Following yesterday’s Budget we have compiled the following list of key measures it contains.
Key points for individuals:
Personal Taxation
- The income tax standard rate band has been increased by €1,500 for all earners, resulting in the band for single individuals increasing from €35,300 to €36,800 and for married couples/civil partners with one earner from €44,300 to €45,800.
- The personal tax credit, the employee tax credit and the earned income credit have all increased from €1,650 to €1,700.
Universal Social Charge (USC)
- The second USC rate band ceiling has increased from €20,687 to €21,295. The other bands and rates of USC remain unchanged.
- The reduced rate of USC of 4.5% for medical card holders will be extended for a further year. The exemption for income less than €13,000 also remains unchanged.
Remote Working expenses
- The current tax arrangements for working from home will be enhanced and formalised. Employees can claim a tax deduction of 30% of vouched utility expenses in their income tax return to include light, heat and broadband.
Help to Buy scheme
- The enhanced version of the Help-to-Buy scheme introduced in the July Stimulus Package last year, has been extended until 31 December 2022. The maximum credit is 10% of the house price, up to a maximum of €30,000.
Electric vehicles BIK exemption
- There will be an extension of the BIK exemption for electric vehicles to 2025. From 2023, a tapering effect on the vehicle value will apply. The original market value of an electric vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.
Income from micro-generation of electricity
- Up to €200 of income received by households from the sale of residual electricity to the grid will be disregarded for tax purposes.
Pre-letting expenditure relief
- The pre-letting expenditure relief has been extended to the end of 2024. A deduction against rental income is available for expenses incurred on a vacant residential premises prior to it being first let after a period of non-occupancy (at least 12 months). The deduction is capped at €5,000 and must be incurred in the 12 months before the letting.
Key points for business:
Corporation Tax
- New minimum corporation tax rate of 15% arising from the “BEPS 2.0” initiative conducted by the OECD. The initiative proposed a two-pillar approach to dealing with the tax challenges arising from the digitisation of the global economy.
- Pillar 1 deals with the allocation of company profits between jurisdictions largely based on the location where the services are consumed. This will apply to groups with annual consolidated revenues of greater than €20 billion.
- Pillar 2 proposes rules to ensure that groups with annual consolidated revenues of greater than €750 million will pay an effective rate of tax of at least 15%. No firm date has been proposed for when this will be implemented, and it is not expected to be included in the Finance Bill this year.
- It is important to note that all other companies outside the scope of this new legislation will be unaffected and the corporation tax rate for those companies will remain at 12.5%.
VAT
- The temporary reduction in the VAT rate for the hospitality and tourism sector to 9% will end at the end of August 2022.
Employer PRSI
- From 1 January 2022, the weekly threshold for the higher rate of employer’s PRSI will increase from €398 to €410 to reflect the increase in the minimum wage from €10.20 to €10.50.
Employment Wage Subsidy Scheme (EWSS)
- There will be an extension to the Employment Wage Subsidy Scheme until 30 April 2022.
- The current EWSS measures will apply until 30 November 2021. For December 2021 to February 2022, the original two-rate subsidy per employee per week (€151.50 and €203) will apply, and for March 2022 and April 2022, a single flat rate of €100 per week will apply. The existing reduced rate of employer’s PRSI (0.5%) will apply until the end of February 2022, with the full employer’s PRSI contribution then being reintroduced with effect from 1 March 2022 until the scheme ends on 30 April 2022.
- Eligibility for the scheme continues to be a 30% reduction in turnover/customer orders in the full year 2021 as compared to the full year 2019. The scheme will not be available to new employer entrants with effect from 1 January 2022.
Tax debt warehousing
- The tax debt warehousing scheme will be extended to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their salary from that employer. Extension of warehousing of tax liabilities for proprietary directors
Corporation tax start-up relief
- The corporation tax exemption for start-up companies is being extended to the end of 2026. The exemption will now apply for the first five years of trading and not three years as is currently the case. The exemption can be worth up to €40,000 per annum for a company, depending on its level of corporation tax and employer’s PRSI.
Energy-efficient capital allowances
- The scheme for accelerated capital allowances of defined energy-efficient equipment is being extended for a further three years up to 31 December 2024. The Minister announced changes to the current scheme where capital allowances at a rate of 100% of the cost incurred on qualifying assets can be claimed in the year of acquisition rather than eight years for non-qualifying assets. The scheme is being amended to exclude equipment directly operated by fossil fuels as qualifying assets.
- The accelerated capital allowance scheme for gas vehicles and refuelling equipment has also been extended to 31 December 2024 and extends the definition of qualifying assets to hydrogen-powered vehicles and refuelling expenditure.
Tax credit for digital gaming sector
- The Minister announced a new refundable corporation tax credit at a rate of 32% for the digital gaming development sector for expenditure incurred on the design, production and testing of such games, subject to a minimum expenditure spend of €100,000 and maximum of €25 million per project.
Employment & Investment Incentive Scheme (EIIS)
- EIIS is being extended for a further three years to the end of 2024. A number of changes are also proposed. The requirement that 30% of the funds raised are used by the company before relief can be claimed is being removed. It is also proposed to allow greater capacity for investors to redeem their capital without penalty. Finally, it is proposed to widen the eligibility criteria to open up the scheme to a wider range of investor funds and to attract more investors into the scheme.
Other Measures:
Carbon tax
- The rate of carbon tax will increase by €7.50 to €41 per tonne of carbon dioxide emitted. Increase to apply to all auto fuels from 12 October 2021 and all other fuels from 1 May 2022.
VRT
A revised VRT table will be introduced from January 2022. The change in rates will be as follows:
• 1% increase for vehicles that fall between bands 9-12
• 2% increase for bands 13-15
• 4% increase for bands 16-20
The relief of €5,000 for battery electric vehicles is extended until the end of 2023.
Other taxes
- Excise duty to increase by 50c on a packet of 20 cigarettes with a pro rata increase on other tobacco products.
- Farmers’ flat rate addition to decrease 5.6% to 5.5% from 1 January 2022.
- The bank levy is extended to the end of 2022.
For further information call Dave on 091 586020 or dave@dvmannion.ie