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Budget Snippets 2013

PERSONAL TAX

There have been no increases in the income tax rates, no reductions in income tax credits and no adjustments to the income tax bands.

CHARITABLE DONATIONS

From 1 January 2012, charitable donations from all individual donors will be treated in the same manner, with the tax relief in all cases being repaid to the charity at a new blended rate of 31%. Charitable donations will no longer be included in the calculation of the high earners restriction. There will be an annual donation limit of €1 million per individual.

BIK ON PREFERENTIAL LOANS

The specified interest used in calculating the taxable benefit from preferential loans, other than home loans, has increased from 12.5% to 13.5%. The specified rate used to calculate the taxable benefit from home loans has decreased from 5.0% to 4.0%.

UNIVERSAL SOCIAL CHARGE

With effect from 1 January 2013 the standard rate of USC will apply to those aged 70 years of age and over, earning €60,000 and above. This change also applies to medical cardholders earning over €60,000.

PRSI

The €127 weekly PRSI allowance has been abolished. The minimum annual PRSI contribution for self-employed earner will increase from €253 to €500. Both changes take effect from 1 January 2013.

With effect from 1 January 2013 modified PRSI rate contributors will no longer be exempt from PRSI on trading, professional and unearned income. Employees who earn €352 or less per week continue to have no liability to PRSI. With effect from 1 January 2014, PAYE employees will be subject to PRSI on their unearned income including rental, investment, dividends and bank deposit interest income.

BUSINESS TAX

While the budget hit individuals hard, most of the provisions introduced for business will be broadly welcomed. The Minister announced a 10-point tax reform plan to help small businesses. All the features of this 10-point plan will be outlined in the Finance Bill. The main changes of note are set out below:

CORPORATION TAX RELIEF FOR START-UPS

The 3-year exemption for start-up companies is being reformed to allow any unused credits be carried forward beyond the first 3 years of trading. This is subject to the maximum amount of relief in any one year not exceeding the eligible amount of employers PRSI in that year

R & D TAX CREDIT

The first €200,000 of qualifying expenditure will benefit from the 25% R & D tax credit on a volume basis, with no requirement to refer to the 2003 base year spend. This is an increase of €100,000. For R & D expenditure in excess of €200,000 the relief continues to be based on incremental costs in excess of the 2003 spend. A full review of the R & D Tax Credit regime will be carried out in 2013.

12.5%

The Minister reaffirmed the government's commitment to maintaining the corporation tax rate at 12.5%

AVIATION SECTOR

An accelerated capital allowance scheme, over seven years, will be introduced for aviation specific facilities. This will be in place for a five-year period and will serve to further bolster Ireland's status as a leading player in the aviation sector.

CAPITAL GAINS TAX (CGT)

The current rate of CGT of 30% is being increased to 33% and will apply in respect of disposals made on or after 6 December 2012.

PROPERTY TAXES

LOCAL PROPERTY TAX

The Local Property Tax (LPT) will come into effect from 1 July 2013 with a half-year charge applying for 2013. The Revenue Commissioners will administer the LPT. Aside from some exemptions, owners of residential properties, including rental properties, will be liable to play the LPT, which will apply on a self-assessed basis.

Individuals can self-access the value of their property or follow Revenue's guidance on this process. The initial valuation (which must be carried out on 1 May 2013) is valid up to 31st December 2016. For the first 18 months (up to 31 December 2014), the national central rate of LPT will be 0.18% of the first €1 million of value with 0.25% applying to the excess. From 1 January 2015, local authorities will have the discretion to vary the rates by +/- 15%.

The market value of the property will be divided into bands with the initial band covering €0 - €1000,000. Thereafter banks of €50,000 width will apply up to €1 million. The tax liability will be calculated by applying the tax rate to the mid-point of the band. No band will apply where houses are valued at over €1 million) 0.18% on the first €1 million and 0.25% thereafter).

Newly constructed to unsold residential property, mobile homes, vessels, houses in certain unfinished estates and unoccupied principal residences by reason of long term mental illness or infirmity will be exempt from LPT.

