Budget News

Institute reacts to Autumn Statement announcements  17 November 2022 – Today’s Autumn Statement did little to support businesses and their employees through the tough times ahead, according to Chartered Accountants Ireland. The Institute, which represents over 5,200 members working in businesses and practices across Northern Ireland, commented as the Government announced its ‘Autumn Statement’ in Westminster, with the Chancellor acknowledging that the UK is in recession after the biggest monthly increase in inflation in over 40 years.  Commenting, Dr Brian Keegan, Director of Public Affairs, Chartered Accountants Ireland said,  “Businesses in Northern Ireland are feeling the effects of this inflationary crisis particularly acutely. These businesses are also dealing with continued uncertainty over trading arrangements in the context of the ongoing Protocol negotiations along with the absence of devolved government.  “We saw during the COVID-19 pandemic that the Government can react speedily at a time of crisis. As this crisis deepens, more needs to be done by the Government to develop and deliver much needed supports through the tax system. For many businesses, these could be a vital lifeline for survival and, ultimately, job protection.  “For example, the Government could reintroduce extended relief for trading losses, as it did during the pandemic. This would enable businesses to claim relief for losses much earlier which would generate vital tax refunds and improved cash flow. “Tax policy and the tax system can, and must, be used to not only build strong and sustainable economies but to provide crucial support via targeted interventions.” ENDS     

The Minister announced the extension of reduced VAT rates for gas and electricity, with newspapers and certain health products becoming zero-rated. As signalled earlier this year, the reduced 9 percent VAT rate for the hospitality sector will not continue past 28 February 2023. Gas and Electricity The 9 per cent rate of VAT will be extended for gas and electricity to 28 February 2023. The measure was due to end on 31 October 2022. Newspapers Newspapers play a critical role in our society. In recognition of this, the Minister announced a reduction in the VAT on newspapers (including digital editions) from 9 per cent to zero rate from 1 January 2023. Health Products Automatic External Defibrillators will now be taxed at the zero rate. In addition, non-oral Hormone Replacement Therapies and non-oral Nicotine Replacement Therapies will be zero rated. These changes will be introduced from 1 January 2023 Hospitality The 9 per cent VAT rate which is currently in place for the benefit of the tourism and hospitality sector will cease after 28 February 2023 where the rate will revert to 13.5 per cent.

The Bank Levy has been extended to the end of 2023. It is expected that the amount collected in 2023 will be in the region of €87 million.

In an effort to ease the cost-of-living pressures brought about by rising prices and inflation, the Minister for Finance announced a €3,200 increase in the standard rate band, in addition to a €75 increase in the personal tax credit, employee tax credit and earned income tax credit. The home carer tax credit has been increased by €100. Additional measures announced include changes in the USC to ensure the increased minimum wage remains outside the top rates of the charge and an increase in the small benefit exemption for employees. Credits and rate bands The income tax standard rate bands will increase as follows: Single, widowed or surviving civil partner from €36,800 to €40,000; Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €40,800 to €44,000; Married couples or civil partners (one income) from €45,800 to €49,000; Married couples or civil partners (two incomes) from €45,800 to €49,000 (with an increase of €31,000 max) The personal tax credit, the employee tax credit and the earned income tax credit will all increase from €1,700 to €1,775. The home carer tax credit will increase from €1,600 to €1,700. Marginal tax rate payers will receive an additional € 830 in their take home pay, when USC changes are factored in (discussed below), while those earning below the standard rate band threshold will have the opportunity to earn additional income without paying tax at the marginal rate. The estimated cost of these measures is €1.226 billion on a full year basis. USC To ensure that the salary of a full-time worker on the minimum wage will remain outside the 4.5 percent rate of USC when the minimum wage increases from €10.50 to €11.30 from 1 January 2023 the ceiling of the second USC rate band will increase from €21,295 to €22,920. Workers with income above €22,920 will also benefit. The USC Rates & Bands from 1 January 2023 will be: €0 – €12,012 @ 0.5% - no change €12,013 – €22,920 @ 2% €22,921 – €70,044 @ 4.5% €70,045+ @ 8% Self-employed income over €100,000: 3% surcharge *Incomes of less than €13,000 are exempt from USC. The estimated cost of these changes in USC is €67 million in 2023 and €77 million per annum thereafter. The Minister also announced the extension of the reduced rate of USC for medical card holders by a further year. This measure is revenue neutral as it is already included in the tax base. Small Benefit Exemption Today the Minister for Finance announced changes to the Small Benefit Exemption, permitting two vouchers to be granted by an employer in a single year and increasing the annual limit per employee from €500 to €1,000 per annum. These changes will apply for 2022 and subsequent years. Sea-going naval personnel tax credit The sea-going naval personnel tax credit entitles certain individuals to a tax credit of €1,500. The Minister announced the extension of the credit to 31 December 2023. The credit is available to permanent members of the Irish Naval Service who spent at least 80 days at sea on board a naval vessel in the previous tax year. The cost of the extension of the credit is estimated to be €500,000. Foreign Earnings Deduction The Foreign Earnings Deduction (FED) will be extended to 31 December 2025. It provides relief from income tax on up to €35,000 of income for employees tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries. Compliance Revenue will conduct a range of targeted projects which will include PAYE compliance interventions involving a further focus on share schemes, and increased debt management activity. It is expected that these projects will yield additional Exchequer receipts of €80 million arising from increased taxpayer compliance.  

