Budget 2018; the devil is in the detail!
This analysis of the provisions of Budget 2018 (announced on 10th October) is supplemented by the further details and clarifications included in the Finance Bill published on 19th October.
In this summary we will focus on some of the less publicised features of the budget which you may have missed!
- €5m VAT refund scheme for Charities – Charities are not able to register and claim back VAT on goods and services they receive e.g. utility bills, maintenance costs or business purchases. This adds significantly to the costs of operating a charity. The scheme announced in the budget will commence as from 1/1/2018, however, any rebates will be payable one year in arrears, in 2019. The partial refund amount will depend on the level of claims submitted. The €5m rebate will be apportioned pro-rata based on the number of claims received. The Dept. of Finance has stated in its overview of the scheme, that the amount of the VAT eligible for refund will be based on the proportion of the charities income from private sources i.e. fundraising, subscriptions and donations, as a percentage of its total income. In preparation for the introduction of the scheme, Charities should ensure that their financial systems support the recording of VAT incurred on goods and services.
- Consanguinity Relief at 1% extended – stamp duty on transfers of agricultural land between relatives has been extended to 31/12/2020. Also, the requirement for the transferee to be under 67 years has been removed. This is a significant relief considering that transfers of land to third parties will now be liable at 6%.
- Landlord relief for pre-letting expenses introduced for residential properties which have been vacant for at least 12 months. The cap on the deduction is €5K. Note that if the property ceases to be let within 4 years the deduction will be clawed-back. Examples of expenditure could be painting, landscaping or maintenance services. Note you must have a valid VAT invoice from a third party to claim the pre-letting deduction.
- Home carer credit increased by €100 to €1,200 – Spouses of a stay-at-home parent can claim this relief. Even if the stay-at-home spouse earns up to €7,200 per year the credit is still available. This tax credit is often overlooked by stay-at-home parents. Depending on the earnings of the main earning spouse there may be no tax saving to claiming the relief. If that is the case you won’t be expected to pay more tax as Revenue will only allow the credit if it to your benefit to do so.
- Both Employer PRSI rates will increase by .10% to 10.85% and 8.6% respectively – a slight increase but further increases of .9% and 1% are scheduled for 2019 and 2020. This increase will be on top of an increase in the Minimum Wage to €9.55 per hour from 1/1/2018.
- Earned Income Credit increased by €200 to €1,150 – there is still a way to go until equity with the Employee credit of €1,650.
- Dwelling House Relief from CAT changes for Inheritances by Dependant relatives – This change will allow a property owned by the disponer to be bequeathed to a dependant relative without the requirement for the disponer to have occupied the house prior to their death. The inheritance will be exempt from CAT and from aggregation with gifts/inheritances from the same disponer.
- Land leased for Solar Panels – confirmation that agricultural land leased for such use will qualify as agricultural land for the purposes of Retirement Relief (CGT) and Agricultural or Business Relief (CAT). Note that no more that 50% of the total farm acreage can be used for this purpose. This gives farmers further business diversification options with the reassurance of being able to claim the aforementioned CGT and CAT reliefs.
- CGT 7 Year Exemption amended to allow disposal after 4 Years – Finance Bill 2017 clarified that properties acquired in EEA States ( EU members, Norway, Iceland & Lichenstein) may also be sold after 4 years and will still enjoy full exemption from CGT.
- Electric vehicle BIK exemption – to encourage the use of electric vehicles by business. It also exempts from BIK the cost of charging the vehicle on the business premises. The exemption applies for one year to 31/12/2018.
- KEEP Share option scheme for SME’s – a welcome provision which allows a company grant share options to key employees. These options will be subject to the same taxing provision as Approved Shared Option Schemes i.e. share options will not be subject to income tax on exercise, however, any gain from a subsequent sale of the shares will be liable to CGT. The scheme will run from 1/1/2018 to 31/12/2023. Up to now granting of share options effectively resulted in an income tax liability for the recipient when the option was exercised. This offering is more attractive for the employee and should be an effective measure for SME’s in their efforts to retain and attract key staff. There are also many qualifying conditions to be met which one would expect (see link below).
- Brexit Loan Scheme €300m – to provide loans to SME’s to develop responses to the challenges of Brexit through new product and market development. Although available to food companies primary agricultural and fishing businesses cannot utilise this fund; a €25m fund has been set-up for the agri-food sector.
- Accelerated Capital Allowances scheme for investment by farmers/farming enterprises in energy efficient equipment has been extended for three years to 31/12/2020.
For further details on any of the above please follow click here.
Hopefully something here presents an opportunity for you or your business!