Budget October, 2014 Summary of Key Tax Changes

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1 PERSONAL TAX Changes to Income Tax There is no change in the standard rate (20%) but the marginal rate (41%) of Income Tax in reduced to 40% with effect from 1 January There s an increase in the standard rate band by 1,000 from 32,800 to 33,800 for a single person and from 41,800 to 42,800 for married couple with one earner. Universal Social Charge The following changes are introduced with effect from 1 January Income less than 12,012 or less is exempt from USC. The new rates for 2015 where income exceeds 12,012 are as follows: 0 to 12, % 12,013 to 17, % 17,577 to 70,044 7% 70,044 to 100,000 8% PAYE income in excess of 100K 8% Self Employed Income in excess of 100K 11% 7% rate of USC for medical card holders whose aggregate income does not exceed 60,000 will not pay a maximum rate of 3.5%. Individuals aged 70 years or over whose aggregate income is 60,000 or less will pay a maximum rate of 3%. PRSI No changes to PRSI this year.

2 Deposit Interest Retention Tax ( DIRT ) The standard DIRT rate remains at 41%. First time buyers on savings used towards the deposit on a home (up to 20% of purchase price) will be exempt from DIRT. This is effective from 15 th October Home Renovation Incentive (HRI) Tax relief of 13.5% will be available for qualifying expenditure on home renovation and improvement work. The relief will be granted by way of a tax credit split over two years following the year in which the works are carried out. The minimum expenditure must be 5,000 and relief will be provided up to a maximum of 30,000. This relief is being extended to include rental properties owned by landlords subject to income tax. Water Charges Tax relief at 20% will be provided on water charges up to a maximum of 500 per annum. Employment and Investment Incentive (EII) EII is being amended to raise the company limits, increase the holding period by 1 year and include medium sized companies in non assisted areas and internationally traded financial services. Hotels guest houses and self catering accommodation will remain eligible for a further 3 years and managing nursing homes will be included for 3 years. Capital raised under the EIIS regime to be increased to 5m annually subject to a lifetime limit of 15m. The holding period for EIIS relief to be increased by one year form three years to four years. Seed Capital Scheme This scheme is being rebranded as Start- Up relief for entrepreneurs (Sure) and will be extended to individuals who have been unemployed up to 2 years

3 Rent a Room Relief The threshold for exempt income under rent a room scheme is being increased to 12,000 per annum. Pensions The 0.75%stamp duty levy on pension fund will be reduced to 0.15% for This levy is too abolished from 1 January Artist Exemption The threshold for the artist exemption is increased by 10,000 to 50,000. The exemption is extended to non-resident artists. BUSINESS TAX Corporation Tax rate The standard rate of Corporation Tax remains unchanged at 12.5%. Research & Development Credit The 25% tax credit applies to the amount of qualifying R&D expenditure in a given year that is in excess of the amount spent in The 2003 base year is being removed. 3 Year Relief for Start up Companies This relief is being extended to new start companies in 2015 and a review of its operation will take place in 2015.

4 FARMERS Increase the amount of income exempted from long term leasing by 50% and introduce a fourth threshold for lease periods of 15 years or more with income up to 40,000 being exempted. Allow relief where the lessee is a company. Remove the 40 years of age threshold for leasing relief. Allow income averaging where there is on farm diversification. Increase income averaging from 3 years to 5 years. CAPITAL ACQUISITIONS TAX The rate of Capital Acquisitions Tax remains the same-33%. Agricultural Relief Changes are being introduced to target CAT agricultural relief to active farmers. From 1 January 2015, and subject to other conditions, the relief will be available only in respect of agricultural property gifted to or inherited by active farmers and to individuals who are not active farmers but who lease out the property on a long-term basis for agricultural use to such farmers. CAPITAL GAINS TAX The rate of Capital Gains Tax remains the same-33% Property purchase incentive The inventive relief from CGT (in respect of the first 7 years of ownership) for properties purchased between 7 December 2011 and 31 December 2014 is not been extended. Windfall Tax The 80% rate of tax is to be abolished with effect from 1 January 2015.

5 CGT Farm Restructuring Farm restructuring relief is available where the first transaction in the restructuring (e.g. sale, purchase or exchange of land) is carried out by 31 December 2015 with the restructuring to be completed within 24 months. The deadline for the completion of the first restructuring transaction is being extended to 31 December CGT Retirement Relief CGT retirement relief is being amended so that, subject to other conditions, land that has been leased for up to 25 years in total (increased from 15) ending with disposal will qualify for the relief. Amendments are also being made to provide (in the case of land disposals outside the family) that land currently let under co nacre arrangements which end with disposal on or before 31 December 2016 or which (before 31 December 2016) is instead leased out for minimum periods of 5 years to a maximum of 25 years ending with disposal will, subject to other conditions, also qualify for CGT retirement relief. VALUE ADDED TAX Retention of the 9% reduced VAT rate The 9% reduced VAT rate, which was introduced in 2011 as part of the Government Jobs Initiative for tourism related services, is due to revert to 13.5% on 31 December The 9% VAT rate is being retained. Increase in the Farmer s Flat-Rate Addition from 5% to 5.2% The farmer s flat-rate addition will be increased from 5% to 5% with effect from 1 January The flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs. Stamp Duty Stamp Duty on Agricultural Leases Agricultural leases between 5 and 35 years in duration to active farmers will be exempt from Stamp Duty. Consanguinity Relief Consanguinity relief, which applies to transfers of non-residential property to certain relatives, is due to expire on 31 December This relief, which halves the applicable rate of Stamp Duty, will be extended for a period of three years in certain circumstances where the transferor is 65 years or under and the transferee is an active farmer.

6 EXCISE DUTY Cigarettes The excise duty on a packet of 20 cigarettes is being increased by 40 cents (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 14 October The excise duty on roll-your-own tobacco is being increased by an additional 20 cents (including VAT) per 25g pouch with effect from midnight on 14 October If you have suggestions for future newsletters, contact Dean O Reilly on office@bmsaccountants.ie. Or if you have any feedback in relation to this Newsletter, contact raymond@bmsaccountants.ie. offer complete accounting & bookkeeping services. Contact BMS for a free consultation on or info@bmsaccountants.ie. Courtesy of Robert Browne, Tax Director, KBG

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