The Minister announced a scheme of accelerated capital allowances for farmers for the construction of modern slurry storage facilities and extended several important agricultural reliefs that were due to expire at the end of 2022. The following reliefs will be extended: Extension of Young Trained Farmer Relief from stamp duty Young Trained Farmer Relief (section 81 Stamp Duty Consolidation Act (“SDCA”) 1999) provides for a complete exemption from stamp duty for young trained farmers on the acquisition (by gift or purchase) of farmland and associated buildings. The scheme will now be extended to 31 December 2025, pending finalisation of issues relating to the EU Agricultural Block Exemption Regulations. Extension of Farm Consolidation Relief from stamp duty Farm Consolidation Relief (section 81B SDCA 1999) provides for a 1 percent rate of stamp duty on instruments which give effect to acquisitions and disposals of agricultural land where the land transactions involved qualify for a “Farm Restructuring Certificate” from Teagasc. The scheme will be extended to 31 December 2025, pending finalisation of issues relating to EU Agricultural Block Exemption Regulations. Farm Restructuring Relief from Capital Gains Tax Farm Structuring Relief (section 604B Taxes Consolidation Act (“TCA”) 1997) provides relief from CGT for land transactions qualifying for “Farm Restructuring Certificate” from Teagasc. The scheme will be extended to 31 December 2025, pending finalisation of issues relating to EU Agricultural Block Exemption Regulations. Young Trained Farmer and Registered Farm Partnership Stock Reliefs                                                                                                              Young Trained Farmer Stock Relief and Registered Farm Partnership Stock Relief (Part 23 Chapter 2 TCA 1997) are stock relief measures for young trained farmers and for registered farm partnerships respectively. The schemes will be extended to 31 December 2024, however the extension will be contingent on the update of the EU Agricultural Block Exemption Regulation. Accelerated capital allowances for the construction of slurry storage facilities The Minister announced a time-limited scheme of accelerated capital allowances for farmers for the construction of modern slurry storage facilities. The scheme will run for three years and will provide for the capital cost of the facilities to be written off over two years rather than seven years. This scheme will in turn assist Irish farmers adopt environmentally positive farming practices. Flat-rate VAT compensation percentage for farmers reduced to 5 percent The Minister announced that the flat-rate compensation percentage for VAT for farmers will be reduced to 5 percent (a reduction of 0.5 percent). The flat-rate scheme compensates unregistered farmers on an overall basis for VAT incurred on their farming inputs. The reduction is line with requirements under the EU VAT Directive. This change will be introduced from 1 January 2023.

In his speech the Minister commented on climate change and the increasing frequency and destructiveness of climate events. Finance Act 2020 set out the trajectory for increases in carbon tax, a key measure in combating climate change, with the pre-committed increases confirmed today. Carbon tax, calculated on the rate of carbon dioxide per tonne, will increase to €48.50 per tonne (previously €41 per tonne). Motor fuel The carbon tax increase will result in additional 2 cent per litre to the cost of petrol and diesel. This means that a 60-litre tank of diesel will increase by an estimated €1.48 and a similar tank of petrol will cost an estimated extra €1.28. Carbon tax will rise by the same amount in every Budget until 2029, further increasing the cost of petrol, diesel and home heating fuels.  Home heating The price of home heating oil, coal and peat will all increase from 1 May 2023. A 900-litre tank of home heating oil will cost €19.41 more while a 40kg bag of coal will cost 90 cents extra and a 12.5kg bale of peat briquettes will go up by 19 cents. The cost of annual natural gas usage will increase by an average of €16.98.   Funds raised from these increases are intended to go towards funding an increase in the fuel allowance in addition to programmes aimed at reducing the State’s overall carbon footprint, including the better insulation of homes. In recognition of the impact the increase in carbon tax will have on the cost-of-living, the impact of the increases will be offset by a reduction in the National Oil Reserves Agency (NORA) levy to 0 cent per litre. Carbon tax is estimated to raise an additional €114 million in 2023 and €151 million in 2024. The Government has committed the additional revenues to the Just Transition, fuel poverty prevention and funding to encourage greener and more sustainable farming. Windfall Energy Tax Ireland aims to be part of the EU-wide response to high energy prices which could see excess profits of energy taxes subject to a windfall tax. If agreement is not achieved at EU level, the Government will bring forward its own measures to capture excess profits of energy companies.

This year, Minister Donohoe reaffirmed his commitment to the international Two-Pillar solution to address tax challenges of digitalisation to ensure the global tax system keeps pace with technological developments and also announced that serious consideration will be given to a move towards a territorial corporation tax system. The Budget measures announced today are aimed at supporting enterprise with the extension of a number of key tax reliefs and aligning the refund of the R&D tax credit with international regimes. Research & Development (R&D) Tax Credit It was announced today that Finance Bill 2022 will introduce changes to the payment provisions for the R&D tax credit to align  with international tax reforms taking place at EU and OECD level. This was called for by the CCAB-I in its Pre-Budget Submission 2023 and in its response to the Public Consultation on the Research & Development Tax Credit and the Knowledge Development Box. The R&D tax credit provides for a 25 percent tax credit for all qualifying R&D expenditure. The changes announced today are outlined below: The current system of offset against corporation tax liabilities and payment in three payable instalments is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities. Existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year. Transitional measures will be in place for one year, to smooth the transition to the new payment system for companies that are already engaged in research & development activities. Knowledge Development Box (KDB) The KDB, which was due to expire at the end of the year, will be extended for a further four years until 1 January 2027. The KDB will have a new effective rate of 10 percent (previously 6.25 percent) to come into effect from a date to be set by commencement order which will be determined by progress on the implementation of the Pillar Two Subject to Tax Rule. This is expected to occur at some point during 2023. The KDB is a Corporation Tax relief  to encourage innovation by applying a lower rate of corporation tax on profits on Intellectual Property Assets resulting from qualifying research and development activity. In its response to the Public Consultation on Pillar Two Minimum Tax Rate Implementation, the CCAB-I called for the KDB to be restructured in light of ongoing reforms at an international level. Film Corporation Tax Credit The Film Corporation Tax Credit will be extended in Finance Bill 2022 beyond the current end date of 2024 until 31 December 2028. Section 481 TCA 1997 is a tax credit, incentivising film and TV, animation and creative documentary production in Ireland. Key Employee Engagement Programme (KEEP) Announced today was the extension of the KEEP scheme until 31 December 2025. The KEEP scheme was designed as a share option programme to assist SMEs attract and retain talent in a competitive job market. Today’s announcement that the issuing company can buy-back the KEEP shares should provide a much-needed market for the disposal of shares in small Irish companies and increase the uptake of the scheme. In its response to the Public Consultation on the Key Employee Engagement Programme, the CCAB-I highlighted this as a key measure to enhance the attractiveness and operation of the KEEP scheme. Also announced today was the increase in the lifetime company limit for KEEP shares being raised from €3 million to €6 million. The Finance Act 2019 provisions that have not yet been enacted will be brought into effect following approval by the European Commission. Special Assignee Relief Programme The Special Assignee Relief Programme (SARP) has been extended to 31 December 2025 and the minimum income limit for new entrants will increase from €75,000 to €100,000. The SARP scheme is aimed at employees who have been assigned by their employer to relocate to Ireland to work for that same employer. Where certain conditions are satisfied, 30 percent of qualifying employment income will be disregarded for income tax purposes.

