The National Recovery Plan – Immediate Tax Changes

Following the publication of the National Recovery Plan on Wednesday, the Minister for Finance has clarified that the Tax Exemption for Patent Royalties, and the Approved Share Options Scheme have both been abolished with immediate effect, from 2pm on 24 November.

The other tax changes for 2011 arising from the Recovery Plan will be announced as part of the Budget on 7 December.

The National Recovery Plan – List of Tax Changes

The National Recovery Plan 2011-2014 has just been announced and is now available online

The Taxation Measures in the Plan are outlined on pages 89-103 of the document.

Page 89 lists the following ‘Key Messages’ of the Plan’s tax measures.

• Revenue measures will provide one third of the budgetary adjustment.
• 40% of total revenue measures will be adopted in 2011.
• The income tax system is unsustainable if 45% of tax units pay no income tax.
• Radical base broadening across the tax system is needed.
• All taxpayers must contribute.
• By overhauling tax expenditures, those that can afford to pay more will pay more.
• Tax policy emphasis must be on sustainable structural reform.
• Funding of local service provision must be addressed.
• The Government will maintain the 12½% rate of corporation tax.
• Supports for small and medium enterprises will be reformed.

The document proceeds to announce the following changes

Tax Credits and Bands

Tax credits and bands are to be cut by a total of 16.5% over the 4 years covered by the plan.

Pensions Tax Relief

• The rate of income tax relief on pension contributions will remain unchanged in 2011, but will be cut from 41% to 34% in 2012, to 27% in 2013 and 20% in 2014
• The existing PRSI and Health Levy relief on employee pension contributions will be abolished from 2011.
• The annual earnings cap for pension contributions eligible for relief will be cut from €150,000 to €115,000 in 2011.

Tax Reliefs

A range of Tax reliefs and exemptions are to be abolished in 2011. These are:

• Tax exemption for patent royalties.
• The investment allowance for machinery and plant and for exploration expenditure.
• Approved Share Options Scheme.
• BIK exemption on employer provided childcare.
• The accelerated allowance for capital expenditure on farm buildings for pollution control.
• The tax exemption for payments to National Co-operative Farm Relief Services Ltd.
• Income tax relief for rent paid for private rented accommodation.37
• Income tax relief for trade union subscriptions.
• Income Tax Age Credit (phased over 4 years).
• Income Tax Age Exemptions (phased over 4 years)

The following measures will also be adopted:

• PRSI, Health and Income Levy charge will now apply to Approved Profit Sharing,Save-As-You-Earn,Unapproved Share Options and Share Awards Schemes.
• Artist’s exemption from Income Tax will now be restricted to €40,000 earnings.
• Ex-gratia termination and pension lump sum payments in excess of €200,000 will now be taxed.

VAT

The standard 21% rate of VAT will increase to 22% in 2013 and 23% in 2014.

Property Tax

A ‘Site Value Tax’ will be introduced in 2012, in the form of an interim fixed “household charge” of €100 per annum in 2012, and a full charge based on property value from 2013.

Carbon Tax

Carbon taxes will double over four years.

Capital Taxes

• The 25% rate of Capital Gains Tax will change to a new system in 2012, with differing rates for different levels of gains.
• The current tax-free thresholds for Capital Acquisitions Tax (CAT) are to be cut.
• Current reliefs and exemptions from CGT, CAT and Stamp Duty ‘will either be abolished or greatly restricted’.

Corporation Tax

• There will be no change in the 12½% rate of corporation tax.
• The Business Expansion Scheme(BES) is to be reformed.

2010 Capital Gains Tax Deadlines Looming

If you made a Capital Gain in 2010 from selling or disposing of an asset, congratulations! Making a gain of any sort is quite an achievement in these difficult times.  That said, don’t celebrate for too long, as the deadline is looming for payment of your Capital Gains Tax (CGT) liability.

For Capital Gains arising in the period 1 January 2010 to 30 November 2010, the due date for payment is 15 December 2010. For gains made in the month of December 2010, the payment deadline is 31 January 2011.

Although these are very tight deadlines (as short as 15 days for a sale made in late November),  it is essential to meet them, as Revenue charge interest on late payments.

To make a payment to Revenue for the January – November period, download and complete a CGT payslip attach your cheque or draft payment, and forward it to The Collector-General, FREEPOST, Sarsfield House, Francis Street, Limerick.

If you dispose of property in 2010, you must also submit a tax return to Revenue in respect of the disposal. This can be done by using a Form CG1 or Form 11 tax return, and applies regardless of whether you have a CGT liability on the disposal.

The due date for filing such a return for 2010 is 31 October 2011.  Late- or non-filers are charged an additional surcharge of 5-10% of the liability, so it is very much in your interest to file on time.

The 2010 Form CG1 and Form 11 will not be released until early 2011, but the 2009 versions of these forms may be accessed here and here respectively.

16 Nov. ROS deadline applies to Pensions Relief

Chartered Accountants Ireland have confirmed today that the deadline for paying Pension Contributions that attract backdated tax relief for 2009 is extended from 31 October to 16 November. This applies where an individual has filed their 2009 Income Tax return by 16 November, and paid any 2009 tax balance via ROS by the same date.

In a statement issued  today, Chartered Accountants Ireland stated  “Following a request for confirmation from our members, we wish to advise all readers that where a taxpayer qualifies for the extended ROS Pay & File deadline of 16 November 2010, this extended deadline also applies to RAC, PRSA and AVC contributions.  Readers are reminded that in order to avail of this extended deadline, both the return and the payment must be made online.  Where only one of these actions is completed through ROS, the extension will not apply.”

As yet I don’t have a link for the statement but I will add this when it is online.