGT incentive relief applies to properties bought between Budget night and the end of 2013. If the property is held for more than seven years, the Capital Gain arising in that period will not attract CGT. This incentive is introduced with immediate effect.

The tax relief scheme for corporate investment in renewable energy projects is being extended from 31 December 2011 to 31 December 2014. This scheme encourages investment in approved renewable energy projects in the solar, wind, hydro (including ocean, wave or tidal energy) and biomass sectors

The exit tax on life assurance policies is being increased from 27% to 30% in line with the increase in DIRT tax on deposit interest. These changes apply from 1 January 2012.

The €200,000 Domicile Levy is being extended to include non-Irish citizens. The Budget 2011 version of this levy was an embarrassing failure with just 10 people declaring themselves liable to pay it by the recent deadline, according to RTE News last month.

The VAT rate increase from 21% to 23% will apply from 1 January 2012. Traders will therefore avoid the VAT hike on their pre-Christmas and pre-New Year Sales receipts.

The VAT rate on District Heating is being cut from 21% to 13.5%

Admission charges to open farms will become liable to VAT from 1 January 2012. This will be charged at the 9% VAT rate for tourist enterprises.

Excise Duty on cigarettes goes up by 25 cents (including VAT) for a packet of 20. A pro-rata increase applies to other tobacco products.

The Carbon Tax increase on petrol and diesel applies from midnight on Budget Day, with the corresponding increases in Kerosene, Marked Gas Oil, Liquid Petroleum Gas (LPG), Fuel Oil and Natural Gas applying from 1 May 2012.

Betting Duty of 1% is being applied to remote betting. A  Gross Profits Tax of 15% is being charged on betting exchanges. These will commence from the second quarter of 2012, subject to EU Commission approval.

Research & Development Tax Credit – The first €100,000 of qualifying R&D expenditure will benefit from the 25% R&D tax credit on a volume basis. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000 compared to the equivalent expenditure in the base year 2003.

The outsourcing limits for sub-contracted Research & Development costs are being increased.

A portion of the R&D credit may be used to reward key employees who have been involved in the development of R&D.

The annual ‘imputed distribution’ charge on Approved Retirement Fund (ARF) assets is being increased from 5% to 6% in respect of ARFs with asset values over €2 million. This comes into effect on 31 December 2012. A similar charge will now apply to vested PRSAs with assets in excess of €2 million.

The 20% ‘final liability tax’ on the transfer of ARF assets on the death of an ARF owner to their adult children is being raised to 30%.

The current 50% employer PRSI relief for employee contributions to occupational pension schemes and other pension arrangements is being scrapped from 1 January 2012.

Capital Gains Tax Retirement Relief

The existing unlimited retirement relief from CGT for transfers of ‘qualifying assets’ to family members will be maintained for individuals aged 55 to 66. An upper limit of €3 million will apply to such transfers made by owners over 66 years, after a two year transitional period.

The current upper limit of €750,000 for assets transferred outside the family is being retained for individuals aged between 55 and 66 years. However a lower limit of €500,000 will apply to such disposals by persons over 66 years after a similar two year transitional period.

 

 

 

 

 

Budget 2012 Live Updates

Michael Noonan, Minster for Finance is now delivering his Budget 2012 speech to Dáil Éireann.

The Minister has announced the following Tax measures:

Corporation Tax

• No change in the 12.5% Corporation Tax rate.
• A special Assignee Relief Programme to attract multinationals’ executives to Ireland
• New Foreign Earnings deductions for individuals developing markets abroad
• International financial services sector boosted by measures to be announced in Finance Bill
• First €100,000 of Research & Development expenditure to be allowed for R&D credit.
• Corporation Tax exemption for new companies extended for a further 3 years.

Farming

• Farm transfers to the next generation are to be incentivised
• Significant fall in the rate of stamp duty for farmland and other commercial property
• Retirement relief for CGT to be modified – no detail of this measure included in the Budget Speech.
• Farm partnerships to be encouraged by 50% Stock relief for participating farmers and existing 100% Stock relief for young farmers
• The 9% rate of VAT to apply to Open Farms

Air Travel Tax

• Government are ‘prepared to negotiate’ with Aer Lingus and Ryanair to incentivise tourist routes into Ireland

Construction Sector

• Stamp duty for commercial property to be cut to 2% overnight – the previous top rate was 6%
• The current rates for residential property will apply
• CGT exemption for properties bought between tonight and the end of 2013 – if they are held for 7 years.
• Commercial properties – NAMA can now approve rent reductions in certain cases, even in cases where ‘upward only rent review’ clauses apply
• Those who bought homes at the end of the property boom will gain by an increase in mortgage interest relief to 30% for those homeowners
• First time buyers will get 25% mortgage interest relief for property purchases in 2012

Property Reliefs

• Detailed policy measures to be made in Finance Bill
• s.23 Reliefs to small scale investors will not be cut
• Surcharge of 5% will apply to sheltered income where one’s income is over €100,000

Income Tax

• No increase in Income Tax bands, rates or credits.
• Universal Social Charge to be changed to help low paid seasonal & temporary workers – the exempt income level rises from €4,004 to €10,036
• the USC will be collected on a cumulative basis in 2012

Value Added Tax

• The Standard rate of VAT will rise by 2% to 23%
• The other rates of VAT remain unchanged

Capital Taxes

• Capital Acquisitions Tax & Capital Gains Tax go from 25% to 30%
• Standard Exemption for Capital Acquisitions Tax (parent-child transfers) cut from €332,084 to €250,000

Investment Income

• Deposit interest retention tax (DIRT) increased from 27% to 30%
• PRSI will cover rental and investment income from 2013

Approved Retirement (ARF) Funds

• ARF ‘imputed distribution’ charge increased to 6%
• ARF tax on death of a child over 21 goes to 21%
• Citizenship condition on domicile levy is scrapped
• Carbon Tax goes up from €15 to €20 per tonne – a 33% increase. This increase does not apply to home heating oil or solid fuel.
• Double income tax deduction for Carbon tax for farming
• VAT Refunds on farm buildings will include wind turbines

Other

• The income tax relief on pension contributions remains unchanged – tax relief will remain at the marginal rate of tax.
• A household charge of €100 per household is being introduced. Certain limited waivers will apply.
• Motor Tax increases to raise €47 million
• A new export refund scheme will apply to exports of motor cars
• The existing tax exemption for the first 26 days of disability benefit per annum is to be abolished. The Minister described this as ‘an incentive for absenteeism’

Excise Duty

• Alcohol excise duty is unchanged.

 

 

 

 

Revenue extend Pay & File Tax Return Deadline

In a surprising move, Revenue have announced today that they have extended next week’s ROS online Pay & File Tax Deadline by 24 hours. The original deadline of Tuesday 15 November is now extended until midnight on Wednesday 16 November.

This new deadline covers the following

• online filing of Form 11 Income Tax Returns on ROS
• online payment of 2010 Income Tax liability
• payment of Preliminary Tax for 2011.

Today’s Revenue statement does not mention any extension to the deadline for making Pension/AVC contributions which qualify on a back-dated basis for tax relief for 2010. If you are considering making such a contribution in the coming days in order to obtain 2010 tax relief, I suggest that you do so by the original deadline of next Monday – at least until and unless Revenue confirm in the meantime that the pension relief deadline is also extended.

I have no idea why Revenue have at this late stage opted to extend the deadline by a day. Perhaps it is compensation of sorts for last week’s 31 October deadline for paper-filed tax returns, which fell on Bank Holiday Monday when Revenue offices were closed and many accounting and tax firms found themselves having to open on the Bank Holiday.

Either way, the deadline extension is very welcome, although it would have been simpler and easier for everyone concerned had this change been made months ago.  Spare a thought for your accountant or tax advisor if they have already made holiday or ‘quality time’ plans for Wednesday 16 November!

The ROS Technical Helpdesk will now be open until midnight on 16 November 2011.

Less Frequent Business Tax Returns on the way

Revenue have this week announced that more small businesses will be qualify for reduced frequency VAT, PAYE/PRSI, & RCT tax returns and payments in 2012.

With effect from 1 January 2012, businesses whose annual VAT bills are less than €3,000 will only be required to file VAT returns and pay VAT liabilities every 6 months. If their annual VAT bills are between €3,000 and €14,400, they will file and pay every 4 months.

In addition, employers and contractors whose annual PAYE/PRSI or RCT liabilities are less than €28,800 will be eligible to make quarterly P30 & RCT30 returns and payments.

Revenue state that this will mean improved cashflow and less form-filling for eligible businesses.

They will soon be writing to businesses that they believe to be eligible for these new arrangement. If you don’t hear from them, but feel that your business should be eligible, (for example due to falling turnover), you should get in touch with Revenue before the end of December.

