News

Michael Noonan, Minister for Finance, delivered the 2016 budget on 13 October 2015. With uncertainty surrounding whether there would be a potential snap election before Christmas, this budget was heralded as a “goodie bag” budget with treats for all.

This budget saw more tax breaks than tax hikes with smokers being the only category hit. The cut in the rates of Universal Social Charge (USC) is the main benefit to most taxpayers. The self-employed also benefited with the introduction of a new tax credit.

Highlights of the budget are set out below.

Personal Tax

• No changes to Income Tax rates or bands.
• Changes are introduced to USC. The income threshold for which individuals become liable to the USC will be increased from €12,012 to €13,000.
• The rates of USC have decreased. The new rates are:
• 1% on the first €12,012
• 3% on income between €12,012 and €18,668
• 5.5% on income between €18,669 and €70,044
• 8% on income between €70,045 and €100,000
• The rate of USC for self-employed individuals with income in excess of €100,000 remains at 11%.
• The exemption from the higher rate of USC remains in place for medical card holders or individuals aged over 70 who have income below €60,000. The maximum USC they will now pay is 3%.
• A new Earned Income Tax Credit of €550 is being introduced for self employed individuals who are unable to benefit from the PAYE tax credit.
• The Home Carer Tax Credit will increase from €810 to €1,000. The income threshold will also increase by €2,120 from €5,080 to €7,200.
• A tapered PRSI relief of a maximum of €12 per year will be introduced. The relief will begin at €352.01 per week and will taper out when income reaches €424 per week.
• The Home Renovation Incentive scheme which was introduced in 2014 is being extended until December 2016. This scheme provides an income tax credit to homeowners and landlords to carry out certain renovation and improvement works on their main home or rental property by qualifying contractors.
• The revaluation date for Local Property Tax is being postponed from 2016 to 2019.

Business

• No change in the 12.5% rate of Corporation Tax.
• Last year consultation was undertaken in relation to the creation of a Knowledge Development Box. It is now proposed to provide a 6.25% rate of Corporation Tax to apply to the profits arising from certain patents and copyrighted software which are the result of qualifying R&D undertaken in Ireland. Further details will be announced in the Finance Bill.
• The 3 year exemption from corporation tax for start-up companies is being extended to new businesses commencing to trade over the next 3 years.
• Increase from €356.01 to €376.01 in the weekly threshold at which liability to employers PRSI increases from 8.5% to 10.75% on all earnings.
• A new farm succession transfer partnership model is being introduced. This is subject to EU State Aid approval. The proposal will allow 2 people to enter into partnership with an appropriate profit sharing agreement which makes provision for the transfer of the farm to the younger farmer at the end of a specified period not exceeding 10 years. An income tax credit of up to €5,000 per annum for five years will be allocated to the partnership and split according to the profit sharing agreement.
• The cap on eligible expenditure under the Film Relief scheme is being increased from €50 million to €70 million. This is subject to State Aid approval.
• Measures announced in 2015 in relation to the Employment and Investment Incentive which were subject to approval by the European Commission are now being introduced. The scheme is being amended to include expansion works on existing nursing homes.
• Profits from the occupation of woodlands are being removed from the high earners restriction.
• General stock relief, stork relief for young trained farmers, stock relief for registered farm partnerships and the stamp duty exemption for young trained farmers are being extended until December 2018. These measures were due to expire at the end of December 2015.
• The pension fund levy of 0.15% which was introduced for 2014 and 2015 is now being abolished.
• The bank levy is being extended to 2021 subject to a review taking place of the methodology used to calculate the levy.

Capital Gains Tax

• A revised CGT rate of 20% is being introduced from January 2016 for entrepreneurs who dispose of all or part of their business up to an overall lifetime limit of €1 million in chargeable gains.

Capital Acquisitions Tax

• The group A threshold which mainly applies to transfers from parents to children is being increased from €225,000 to €280,000. This will apply for all gifts or inheritances on or after 14th October 2015.

Stamp Duty

• The current charge on ATM cards and combined ATM & Debit cards is being abolished and is being replaced with a new 12c ATM withdrawal fee up to a maximum of €2.50/€5 per year. The change will apply from 1 January 2016.

Excise Duty

• No changes to excise duty on petrol, diesel or alcohol.
• Excise duty on a packet of 20 cigarettes is increased by 50 cents with effect from midnight 13 October. A pro-rata increase will apply to all other tobacco products.
• Motor Tax is being reduced for vehicles above 4,000kgs with a new annual rate of €500 for vehicles between 4,000kgs and 12,000kgs and €900 for vehicles over 12,000kgs.

If you would like to discuss any of the above points in more detail, please contact our Tax team or call us +44 (0) 28 8775 2990.