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INTRODUCTION
The increase in the Income Levy and the doubling of the Health Levy are by far the amendments with widest impact in Finance Bill 2009. The abolition of mortgage interest relief for individuals with mortgages for more than seven years will further reduce the finances of most households in Ireland from 01 May 2009.
So is it all doom and gloom you may well ask, Finance Bill 2009 did introduce some positive measures such as a relief for the Exchange of Houses, Intangible Assets and an extension to the Mid-Shannon Tourism Infrastructure Scheme.
The Finance Bill was enacted on 3 June 2009, however the Act has yet to be released. No changes are expected in the Act.
PERSONAL TAX
> Income Levy: From 01 May 2009 the Income Levy rates have been increased to 2% (on first €75,036), 4% (on €75,036 to €174,980) and 6% (on the excess over €174,980). Previously the rates were 1% (on first €100,100) and 2% (on the excess over €100,100). The exemption threshold for the income levy has also been decreased from €18,304 to €15,028 per annum.
> Health Levy: From 01 May 2009 the Health Levy has increased from 2% (on first €100,100) and 2.5% (on the excess over €100,100) to 4% (on the first €75,036) and 5% (on the excess over €75,036) respectively. Therefore not only have the rates increased but the entry level for the higher rate has also been decreased thereby significantly increasing the tax take for high earners.
> Mortgage Interest Relief: From 1 May 2009 mortgage interest relief will only be available for mortgages for 7 years from the date the mortgage was first taken out.
> Rented Residential Property: Mortgage interest relief for rented residential properties has been curtailed to 75% from 01 May 2009. This measure will apply to both new and existing mortgages.
> Residential Development Land: The 20% special rate of tax which applied to trading profits from dealing in or development of residential development land has been abolished. For accounting periods ending on or after 1 January 2009 the profits will be subject to tax at the individual’s marginal rate of tax or in the case of a company at a rate of 25%.
> DIRT: The rate of retention tax on deposit interest has seen a further increase to 25%. The rate applicable to life assurance products has increased to 28%. The increased rates will apply on or after 8 April 2009.
COMPANY TAXATION
> Capital Allowances: Capital allowance schemes for private hospitals and nursing homes have been terminated. However schemes for palliative care units and child care facilities are still in force. The Mid-Shannon Tourism Infrastructure Scheme has been extended to 31 May 2013 and the 31 May 2009 deadline for submissions of applications has been extended to 31 May 2010.
> Intangible Assets: This scheme provides for capital allowances on capital expenditure incurred by companies after 7 May 2009 on the provision of intangible assets (goodwill, patents, trade marks, copyright, know-how) for the purposes of a trade.
> Motor VAT Scheme: In the Mini-Budget 2009, the Minister announced a new VAT margin scheme to apply to secondhand cars. Following consultation with the Motor Industry this scheme has been scrapped.
> Participation Exemption: The exemption from Capital Gains Tax applicable to Irish Resident Companies disposing of shares in other companies will no longer be available where the value of the shares is derived from exploration activities.
STAMP DUTY
> Exchange of Houses: Where a Second-Hand House is transferred in exchange for a New House, the stamp duty payable on the Second-Hand house will not be due until the earlier of the subsequent sale of the Second-Hand House or 31 December 2010.
CAPITAL GAINS TAX
> The rate of capital gains tax has been increased from 22% to 25% on all disposals made on or after 8 April 2009.
CAPITAL ACQUISITIONS TAX
> The rate of capital acquisitions tax has been increased from 22% to 25% on all gifts or inheritances made on or after 8 April 2009.
> The CAT thresholds have been reduced to €434,000 (Group A- Parent to Child), €43,400 (Group B- Between Related Persons) and €21,700 (Group C- Unrelated Persons). These thresholds will apply from 8 April 2009.
REVENUE INTEREST RATES
Interest on Overdue Tax: The statutory rate of interest applied by Revenue has been reduced to a daily rate of 0.0219% (All taxes except for VAT and PAYE) and a daily rate of 0.0274% (VAT and PAYE). These rates will apply from 1 July 2009. |
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Following the recent mini budget the government revealed changes to the rate of Inheritance tax which has increased from 22% to 25% on all inheritances/gifts received above the allowable threshold (the amount a person can inherit without paying tax). Thresholds themselves have decreased considerably.
The net effect of this is that you will be able to inherit less without paying tax on your inheritance and, will pay a higher rate of tax on the amount over and above your applicable threshold.
A Section 72 policy can minimise the inheritance tax liabilities your family may inherit.
Inheritance Tax – What is it?
It is a tax that is paid when you receive an inheritance as a result of death.
Who pays the tax?
The Beneficiary (the person who receives the inheritance)
What is taxable?
Practically all assets – cash, land, investments, etc
How much can you receive?
This depends on the relationship between the donor and the recipient and whether or not any previous gifts / inheritances were received. There are three tax free thresholds, which apply for Inheritance tax purposes:
Group 1, €434,000 – where a recipient is a child, or a minor grandchild of the donor, (where the parent is dead). In some cases this threshold can also apply to a parent, niece or nephew who have worked in a family business for a period of time.
Group 2, €43,400 – where the recipient is a brother, sister, niece, nephew or linear descendant of the benefactor or where the gift is made by the child to the parent.
Group 3, €21,700 – in all other cases. This is known as the stranger threshold. Thresholds are normally linked with inflation but were in fact reduced following the mini budget.
Rates of Inheritance Tax
Up to threshold amount at zero. The balance is taxed at 25%.
S72 Life Policies
Life assurance policies taken out to pay Inheritance tax due on your death (previously called Section 60 policies but now called S72 due to changes in legislation) are also exempt from inheritance tax, provided that the proceeds are used to pay the tax due > if the policy provides more money than is needed to pay the inheritance tax due, the excess will be taxable.
When is the tax payable?
The Inheritance tax must normally be paid, in one lump some, within 4 months of the date the inheritance is received by the beneficiary and within 1 year of the date of death. |
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| Finance (No2) Act 2008 introduced changes to the statutory fixed penalties. So far in 2009 exchequer returns are considerably reduced and Revenue audits are multiplying as Revenue is seeking to increase the tax take by whatever means possible. We have set out some of the key penalties below: |
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New Fixed Penalty |
Old Fixed Penalty |
| Forms 46G – Failure to Provide a Return |
€3,000 |
€1,520 |
| P35 – Failure to Provide a Return |
€4,000 |
€2,535 |
| Failure to deliver returns (individual) |
€3,000 |
€950 |
| Failure to deliver returns (individual) in excess of 1 year |
€4,000 |
€1,520 |
| Failure to deliver returns (company) |
€1,000 |
€630 |
| Failure to deliver returns (company) in excess of 1 year |
€2,000 |
€1,270 |
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| The penalties have increased significantly and to that end it is best to ensure that all individual/company returns are submitted in order and on time. |
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| These are intended as a general guide to the subject matter, it should not be used as a basis for descisions. For this purpose advice should be obtained which takes into account all the client's circumstances. Every effort has been made to ensure the accuracy of the information. In view of its purpose the reader will appreciate that we are unable to accept liability for any errors or omissions which may arise. |
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