Individuals and Entrepreneurs
Finance Bill 2017
In the area of personal taxation, the majority of the measures provided for in the Bill were already announced in the Budget Statement. There are however a small number of additional measures included in Finance Bill 2017 that were not announced in the Budget. These measures include the following:
- There are some amendments to stamp duty young trained farm provisions dealing with relief on the transfer or purchase of farm lands. There is a new requirement that the young trained farmer will need to submit a business plan to Teagasc and also come within the definition of “micro, small and medium enterprises” under Regulation (EU) No 702/2014.
- Provision is made for changes to certain anti-avoidance measures relating to offshore settlements and companies. These sections deem the income and gains of those structures to be the income and gains of Irish resident individuals in certain circumstances. Previously if the foreign structure carried on a genuine economic activity in a relevant Member State and the tax payer could evidence that the assets were not transferred with a main purpose being to avoid a liability to tax, then the deeming provision did not apply. The change now only requires the taxpayer to evidence that a genuine economic activity is carried on by the structure in a relevant Member State (essentially an EU or EEA Member State). These qualifying provisions to the anti-avoidance measures were initially introduced to ensure the anti-avoidance measures comply with EU law, but it appears they required further amendments to become compliant.
- CGT farm restructuring relief applies where land is sold or exchanged by a farmer with a view to acquiring other lands in closer proximity to the farmer’s main holding (essentially rationalisation of farm land holdings). The acquisition of the new lands must occur within 24 months of the disposal of the original lands. In relation to farmers who have claimed relief from CGT under the restructuring relief since 1 July 2016, they must now provide certain information to Revenue to enable Revenue determine the level of tax that would have arisen had the relief not applied. This measures is being introduced to comply with State Aid publication requirements.
- Changes have been made where non-residents dispose of shares in a company where the shares in that company derive the greater part of their value from Irish land, minerals or exploration/exploitation rights (“relevant assets”). Finance Act 2015 introduced an anti-avoidance measure to prevent the introduction money to the company so as to ensure it did not derive the greater part of its value from relevant assets. This measure will now be extended to include introducing assets, other than just money, to the company.
The Finance Bill makes provision for the implementation of the following measure that were announced by the Minister for Finance in his Budget Statement:
- An increase in the standard rate band for income tax of €750 to €34,550 for single earners. For married one-income couples, the standard rate band increases from €42,800 to €43,550.
- The USC 2.5% rate is to be reduced to 2%. The ceiling for this band is to be increased to €19,372 from €18,772. The 5% rate is to be reduced to 4.75%. Thus, the marginal rate of tax on incomes up to €70,044 will be 48.75% going forward.
- Increase in the home carer tax credit from €1,100 to €1,200
- Increase in the earned income tax credit from €950 to €1,150
- Medical card holders with income of up to €60,000 will continue to pay USC at the lower rate (now 2%) for a further two years.
- Expenses incurred prior to the letting of a property are to be allowed as a deduction for tax purposes. This applies for properties that have been unlet for 12 months or more. If the property is removed from the rental market within 4 years then the relief will be clawed back. A cap of €5,000 will apply per property.
- Agricultural land used for solar panel purposes (covering up to 50% of the land) will qualify for CAT agricultural relief and CGT retirement relief
- Consanguinity relief for inter-family farm transfers, which applies stamp duty at a rate of 1%, is to continue.
The Budget and subsequent Finance Bill made a number of minor provisions to the area of personal taxation. However, most of the measures have limited impact. There has been no movement in relation to key personal taxation areas such as CAT thresholds, CGT entrepreneur relief and the additional USC levy for self-employed individuals. The failure to introduce changes in these areas is disappointing but it is hoped measures might be introduced in the near future perhaps following the conclusion of the USC/PRSI review.