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Finance (No.2) Act 2008

Finance (No.2) Act 2008. Conor Kennedy Law Library Four Courts Dublin 7. Income Levy. Applies to all income Except Deposit interest Credit Union Dividends Certain Life Policies Investment undertakings Certain offshore funds Certain social welfare payments. Income Levy. Calculation

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Finance (No.2) Act 2008

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  1. Finance (No.2) Act 2008 Conor Kennedy Law Library Four Courts Dublin 7.

  2. Income Levy • Applies to all income • Except • Deposit interest • Credit Union Dividends • Certain Life Policies • Investment undertakings • Certain offshore funds • Certain social welfare payments

  3. Income Levy Calculation • 1% up to €100,100 • 2% on excess over €100,100 but not exceeding €250,120 • 3% thereafter • Not applicable to • Over 65’s • Single income less than €20,000 • Double income less than €40,000 • Under 65 • Exemption threshold = €18,304 • Medical card

  4. Income Levy No Allowance • Double rent relief • S.23 • Donations • Capital allowances • Pension contributions Effective from 1st January Preliminary tax payments

  5. Car Parking Levy • Difficult to implement • Applies to certain urban areas • Ministerial order • Rate Default = €200 Possible = €100 • Reductions • 10 or more employees • Not used fully in year • Job sharing • Maternity • Collected by employers through PAYE system

  6. Standard Rate Bands Tax Year 2008 Tax Year 2009 and Subsequent Years € € Single Person 35,400 36,400 Widowed/single parent 39,400 40,400 Married couple One earner 44,400 45,400 Two earners 70,800 72,800

  7. Benefit in kind • Pref loans Home loans - 5% Other  - 12.5% • Bikes €1,000 expended by employer Safety equip Salary sacrifice Once every 5 years • 1st January 2009

  8. Benefit in kind - Cars Business mileage Business mileage Percentage of original lower limit upper limit market value (1) (2) (3) kilometres kilometres per cent 24,000 32,000 24 32,000 40,000 18 40,000 48,000 12 48,000 — 6

  9. Benefit in Kind - Cars CO2 Emission Categories Category CO2 Emissions (CO2g/km) A 0g/km - 120g/km B 120g/km - 140g/km C 140g/km – 155g/km D 155g/km – 170g/km E 170g/km - 190g/km F 190g/km - 225g/km G More than 225g/km

  10. Motor Vehicles • Category A - Opel Corsa & Toyota Prius 1.5 • Category B - Ford Focus • Category C - Audi A3 • Category D - Ford Mondeo 2litre • Category E - BMW 330i • Category F - Jaguar XJ6 • Category G - Range Rover • Ministerial Order

  11. Benefit in kind - Cars Business mileage Vehicle Vehicle Vehicle Categories Categories Categories lower upper A, B and D and E F and G C (1) (2) (3) (4) (5) km km % % % — 24,000 30 35 40 24,000 32,000 24 28 32 32,000 40,000 18 21 24 40,000 48,000 12 14 16 48,000 — 6 7 8

  12. Finance No.2 • S. 8 - Health Expenses • 1st January 2009 – standard rate • Nursing home expenditure – unaffected • S.9 Share Schemes • Withdrawal of approval for failing to file returns • S.10 Share Schemes • Anti-avoidance regarding exchanges • Effected from 2oth November • S.11 Share Schemes • Penalties for failing to report

  13. Finance No.2 Act • S.12 - Restricted & Forfeitable Shares • S.128D – Restricted shares • Tax reduced depending on retention period • Period 1 – 5 yrs • Abatement 10% - 60% • S.128F – Forfeited Shares • Shares acquired & assessed on MV • Subsequently forfeited • Repayment by Revenue • Effective from 20th November

  14. Remittance Basis • Section 825B • relief to non Irish domiciled employees • employed and paid by the overseas employer • period of at least three years. • from a treaty country but outside the EEA • relief ensures tax in Ireland will be the greater of:  • total employment earnings remitted to Ireland; and • 1st €100,000 plus 50% of the earnings over this amount.  • repayment of taxes otherwise payable • overseas employer to operate PAYE/PRSI.

  15. Remittance Basis S.13 Example • US assignee earned €300,000 • Remitted €150,000 Taxes in Ireland on greater of • €150,000 or • €100,000 + €100,000 (50% of €200,000) • Year of assessment 2009

  16. Mortgage Interest • S.14 • From 1 January 2009 the relief due to first-time buyers will be as follows—  • 25 % for years 1 and 2 • 22.5 % for years 3, 4 and 5, and • 20% for years 6 and 7. • The rate of mortgage interest relief for non-first-time buyers will be reduced from 20% to 15%.

  17. Residency • S.15 • 819 of the Taxes Consolidation Act 1997 • in determining the number of days spent in the State • an individual shall be present in the State for a day if present in the State at any time during that day

  18. Pensions • Section 16 • amends the formula to determine the standard and personal fund thresholds to be indexed in line with an earnings adjustment factor in future years. • Formula in section 790A (2) relating to the determination of the annual earnings limit for tax relieved pension contributions. The amendments ensure that where no indexation is provided for, the thresholds and the annual earnings limit will remain at the previous year’s amounts. • Finally, the section restricts the annual earnings limit from €254,000 to €150,000 for 2009.

