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Finance Act 2008

Conor Kennedy Law Library. Finance Act 2008. Legislative Process. Conversion of political commitment or decisions into Act of Oireachtas Undertaken by Revenue Relevant in-house expertise Finance Act different to other Acts Legislative timescale – 4 mths from Budget

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Finance Act 2008

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  1. Conor Kennedy Law Library Finance Act 2008

  2. Legislative Process • Conversion of political commitment or decisions into Act of Oireachtas • Undertaken by Revenue • Relevant in-house expertise • Finance Act different to other Acts • Legislative timescale – 4 mths from Budget • Act signed into law on 13th March 2008

  3. Rate Bands S.2 amends S.15 TCA – Standard rate bands Tax year 2007 Tax year 2008 € € Single person 34,000 35,400 Widowed/single parent 38,000 39,400 Married couple One earner 43,000 44,400 Two earners 68,000 70,800

  4. Credits Tax credit 2007 Tax credit 2008   € € married person 3,520 3,660 bereaved in yr 3,520 3,660 single person 1,760 1,830  Credit certain widowed persons 550 600  One-parent family tax credit 1,760 1,830  Widowed parent tax credit 1st year 3,750 4,000 2nd year 3,250 3,500 3rd year 2,750 3,000 4th year 2,250 2,500 5th year 1,750 2,000

  5. Credits Designation Tax credit 2007 Tax credit 2008 € € Age tax credit married person 550 650 single person 275 325 Incapacitated child tax credit 3,000 3,660 Home carer tax credit 770 900  Blind person’s tax credit blind person 1,760 1,830 both spouses blind 3,520 3,660  Employee tax credit 1,760 1,830

  6. Exemptions & Credits S.4 – Exemption limits – Over 65’s • Single €20,000 • Married €40,000 S.5 - Repeals marginal relief S.6 - Increases to Relief for Rent • Under 55 • Single €2,000 • Married €4,000 • Over 55 • Single €4,000 • Married €8,000 • Widowed same as married relief

  7. Credits & Allowances S.7 - Mortgage Interest Relief • First Time Buyers • Single €10,000 • Married/Widowed €20,000 S.8 - Preferential Loans • Home Loans 5.5% • Other Loans 13% S.9 - Employed carer for incapacitated person • Deduction = €50,000 • Change to ensure deduction claimed in yr of incapacitation S.10 - Trade Union Subs • €350

  8. Exemptions & Employee Remuneration S.11 - Rent a room relief • Increased to €10,000 S.12 - Accountable Persons • Withholding tax bodies – adds/amends/deletes S.13 - Approved Savings Related Option Schemes • Savings by employees to acquire shares • Shares can be discounted by 25% • Alternatively take cash tax free • Monthly savings limit increased to €500 S.14 - Employee Share Ownership Trusts (ESOT) • ESOT acquires shares with view to transfer to employee • Transfer can be up to €38,100 per annum • FA amendment allows ESOT to repay loan earlier than 10 years

  9. Farm Income S.15 - Farm income averaging – no clawback in certain cases • Commencements of Milk Production Partnership • Relevant if earlier trade carried on

  10. Convertible Securities S.16 inserts new S.128C • Capable of converting into different securities or money’s worth • Historically employment related shares valued at date of issue • Restricted rights – therefore highly unmarketable • Additional tax charge on conversion, release, assignment or disposal • Tax charged on market value less certain costs

  11. S.17 – PAYE Regulations • Collection of tax due on non-PAYE income through the PAYE system; • Collection of tax directly from where the employer has failed to deduct tax; • The requirement for employers to submit certain details as prescribed in accordance with PAYE Regulation 31; • Authority to allow the Revenue to notify employer that it is not necessary to comply with the PAYE regulations.

