INTRODUCTION
The principal feature of the Finance Act 2009 is the introduction of an Income levy from which there are no allowances or deductions.

On the positive side an important relief for starter companies has been introduced and in addition attempts have been made to make it more attractive to carry out R&D in Ireland. 

The Act has also reduced the stamp duty rates for non-residential property.

The Act includes a portion of the Revenue Code of Practice for Auditors in the Act for the first time, although some of the new terminology is less than clear.

COMPANY TAXATION – Principal features

• Three year exemption for Start-up Companies – This applies to new companies commencing to trade in 2009.  The exemption is granted for a period of three years in respect of the profits of a new trade and chargeable gains on the disposal of any assets used for the purposes of a new trade.  Full relief is available where the corporation tax payable by a company for an accounting period is up to €40,000 with some marginal relief between €40,000 and €60,000.
• R&D Credits – Enhancements - The Act increases the rate of tax credit from 20% to 25% of qualifying R&D expenditure. In addition a qualifying company can claim a credit on the excess of expenditure on R&D in the year of claim over such expenditure in the base year ( which will remain as 2003 for all future accounting periods). Unutilized credits are available for further reliefs.
• Preliminary Tax Payment Dates - The payment dates for preliminary tax by companies with more than €200,000 in the previous accounting period has been changed.  Two installments are payable: the first installment, of 50% of the CT liability of the preceding accounting period, will be payable in the 6th month of the accounting period (alternatively 45% of the corporation tax liability for the current accounting period may be paid): the second installment will be payable (as before) in the 11th month of the accounting period. The amount payable must bring the total preliminary tax paid to 90% of the corporation tax liability for the current accounting period.

INCOME TAX

• New Income Levy - A new progressive income levy came into effect  from 1 January 2009.  It applies to all income for income tax purposes.  However no deductions are allowed for pension contributions or capital allowances.  The levy will be imposed on an individualised basis as follows:

• BIK - Preferential Loans - The specified rate used in calculating the taxable benefit from loans at preferential rates of interest provided by employers to employees (other than home loans) is increased from 13% to 15% from 1 January 2009.

• BIK – Company Cars - The Act introduces a new CO2 based system of calculation of benefit-in-kind (BIK) in respect of company cars provided for employees and is structured on the 7-bands adopted for Vehicle Registration Tax (VRT).  Cars in the 3 lowest bands of CO2 emissions remain at the current level of BIK charge, and higher charges apply for vehicles with higher emission levels. Existing vehicles retain the current method of calculation of benefit-in-kind.

Parking Levy - A further levy has been introduced where an employee has an entitlement to use a parking space and that space is provided directly or indirectly by his or her employer. The charge for a full year will be €200 with a reduction for shared spaces.  Employers are required to deduct the levy from employees’ net wages or salary and to remit the levy to Revenue at the same time as they remit income tax deducted under the PAYE system. The levy will not apply to disabled drivers or to employees of the emergency services in the context of responding to an emergency situation. Occasional permission to park for not more than 10 days in a year is excluded.

• BIK – Bicycles - An exemption from the general benefits-in-kind charge in respect of the first €1,000 expended by employers (from 1st January 2009) in the provision of bicycles to their employees/directors.

• Medical Expenses Relief - Medical Expenses Relief is reduced to 20% with the exception of expenditure on nursing home expenses (for 2009).

• Mortgage Interest Relief - The Act increases the rate at which mortgage interest relief is granted to first-time buyers on relievable interest for the first five years of their mortgage and retains the 20% relief available for years 6 and 7.  The rate of mortgage interest relief for non-first-time buyers will be reduced from 20 to 15%.  From 1 January 2009 the relief due to first-time buyers will be as follows:

25 per cent for years 1 and 2 22.5 per cent for years 3, 4 and 5, and 20 per cent for years 6 and 7.

• Pension Deduction - The annual earnings limit for tax-relieved pension contributions to €150,000 for 2009.

• DIRT - The Act increases DIRT by 3% for 2009.

CAPITAL GAINS TAX - CGT

• Payment Date -  The payment date for disposals made in the period 1 January to 30 November of a year of assessment will be 15 December.  The payment date for disposals made in December will be the following 31 January.

• CGT Rate - The rate of tax on capital gains is increased from 20% to 22% in respect of disposals made after 14th October 2008.

• Remittance Basis - The remittance basis of taxation is amended so that, with effect from 20th November 2008, it now applies to gains arising to all non-Irish domiciled persons in respect of non-Irish situated assets including UK assets. 

FARMER TAXATION

• Farmer Allowances/Reliefs - Capital allowances for expenditure incurred on certain buildings and structures for the control of farm pollution extends are extended for a further two years to 31 December 2010.  The 25% stock relief and the special 100% stock relief for certain young trained farmers are extended for a further two years to 31 December 2010.  In addition, the Act extends the exemption for young trained farmers for another four years until 31 December 2012.  Farm Consolidation Relief is extended for another two years until 30 June 2011.

CAPITAL ALLOWANCES

• New Industrial buildings – Relaxation of Rule Where the an industrial building or structure is sold before it is used, or, within one year after it commences to be used the purchaser gets the value of available Capital Allowances. However if the sale takes place beyond the one-year time limit, capital allowances are available on a more restrictive basis which makes the purchase of the building a less attractive option.  The one-year time limit is extended to two years and applies to sales taking place on or after 14 October 2008.

• Regeneration of Docklands - A new scheme of allowances is being introduced to facilitate the removal and relocation of certain facilities which may hinder the regeneration of urban docklands.  The relief, given by way of accelerated capital allowances and ‘‘additional relocation allowances’’, covers the removal costs of the industrial facilities and the cost of building the relocated facilities, including land purchase costs.  Costs are limited to the net costs of the removal and relocation.

• Capital Allowances - Energy Efficient Equipment The Act introduces new categories of energy efficient equipment used for the purposes of the trade which can avail of 100% capital allowances in the year of purchase:

Information and Communications Technology,
Heating and Electricity Provision,
Process and Heating, Ventilation and Air-conditioning (HVAC) Control Systems,
Electric and Alternative Fuel Vehicles

VAT

• Rate of VAT - The rate of VAT in increased from 21% to 21.5% from 1 December 2008.

STAMP DUTIES

Stamp Duty Rates - The rates of stamp duty for non-residential property are amended by the Act as follows:

CAPITAL ACQUISITIONS TAX

• Rate of CAT - The rate of tax on gifts and inheritances in increased from 20% to 22% for gifts and inheritances taken on or after 20 November 2008.

• Agricultural Relief - Agricultural relief is extended to apply to agricultural land situated in a Member State of the European Union. It applies to gifts and inheritances taken on or after 20 November 2008.

MISCELLANEOUS

• Cinderella Rule - For 2009 onwards in determining the number of days spent in the Ireland for tax residence purposes, an individual is treated as being present in Ireland for a day if they are present in the State at any time during that day.

• Penalties Regime - The current practice of the Revenue Commissioners in relation to the level of tax-geared penalties sought in settlements arising out of Revenue audits and investigations has been included in the legislation for the first time.  The tax geared penalties under the legislation are now as follows: