Income levy
The levy will apply from 1 January 2009 where an individual’s aggregate income for the year exceeds €18,304. An employer will be obliged to apply the levy to the employee’s emoluments over the year and pay this over to Revenue within 14 days of the end of each month i.e. with their PAYE/PRSI returns. The levy will apply as follows:
The first €100,100 at 1%
From €100,101 to €250,120 at 2%
Income in excess of €250,120 at 3%.
Weekly salary thresholds have been noted in the Bill so that employers can apply the correct rate. The levy will also apply to all income excluding: interest income subject to DIRT, credit union dividends, certain life policies and investment undertakings and social welfare or welfare type payments. Where individuals have other income to which the levy applies it must be accounted for through self assessment. No deduction can be taken for pension or capital allowances in calculating the levy. Exemption exists for those over 65 with income below certain limits - €20,000 for a single person and €40,000 for a married couple.

Car park levy
A levy of €200 is to be charged to employees entitled to an employer-provided parking space in the urban centres of Dublin, Cork, Galway, Limerick and Waterford. The specific areas in these centres where the charge will apply are yet to be identified. The levy will be collected through the PAYE system. A reduced levy of €100 applies where spaces are shared between employees on a ratio of 2:1. Where employees work part-time, job share or do shift work a reduced levy will apply but will not be below €100. Where an employee does not have an entitlement to a space, permission to park in a space for no more than 10 days a year will be exempt. Exemptions will also apply to disabled drivers and retired persons. Where an employer refunds an employee’s on street parking or public car park charges no levy will apply. A date for introduction has yet to be set. A guide has been produced by Revenue which is available here.

BIK: Emissions based
The BIK charge on company cars will take account of the cars' emission levels following the bands introduced for VRT. Cars in the lowest 3 bands remain taxed at the current level, whereas higher charges will apply to higher emission levels. Existing BIK provisions will apply for 2009 for existing company cars.

BIK and bicycles
As announced in the Budget the first €1,000 expended by an employer for the provision of bicycles or related safety equipment for employees is exempt from BIK, provided the bike is used for travel to and from work. This can only be availed of once every 5 years.

Tax relief on health expenses
As previously advised, from 1 January 2009 relief for qualifying medical expenses will be standard rated. Relief for nursing home expenses remains at the marginal rate for 2009.

Employee share schemes – withdrawal of relief
Where companies fail to make the required returns for approved profit sharing schemes and employee ownership trusts Revenue will be able to withdraw approval. Penalties have also been introduced where employers fail to make returns of awards of convertible securities.

Tax Treatment of directors/employees granted rights to acquire shares or assets
This is an anti-avoidance provision introduced to prevent abuse when the rights in question are exchanged.

Retirement benefits
This sets the limit on annual earnings for the calculation of tax relieved pension contributions to €150,000 and allows the Minister discretion as to whether to index the personal fund thresholds.

“Midnight Rule” for tax residence
Under current tax residence rules an individual is considered resident if he/she is in the State for 183 days in a tax year or 280 days over 2 consecutive years. Prior to this change a person was considered present in the State for a day if they were in the State at midnight. From 1 January 2009 if present at any time in the day, that will be counted as a full day for the purposes of counting the number of days in the State.

Income Tax Bands for 2009
As announced in the Budget the standard rate band for single persons will increase from €35,400 to €36,400. For married couples with one income the rate band will increase form €44,400 to €45,400 and for two earners from €70,800 to €72,800. The widowed or single parent standard rate band will also increase by €1,000 from €39,400 to €40,400.

Preferential loan
The “specified” rate used in calculating a taxable benefit provided by employers in providing loans at preferential rates, other than home loans, has been increased from 13% to 15%. This will apply from 1 January 2009.

Mortgage Interest Relief
Changes to mortgage interest relief  which were proposed in the Budget have been clarified in the Bill. First-time buyers can avail of a higher rate of interest relief of 25% for years 1 and 2 and a rate of 22.5% in years 3, 4 and 5. Relief for years 6 & 7 will remain at 20%.
The rate of relief for non first-time buyers will reduce from 20% to 15%. These changes are effective from 1 January 2009.

Business Tax

Start-up Exemption
New companies incorporated after 14 October 2008 and commencing a new trade in 2009 will be exempt from corporation tax on income and chargeable gains for the first 3 years where the total amount of corporation tax payable for an accounting period does not exceed €40,000. Marginal relief will apply where corporation tax payable by a new company for a period is between €40,000 and €60,000. This relief will not apply where an existing trade is acquired. It will also cease to apply where part of the newly established trade is passed to a connected party. Companies carrying on excepted trades and close service companies will not qualify for this exemption. The exemption requires a Ministerial Order to come into effect following consultation with the European Commission and consideration of the relevant State Aid rules.

