The relatively good news from the Finance Bill 2009 is that from 1 July 2009, the interest on late payments of taxes other than VAT, employers PRSI and duties will decrease from c.10% to c.8% p.a. The interest on late payments of VAT, PRSI and duties will decrease from c.11.7% to c.10%. The bad news is that it is expected that pension and other reliefs will be restricted further in the December budget and that capital taxes will be addressed in the next two budgets. The main features of the Finance Bill 2009 are:
A new form of capital allowances for certain intangible assets used for a trade was introduced for expenditure incurred after 7 May 2009. The allowances will be determined by the standard accounting treatment of intangible assets and will be based on the amount charged to the profit and loss account in respect of the amortisation/depreciation of the asset. Otherwise, companies can choose to use a fixed write down period of 7% for 15 years and 2% for year 16.
The allowances can only be claimed against trading income earned by the company in relation to managing, developing or exploiting of the intangible asset (these activities are to be treated as a separate trade to any other trade carried on by the company). The aggregate amount of the allowances and any associated interest expense cannot exceed 80% of the trading income from that separate trade. Any unclaimed allowances/interest can be carried forward to shelter future profits from that separate trade.
Allowances will not be available where relief for such capital expenditure is otherwise available or where the expenditure incurred exceeds the price that would be paid between independent parties. Where intangible assets are transferred between group companies, the acquiring company will be able to claim capital allowances on the asset acquired where both companies elect to opt out of the existing CGT group relief provisions.
The definition of intellectual property for stamp duty purposes was widened which increases planning opportunities.
A new stamp duty “trade-in” scheme was introduced where stamp duty can be deferred by a person who acquires an old house in exchange for a new house or apartment until he can sell the old house or 31 December 2010, whichever is earlier.
The CGT and CAT rates increased from 22% to 25% and the CAT exemption thresholds reduced by 20% with effect from 7 April 2009.
The three rates (1%, 2% and 3%) of the income levy which was introduced with effect from 1 January 2009, doubled with effect from 1 May 2009. In addition, the new lower entry levels of €75,036 (formerly €100,100), above which the new 4% rate will apply and €174,480 (formerly €250,000), above which the new 6% rate applies, will make a significant difference to middle and high earners. Importantly, the levy must be included when calculating preliminary tax for 2009 even where the tax is being calculated based on 100% of the prior year liability.
Individual’s marginal tax rates increased following the doubling of health levies to 4 and 5% and the increase to the employee ceiling from €52,000 to €75,036 with effect from 1 May 2009. It is likely that this ceiling will increase again or even be abolished in the next Budget, bringing employees into line with self-employed individuals.
DIRT increased from 23% to 25% and retention tax on life assurance and certain investment funds also increased to 28%.
Mortgage interest relief, a relief that attracts more attention than is justified, will from 1 May 2009, only be available for the first seven years of any new mortgage, other than a mortgage switched to a different bank. The relief will be at 15% (of a maximum of €3,000) for 7 years for non first time buyers. The relief ranges from 25-20% (with a maximum of €10,000) for first time buyers, depending on whether it’s year 1 or year 7 of the mortgage.
Interest relief for rented residential property has reduced to 75% with effect from 1 May 2009 and intensive lobbying asking for this change to affect new investments only is ongoing.
The special 20% rate on land dealing activities which encourages individuals and companies to build houses has been abolished. Ordinary income tax or corporation tax rates will now apply and losses carried forward will be ring-fenced.