  12. Remittance & Returns S.18 – Remittance Basis • UK sourced investment and employment income (not relating to employment performed in Ireland) • Derived by individuals not domiciled in the State or who are Irish residents but not ordinarily resident. • Relevant UK income is now only to be taxed on such individuals to the extent that it is remitted into Ireland. • The remittance basis has not been extended to UK capital gains. S.19 - Share Schemes – Return of Information • Automatic obligation to file returns • Enable Revenue to determine participants’ tax liability • Supervise the admin of scheme

  13. Compensation & Employments S.20 - Sugar beet restructuring • Spread of 6 yrs for moneys received s.21 - Salary Sacrifice • New definition • Excludes • Travel passes • Approved profit sharing schemes S.22 – Termination Payments • Additional €5,000 exempt to retrain worker • Paid by employer • Employee must have at least 2 yrs service • Course must be undertaken within 6 mths of termination

  14. Income Tax S.23 – High Income Earners • Clarifies correct sequence of events in calculations S.24 – BES & Seed Capital Schemes • EU State Aid approval • Recycling companies • Approval or assistance from County Enterprise Boards • Medium companies only in ‘assisted areas’ S.25 – Employee benefit contributions • Trust type fund for Employees • Alignment of CT deduction for contribution to time when employee is taxed on benefit

  15. S.26 – Capital Allowances – Palliative Care • Hospice type care • Rules for allowances similar to private hospitals • Approved by HSE • 20 in-patient beds • 15 yr period • Allowances • 15% Year 1 -6 • 10% Year 7 • Commencement Order

  16. Capital Allowances s.27 – Mid Shannon Corridor • New EU Regs on Aid guidelines • Recovery proceedings if aid illegal or incompatible S.28 – Caravan & Camping sites • Building or structures now qualify • Allowances of 4% per annum S.29 – Property developers • Childcare facilities – S.843 • New childcare Regs • Denies allow to connected persons • Also denies allowances on medical type centres and Mid Shannon Corridor

  17. Capital Allowances S.30 – Decommissioning of fishing vessels • EU initiative t0 decommission vessels • Compensation payments • If balancing charge spread over 5 years S.31 – Motor Vehicles • Inserts 6 new Sections as Part 11C • S.380K - S.380P • S.380K – Definitions & General • S.380L – Modifies allow to Category of Vehicle • S.380M – Leasing of vehicles • S.380N – Hire purchase arrangements • S.380O – Lessee or hirer becomes owner • S.380P – Taxis & short care hire exclusions

  18. 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

  19. Motor Vehicles Capital Allowances Categories A/B/C D/E F/G Cost less than €24,000 €24,000 50% None Cost more than €24,000 €24,000 €12,000 None Balancing Allowance/Charge corresponding implications

  20. Motor Vehicles Leasing charges Categories A/B/C D/E F/G Cost less than €24,000 Proportionate 50% None to €24,000 of charge Cost more than €24,000 Restricted 50% None to €24,000 of charge

  21. Reliefs & Amendments S.32 – Film Relief • Extension of 4 yrs to 2012 • Limit increased to €50 million • EU Clearance required S.33 – Farm Stock Relief • Disease eradication measures • Relief now applies where part of herd disposed S.34 – Irish Heritage Trust • Now qualifies as a Charity • Removed from Schedule 26

  22. S.35 – Relevant Contracts Tax • 35% withholding tax regime • Connected person definition amended • No obligation on a company not involved in construction operations . • Work on own buildings or lands • Condition relaxed for work on private dwelling • Applies only to in individuals connected to forestry or meat processing companies • Excludes individuals connected to construction companies • Relaxed condition relating to joint declaration of employment status in certain cases

  23. Investments S.36 – Securitisation • Now includes partnership interests • Financial Assets • Contracts for insurance/reinsurance • Greenhouse gas emissions allowance S.37 – Credit Insurance Companies • Appropriations of profit to reserve tax deductable S.38 – Exit tax on Gross Roll ups • Branch in other EU or EEA State • Written approval from Revenue is required

  24. S.39 – Investments S.39 – Investment Undertakings • Gross roll up regime • FA 2006 changes • Chargeable event – 8 yrs • FA 2008 changes • Deemed disposal election dates • Less than 10% of fund made up by Irish – disposal to be reported by investor on self assess basis • Refund by Revenue directly to unit holder where Irish hold less than 15%

  25. Anti-Avoidance s.40 – Allowance for ‘know-how’ • No deduction where • Company acquires ‘know-how’ • Connected company acquires trade • Bona fide commercial reasons • Consultation with experts S.41 – Expenditure involving crime • No deduction for illegal payments S.42 – Reconstruction Relief • Anti-Avoidance - ‘Investment Companies’ • Prevents deferral by use of gross roll up regime