Preliminary Corporation Tax Dates
As indicated in the Budget the payment dates for preliminary corporation tax for large companies, i.e. those with a liability greater than €200,000, have been changed. The first instalment will be due in the 6th month of the accounting period and based on 50% of the final corporation tax liability for the preceding accounting period or 45% of the tax liability of the current accounting period. The second instalment will continue to be due in the 11th month of the accounting period and must bring the payment up to 90% of the final liability for the current period. Where accounting periods are shorter than 7 months, preliminary tax of 90% will be payable in one instalment as before. These new arrangements apply for accounting periods commencing after 14 Oct 2008.

BES and SCS
An extension of 3 months to the normal cut off point has been made to the BES and SCS schemes where the required statements are submitted by companies within the current time limit.

DTAs
The Bill provides that favourable domestic tax treatment available under a Double Tax Treaty between Ireland and another country will be unilaterally available in Ireland once the Treaty in question is signed even if it has not yet been ratified. A correlating adjustment has been introduced to prohibit deductions for certain transfer pricing adjustments other than under the relevant treaty.

R&D
The rate of R&D tax credit has been increased from 20% to 25%. Significant further changes were introduced which allow unused credits to be set against a previous years corporation tax liability or to be carried forward indefinitely against future corporation tax liabilities. Alternatively, it will be possible to make a repayment claim to Revenue for the excess credit over a 3 year cycle. Information on how the repayment amount is calculated is detailed in the Bill. The base year with which incremental expenditure is compared remains at 2003 indefinitely. This equates to a volume based approach going forward.
The R& D credit on buildings used in relevant activities has been enhanced to allow the full credit in one year rather than spreading it over four years as was previously the case. The requirement that a building is used “wholly and exclusively” for R&D has been relaxed, a 35% use requirement over 4 years has been introduced in its place. The changes in relation to buildings credit require EU approval. R&D credits must be claimed within 12 months of the year in which the expenditure is incurred. A summary of the new provisions is available on Revenue’s website.

Amendment to time limit for Section 279
Section 279, which contains rules regarding capital allowances for industrial buildings sold before use or with a year of use, has been amended to allow the provisions of the section to apply where a sale is made with two years of first use. This applies to sales from the date of the Budget, 14 October.

Scheme on removal and relocation of certain industrial buildings
As announced in the Budget this is to incentivise the removal and relocation of certain industrial buildings through the use of accelerated allowances. This is subject to EU approval.

Energy efficient capital allowances
Finance Act 2008 introduced 100% allowances for certain energy efficient equipment. As indicated in the Budget the list of qualifying equipment has been extended.

Palliative care units
Certain technical changes have been made to the capital allowances scheme for palliative care units to include an reduction in the number of in-patient beds that must be available from 20 to 8.

Industrial building definition
Certain hotel projects need EU approval to benefit from capital allowances. This amendment provides that in case of delay of approval, capital allowances will apply from the date the building is first used. If the Commission puts a ceiling on the capital allowances that can be obtained, the adjusted expenditure approved by the Commission, will replace the expenditure that would otherwise have qualified for capital allowances.

Amendment to Section 239: Income tax on payments by resident companies
Income tax due on certain payments made by resident companies’ e.g royalties, medical insurance premiums, is to be paid and the return filed at the same time as corporation tax. This applies to accounting periods commencing on after 14 October 2008.

Capital Taxes

CGT rate
As proposed in the Budget the CGT rate has increased from 20% to 22% for disposals from 15 October 2008.

CGT Payment Date
It was highlighted in the Budget that a payment date of 15 December will apply for CGT arising on disposals from 1 January to 30 November 2009 and subsequent years and this has been confirmed in the Bill. In a change from the Budget proposals a payment date of 31 January of the following year will apply for December 2009 disposals. It had previously been proposed that CGT on such disposals would be due for payment on 31 October of the following year, to align with the pay and file provisions. This change will have significant cash flow implications.

CAT rate
The rate of CAT has also been increased from 20% to 22% for gifts/inheritances made after 20 November 2008.

Agricultural relief for farms in other member states
Agricultural relief from CAT now applies to farms situated in an EU Member State. This applies from 20 November 2008.

