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Individuals

Finance Bill 2019

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Budget Measures

Finance Bill 2019 makes provision for the measures announced in Budget 2020, such as the increases in the following:

  • The earned income tax credit to €1,500.
  • The home carer tax credit to €1,600.
  • The CAT class A threshold (the tax free threshold on gifts and inheritance passing from parents to children) to €335,000.
  • Dividend Withholding Tax (“DWT”) on dividends paid from Irish companies to 25% from 1 January 2020 (the rate will increase further in line with the individual’s tax rate from 1 January 2021 onwards).

Extension of reliefs as a result of Brexit

The Finance Bill also attempts to extend certain legislative provisions to certain situations that might be affected by Brexit that were not already covered under the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019.

Non-resident individuals are not normally entitled to tax credits. However, existing legislation extends the entitlement to tax credits to non-resident individuals who are citizens or a resident of an EU Member State.

Finance Bill 2019 will extend this relief to non-resident individuals who are citizens or a resident of the United Kingdom. This change will come into effect when the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 takes effect.

High Earners Restriction Relief – technical amendment

Certain high income individuals were restricted from claiming certain reliefs (e.g. capital allowances on certain property incentives, exempt patent income dividends) but could carry these reliefs forward and claim them in subsequent years. The relief was only available to offset against certain types of income (e.g. the relief could not be offset against offshore fund income or gains). Finance Bill 2019 proposes to allow these individuals to offset this relief against offshore fund income or gains.

Capital Gains Tax

As provided in the Budget, Farm restructuring relief from capital gains tax (e.g. on selling and purchasing or exchanging parcels of land to bring them closer together) has been extended to 2022 with no changes to relief.

Capital Acquisitions Tax

Introduction of eProbate

At the moment, when an individual wishes to extract a grant of probate/letters of administration in the event of an individual’s death, they must file a document called an Inland Revenue Affidavit which sets out a list of the deceased’s assets, liabilities and other information.

Finance Bill 2019 provides, subject to the introduction of regulations in this regard, for the introduction of an electronic version of the Inland Revenue Affidavit which will mean it no longer needs to be sworn in front of solicitor. This should simplify the exchange of information between the Probate Office and the Revenue Commissioners.

Dwelling House Relief

Previously, where an individual was inheriting multiple properties on the death of another individual and one of those properties qualified for dwelling house relief, the fact that the individual was inheriting other residential properties did not affect the availability of the relief.

However, Finance Bill 2019 proposes to change this position so that if an individual inherits an interest in more than one residential property, they will not be entitled to claim dwelling house relief in respect of any property.

Our View

There is nothing of particular significance for individuals in the Finance Bill that was not already contained in the measures announced in the Budget. Budget 2020 was significantly affected by the possibility of a no-deal Brexit. However, given the fact that a deal has now been agreed between the prime minister of the UK and the EU leaders (subject to UK parliamentary approval), it will be interesting to see whether any additional measures will be brought in through the Finance Bill before it is enacted.

The technical amendment in relation to the High Earners relief is interesting as, for these individuals, it will bring the effective tax rate on offshore fund income and gains down to just under 33%. Given that it is 12 years since this legislation came into effect a very limited number of individuals are likely to benefit from this amendment.

The dwelling house relief from Capital Acquisitions Tax has been restricted even further by Finance Bill 2019 and one wonders if the relief is achieving its aim any longer. The purpose of the relief was to ensure that a person’s home was not subject to tax on any gift/inheritance. However, the recent changes to the relief have made it virtually unusable. Consequently, we would encourage a review of the relief in its current form.

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