Finance Bill 2019
Finance Bill 2019, published on 17 October 2019, provides the legislative framework for the tax measures announced in Budget 2020, along with some surprises in the form of new measures, which were not announced on Budget Day.
The backdrop of a potential no-deal Brexit has underpinned the budget planning approach for 2020, with Minister Donohue adopting a prudent approach to tax and spending measures. The Minister has sought to balance the economic risks presented by Brexit and wider global uncertainty, with the strong economic performance experienced in recent years in the Irish economy, including warnings around a potential for the economy to overheat. However, as things have transpired, Finance Bill 2019 dropped on the same day as the announcement that a new Brexit deal has been reached.
The international tax agenda, supporting business, environmental concerns and the housing market are reflected as key themes in the Finance Bill 2019. The Bill includes measures such as:
- A range of targeted tax measures to support business, with a particular emphasis on small and medium enterprises;
- Tax measures to address climate change, including an increase in carbon tax;
- Limited personal tax changes, reflecting modest changes to a small number of personal tax credits;
- A range of targeted anti-avoidance measures, including significant changes to the taxation of certain real estate funds;
- An increase in commercial stamp duty rates, along with an increase in the parent/child tax-free threshold for gift and inheritance tax purposes;
- Significant changes to Ireland’s transfer pricing regime, including documentation requirements, in line with OECD best practice; and
- Adoption of new legislation to incorporate anti-hybrid rules and a legislative framework for cross border mandatory reporting, in line with the requirements of the EU Anti-Tax Avoidance Directive.
A number of the measures, particularly those impacting on business, reflect policy decisions adopted following public consultation undertaken by the Department of Finance during 2019. However, many of these areas, in particular changes to Ireland’s transfer pricing regime and the manner in which the anti-hybrid rules will operate, are likely to be subject to further consultation and the publication of guidance from Irish Revenue in the months ahead.
Enhancements to the R&D Tax Credit regime for small and micro business, the Key Employee Engagement Programme (KEEP) and Employment Investment Incentive (EII) Scheme introduced by Finance Bill 2019, with a view to encouraging uptake in such schemes, while also promoting increased simplicity and flexibility are welcome, but could have gone further. The extension of a number of key tax reliefs, notably the Help to Buy Scheme for another two years until the end of 2021, and the SARP and FED reliefs to the end of 2022 are also welcome, but do not reflect any policy changes to enhance the nature of these existing reliefs.
Notably absent from the Finance Bill issued was any reference to interest restriction rules required as part of the EU Anti-tax Avoidance Directive. From a business certainty perspective, clarity as to the timing for implementation of these new rules would be welcome in due course.
Finance Bill 2019 Perspectives
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Against the backdrop of Brexit, the Finance Bill 2019 reflects measures and an approach that was generally anticipated in advance of the Budget 2020 announcements – a requirement for prudence and caution. Minimal personal tax changes have been adopted, with the result that the high marginal tax rate faced by individuals and the taxation of work will remain key policy areas that require focus in the years ahead. The question will of course be raised, where a no deal Brexit is avoided, whether we will see a supplementary budget; although the Minister has been clear to date that this will not happen.
The extension (and enhancement in some instances) of key tax reliefs designed to support business has to be welcomed, but policy reform will be required going forward in order to really make a step change in supporting business and entrepreneurship. In particular, further enhancements to the R&D tax credit regime, the taxation of assignees/mobile talent, including broader share based reward reforms, and the taxation of entrepreneurs, are key areas that will require attention in the near term.
For corporate taxpayers generally, and certain real estate funds, early engagement with the key developments in Finance Bill 2019 will be an imperative in the coming months, to identify the specific impacts and new obligations arising.
For further details on the above and other new measures not included in Budget 2019, we invite you to view our articles and commentary analysing the Finance Bill on our website.
If you have any questions on what the Finance Bill means for you, your business or your family, please do not hesitate to speak with your usual Deloitte tax adviser or any member of the Deloitte tax team.