FINANCE ACT 2014


The Finance Act 2014 was signed into law on 23 December 2014.

Universal social charge

2.USC rates. Income below €12,012 is exempt.

Medical card holders with income below €60,000 are exempt from the top rates.

Income up to €12,012 is taxed at 1.5% (previously 2%).

Income from €12,013 to €17,576 is taxed at 3.5% (previously 4%).

Income between €17,577 and €70,044 is taxed at 7%.

Income above €70,044 is taxed at 8% (previously 7%).

Income above €100,000 from self-employment is taxed at 11% (previously 10%).

Effective 01.01.2015.

Income tax

3.Income tax higher rate.The higher rate is reduced to 40% (previously 41%).

4.Employee share options. The employee must file a self-assessment return declaring the benefit received.

5.Artists exemption. Increased to €50,000 (previously €40,000) and extended to individuals resident or ordinarily resident in an EU/EEA Member State. Effective 01.01.2015.

6. Living donors.Compensation received by a living kidney donor is exempt.

7. Home loan interest. Ensures the tax relief is in line with EU law.

8. Professional services withholding tax (PSWT). Adjusts the list of bodies that must deduct PSWT.

9. Rent-a-room.Increases the exemption limit to €12,000 (previously €10,000). Effective 01.01.2015.

10. Trusts. Allows undistributed trust funds to be distributed to the last surviving individual incapacitated beneficiary of the trust.

11. Trading losses. Restricts relief for losses arising from a part-time trade, i.e., where the trader does not spend, on average, 10 or more hours in activities that are commercial with a view to making a profit. The relief is limited to €31,750 per year or proportionate part of the year.

12.Housekeeper allowance.Increases the deduction to €75,000 (previously €50,000).

13.Home renovation incentive. Extends the relief to rental properties.

14. Ministerial expenses.The deduction give to Ministers for the cost of maintaining a second residence excludes local property tax and water charges.

15. Special assignee relief programme. This relief exempts, for five years, 30% of income above €75,000 (previously between €75,000 and €500,000) in the case of an employee:

(a) assigned from a tax treaty country to work in the employer’s Irish operation,

(b) who was employed abroad for six months (previously 12 months).

The relief is extended to 31.12.2017.

16. Foreign earnings deduction. Extended to 31.12.2017.

17. Relevant contracts withholding tax (RCWT).A principal contractor who fails to deduct RCWT from a relelvant payment to a subcontractor is:

(a) subject to a penalty, and

(b) required to make an unreported payment notification to Revenue.

18. Charities.Allows relief for an eligible charity to be withdrawn retrospectively.

19. Pensions.National University of Ireland Galway (NUIG) employees can obtain relief for pension contributions made in respect of tax years 2003-2008. Effective 01.01.2015.

Anti-avoidance: The assignment of an approved retirement fund (ARF), or assets from an ARF, is a distribution. Any distribution from an ARF is deemed to be made by the Qualifying Fund Manager and is subject to tax. The investment of ARF assets in a scheme which is also invested into by the ARF’s beneficial owner triggers a taxable distribution from the ARF of an amount equal to the ARF assets used in the investment. Effective 21.10.2014.

The beneficial owner of an approved minimum retirement fund (AMRF) can draw down 4% of the AMRF value each year, subject to taxation.

The annual deemed distribution rate applicable to ARFs and vested PRSAs is reduced to 4% (previously 5%) where the value is €2m or less and the owner is not aged 70 or over. The rate continues at 5% where the owner is aged 70 or over. If the value of the fund is €2m or more, the rate remains at 6% irrespective of the owner’s age.

The maximum allowable pension fund at retirement (€2m) is referred to as standard fund threshold (SFT). An individual with a larger allowable fund as at 01.01.2014 may claim a higher personal fund threshold (PFT).

If the fund exceeds the threshold at drawdown, the excess is chargeable to tax.

A divorce/separation may require a pension adjustment order (PAO) whereby part of an individual’s pension fund is designated to the individual’s former spouse or partner.

This could give rise to inequity if the tax arising on the chargeable excess were charged entirely on the pension holder. In such situations the tax is apportioned so that the pension member and the spouse share the tax charge equitably.

The tax rate applicable to any chargeable excess is 40% (previously 41%). Effective 01.01.2015.

Income tax, corporation tax and capital gains tax

20. Farm taxation. Income averaging may be made for five (previously three) years. There are transitional rules for farmers who opt into averaging in 2014 or who opt our of averaging in 2015 or 2016.

Averaging will not be denied to a farmer who carries on a trade relating to on-farm diversification.

The farm land leasing exemption limits are revised as follows:

(a) €40,000 where the lease is for 15 years or more,

(b) €30,000 where the lease is for 10 to 15 years,

(c) €22,500 where the lease is for 7 to 10 years,

(d) 18,000 in any other case.

The farming changes are effective from 01.01.2015.