Small and medium businesses are the backbone of our domestic economy and they support thousands of jobs. Today, Minister Donohoe announced that a new scheme to help such businesses pay for increasing energy costs will be launched. Full details of the new Temporary Business Energy Support Scheme (TBESS) are yet to be published but what we understand from the Minister’s speech is that it will pay for 40 percent of the increase in gas and electricity that small and medium businesses are facing. The details of the scheme outlined by the Minister today are set out below and once more details are published we will update members via Chartered Accountants Tax News. The scheme will be open to businesses that carry on a Case 1 trade, are tax compliant and have experienced a significant increase (more than 50 percent) in their natural gas and electricity costs; It will be administered by the Revenue Commissioners and will operate on a self-assessment basis; The scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021; In order to be eligible for the scheme, the average unit price must have increased by more than 50 percent; Claims will be able to be made by businesses for up to 40 percent of the amount of the increase in the bill, capped at €10,000 per month per trade; An overall cap will apply on the total amount which a business can claim. According to the Department of Enterprise Trade and Employment payments will be backdated to September 2022 and will run until at least February 2023 and will cost €1.25 billion. The scheme is being designed to be compliant with the EU State Aid Temporary Crisis Framework and will require approval by the EU Commission in the advance of making payments.

‘Unprecedented’ the new normal as government again leverages tax system to help individuals and businesses in 3rd ‘crisis’ Budget    Accountants will have critical role in helping businesses access new energy support scheme supports Tuesday 27 September 2022 – The cost of living Budget announced by the government should help SMEs survive the coming months, but there has been little emphasis on addressing capacity constraints in the health, education, and housing sectors. Reacting to Budget 2023, Chartered Accountants Ireland, the largest professional accountancy body on the island of Ireland, noted that the unprecedented has now become the new normal as the Government responds to crisis circumstances for the third year in a row.  Commenting, Dr Brian Keegan, Director of Public Affairs, Chartered Accountants Ireland said “Previously, Budget Day was mainly focused on collecting taxes, however, since Budget 2021, the focus has shifted to targeting behaviour by intervening directly in the operation of the economy. We saw the effectiveness of this when the economy recovered so quickly from COVID-19 disruption. The Government has learned from this and is again using the tax system to put money back in businesses and people’s pockets to help in the face of inflation and rising energy costs.” Administering the Temporary Business Energy Support Scheme (TBESS) Accountants played a vital role in the last two years in advising businesses on how to administer the pandemic-era support schemes and the Institute noted the role its members will now come to play in assisting both government and SMEs in implementing the new TBESS.  Keegan commented “Today’s decision to introduce a new energy support scheme, similar to the pandemic-era EWSS, will come as a major relief for many small businesses that are facing crippling energy bills over the winter months. These supports cannot last forever, but they are an example of the targeted approach by the state which has worked well in the past.     “Simplicity and efficiency in implementation are going to be critical in getting the supports to businesses as quickly as possible.” Missed opportunity to tackle capacity constraints  The Institute highlighted the ongoing need to tackle capacity constraints in the supply side of the Irish economy, for example in rental accommodation, healthcare, skills shortages, and education. It noted that this lack of capacity is a huge problem.   Keegan commented  “There has been more emphasis today on demand rather than on ability to supply. There is an increase in the number of doctor only medical cards, but it will increase the pressure on GPs. Our third level system is accessible and after today even more affordable, but are we investing enough in our universities and colleges? Some much-needed relief was provided today for hard-pressed renters, but are the measures to improve the supply of accommodation going to improve the supply quickly enough?” On the housing front, today’s announcements will not help renters find accommodation as landlords are still leaving the market.   Keegan commented “It was a missed opportunity to not use the Budget as a means to incentivise landlords to remain in the rental market. Targeted tax measures should have been introduced to prevent the removal of rental properties from the market, reduce the displacement of tenants, and result in more residential properties becoming available to purchase. The omission of such measures from this Budget will lead to continued hardship for those renting or trying to buy in the current market.” In its pre-Budget submission, Chartered Accountants Ireland, under the auspices of the CCAB-I, outlined a range of tax measures and supports which could have been used to target elements of the housing crisis. These proposals included: Making available a relief from Capital Gains Tax on disposal of a rental property, conditional on the property being sold with a tenant in situ and/or a requirement for the property to continue in use as a rental property. Local property tax to be allowed as a deduction against rental income. Where landlords retrofit a property to improve its energy rating, 100% capital allowances should be offered in the year of work.  ENDS