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Finance Act 2011. Summary of Measures Introduced. Some of the Basics. Standard Rate Bands reduced by 10% Basic tax credits reduced by 10% Age exemption limits reduced by 10% No changes in actual rates of income tax No changes in actual PRSI rates However, employee ceiling abolished.

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Finance act 2011

Finance Act 2011

Summary of Measures Introduced


Some of the basics
Some of the Basics

  • Standard Rate Bands reduced by 10%

  • Basic tax credits reduced by 10%

  • Age exemption limits reduced by 10%

  • No changes in actual rates of income tax

  • No changes in actual PRSI rates

  • However, employee ceiling abolished


Universal social charge
Universal Social Charge

  • Income Levy abolished along with Health Levy

  • Both replaced by Universal Social Charge

  • Similar but not identical to Income Levy

  • First €10,036 @ 2%

    • Next €5,980 @ 4%

    • Balance @ 7%

    • New 10% rate for incomes over €100,000 (*)


Universal social charge1
Universal Social Charge

  • Applies to:

  • Gross income including exempt income

  • Does not apply to social welfare and similar payments

  • Does not apply to DIRT income, CU dividends and certain other investment income

  • Calculated after Losses/Cap. All. for Case I/II


Universal social charge2
Universal Social Charge

  • Calculated on Case I/II after Capital Allowances

  • Calculated on Case V before Capital Allowances

  • Does not apply to Deposit Interest

  • Does not apply to Tax Free Termination

  • Does apply to most tax free income (e.g. artist, woodland etc)


Universal social charge3
Universal Social Charge

  • No exemption for medical card holders, but reduced rates apply, viz.

  • Extra rate of 3% applied on incomes over €100,000 – this does not apply to emoluments

  • Proprietary director is better than sole trader


Universal social charge4
Universal Social Charge

  • Paid under self assessment, if using 2010 tax liability for calculating 2011 prelim tax, must be assumed that USC in force in 2010

  • Deducted under PAYE

  • Revenue say that other employment cannot be ignored where more than 1 employment

  • 3% extra rate does not apply to employment

  • Overpayment can be recovered

  • Q&A on revenue.ie for more details


Bik changes
BIK Changes

  • BIK exemption for payment of professional subs no longer applies

  • However, Tax Instruction 5.2.9 still applies

  • Therefore, employer must operate BIK on payment of sub

  • Employee can get tax relief for sub

  • Tax credit for Trade Union subs abolished

  • BIK childcare exemption also removed


Termination payments
Termination Payments

  • Lifetime Limit of €200,000 introduced

  • Payments on account of death or disability not subject to cap.

  • Top slicing still in place

  • Pre termination bonus for long serving employees may no longer be attractive


Other items abolished
Other Items Abolished

  • Tax free status of patent income both for income itself and dividends from such income

  • Lifetime limit of €6,350 for subscription for shares in employer

  • Exemption in relation to approved share options


Interest as a charge individuals
Interest as a Charge - Individuals

  • Abolished for new loans or replacement loans effected from 7 December 2010

  • Phasing out of relief for interest on existing loans:

  • 2011 – 75% of interest incurred allowed

  • 2012 – 50% of interest incurred allowed

  • 2013 – 25% of interest incurred allowed

  • 2014 - Abolished


More bad news
More bad news….

  • Relief for 3rd level fees – no relief on first €2k of fees for fulltime or €1k fees for part-time

  • Phasing out of rental tax credit

  • Artists exemption limited to €40,000 p.a.