There will also be an exemption until the end of 2016 for new and previously unused properties that are purchased between 1 January 2013 and 31st December 2016. The exemption will also apply for second hand property purchased by a first time buyer in 2013. The LPT is expected to yield €250 million in 2013 and €500 million for a full year charge.

OTHER ISSUES

The household charge will cease with effect from 1 January 2013. The NPPR charge will cease with effect from 1 January 2014. However, any unpaid arrears along with any interest and penalties on NPPR and the household charge that have accrued will remain a charge on the related property.

INDIRECT TAXES

VALUE ADDED TAX (VAT)

There is no change to the various VAT rates. The Minister confirmed that the temporary 9% rate applying mainly in the tourism sector will apply until 31 December 2013. However, the farmer's flat rate addition, which compensates unregistered farmers for VAT incurred, is being reduced from 5.2% to 4.8% with effect from 1 January 2013.

CASH RECEIPTS BASIS

Most traders' account for VAT on sales on the basis of the invoices issued during a VAT period. This means that in many cases, VAT is payable to Revenue before the trader has received payment from its customer. Certain traders, whose turnover is below €1m per annum, are entitled to account for VAT on sales, calculated on the payments received in the VAT period. This can assist cash flow for SME businesses. The threshold for the use of the cash receipts basis will be increased from €1m to €1.25m with effect from 1 May 2013.

AUTO DIESEL AND PETROL TAXES

There is no increase in the rate of excise duty applying to petrol or diesel. A system to provide for rebates of auto-diesel duty will be introduced on 1 July 2013, for tax compliant licensed road hauliers.

CARBON TAX

A €10 per tonne carbon tax will be applied to solid fuel with effect from 1 May 2013. It will increase to €20 per tonne with effect from 1 May 2014.

VEHICLE REGISTRATION TAX (VRT)

Due to the drop in VRT Revenue in the last number of years (following the introduction of the emissions based method of calculating VRT), it was announced in last year's budget that a consultation process would take place with a view to revising the system. Following that process, a general increase in VRT rates and a restructuring of VRT Bands A and B will be introduced from 1 January 2013. Bands A and B have been subdivided into four and two sub-bands respectively, based on different levels of emissions. For example, the VRT rate applying to Band A has increased from 14% to a variety of rates (15% - 18%) within the new bands A1 A4. The rate for the top band (G) remains unchanged at 36%. VRT reliefs currently in place for electric vehicles, hybrids etc are being retained until 31 December 2013.

MOTOR TAX

Increases will apply to motor tax rates from 1 January 2013. For example, the emissions based rate applying to the new Band A4 (emissions between 110g/km and 120g/km) will increase by €40 from €160 to €200 while the highest Band (G) will increase by €92 from €2258 to €2350. Increases will also apply to the older rates based on engine size with increases ranging from €14 for a 1,000cc car to €126 for a 3,001cc car. Motor tax on electric cars is being reduced (by €37) to €120.00.

PENSIONS

CHANGE TO THE MAXIMUM ALLOWABLE PENSION FUND

With effect from 1 January 2014, tax relief for pension contributions will be capped in respect of pensions schemes that deliver an annual pension in excess of €60,000 per annum. There will be a consultation process as to how the changes will be implemented.

TAX RELIEF

Relief for pension deductions continues at the marginal rate of tax. There was speculation that relief would be restricted to a lower rate of tax.

PRE-RETIRMENT ACCESS TO FUNDED ADDITIONAL VOLUNTARY CONTRIBUTIONS

Individuals will be allowed a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions made to supplement retirement benefits. Withdrawals will be liable to tax at the individual's marginal rate. This option will be available for 3 years from the passing of the Finance Act 2013.

PENSION LEVY

The Pension Levy announced as part of the Jobs Initiative will not be renewed after 2014.

This leaflet is only a summary of the Budget Speech and is not intended to be a comprehensive guide. 05/12/12. Printed by Unique Publishing (01) 860 3477