  26. Corporation Tax S.43 – Treatment of certain dividends • EU or Treaty Countries • Dividends from trading profits of foreign companies now taxable @12.5% • Credit also allowed for foreign taxes • Pooling of credits • 25% tax credits available for offset against 12.5% but not visa versa

  27. Corporation Tax S.44 – Close Companies • Dividends received from Irish close company • No surcharge • Now conforms with foreign dividends • Election required S.45 – Profit Resource Rent Tax • Petroleum leases • In addition to 25% CT • Taxable fields

  28. Corporation Tax S.46 – Accelerated Capital Allowances • Energy efficient equipment • 100% write off in Yr 1 • Categories • Electric Motors • Lighting • Building Energy Management systems • Only available to Companies S. 47 – Preliminary Tax • Small companies now profits up to €200,000 • 100% of last year • Unrealised Gains arising to IFRS companies

  29. Corporation Tax S.48 – Company Purchase of own shares • No deduction for costs except purchases involving employees S.49 – Double Taxation Relief • Reversal back to original system • Actual income as calculated in foreign jurisdiction • Specific changes to company mergers S.50 – R&D Expenditure • Credit of 20% of excess spend over base year • Base year – 2003 • AP’s after 2014 – 10 years before • Y/E 31/12/14 – Base yr = 2004

  30. Corporation Tax S.51 – Dividends before disposal of shares • New S.591A • Prevent tax free dividend paid before disposal • New measure assess dividend as share disposal S.52 – Schedule 4 Amendment • Sch 4 lists exempt State sponsored bodies • Commission for Communications Regulation • Retrospectively to 1 December 2002 S.53 – Manufacturing Relief • Technical change to method of calculation

  31. Capital Gains Tax S.54 – Retirement Relief • Decommissioning of fishing vessels • Compensation • Boat owned for 6 yrs • Individual must be 45 yrs old • New Bona Fide Test • Dissolution of Farm Partnerships • Caters for inheritances & partitions S. 55 – Disposal of a site to child • Increased site value to €500,000 • Aggregates threshold for joint transfers

  32. Capital Gains Tax S.56 – CGT Exempt Bodies – Sch 15 • Commission for Communications Regulation • Retrospectively to 1 December 2002 • Digital Hub Development Agency

  33. Excise – Electricity Tax S.57 – Interpretation • EU Directive • Households exempt • Applies from 1st October 2008 S.58 – Charging section S.59 – Imposes the obligation on supplier • Consumer liable if false information is furnished S.60 – Returns & Payments S.61 – Mixed Supplies

  34. Electricity Tax S.62 – Registration S.63 – Reliefs • Formula • A x P1 x R1 + A x P2 x R2 S.64 – Repayments S.65 – Offences S.66 – Power to make Regulations S.67 – Care & Management provisions S.68 – Effective Date – 1st October 2008

  35. Excise S.69 – Amends provisions on Warehouses & Tax Warehouses • Clarification of responsibilities S.70 – Technical amendments • to incorporate electricity tax S.71 – Rates of Mineral Oil Tax S.72 – Amends certain derogations S.73 – Relief for Microbreweries S.74 – Rates of tobacco products tax S.75 – Increase in duties on retailers off-licences

  36. Excise S.76 – Repeals relating to firearms authorisation S.77 – Amendment of penalties for excise offences S.78 – Defines “CO2” emissions for VRT

  37. VRT Rates S.79 – Sets out CO2 Emission Categories CO2 Emissions (CO2g/km) % payable of the value of the vehicle 0g/km - 120g/km Greater of 14% or €280 120g/km - 140g/km Greater of 16% or €320 140g/km – 155g/km Greater of 20% or €400 155g/km – 170g/km Greater of 24% or €480 170g/km - 190g/km Greater of 28% or €560 190g/km - 225g/km Greater of 32% or €640 More than 225g/km Greater of 36% or €720

  38. Excise S.80 – Harmonises VAT & VRT to exclude long-term vehicle hire S.81 – Remission of excise on Hybrid electric cars

  39. Value Added Tax New Property Regime • Removes leases from charge • EVT • 4A • Surrender & Assignments • Old Properties • No development in last 5 yrs • Capital Goods Scheme • Option to Tax • Freehold equivalents • Transitional Measures