  • Filing deadline for non self assessed now at 30 September


Relief for energy efficiency
Relief for Energy Efficiency

  • Relief at standard rate

  • Applies to occupied residences only

  • Installer must have C2/tax clearance

  • Limit of €10k/€15k for single/married

  • Does not apply to commercial premises

  • Landlords (except rent a room landlords) cannot claim credit


Restriction of property based allowances
Restriction of Property Based Allowances

  • Subject to commencement order

  • Economic assessment

  • If implemented will be effective in year of implementation


Pensions
Pensions

  • Maximum amount of Income on which pension can be based is €115,000

  • This is effective from 1.1.11 for both 2010 and 2011

  • Maximum tax free lump sum on retirement is €200,000

  • Next €375,000 taxed at 20%


Pension
Pension

  • Maximum capital value of pension at retirement set at €2.3m (20 x €115,000)

  • For people starting out on pension they have little chance of achieving this amount

  • No changes to contribution amounts from company

  • EE PRSI relief no longer available on direct contributions; ER PRSI relief halved


Pensions1
Pensions

  • At retirement excess over Standard Fund Threshold liable to tax at 41%, with withdrawals also being liable to tax

  • Difficult to project forward

  • Defined benefit pensions capitalised at 20x

  • For clients whose funds already in excess of €2.3m, they can mark this higher level before 7 June 2011


Pensions2
Pensions

  • Annuity model can be avoided if guaranteed income > c.€18.5k

  • AMRF can be converted to ARF once threshold exceeded

  • Difficulty with early retirement

  • 3% imputed distribution now increase to 5% - will pension last retirement?

  • 5% does not apply to PRSA


False claims refund
False Claims/Refund

  • Incorrect claims for allowances, credits etc now liable to penalty of €3k

  • Penalty applies to agents who “knowingly or carelessly” assist in such claims

  • Where refund is made to agent/other person, Revenue can now seek repayment of that refund from agent/other person if found to be paid in error


Rct changes
RCT Changes

  • Not yet implemented

  • 3 new bands for RCT

  • 0% - effectively C2 card holder

  • 20% - substantially compliant in last three years

  • 35% - default position, non registered, poor compliance, deductions not sufficient to discharge liabilities


Rct changes how will it work
RCT Changes – How will it work

  • ROS will be an integral feature

  • New contract details must be filed on-line

  • Before payment made, notification of intention to pay must be filed with Revenue

  • Revenue issue deduction authorisation (0%,20%,35%)

  • Cannot operate another rate when paying subcontractor (to avoid fraud)


Rct changes how will it work1
RCT Changes – How will it work

  • Pay and file of returns

  • Surcharge for late filing

  • RCT deducted no longer be refunded during year

  • Refund released once notice of assessment issues

  • Revenue can still withhold if not satisfied

  • Regulations awaited


Employment investment incentive scheme eiss
Employment & Investment Incentive Scheme (EISS)

  • Will replace current BES

  • Subject to EU approval and commencement order

  • Much more widespread, exclusions relate to trade (not defined), businesses in taxed based properties, dealing and development and financial services, professional services companies

  • Approval process set to become more straightforward


EISS

  • Relief granted at 30%, not 41%

  • Extra 11% will be granted to investor after 3 years if company has increased employment numbers or R&D spend

  • Holding period reduced from 5 years to 3 years

  • Amount that can be raised is €10m from €2m

  • Amount that can be raised in any 12 month period is €2.5m from €1.5m

  • Maximum relief is €150,000 p.a. – high earners


Corporation tax
Corporation Tax

  • Some changes to start up companies

  • Currently no tax if CT liability is less than €40,000 p.a. for first three years and reduced tax for liabilities between €40,000 to €60,000

  • Extended to 2011

  • Existing/connected trades excluded

  • Ceiling of €5,000 ER PRSI per employee – but you don’t exclude ER PRSI of non qualifying


Interest on loans companies
Interest on Loans - Companies

  • New restrictions introduced for intra group acquisition of assets

  • Some tightening up of rules regarding directorships etc

  • For most cases, rules remain the same


Cat thresholds
CAT Thresholds

  • Group A - €332,084

  • Group B - €33,208

  • Group C - €16,604

  • CAT at 25%

  • Pay and File Dates now 30 September


Stamp duty
Stamp Duty

  • Stamp duty reliefs for residential property abolished

  • Transfer of site to child – gone

  • First time buyers relief – gone

  • Consanguinity relief – gone for residential element only

  • New rates – consideration less than €1m – 1%

  • Consideration in excess of €1m – 2%


VAT

  • No significant change

  • Reverse charge procedure implemented for scrap metal industry


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