  19. Chapter 4 • S.17 – Farm pollution scheme – extends – 31/12/2010 • S.18 - Farmers stock relief extended to 31/12/2010 • S.19 - IBA allowances • 2 yrs after sale to claim full allows • Previously 1 yr • Reflects market trends • Effective from 14/10/2008 • S.20 capital allowances palliative care units. • in-patient care beds being reduced from 20 to 8.

  20. Capital Allowances • S.21 – EU Seveso Directive • Hinder regeneration of docklands • S.22 – Large hotel projects • No loss of allows due to delays • S.23 – Transfer pricing • Prohibited deductions • Connected parties • S.24 Re-insurance companies • S.25 Exemption for non residents • Debt instruments • S.26 Dirt increased to 23% - 1st Jan

  21. Chapter 4 • S.27 – Life policies & Investment Funds • Increase tax 23% • 1st January 2009 • S.28 – Film relief • Increases investment to €50,000. • Also increase in tax relief available from 80% to 100%. • Ministerial Order • S.29 Business Expansion and Seed Capital Schemes • Extends by three months, the time by which a claim may be made in certain limited circumstances. • S.30 Allowance for Know how • Introduces anti-avoidance provisions

  22. Corporation Tax • Start up companies – 14th October • Relief from CT for 3 yrs • Applies also to gains on disposal of trade assets • Trades excluded • Service companies • Mining companies etc liable @ 25% • Old trades/businesses • Relief where CT less than €40,000 • Marginal relief up to €60,000 • Minister to appoint commencement date

  23. Start up Companies Marginal Relief 3 x (T – M) x A +B T Where T = Total CT payable M = Lower Relevant maximum limit A = CT on trading income B = CT on Gains on trade assets

  24. Marginal Relief Example Tax on Trading income 43,000 Tax on trading gain 5,000 Total Tax 48,000 Tax Calculation 3 x (€48,000 – €40,000) x €43,000 + €5,000 €48,000 Tax Payable = €24,000

  25. Corporation Tax • S32 – Manufacturing relief technical adjustment • Ring fencing of deductions • S.33 Tax Treaties • Delay in ratification procedures • Treaty to be given effect from date of signing • S.34 – R&D • Base year 2003 • Credit increased to 25% • Credit can be used in previous year • Can claim credit as repayment

  26. Corporation Tax • S.35 – R& D credit on buildings • 35% of expenditure for R&D • Activities for at least 4 years • Credit claimed in year incurred • 10 yr clawback • S.36 – Limitation of tax credits • S.37 – 100% Capital Allowances • Companies • Extended to • Information and Communications Technology, • Heating and Electricity Provision, • Ventilation and Air-conditioning (HVAC) Control Systems, • Electric and Alternative Fuel Vehicles

  27. Corporation Tax • S.38 – Large companies • CT of at least €200,000 • 1st instalment due in mth 6 of current period • Lower of either 50% of current or 45% of previous • 2nd instalment due in mth 11 of current period • Aggregate payment must be 90% • Balance due on filing return • Provision for top up for chargeable gains • S.39 ensure that certain interest and royalty payments and employer paid medical insurance premiums paid in accordance with corporation tax rules. • S.40 -Amends Sch 4 exempts from tax Institute of Public Health in Ireland Limited and the Private Residential Tenancies Board

  28. Capital Gains Tax • Section 41 Tax treatment of certain venture fund managers. •  Investment held for at least six years, in the shares or securities of a private company which is: • Carrying on a business set-up and commenced on or after 1 January 2009,and • Carrying on a business of research, development or innovation activities; •  Profits arising from the investment taxed • 12.5% for companies and • 15% for partnerships

  29. Capital Gains Tax • S.42 – Remittance basis for UK assets • S.43 – Anti-avoidance • Connected parties • Prevents artificial losses • 20 November 2008 • S.44 CGT rate now 22% • 15th October 2008 • S.45 Pharmaceutical Soc of Ireland • New body

  30. Value Added Tax • S.68 Technical amendment to S.3 dealing with immoveable goods • S.69 – amend S.7A • Opt to tax ceases where landlord occupies • S.70 amends S.7B • Waiver in VAT groups • S.71 – Travel Agents • Margin scheme • VAT on profit margin • Bought in services – no VAT entitlement • Effective from 1st January 2010

  31. Value Added Tax • S.72 – Standard rate increased to 21.5% • Effective from 1st December 2008 • S.73Amedment of S.12 • S.74 Unjust enrichment • windfall gain if that tax is repaid. • Tax not borne by trader but passed on in the price charged for goods and services. •  Amendment • Revenue must refund unless refund result in the unjust enrichment. • a claim for refund of an overpaid amount must set out full details of the case and the claimant must furnish any relevant documentation requested by Revenue.

