Dear subscriber,

Welcome to OSK's February B2B.

The Minister for Finance, Michael Noonan, published the Finance Bill 2013 and the Finance (Local Property Tax) (Amendment) Bill 2013 on 13th February 2013.

We have provided a summary of the main provisions of both Bills in our ezine.

Your feedback is welcome - please contact us with your queries or comments.

Warm regards,

The team at OSK

Local Property Tax

The Local Property Tax will come into effect from 1st July 2013. It will be a tax that is due on the market value of any residential property. For 2013 a half yearly charge will apply.

For more click here.

Universal Social Charge

From 1 January 2013 persons over 70, and also medical card holders under 70, who have aggregate income in excess of €60,000 are subject to the top USC rate of 7%/10% (as applicable) on their income over €16,016. The rate will continue to be capped at 4% where their aggregate income is below €60,000.

There is no provision contained to limit the exposure of someone with income slightly in excess of €60,000 notwithstanding the fact that they will be paying a much higher charge than someone with aggregate income of just below €60,000.

Ex Gratia Payments

There are a number of changes under this heading as follows:

• Top Slicing Relief (which operates to ensure that an individual does not pay tax on their lump sum at a rate in excess of their average tax rate for the previous 36 months) will no longer be available from 1 January 2013 on ex gratia payments where the non-statutory payment is in excess of €200,000
• The maximum tax free lifetime limit of €200,000 has been extended to cover ex gratia payments made on the death or disability of an employee.
• Foreign Service Relief (an exemption where the employee had foreign service in the exercise of the employment) has been abolished.

Maternity Benefit

From 1 July 2013, amounts payable under this scheme (Maternity Benefit, Adoptive Benefit and Health and Safety Benefit) will be subject to Income Tax, as though they formed part of a persons employment income. The Department of Social Protection will notify employers of the taxable amount in each case.

Tax Treatment of Pension Products and Approved Retirement Funds

The Bill provides an individual with the option to make a once off early withdrawal of up to 30% of their AVC funds. There is a 3 year time limit to do, commencing on the date of passing of Finance Act 2013.

Read more.

Tax Relief for Third Level Tuition Fees

The limit below which relief will not be provided is to be increased in the coming years. For full time courses this will be €2,500 (2013), €2,750 (2014) and €3,000 (2015). In the case of part time courses the new limits will be €1,250 (2013), €1,375 (2014) and €1,500 (2015).

Dealing in or Developing Land

Finance Bill 2013 has implemented two changes here.

• Debt forgiveness
• Restriction of the tax relief available on trading losses against other income of the taxpayer.

Read more.

Charitable Donations

This provision streamlines tax relief on contributions by individuals to approved charities, irrespective of whether they are PAYE taxpayers or self assessed taxpayers.

The donor in the latter case will no longer be entitled to tax relief, and this will be paid directly to the charity as has been historically been the case for PAYE taxpayers. The charity will receive tax relief at the rate of 31%. There is also now an annual limit of €1,000,000 per individual that can be contributed under this scheme. These changes come into effect from 1 January 2013.

Living City Initiative

The Bill provides for a new form of Urban Renewal relief (to be introduced by Ministerial Order, once EU approval is granted) for the conversion and refurbishment of dilapidated Georgian houses in certain areas to be specified for expenditure incurred during a 5 year period from the commencement date. It is intended that this will be introduced on a pilot basis in Limerick and Waterford.

There are two forms of relief proposed, as follows:

• Owner occupier of a residential premises at 10% p.a. over a 10 year period.
• Owner occupier or landlord of certain commercial premises used as shops or offices used for the supply of services within the State. In this case the allowances will be over 7 years (15% for years 1 to 6, 10% in year 7)

Corporation Tax Amendments.

There are a couple of changes proposed here of assistance to small businesses

• The Start Up exemption is to be extended to allow for the carry forward of unutilised credits (due to an insufficiency of profits) beyond the initial 3 year period. This is effective for accounting periods ending on or after 1 January 2013.
• In relation to the Close Company Surcharge and Professional Services Surcharge, the de minimis limit for the application of the surcharge is to be increased from €635 to €2,000. This is effective for accounting periods ending on or after 1 January 2013.

Real Estate Investment Trust companies (REIT’s)

The Bill provides for the introduction of a tax regime for REIT companies, which are property investment vehicles.

Read more.

Film Relief

The Bill provides for the removal of tax relief for individual taxpayers for contributions made to qualifying Film Relief schemes.

Instead the producer company will receive a tax credit of 32% for contributions received. The Bill provides for the introduction of this amendment by Ministerial Order, although it is expected that it will take effect from 2016.

R & D Tax Credit

There are also a number of changes to this, which should allow greater access:

• The first involves an increase in the amount of group expenditure qualifying for the credit on a full volume basis from €100,000 to €200,000, which is effective for accounting periods commencing on or after 1 January 2013.
• The other provision relates to the “key employee” definition for the purposes of passing on the credit to certain employees. This will now reduce from 75% to 50% the minimum amount of time that the employee must spend on R & D activities and also the minimum amount of employee emoluments that qualify as expenditure for R & D tax credit purposes.

VAT - Cash Receipts Basis

The threshold below which VAT can be accounted for under the cash receipts basis is to be increased from €1,000,000 to €1,250,000. This is to take effect from 1 May 2013.

Stamp Duty – Resting on Contract

The bill provides for the introduction of these anti avoidance provisions and deletes the similar 2008 provisions which never commenced. The provisions will not apply where there is a binding written contract in place prior to 13 February 2013.

There are three situations covered - read more.

Capital Taxes – Amendments to Tax Rate and Thresholds

In the case of gifts or inheritances taken on or after 6 December 2012, the CAT rate has increased to 33%. The thresholds have also been reduced as follows:

• Group A            -           €225,000
• Group B            -             €30,150
• Group C            -             €15,075

In the case of disposals made on or after 6 December 2012, the CGT rate has also increased to 33%.