  40. Definitions & Charge S.82 - Interpretation S.83 – Amends S1. VATA • Definitions • Mainly to facilitate new property provisions • In preparation for new VAT Act S.84 – Amends S.2 ‘Charge of VAT’ • In preparation for new VAT Act S.85 – Amends S.3 ‘Supply of Goods’ • To cater in the main for the new property rules

  41. New VAT Rules S.86 – Amends S.4 VATA • Confirms old rules to 30th June 2008 • Old rules continue to apply to ‘transitional properties’ • Old rules still apply to reversionary interests and post letting expenses S.87 – Repeals S.4A S.88 – Supplies of immoveable goods • Inserts S.4B & 4C into Main Act • S.4B – exemptions & joint option • S.4C – transition properties

  42. Property Transactions S.4B(1) – defines completed & occupied S.4B(2) –exemptions • (a) – undeveloped • (b) – not developed in last 5 yrs • (c) – developed property occupied for more than 24 mths • (d) – minor development which is less than 25% of sale price S.4B(3) – land & development agreements S.4B(4) – no registration thresholds

  43. Option & Residential S.4B(5) – Option to tax - Joint option S.4B(6) – Reverse charge S.4B(7) – Residential properties • 1st supply by developer – taxable • Short term letting by developer will not exempt future sale

  44. Transitional Properties S.4C(1) – • (a) developed properties & not disposed prior to 1st July 2008 • (b) long leases prior to 1st July 2008 S.4C(2) – Undeveloped or no VAT entitlement • Property exempt • Joint option to tax S.4C(3) – VAT Entitled & Creates exempt let • VAT clawback calculated using deductibility rules S.4C(4) – Surrender/Assignment • Deemed to be supply of immoveable goods

  45. Transitional Properties S.4C(5)- disposal of taxable property may invoke ‘Capital Goods Scheme’ adjustment S.4C(6) – Surrenders & Assignments • Taxable if entitled to deduct initial tax • Exempt if not entitled to deduct but option to tax S.4C(7) – Reverse Charge on taxable surrender or assignment S.4C(8) – • (a) document to be furnished on surrender/assignment • (b) new interest holder now ‘Capital Goods Owner’

  46. Transitional Properties S.4C(9) – Holiday home owners • (a) cancellation of election – old rules apply S.4C(10) – No application of certain CGS rules S.4C(11) – Applies appropriate definitions from the CGS scheme S.4C(12) – Certain procedures to acquisition of property after 1st July 2007

  47. Waivers S.89 – Amends S.5 VATA ‘Supply of Service’ • (a) excludes immoveable property from S.5(3)(a) • (b) inserts new Ss. (3B) - private use S.90 – Amends S.7 ‘Waiver of Exemption • (a) cancellation of waiver under new rules • (b) inserts new ss(5) – no new waivers S.91 – Inserts new S.7A & S.7B • S.7A(1) • (a) option to tax = rents taxable • (b) option to tax exercised when VAT on development reclaimed & VAT chargeable on rents • (c) option exercised by insertion of VAT clause in letting agreement • (d) option terminated by exempt, residential or connected party letting or on election

  48. Waivers S.7A(2) • No option to elect when letting to connected party • However if connected tenant has 90% recoverability, option may be exercised. S.7A(3) – defines connected parties S.7A(4) – No election on residential S.7B – Transitional - Waiver of Exemption • S.7B(1) – previous waivers covered by new scheme • S.7B(2) – CGS does not apply to waivers • S.7B(3) – connected party lettings – waiver ceases to apply.

  49. Waivers • S.7B(4) – Waiver can remain in place between connected parties subject to certain conditions • S.7B(5) – Calculates minimum thresholds S.92 – Amends S.8 VATA ‘Accountable persons’ • (1)(a) now a taxable person & accountable for VAT • (1)(b)&(c) consequential changes • (1)(d) inserts new ss (1B) • Reverse charge on construction services by subcontractors • Principal now accountable • (1)(e) increases new VAT thresholds • €37,500 – services • €75,000 – goods • (1)(f) amends grouping rule for new definition of taxable person

  50. Chargeable Amount S.93 – Amends S.10 VATA – • inserts new ss (4D) • (a)(i)– immoveable property used for private use • (a)(ii) – allows regulations to allow Revenue identify property in use for private purposes • (b) 2/3’s rule now set aside for construction services • (c) applies to value long lease before 1st July 2008

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