On 12 October 2021 the Minister of Finance, Paschal Donohoe, and the Minister of Public Expenditure and Reform, Michael McGrath, delivered Budget 2022.
This budget, which is set in the context of a recovery from the global pandemic and a return to some level of normality, is a multi-million Euro package with the Government aiming to tackle the rising cost of living.
- The existing Employment Wage Subsidy Scheme will be extended to support businesses availing of the scheme on 31 December 2021 until 30 April 2022. The extension will be in a graduated form:
- There will be no change to the scheme for October and November.
- For December 2021, January 2022 and February 2022 a two-rate structure will apply of €151.50 and €203 per week.
- For March and April there will be one flat rate of €100.
- The reduced rate of employers PRSI will no longer apply from the end of February 2022.
- The scheme will close to new entrants from 1 January 2022.
Employers and employees alike will be pleased that there will be no cliff-edge at the end of the existing scheme.
- An increase in the Income Tax standard rate band for all earners was announced. It will increase from €35,300 to €36,800 for single individuals and from €44,300 to €45,800 for married couples / civil partners with one earner.
- An increase of €50 was announced for the Personal Tax Credit, the Employee Tax Credit and the Earned Income Credit. This increases each credit from €1,650 to €1,700.
These will be welcome announcements for all taxpayers.
- The income threshold for the higher rate of Employers PRSI will increase from €398 to €410 per week from January 2022.
- The ceiling of the second USC band rate will increase from €20,687 to €21,295 in 2022.
- The exemption from the top rate of USC for medical card holders and those over 70 earning less than €60,000 will remain in place.
- A new Income Tax deduction amounting to 30% of the cost of vouched expenses for heat, light and broadband can be claimed by taxpayers in respect of days spent working from home.
- The Help To Buy Scheme has been extended at the enhanced rate of support until the end of 2022.
- The measure which provides relief to landlords in relation to pre-letting expenses has been extended for a further 3 years until the end of 2024. The aim is to encourage landlords to bring derelict properties back into use.
- The current BIK exemption for electric vehicles is being extended until 2025 with a tapering effect on vehicle value. The original market value of a vehicle will be reduced by €35,000 for 2023, €20,000 for 2024 and €10,000 for 2025. Until 31 December 2022 it will continue to be reduced by €50,000.
- The rate of Corporation Tax is to increase to a new minimum effective rate of 15% for large multinationals. For companies with turnover less than €750m, the current rate of Corporation Tax of 12.5% will remain in place.
This will be welcome news to many SMEs that the 12.5% rate is continuing.
- The Accelerated Capital Allowances scheme which gives 100% tax relief in the year of purchase for Energy Efficient Equipment has been amended to exclude equipment which is directly operated by fossil fuels.
- The Accelerated Capital Allowances scheme for Gas Vehicles and Refuelling Equipment is being extended until the end of December 2024. It is also being amended to include hydrogen powered vehicles and refuelling equipment.
- A new refundable Corporation Tax credit at the rate of 32% was announced for digital games development companies for eligible expenditure incurred on the design, production and testing of a digital game up to a maximum limit of €25m per project. The credit will be introduced subject to a commencement order.
This measure demonstrates that Ireland is looking to attract digital based businesses to Ireland.
- The relief for certain start-up companies which provides relief from Corporation Tax in their first 3 years of trading will be extended for a further 5 years until 2026. The relief will also be amended so that companies will be able to avail of the relief in their first 5 years of trading instead of 3.
- The Employment Investment Incentive (EII) scheme is being extended for a further 3 years. Some amendments are also being made to the scheme. These include:
- Opening up the scheme to a wider range of investment funds,
- Allowing more capacity for investors to redeem their capital, and
- Removing the rule that 30% of an investment in an EII company must be spent before relief can be claimed.
- Stock Relief is extended for a further 3 years. Stock Relief for Young Trained Farmers and Farm Partnerships will be extended to 2022.
- The tax debt warehousing scheme will be expanded to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse Income Tax liabilities relating to their Schedule E income from that employer company.
- A tax disregard of €200 for personal income received by households who sell surplus electricity back to the grid is being introduced.
- The national minimum wage is to increase to €10.50 per hour.
- A Zoned Land Tax is to be introduced. This tax will apply to land which is zoned suitable for residential development and is serviced but not yet developed. It will be based on the market value of the land at the rate of 3%. It is proposed for there to be a 2 year lead in time for land zoned before January 2022 and a 3 year lead in time for land zoned after January 2022. This tax will replace the vacant site levy.
- Two new measures are being introduced. These are:
- Interest Limitation Rules - This measure will put in place limits on deductible interest expenses of 30% of EBITDA for companies that fall within the scope of the measure for accounting periods beginning on or after 1 January 2022.
- Anti-reverse-hybrid rules - This measure which will bring certain tax transparent entities within the scope of Irish tax where the entity is 50% or more owned/controlled by entities resident in a jurisdiction that regard it as tax opaque.
- Full details of the measures will be included in the finance bill.
- Young Trained Farmer (Stamp Duty) relief is being extended until the end of 2022.
VAT and Excise Duties
- The VAT reduction from 13.5% to 9% announced last year for businesses in the hospitality and tourism sector is now to remain until 31 August 2022.
This will be welcome news for businesses in this sector which have been badly hit by the pandemic.
- The Farmers Flat Rate VAT charge is decreasing from 5.6% to 5.5%.
- Excise on cigarettes is to increase by 50 cents per packet of 20, with a pro-rata increase on other tobacco related products.
- As announced last year, Carbon Tax is increasing by €7.50 from €33.50 per tonne of CO2 to €41. This will take effect for vehicle fuel from budget night and for all other fuel from 1 May 2022.
- Vehicle Registration Tax (VRT) is being revised from January 2022. The rates of VRT will increase starting with:
- 1% increase for vehicles falling into bands 9-12 (111-130g CO2/km);
- 2% for vehicles in bands 13-15 (131-145g CO2/km); and
- 4% for bands 16-20 (>145g CO2/km).
- The €5,000 VRT relief for electric vehicles is being extended until December 2023.
- The Bank Levy which was due to end in 2021 has been extended to the end of 2022.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.