Budget 2013 Ireland – Impact On Business & Self Employed
The Ministers for Finance and Public Expenditure & Reform presented their budget measures for 2013 on December 5th 2012. While the well signalled Property Tax was the major new tax measure introduced, there were however changes to the PRSI system and some other changes that were new. I propose to look at some of the measures presented in “Budget 2013 Ireland” yesterday that will have an impact on the general business community.
Tax Rates, Tax Credits, PRSI etc
In keeping with the stated intention of this government, all the basic tax rates & credits remain unchanged for the 2013 tax year.
For PRSI the main change here was for employees where the weekly PRSI free allowance of €127 for those earning over €352 per week was removed. This measure is expected to yield the government approximately €300m in a full year.
Other changes here that will have an impact on the general self employed community are:-
- the increase in the minimum PRSI contribution from €253 to €500 per annum
- with effect from Jan 2014 PRSI will apply to all unearned income such as rents, deposit interest, dividends etc
Statutory Redundancy rebate
From January 2013 the current 15% rebate from the State to an employer who pays statutory redundancy to an employee will be removed completely. This means that an employer will have to fund the full cost of the statutory redundancy payment to an employee.
Film Tax Relief (Section 481)
The Minister for Finance announced that this scheme is being extended to 2020 following an Economic Impact Assessment of the relief carried out by his department. It appears as if the relief will be modified to move to the more internationally recognised tax credit model from 2016 onwards. This will also mean that this tax relief will then be unavailable to private investors.
All the main VAT headline rates were untouched in the budget measures introduced. The special 9% VAT rate introduced in July 2011 was left unaffected – this rate was introduced to help the tourism sector work its way through the recession.
One VAT change introduced was the increase in the Cash Receipts basis turnover threshold from €1m to €1.25m with effect from May 2013. If a business registers for VAT on the Cash Receipts Basis as opposed to the Invoice Basis – then that business can pay over the VAT on their sales when they actually receive payment as opposed to when they send out the invoice. This VAT option is becoming increasingly attractive to businesses in these times as it allows them to align their VAT payments to their expected cash inflows.
Deposit Interest Retention Tax (DIRT)
The current DIRT rate of 30% is being increased to 33% from January 2013.
Top Slicing Relief
Currently an employee, who is in receipt of a taxable termination payment, may also claim an additional relief from Revenue known as Top Slicing Relief. From 2013 onwards this relief will only be available to non-statutory termination payments of up to €200,000 and therefore will no longer be available to those in receipt of lump sums of €200,000 or above. There is a planning opportunity to make such a payment before the end of year and avail of the existing relief.
Corporation Tax changes
The Minister, in his presentation yesterday, reaffirmed his commitment to the Irish Corporation Tax rate of 12.5%.
There were however a few changes to Corporate Tax items as follows:-
- The 3 year relief scheme for start-up companies introduced in 2009 which provides a relief from corporation tax on trading income for new start-up companies in their first 3 years of trading is being amended so that any unused relief during the first 3 years can be carried forward. The relief however continues to be capped at the level of employer’s PRSI paid in that year.
- The Research & Development (R&D) tax credit scheme provides companies with a 25% tax credit for expenditure on certain qualifying R&D activities. The Minister introduced a change here whereby companies can spend up €200,000 in any year without reference to the base year 2003 test. This is a relatively technical change but this R&D tax credit is still an attractive relief for companies who may be doing their R&D activities. The range of activities considered to be R&D under the legislation is quite wide and could apply to a lot of companies.
- The Close Company (a company that is controlled by 5 or fewer people) surcharge tax provisions are being amended so that the level of undistributed Investment and Rental income that can be retained by the company before the surcharge is levied is raised from €635 to €2,000 per annum.
Diesel Duty Relief for licensed road hauliers
A proposal was introduced to provide for an excise duty rebate for road hauliers from July 2013 onwards. This proposal must get EU Commission approval before being enacted.
The minister has proposed a new accelerated Capital Allowance scheme for certain Aviation facilities. It seems that these allowances will apply to the construction of certain aviation-specific facilities and will operate for a period of 5 years from commencement of the scheme. Further details will be available next year when the Finance Act is published.
The scheme of tax relief available for donations to charitable and other approved bodies is to be changed. There is going to be a removal of the distinction between a PAYE donor and a self assessed donor. All donations from whatever source will be treated in the same way and all the tax relief will be given to the charity. The Minister referred to a “blended” rate of relief of 31% that will be introduced.
The Minister is also to look at proposals to change our tax system to allow for what he called “suitable recognition” of significant donations to aid Ireland’s recovery.
On a more lighthearted note, we note from the new Local Property Tax (LPT) that was introduced yesterday that this tax will not apply to a “mobile home, vehicle or a vessel”. We believe there might be some merit in considering a move to such a “home” to avoid this LPT and it will also allow you the mobility to source personal supplies of your favourite Sauvignon or Merlot from another jurisdiction with lower Excise Duties.
How has the Budget 2013 affected you and your business?