The Finance Bill – some initial thoughts

Some initial thoughts on the changes announced in today’s Finance Bill

• The mooted changes to the Capital Acquistions Tax system are welcome, IF they help to simplify how CAT works and remove some of the anomalies in the system.  Until we see the detail of the changes, it will be impossible to tell whether these objectives will be met.

• The imposition of VAT on refuse charges and other local services was inevitable since last year’s European Court ruling. That said, it is unfortunate that this measure will be accompanied by the scrapping of tax relief on service charges.  I estimate that this latter move will cost most householders €60-80 per year, from 2012.  In addition, the VAT charge will add a further €40-€55 to typical annual household refuse bills.  An unfortunate double-hit for consumers and families.

• Tax relief on service charges was always one of the tax reliefs that many taxpayers simply forgot to claim each year. At least its removal will make it a little easier for an individual to correctly complete their own tax return.  Every cloud has …

• The curbing of the 80% Windfall Tax is very welcome. Farmers and small landowners will not now have to worry about a punitive tax, when they wish to  sell an individual site  or give a site to their son or daughter.  This move might just give a little, and much-needed, boost to rural builders and tradesmen.  In the current climate the limit of €250,000 per 1-acre site is unlikely to affect (or worry) too many people.

More anon…



The 2010 Finance Bill is unveiled

The 2010 Finance Bill has been published earlier this afternoon.  In addition to the measures announced in the Budget, it contains a raft of new provisions, including the following:

• A new package of reforms to the Capital Acquisitions Tax system,  which are designed “to modernise and simplify the CAT regime, while delivering immediate and significant benefits to taxpayers, their legal advisers and the Revenue Commissioners”.



• Measures to facilitate the development in Ireland  of Islamic finance which  is compliant with the principles of Shari’a law.

• From 1 July 2010, VAT will apply to Public Bodies and local authorities, for waste collection, landfill, and recycling services; off-street parking; toll roads; and leisure facilities).  This follows a 2009 European Court of Justice (ECJ) ruling against Ireland. The changes will not affect education, health, water and passenger transport services.
• The abolition of  certain Tax Reliefs including tax relief on Service/Refuse charges (from 2012 onwards), relief for Gifts of property to the State and Capital Allowances for childcare facilities.
• Confirmation that the 80% Windfall Tax will now not apply to the sale of one-off sites below an acre and €250,000.

• Technical changes to procedures in relation to tax relief for medical expenses. According to the Dept of Finance “he relief is being refocused on expenses incurred by or on the advice of a medical practitioner”.
• The scrapping of the 1% Levy on pension products “in order not to discourage investment in pensions”.
• The introduction of transfer pricing legislation to regulate trading between associated companies.
• Measures to combat the misuse of tax avoidance schemes.

Capital Acquisitions Tax 2010 Thresholds

The Revenue have published Capital Acquisitions Tax Group Thresholds for gifts and inheritances received in 2010.

The Thresholds are adjusted annually in line with inflation. The 2010 Thresholds are as follows:

Group A €414,799. This applies to gifts & inheritances from a parent.

Group B €41,481.  This applies to gifts & inheritances received from a brother, sister, aunt or uncle, niece or nephew, grandparent and most other close relatives.

Group C €20,740. This applies to to all gifts & inheritances not covered by Groups A and B.