Budget 2015 - Summary of main changes across all tax heads
By Mr Patrick Mulcahy, DCU Business School
Budget 2015 was announced on 14 October 2014. Some of the changes announced in the Budget come into effect immediately with others taking effect from the beginning of January 2015 or in mid-2015. Set out below are the changes to the main tax heads:
From January 2015 the standard rate tax band will increase by €1,000: from €32,800 to €33,800 for single people and from €41,800 to €42,800 for married couples with one income. The higher rate of income tax will reduce from 41% to 40%.
From 2015 tax relief on water charges at the standard rate of 20% will be available, up to a maximum of €500 per annum (which means a maximum €100 tax credit). This relief will be paid in arrears.
The Home Renovation Incentive is being extended to include renovation and improvement of rental properties owned by landlords who pay income tax.
The Seed Capital Scheme is being rebranded as "Start-Up Relief for Entrepreneurs" (SURE) and being extended to people who have been unemployed for up to 2 years.
Universal Social Charge:
Incomes of €12,012 or less will be exempt from USC. Once your income is over this limit, you pay the relevant rate of USC on all of your income.
Proposed standard rate of USC (2015)
Up to €12,012.00
From €12,012.01 to €17,576.00
From €17,576.01 to €70,044.00
From €70,044.01 to €100,000.00
Any PAYE income over €100,000
Self-employed income over €100,000
Deposit Interest Retention Tax:
A relief from DIRT on savings used by first time house buyers towards the deposit on a home is being introduced.
Valued Added Tax (VAT):
The 9% rate of VAT is being retained for tourism-related activities.
The excise duty on a packet of 20 cigarettes is being increased by 40 cent (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 14 October 2014.
The excise duty on roll-your-own tobacco is being increased by an additional 20 cent (including VAT) per 25g pouch with effect from midnight on 14 October 2014.
The enactment of the Betting (Amendment) Bill 2013 will allow for the extension of Betting Duty to remote operators and betting exchanges in 2015.
The Vehicle Registration Tax (VRT) reliefs available for the purchase of hybrid electric vehicles, plug-in hybrid electric vehicles, plug-in electric vehicles, and electric motorcycles are being extended to 31 December 2016.
The special relief reducing the standard rate of Alcohol Products Tax by 50% on beers produced in microbreweries which produce not more than 20,000 hectolitres per year is being extended to apply to microbreweries which produce not more than 30,000 hectolitres per year.
The excise rate for Natural Gas and BioGas as a propellant will be set at the current EU Minimum rate and this rate will be held for a period of 8 years.
Capital Gains Tax:
The property purchase incentive relief from CGT (for the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2014 is not being extended beyond 31 December 2014. Where property purchased in this period is held for seven years the gains accrued in that period will not attract CGT.
Windfall tax provisions introduced in 2009 which apply an 80% rate of tax to certain profits or gains from land disposals or land development, where those profits or gains are attributable to a relevant planning decision by a planning authority, are being abolished from 1 January 2015.
The 25% R&D tax credit applies to the amount of qualifying R&D expenditure incurred by a company in a given year that is in excess of the amount spent in 2003. This 2003 base year restriction is now being removed from 1 January 2015.
The accelerated capital allowances for energy efficient equipment were due to expire at the end of 2014. Following a review by the Department of Communications, Energy and Natural Resources, this measure is being extended to the end of 2017.
Agri-Taxation Review / Farming Measures
Income tax measures for farmers include:
- Increase the amounts of income exempted from long term leasing by 50% and introduce a 4th threshold for lease periods of 15 or more years with income of up to €40,000 being exempted
- Allow relief where the lessee is a company
- Remove the 40 years of age threshold for leasing relief
- Allow income averaging where there is on-farm diversification
- Increase income averaging from 3 to 5 years
The VAT flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs. The flat-rate addition will be increased from 5% to 5.2% from 1 January 2015. The flat-rate addition is reviewed annually in accordance with the EU VAT Directive and the increase to 5.2% in 2015 continues to achieve full compensation for farmers.
Farm restructuring CGT relief is available where the first transaction in the restructuring (e.g. sale, purchase or exchange of land) is carried out by 31 December 2015 with the restructuring to be completed within 24 months. The deadline for the completion of the first restructuring transaction is being extended to 31 December 2016.
Teagasc certification guidelines are being amended to enable whole farm replacement to be eligible for the farm restructuring relief subject to meeting the conditions laid down by Teagasc.
CGT retirement relief is being amended so that, subject to other conditions, land that has been leased for up to 25 years in total (increased from 15) ending with disposal will qualify for the relief.
Amendments to CGT retirement relief are also being made to provide (in the case of land disposals outside the family) that land currently let under conacre arrangements which end with disposal on or before 31 December 2016 or which (before 31 December 2016) is instead leased out for minimum periods of 5 years to a maximum of 25 years ending with disposal will, subject to other conditions, also qualify for CGT retirement relief.
Changes are being introduced to target CAT agricultural relief to active farmers. From 1 January 2015, and subject to other conditions, the relief will be available only in respect of agricultural property gifted to or inherited by active farmers and to people who are not active farmers but who lease out the property on a long-term basis for agricultural use to such farmers.
Agricultural leases of between 5 and 35 years in duration to active farmers will be exempt from stamp duty.
Consanguinity relief, which applies to transfers of non-residential property to certain relatives, is due to expire on 31 December 2014. This relief, which halves the applicable rate of stamp duty, will be extended for a period of 3 years in certain circumstances where the transferor is 65 years or under and the transferee is an active farmer.
Employment and Business
The 3 Year Relief for Start-up Companies provides relief from corporation tax on trading income (and certain capital gains) of new start-up companies in their first 3 years of trading. This relief is being extended to new start-ups in 2015. A review of the operation of this measure will take place in 2015.
Funding for Local Enterprise Offices (LEOs) has been increased. It is expected this will help the LEOs to support the creation of up to 1,600 new jobs, to provide Start Your Own Business courses to over 3,000 participants and to assign almost 2,800 mentors to their clients in 2015. Funding of €3 million has also been allocated to a Trading Online Programme. This will allow LEOs to support at least 2,000 small businesses to trade online.
The Employment and Investment Incentive is being extended by:
- Increasing the amount of finance that can be raised by a company to €5 million annually subject to a lifetime maximum of €15 million.
- Increasing the required holding period for shares from 3 to 4 years.
- Extending the inclusion of hotels, guest houses and self-catering accommodation in the scheme by a further 3 years.
- Including management and operation of nursing homes, medium-sized enterprises in non-assisted areas, and internationally traded financial services certified by Enterprise Ireland in the scheme.
These changes are subject to the approval of the European Commission.
Accelerated Capital Allowances for Energy Efficient Equipment is a measure to incentivise companies to invest in energy efficient equipment. This was due to expire at the end of 2014 and is being extended to the end of 2017.
The Special Assignee Relief Programme is being extended for a futher 3 years until the end of 2017. In addition the:
- Upper salary threshold is being removed
- Residency requirement is to only require Irish residency
- The exclusion of work abroad is also removed
- Requirement to have been employed abroad by the employer is being reduced to 6 months
The Foreign Earnings Deduction is being extended for 3 years until the end of 2017. In addition:
- The list of countries eligible is being extended to include Mexico, Chile and certain countries in the Middle East and Asia;
- The number of days that employees are required to be abroad in a year is being reduced to 40 days
- Travel time will be included as time spent in a country to make it easier for smaller companies to send employees on trade missions and the minimum stay in a country is reduced to 3 days
Research and development funding provision of €250 million for Enterprise Ireland and Science Foundation Ireland in 2015.