March 25, 2011
Revenue have today abandoned Brian Lenihan’s plans to tax employees on professional subscriptions and membership fees.
In an eBrief unveiled this evening, Revenue confirm that most professional subscriptions will continue to be exempt from tax under Benefit in Kind rules.
This reverses the former Finance Minister’s announcement in last December’s Budget, that the existing Benefit in Kind exemption on these fees would be scrapped from January 2011. This would have meant that where an employer paid a professional membership or subscription fee on behalf of an employee, the employee would have faced a tax, PRSI and USC charge on the amount paid.
Today, Revenue confirm that the exemption will still apply
- Where the employee is required by law to be a member of a professional body, in order to carry out their work. This includes architects who (under the Building Control Act 2007) must be registered with the Royal Institute of the Architects of Ireland; and Health care professionals who are obliged by the Health and Social Care professionals Act 2005, to be registered with the Health and Social Care Professionals Council.
- Where the employer requires the employee to hold a practising certificate or licence, eg accountants working in professional practices.
- In certain other situations, where the employee is a member of a professional body which is relevant to their occupation. This will cover accountants, engineers and others working in professional capacities in industry.
Revenue stress that the BIK exemption applies only where the professional subscription is relevant to the employee’s work. They cite practical examples to show that the exemption will not apply to a qualified architect who works as a HR manager, or a trained solicitor working as a media presenter.
The Revenue eBrief on this subject outlines 11 practical examples which illustrate how these rules will work in practice. Revenue also stress that Benefit in Kind PAYE, PRSI and USC must be charged on all cases not covered by the exemption.
I think this is a very positive move on Revenue’s part. The original plans to scrap this BIK relief were badly thought out, and a very poor appreciation of the much-vaunted ‘knowledge economy’. It is nice to see Revenue taking action to restore this relief in most cases.
That said, I wonder would such a u-turn have been politically possible if Mr. Lenihan was still Minister for Finance. Maybe it is time for his successor Michael Noonan to work alongside Revenue in reversing some of the anti-business and anti-employment measures introduced in recent Budgets – several of which have proved in the meantime to be counter -productive.
December 10, 2010
High earners can beat a Budget 2011 cut in pensions tax relief if they top-up their pensions before 31 December next.
This week’s Budget cut the earnings ceiling for tax relief on personal pension payments, from €150,000 to €115,000. This means that, from 1 January 2011 onwards, the tax relief claimed by a high-income earner in respect of pension payments is limited to the first €115,000 of their earnings.
Liam Ferguson, of Ferguson and Associates has kindly confirmed to me that this lower ceiling relates to ALL contributions physically made in 2011. This includes contributions made by 31 October 2011, which can be backdated to the 2010 tax year for tax relief purposes.
So if you are in a high income bracket, and you leave it until next October to pay a Personal Pension contribution for 2010, the lower ceiling will apply to your contribution.
However, if you top up your pension by 31 December 2010, before the higher €150,000 earnings ceiling expires, you can still avail of the higher ceiling.
21 days left to act…
December 7, 2010
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.
December 7, 2010
The 2011 Budget includes major changes to Stamp Duty on residential property transactions.
The main change is the introduction of a new flat rate of 1% for transfers of residential property to 1% on properties valued up to €1 million, and a 2% rate on properties valued over €1 million.
The following Stamp Duty reliefs and exemptions are abolished.
- First time buyer relief
- Exemption for new houses under 125 sq m in size
- Relief on new houses over 125 sq m in size
- Consanguinity relief from for residential property transfers between close relatives.
- Exemption for residential property transfers valued under €127,000
- Stamp Duty ‘site to child’ relief
The changes apply for contracts executed on or after 8 December 2010. Transitional measures will apply to contracts currently in progress that are completed by 30 June 2011.
December 7, 2010
The 2011 Budget has been announced by Brian Lenihan, Minister for Finance.
The key tax measures announced by the Minister in his Budget Speech are as follows:
- Income Levy & Health Levy to be replaced by a new Universal Social Charge.
- Tax Bands and Credits to be cut by 10%
- Nine tax relief schemes are to be abolished
- Restrictions on the carry forward of property-based capital allowances and Section 23 reliefs.
- Capital Acquisitions Tax tax-free thresholds to be cut by 20%
- D.I.R.T. tax increases to by 2% from 25% to 27%.
- Pension Tax relief employee PRSI & levy relief to be abolished.
- No change to 12.5% Corporation Tax rate.
- Employer PRSI relief on employer Pension contributions to be cut by 50%
- Business Expansion Scheme to be revamped & renamed – a new investment limit of €10 million will apply up to 2013.
- Accelerated Capital Allowances scheme for energy efficient equipment is to be extended.
- Major revamp of Residential Stamp Duty with a 1% flat rate on transactions up to €1m, 2% thereafter. All current Residential Stamp Duty exemptions & reliefs to be abolished – changes apply from tomorrow 8 December, transitional arrangements for contracts in progress, once they are completed by 30 June 2011.
- Major changes to Relevant Contracts Tax with a cut from 35% to 20% for contractors with an established compliant tax record. Existing rate of 35% will continue to apply to other contractors.
- Travel Tax to be cut to €3 from 1 March 2011, subject to review at end of 2011.
- Excise Duty rises of cent per litre on petrol, 2 cent per litre on auto diesel, applying from midnight tonight.
- Internet betting to be subject to Betting Tax as applies to Betting Shops.
The Minister’s speech is now online.
November 26, 2010
Following the publication of the National Recovery Plan on Wednesday, the Minister for Finance has clarified that the Tax Exemption for Patent Royalties, and the Approved Share Options Scheme have both been abolished with immediate effect, from 2pm on 24 November.
The other tax changes for 2011 arising from the Recovery Plan will be announced as part of the Budget on 7 December.