Budget 2024 was substantial. Brian Brennan and Norah Collender outline the measures that will be implemented in the new Finance Bill
Finance (No.2) Bill 2023 was introduced by Minister McGrath following a budget package worth €14 billion announced on Budget Day. The Bill is large by normal standards, running to over 270 pages, due to substantial legislation required to introduce the new minimum effective rate of tax for companies/groups with revenues exceeding €750 million.
The Bill sets out the legislation for measures announced on Budget Day along with the customary raft of changes of keen interest to us, the accountancy profession, as advisors and business leaders.
Corporation tax
The Bill proposes numerous measures impacting businesses, including changes to corporation tax loss relief rules and amendments to the taxation of leases.
The Bill also includes a revised form of the bank levy for 2024 based on a measure of deposits held by each liable institution.
In addition, the Bill sets in motion the Budget’s enhancement of the R&D Tax Credit (RDTC) rate to 30 percent and doubles a company’s first-year refundable RDTC instalment.
These enhancements apply to accounting periods commencing on or after 1 January 2024.
The Bill also introduces a ‘pre-notification’ requirement for new RDTC claimants or companies that have not made an RDTC claim in the three previous accounting periods.
New measures are also provided for in the Bill on outbound payments of interest, royalties and distributions (including dividends) to jurisdictions on the EU list of non-cooperative jurisdictions, no-tax and zero-tax jurisdictions. These measures are designed to meet commitments contained in Ireland’s National Recovery and Resilience Plan.
Income tax
The Bill sets out the required provisions to enable Budget increases to income tax rate bands, tax credits and reductions to USC.
It also provides that gains on the exercise, assignment or release of a right to acquire shares or other assets will be assessed under the PAYE regime for gains realised on or after 1 January 2024.
As with other emoluments and benefits chargeable under PAYE, employers will be responsible for processing the calculation and collection of tax as part of their employer PAYE returns.
Capital gains tax (CGT) and Capital acquisitions tax (CAT)
The Bill proposes changes to CGT Retirement Relief for business owners and farmers, which extends the age limit for the relief from 66 to 70 but limits disposals to a child made by a disponer aged 55 to 69 to €10 million. This measure will be an impediment to a well-organised lifetime intergenerational transfer of larger businesses.
The Bill introduces a new CAT reporting requirement on interest-free loans involving private companies, even where no gift tax is payable.
Clawback provisions impacting CAT Business Relief and Agricultural relief are also amended in the Bill.
Pension measures
Several measures relating to pensions are proposed in the Bill, including the removal of the upper age limit on taking benefits from Personal Retirement Savings Accounts (PRSAs), allowing for drawdowns by PRSA holders after they reach the age of 75 years.
The Bill proposes that Revenue will not approve any applications for new retirement annuity contracts received after 1 January 2024.
Anti-avoidance measures in the Bill aim to prevent assets from being used to provide loans and/or as security to private companies.
Pension funds will also have to ensure that tenancies are registered with the Residential Tenancies Board (RTB) to avail of gross roll-up on rental income.
Property
The Bill legislates for the Budget’s relief at the standard rate of income tax for residential rental income earned by landlords with properties in the rental market from 2023 to 2027.
In addition, the Bill clarifies the taxation of rents paid to non-Irish resident landlords by amending legislation introduced in the Finance Act 2022.
In summary, where a tenant of a non-resident landlord pays rent to a collection agent, the tenant will not be required to deduct and remit withholding tax to Revenue. Instead, the collection agent may either deduct and remit tax to Revenue or otherwise remain assessable and chargeable for tax in respect of the rental income of the non-resident landlord.
The Bill also extends the Help to Buy scheme until the end of 2025.
VAT
The Bill confirms a number of measures announced in the Budget, such as the extension of the nine percent rate of VAT for the supply of gas and electricity, the application of the zero-rate of VAT to certain audiobooks or eBooks, and the increase in the VAT registration thresholds.
The Bill is currently making its way through the Dáil and is expected to be signed into law just before Christmas.
Brian Brennan is Tax Parter at KPMG
Norah Collender is Tax Director at KPMG
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