  32. Value Added Tax • S.75 - regulations relating to the operation of the travel agent’s margin scheme. • S.76 amends 1st Sch by removing the exemption for agency services in the arrangement of passenger transport or accommodation with effect from 1 January 2010. • S.77 – • 0% to margin scheme services, for bought-in services are availed of by persons travelling outside the Community. • supply of tea and coffee in non drinkable form e.g. tea leaves, tea bags, ground coffee etc. is zerorated. • supply of tea and coffee in drinkable form is not zero-rated.

  33. Stamp Duties • Section 79 - e-stamping of instruments for stamp duty • Major strategic development • Anticipated 90 per cent of cases. • Commencement Order. • Section 80 Amendment of section 5 • Payment of stamp duty in bulk • Section 81 an incentive to encourage the presentation of instruments • Measure in anticipation of the introduction of e-stamping, to facilitate a smooth transition

  34. Stamp Duties • Section 82 • Sub-sales • Resting in contract • Licences • Agreement for lease • Subject to a Commencement Order being made. • Section 83 • Exchange of properties • Section 84 • Young trained farmers • Land transfers • Exempt to 31/12/12

  35. Stamp Duty • Section 85 • Relief on sale on subsequent reinvestment • Period – 18 months • Extended to June 2011 • Section 86 – ATM Cards Description Old New € € ATM cards 5 2.50 Debit cards 5 2.50 ATM/Debit cards 10 5

  36. Stamp Duty • S.87 – Amendment to Sch 1 • Cheques – rate - €0.30 to €0.50 • 15 October 2008. •  exemption on share transfer forms where the duty is €10 or less after the enactment of the Bill. • Non-Residential Property Rates  Aggregate Consideration Rate of Duty  Up to €10,000 Exempt €10,001 to €20,000 1% €20,001 to €30,000 2 % €30,001 to €40,000 3 % €40,001 to €70,000 4 % €70,001 to €80,000 5 % Over €80,000 6 % 

  37. Capital Acquisitions Tax • Section 89 the relief will apply to agricultural land situated in a Member State of the European Union. It applies to gifts and inheritances taken on or after 20 November 2008. • Section 90 increases the rate of tax on gifts and inheritances from 20% to 22%. It applies to gifts and inheritances taken on or after 20 November 2008.

  38. Miscellaneous • Section 92 • aligns the definition of ‘‘financial institution’’ to include financial institutions authorised in another Member State operating in Ireland under a passport arrangement. • concisely sets out parameters for disclosure of information and professional advices. •  Section 1002(1) is amended by replacing the existing definition of ‘‘financial institution’’ in order to align it with the same definition as it appears in other areas of the Principal Act.

  39. Miscellaneous • Section 93 • new section 896A • delivery of information by a third party where that party is concerned with the making of a trust and the settlor is resident in the State but the trustees are not resident in the State. • an authorised officer of the Revenue Commissioners may, by notice in writing, request a party to a settlement to provide details of the settlement. • Section 94 • Relief available from 100% of the market value of the heritage items or heritage property donated to 80% • Restriction will apply on and from 1 January 2009

  40. Miscellaneous • Section 95 • Enable delegation to nominate authorised officer • Concerns protective notices under S.811 • Section 96 • Extension of return filing dates for ROS • 1st January 2009 • 23rd of month • Section 97 • Extends recovery proceedings for Collector General

  41. Miscellaneous • S.98 – Revenue Penalties • Inserts • Chapter 3A • S.1077A • S.1077B • S.1077C • S.1077D • Chapter 3B • S.1077E • Applies to other Tax Heads • Fixed Penalties

  42. Penalties • S.1077A • Definitions • Court jurisdictional limits • S.1077B • Absence of agreement regarding penalty • Revenue confirm in writing • No agreement within 30 days • Revenue petition court • Court determines whether taxpayers actions gives rise to a liability

  43. Penalties • S.1077C – Recovery • Court determination • Recovered as a tax • Provision applies to liability before on or after passing of Act • S.1077D – Proceedings against admin or estate • where the person either agreed in writing to pay the penalties or • a court has determined, before the person’s death, that the person was liable to the penalties.

  44. Penalties • S.1077E • Defines • Qualifying disclosure • Unprompted qualify disclosure • Category of penalty • Deliberately fails • Carelessly but not deliberately • Other careless behaviour • tax or duty underpaid is greater than 15% of the correct tax or duty payable for the relevant period. • Specific penalties for • VAT • CAT • Stamp Duty

  45. Disclosures • Qualifying disclosure • Complete information • All matters occasioning a penalty • Made in writing • Unprompted Qualifying Disclosure • Voluntary furnished • Before investigation started and • Before person is notified by Revenue • Prompted Qualifying Disclosure • Received notification of Revenue investigation • Report indiscretion before “investigation or inquiry starts”

  46. Penalty Table

  47. Penalty Provisions • Significant consequences • Where tax underpaid is greater than 15% of previously declared • Fraud & Neglect changed • Now – • Deliberate • Careless

  48. Miscellaneous • S. 99 and Schedule 6 provide for technical amendments • S.100 - Capital Services Redemption Account • S101 – “care and management’’ of taxes and duties.

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