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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 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
  • 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%
  • 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
  • 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
  • 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
  • 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%
  • No significant change
  • Reverse charge procedure implemented for scrap metal industry