CGT on UK sourced gains
The Bill extends the remittance basis to UK sourced gains of non Irish domiciled individuals for disposals on or after 20 November 2008. The remittance basis had been extended to UK sourced income in such circumstances in Finance Act 2008.

Stamp Duty

e-Stamping
Technical legislative changes have been made to facilitate the introduction of e-Stamping.

Resting on contract
The FA07 provisions to remove resting on contract have not yet been commenced. Yesterday’s Bill amends the 2007 proposals such that, if they were to be commenced, certain transactions would be excluded from the change. These included PPP and certain incentive schemes for capital allowance purposes such as nursing homes, convalescent homes, qualifying hospital; palliative care; certain holiday camps; certain tourism infrastructure facilities and childcare facilities. The Finance (No. 2 ) Bill 2008 change remains subject to Commencement Order also.

Penalty regarding stamp duty
If you are out of time for stamping your instrument at the enactment of the Bill, you have 56 days from the enactment of the Bill to present your instrument for stamping together with the appropriate payment in order not to suffer a penalty. Interest will however still apply.

Anti-avoidance
The Bill provides that an agreement in connection with, or in contemplation of, a sale of property is stampable. This provision will now extend to agreements in connection with, or in contemplation of, exchanges of property, for conveyances or transfers executed on or after 20 November 2008

Stamp duty on commercial property
The 9% rate has been reduced to 6%.

Stamp duty on cards
The Budget changes announced in the charges applying to ATM cards/debit cards and combined cards have been confirmed, together with the 20c increase in stamp duty on cheques.

Revenue audit penalties and Revenue powers

Revenue audit penalties
A special Taxfax was issued yesterday explaining the changes in detail. To read this click here. These developments are a key representations issue for ITI.

Revenue powers
Significant changes have been made to Revenue’s powers to access client documents from advisers. It appears that the only documents that are now excluded are:

• Information with respect to which a claim to legal professional privilege could be maintained in legal proceedings,
• Information of a confidential medical nature, or
• Professional advice of a confidential nature given to a client (other than advice given as part of a dishonest, fraudulent or criminal purpose).

Other

Air travel tax
The airport travel tax provisions have been clarified and will apply from 30 March 2009. €2 per passenger will apply for flights within 300 km from Dublin Airport and a rate of €10 per passenger for other flights. Revenue have produced further guidance available here.

Incentives to pay and file
Limited incentives have been introduced for paying and filing corporation tax, VAT and RCT on line. Filing dates for returns will be aligned to the 23rd of the month in question. This is a 2 day extension for corporation tax but a 9 day extension for RCT. Amendments will be made to PAYE regulations to extend the filing date to the 23rd of the month also.

Farming
Further details have been provided on the young trained farmers’ scheme and farm consolidation relief following on from Budget provisions. A further extension of 2 years to the scheme of capital allowances on certain buildings under the control of farm pollution scheme has been provided for. Similarly, farm relief for increase in stock values has been extended for another 2 years, subject to Ministerial Order.

Settlements and trustees
A new section has been introduced which places certain obligations on advisers to provide information in respect of settlements and trustees.

Collection and recovery of tax
A new streamlined system has been given statutory footing and confirms Revenue’s policy regarding offsets and non-filing of returns. The new system appears to change the priority of tax debts in bankruptcy situations.

VAT

VAT on Property
The Bill makes some technical amendments to the VAT on property legislation. It also contains some anti-avoidance provisions to disallow a landlord from not opting to tax a letting where it is to a connected party and confirms that the option to tax terminates when the landlord himself occupies the property. A provision has also been introduced to ensure landlords cannot avoid VAT liability in the case of transitional measures on short term lettings by entering a VAT group with the tenant.

Travel Agents Margin Scheme
This is to come into effect in January 2010. Tour operators and travel agents who buy-in services for onward supply as a travel package will be affected. Tax will be payable on the profit margin on supply of the travel package. VAT will not be deductible on the bought in services but will be deductible on the overheads. Following on from the introduction of the Scheme the exemption for agency services in the arrangement of passenger transport and accommodation will be removed from 2010. Provisions have also been introduced to allow Revenue make regulations in relation to the operation of the scheme.

VAT rate of 21.5%
This confirms the increase in VAT rate from 1 December 2008 to 21.5%. Revenue issued guidance on administrative issues on the rate change, available here.

Refund of tax – unjust enrichment
This tightens the rules for determining that a trader will be unjustly enriched where a VAT refund is made by Revenue. It provides Revenue with greater powers of enquiry and makes it very clear that the trader will have to prove that the customer incurred no loss as a result of the error or that the refund will be passed to the customer.