News

Minster for Finance, Michael Noonan, delivered his sixth budget since 2011. There were little surprises in this budget given most of it had been leaked in advance. There was a little something for everyone with cuts in USC, DIRT and increases in CAT thresholds and social welfare payments. Smokers were once again hardest hit with the only tax increase being on a packet of cigarettes.

While the terms of Brexit still remain uncertain, this leads to increased risk for the Irish economy and difficulties in forecasting the impact. Some measures were introduced to assist certain sectors of the economy such as farmers and the reduced rate of VAT was maintained to assist the tourism sector in remaining competitive.

Highlights of the budget are set out below:

1. Personal Tax

• No changes to tax rates and bands
• Changes are introduced to the Universal Social Charge. The threshold for which individuals are liable to the USC will remain at €13,000.
• The rates of USC have decreased. The new rates are:
  -0.5% on first €12,012
  -2.5% on income between €12,013 and €18,772
  -5% on income between €18,773 and €70,044
• There is no change to the top rate of USC which remains at 8% for income between €70,045 and €100,000.
• The rate of USC for self-employed individuals with income in excess of €100,000 remains at 11%.
• Medical card holders or individuals aged over 70 who have income below €60,000 will pay USC at a maximum rate of 2.5%.
• The Home Carer Tax Credit will increase from €1,000 to €1,100.
• The Earned Income Credit which was introduced last year for the self-employed will increase from €550 to €950.
• The interest deduction for rented residential properties will increase by 5% from 75% to 80% in 2017. This will increase by a further 5% each year until it reaches 100%.
• The exemption for renting out a room in your own home is being increased from €12,000 to €14,000 for 2017.
• The Living City Initiative which provides for a scheme of property tax incentives for certain areas of city centres is being extended to landlords and certain restrictions removed.
• The Home Renovation Scheme which was introduced in 2014 is being extended to December 2018.
• The Foreign Earnings Deduction and Special Assignee Relief Programme are being extended to the end of 2020.
• The rate of DIRT will decrease by 2% each year for the next four years. The rate will decrease from 41% to 33% by 2020.
• Mortgage interest relief is to be extended beyond 2017 to 2020. Further details to be provided.

2. Business Tax

• No change to the 12.5% Corporation Tax Rate.
• The Start Your Own Business Relief which was introduced in 2014 is being extended for a further 2 years until the end of 2018.
• The Accelerated Capital Allowances for energy efficient equipment is being extended to sold traders and non-corporates.
• A step out will be introduced for the farmers averaging scheme whereby farmers will be allowed to opt out of the averaging scheme in a poor year and defer liability of the time to subsequent years.
• It is planned to introduce a new share based incentive scheme in Budget 2018. This will be subject to EU approval.
• A consultation is being launched to overhaul the PAYE system to improve compliance and reduce administration costs.

3. Capital Gains Tax

• A reduced rate of CGT of 10% will apply to the disposal of whole or part of a business up to a lifetime limit of €1,000,000. Farm restructuring relief announced in 2015 has been extended to the end of 2019.

4. Capital Acquisitions Tax

• Changes were introduced to the thresholds for Capital Acquisitions Tax. The thresholds have increased as follows:
  -Group A will increase from €280,000 to €310,000
  -Group B will increase from €30,150 to €32,500
  -Group C will increase from €15,075 to €16,250

5. VAT

• The reduced rate of 9% VAT will continue to apply to the tourism sector.
• The flat rate additions for farmers will increase from 5.2% to 5.4%. This scheme is designed to compensate unregistered farmers for VAT incurred.

6. Help to Buy

• A new help to buy scheme is being introduced for first time buyers acquiring newly built residential properties as their main residence. The scheme will provide an Income Tax rebate based on the previous 4 years up to 5% of the purchase price of up to €400,000 as a contribution to the deposit. The individuals must take out a mortgage of at least 80% of the purchase price. The maximum amount of the rebate is €20,000.

7. Excise

• The price for a packet of 20 cigarettes is increased by 50c with effect from midnight on 11 October 2016. This will leave the average price of a packet of cigarettes at €11.
• No changes were introduced for excise duty on petrol, diesel or alcohol.
• The VRT reliefs previously announced for hybrid electric vehicles and plug-in hybrid electric vehicles are being extended to December 2018.
• Electric motorcycles and electric vehicles are being extended to December 2021.
• An exemption from Carbon Tax will be apply to fuel inputs used to create high efficiency electricity in combined heat and power.

8. Sugar Tax

• A new sugar tax will be introduced on sugar sweetened drinks from April 2018.

9. Anti-Avoidance

• Legislation will be introduced in the Finance Act to amend S110 to counteract the unintended use of same. S110 was previously introduced to benefit the financial services industry.
• A new programme is being introduced to tackle offshore tax evasion. The measures will include obtaining new data from additional information sources, denying the opportunity to make qualifying disclosures from 1 May 2017 and introducing new penalties for failing to return details of offshore accounts and assets.

Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information in this overview of Republic of Ireland Budget 2017, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have any liability to any person who relies on the information thereon. If having read the above and you would like to discuss further; one of our taxation staff will be pleased to help you.