The Budget includes a range of measures affecting the Business sector including changes to Relevant Contracts Tax, a revamp of the Business Expansion Scheme and the scrapping of several business tax reliefs.
Relevant Contracts Tax
The Relevant Contracts Tax (RCT) system, which applies to construction, forestry and meat processing contractors, is being reformed.
The current RCT withholding tax rate of 35% is being replaced by a two-tier system, in an effort to combat the black economy.
- A lower rate of 20% will apply to subcontractors ‘registered for tax with an established compliance record’
- The existing rate of 35% will apply to ‘subcontractors not registered for tax’.
The RCT monthly repayment system is being abolished, and will be replaced by an offset system.
In addition, Principal contractors will be subject to a stronger RCT reporting system in order to ‘enhance compliance and reduce the opportunities for fraud’.
Employment and Investment Incentive
The Business Expansion Scheme is to be revamped and renamed as the ‘Employment and Investment Incentive’, with a big increase in the amount that companies can raise under the Scheme.
Relief for Energy Efficiency Measures
A new scheme is to be introduced to encourage people to make their homes more energy efficient. Tax relief will apply to expenditure up to €10,000. This will be allowed at the standard rate of income tax.
Tax Reliefs Abolished
The following Tax Reliefs will be abolished, with effect from 1 January 2011 unless otherwise stated.
- Tax Exemption for Patent Royalties
- Tax relief on Loans to invest in certain companies.
- Accelerated capital allowances for Farm Pollution Control.
- Tax exemption from BIK for Employer Provided Childcare.
- Abolition of tax relief on subscriptions to professional bodies.
- Capital expenditure on Mining plant & machinery and plant
- Approved Share Options Scheme (from 24 November 2010)
- Tax relief for new shares purchased by employees.
- Tax exemption relating to National Co-Operative Farm Relief Services Ltd.