CRO U-turn on Company Voluntary Strike-off Rules

The Companies Registration Office has made a u-turn on its plans to restrict the Voluntary Strike Off procedure for companies.

In a recent blog article, I bemoaned a Companies Registration Office (CRO) move to curtail the simple and inexpensive CRO Voluntary Strike Off process to have a company dissolved. The CRO announced this summer that a company could only avail of this procedure if its Issued Share Capital was  less than €150. This meant that companies with a higher Issued Share Capital would instead have to undergo a Members’ Voluntary Liquidation  – a complex exercise that can cost thousands of euro in professional fees.

Thankfully the CRO have now scrapped these plans.

In a statement released yesterday, they confirm that a company can now still avail of the Voluntary Strike Off process, even if its Issued Share Capital exceed €150.

This is a very welcome development, and the CRO deserve credit for taking speedy action to resolve this issue.

Plain-paper P60 Forms now online

Revenue have today published approved-format P60 templates which allow employers and their accountants to print P60s for employees. They confirm that they will no longer issue P60 stationery to the public.

A MS Word version of the P60 is here, while a ‘laser’ version (presumably for use with laser printers) is here.

The new format P60 reflects two notable changes :

• A separate Certificate is no longer needed to confirm USC details, as these are included in the P60 form. In 2009 & 2010, employers had to issue their employees with separate Income Levy Certificates, in addition to their P60′s. Thankfully this duplication of paperwork is no more.

• Up to now, it was necessary to issue P60s in duplicate, one part of the form to be used for tax purposes, the other for PRSI & social welfare purposes. It appears that the new single-page form will be adequate for both purposes.

Bizarre CRO Change To Cost Companies Thousands

A bizarre and pointless change to CRO procedure is set to cost some companies thousands of Euro in professional fees.

If you own a limited company and wish to close it down, you can no longer use the simple and inexpensive Companies Registration Office (CRO) Voluntary Strike Off process to have your company dissolved – if your company’s ‘Issued Share Capital’ exceeds €150. Instead, the CRO now will now require your company to undergo a Members’ Voluntary Liquidation  – a more complicated process that can cost you several thousand euro in professional fees.

This arises from a little-heralded administrative change announced by the CRO earlier this year.  Previously any company could avail of the Voluntary Strike Off process. Now it applies only to companies with ’Issued Share Capital’ of less than €150.

Issued Share Capital is a technical term for the value of shares issued by a company. Most owner-operated companies will normally have an Issued Share Capital of €100, usually comprising 100 ordinary shares of €1 each.

However, a company that has been in existence since 2001 or earlier may well have an Issued Share Capital of €200, (eg 100 ordinary shares of €2 each). This is because such companies were encouraged, as part of the Euro Changeover, to convert their share capital from Irish Pounds to Euro. The most common way to do this at the time was to increase the value of their shares from £1 (€1.26973) each to €2 each. All such companies are now excluded from the Voluntary Strike Off procedure.

In addition, any company that was formed with a higher number of €1 shares (eg 3 shareholders with 100 shares each, making up a total of 300 shares) will also be barred from availing of a Voluntary Strike Off.

Furthermore, to qualify for Voluntary Strike Off, a company’s share capital must not have exceeded €150 anytime in the previous three years. If a company has a higher share capital, e.g. €200 or €300, it is difficult and problematic to have this reduced to a lower  figure. And, even if they manage to do so, they will then have to wait three years before they can qualify for Voluntary Strike Off.

This means three more years of preparing and filing accounts and other general administration – all the time incurring additional costs.

I am sure there is a technically and legally sound reason for this obscure change, but its logic escapes me. I can’t help thinking that it is bizarre and pointless to arbitrarily ban some companies from the very useful Voluntary Strike Off process, simply on the basis that their share capital is slightly higher than the norm.

According to the 2010 CRO Annual Report, last year a total of 5,488 companies underwent Voluntary Strike Off, which meant that they were dissolved in an orderly and legal manner, with no creditors or obligations left unpaid. In contrast, the CRO struck off  6,272 companies for failure to file returns. Practically all of these companies were dissolved while owing unpaid filing fees to the CRO (up to €1,240 for each unfiled return), while many among them would have also owed further sums to Revenue, banks and other creditors.

All the time, it seems that bureaucratic administrative rules are making it harder and harder for compliant companies and their directors to adhere to the law – while at the same time over 6,000 companies last year were allowed to flout the law and avoid both their public filing obligations and the associated compliance costs.

One more example of punishing the innocent for the sins of the guilty?

Companies Office Annual Report 2010 now online

The Companies Registration Office (CRO) Annual Report for 2010 has just been published online. It is a treasure trove of interesting statistics about Irish companies last year, and a fascinating insight into the state of Irish company administration.

The following points caught my eye.

• At the end of 2010, some 185,000 companies were in existence in Ireland.
• At that date, 88.3% of companies had an up-to-date filing record.This means that the remaining 11.7% were in arrears, and are all ineligible for Audit  Exemption.
• The CRO processed 170,000 annual returns in 2010. Their busiest month was November, when they registered 32,000, so it would appear that large numbers of CRO returns are not filed until the end of the annual Revenue tax filing season. The normal CRO monthly average is 12,000 per month.
• The CRO registered 28,089 new business names in 2010. Despite the recession, 10% more business names were registered in 2010 compared to 2009.
• The CRO earned a total of €11.31m in later filing penalties in 2010. They expect this income to fall in 2010, as more companies file on time.
• 93 companies were prosecuted for non-filing last year, with 49 convicted. These 49 convictions yielded €63,000 in fines, an average of €1,285 each. In this context, its worth noting that a company filing an annual return a year late will pay a maximum penalty of €1,200, 93% of the average penalty imposed by the courts for non-filing.  This unfortunately represents a scant incentive for companies to regularise their affairs and bring their CRO filings up to date.
• 28 companies went into examinership in 2010. By year end, 15 had returned to normal trading, two had entered court liquidation and receivership, a further two had gone into receivership while the remaining nine continued in examinership.
• A total of 2,403 liquidations were notified to the CRO last year. Nearly half (1,158) of these were Members Voluntary Liquidations, a similar number (1,124) were Creditors Voluntary liquidations, while the remaining 121 were Court Liquidations.
• It is perhaps sobering to note that an average of 10 companies went into liquidation every working day in 2010.
• A total of 6,287 companies were in liquidation at the end of 2010, a grim epitaph for a grim year for Ireland’s economy.

NPPR Deadline 30 June – Here’s what to do…

Next Thursday, 30 June, is the deadline for payment of the  €200 Non- Principal Private Residence (NPPR) charge for 2011.  If you are liable to pay the charge and fail to do so by next Thursday, you will face an extra charge of €20 per month until it is paid.

The NPPR charge is levied on domestic properties, second homes, rental houses and apartments and other properties, except for an individual’s main residence.

You can pay this charge online at www.nppr.ie. Thankfully, this site is very easy to use.

If you have previously paid your 2009 or 2010 liability online, just follow the Login button on the homepage. You will be prompted for your Account Reference code and PIN password. If you don’t have these details to hand, click on the ‘Lost Account Ref’ and ‘Lost PIN’ buttons and these details will be sent to you by email. You will need your PPS number in order to retrieve your Account Reference code.

Once you manage to log in, you will see details of your registered property or properties. Then  you can follow a few simply steps to re-register  and pay by credit card or laser/debit card.

If you haven’t used the online facility previously, go to the ‘New Customer’ area of the home page, select ‘New Account‘ and follow the steps outlined to enter your personal and property details and pay the charge.

The entire exercise should take only about 5 minutes, perhaps a little longer if you need to have your login details emailed to you. If you have queries, follow the FAQs (frequently asked questions) tab on the NPPR homepage.

2011 Form CT1 Corporation Tax Return now online

Revenue have today unveiled the ROS Form CT1 Corporation Tax Return for 2011.

For the first time ever, this year’s CT1 return includes an an optional facility to pre-populate the tax return with data extracted from the company’s CT1 tax return for 2010. This useful feature is included in both the ROS on-line and ROS off-line applications.

Online CT1 filing is now compulsory for most companies from 1 June 2011. Revenue have now also published a downloadable pdf-format paper CT1 return to facilitate the remaining companies who are still permitted to file paper returns.

Thankfully Revenue have now ceased the wasteful practice of mass-producing paper CT1 returns, most of which ended up in recycling bins.

For more, see todays Revenue eBrief on the 2011 CT1 return, and the recent eBrief on mandatory e-filing.  Revenue have promised to publish soon a further eBrief on how to use the pre-population facility on the new CT1 tax returns.