21. Social welfare income. Exempts Minister for Social Welfare from tax in respect of investment returns on social fund accounts.

22. Deposit interest retention tax (DIRT).A first-time buyer saving a house purchase price deposit can obtain a refund of DIRT paid on in the 48 months prior to the purchase. Expires 31.12.2017.

23. DIRT rate.Deletes the 41% rate that applied to non-EU source deposit interest, as the higher rate is now 40%.

24. Film relief.Makes the following changes:

(a) Removes the requirement that a qualifying company must distribute films.

(b) Ensuresthat a company controlling a special purpose company (SPC) will not qualify if the SPC is not compliant.

(c) Brings the minimum expenditure requirement into line with EU law.

(d) Removes the requirement that appication be made before filming etc commences to allow contracting of production elements to a qualifying company after production of the film has commenced.

25. Bord Gáis securities. Interest earned in on certain securities issued by Bord Gáis Éireann may be paid without deduction of tax, and gains arising on such securities will not be subject to capital gains tax.

26. R & D relief.In 2014, the tax credit on the first €200,000 of group expenditure was calculated (at 25%) without reference to the 2003 threshold amount.

From 01.01.2015, the tax credit is calculated without reference to the 2003 threshold amount.

27. Employment and investment incentive scheme (EIIS).  Effective from the date of a Ministerial Order:

(a) The lifetime limit for any company is €15m (previously €10m), and the annual limit is €5m (previously €2.5m).

(b) Shares must be held by the investor for not less than four(previously three) years. The maximum rate of relief is 30%, but this may be increased to 40% at the end of the holding period provided the company has increased its employment or expenditure on research and development.

(c) The scheme is expanded to include medium-sized enterprises in non-assisted areas, management of nursing homes, and internationally traded financial services.

28.Returns.Allows Revenue to make Revenue specifying information to be provided by financial institutions for the purposes of automatic returns of information.

29.Real Estate Investment Trusts (REITs). A REIT company is tax exempt as regards income and chargeable gains arising from its property portfolio, provided it derives 75% of its income from rents, and distributes 85% of its income by way of dividend.

Chargeable gains relief on intra-group asset transfers does not apply where the acquiring company is a REIT or a member of a group REIT.

A group REIT must notify Revenue each time a new company is added to the group.

REIT-owned deposits are exempt from deposit interest retention tax (DIRT).

30. Undertakings for Collective Investment in Transferable Securities (UCITS). A relevant UCITS or Alternative Investment Fund (AIF) is not subject to Irish tax by reason only of having an Irish-authorised management company or being managed through an Irish branch of a manager authorised in an EEA State.

31. “Windfall” profits or gains from land disposals. Under the National Assets Management Agency Act 2009, such gains were subjected to an 80% tax rate. From 01.01.2015, the normal rate of income tax, corporation tax or capital gains tax applies to such disposals.

32. Living City Initiative. This five year scheme provides tax relief for the conversion and refurbishment of owner-occupied Georgian houses and certain commercial premises.

The definition of “relevant house” now includes single storey buildings.

“Qualifying expenditure” is now limited to €400,000 for individuals and €1.6m for companies.

The maximum aggregate amount of relief which can be obtained, irrespective of the number of investors involved in a project, is €200,000.

The requirement that commercial refurbishment require part of the house to be refurbished for residential purposes is removed.

Prior to making a claim, the claimant must provide certain information to Revenue in electronic format.

33. Aviation service buildings.Extends industrial buildings allowance to qualifying buildings in regionally assisted areas. Effective from the date of a Minsterial Order.

34. Income transfers. An owner of a security (share or bond) who transfers the right to receive income from a security while continuing to own the security is subject to income tax on the transferred income (TCA 1997 s 812). This rules does not apply if the interest in question is exempt, nor does it apply if the transfer proceeds are already taxed as trading income (Sch D Case I).

35. Exit tax.Updates the exit tax rates on life policy investments to 41% / 60% / 80% depending on the nature of the investment.

Corporation tax

36. Short-life assets.If an asset with a three year useful life is leased for a three year period, the lessor can write the asset off for tax purposes over that period (instead of over eight years). This legislation (TCA 1997 s 80A) was based on short-life asset portfolio values in 2010. That threshold is now being phased out.

37.Exemptions.Adds the Credit Union Restructuring Board and the Health and Social Care Professionals Council to the list of bodies exempt from corporation tax.

38.Energy-efficient equipment.Extends the 100% capital allowance regime by three years to to 31.12.2017. Also amends the description of the classes of qualifying technology.

39.Relief for start-up companies. Extends the relief to 2015.

40. Intangible assets.The purchase cost of a specified intangible asset (TCA 1997 s 291A) qualifies for a 7% annual capital allowance. The 80% limit on the aggregate amount of capital allowances that can be offset against trading income in an accounting period is removed. A specified intangible asset can include a customer list if not acquired in connection with the transfer of a business. Effective for accounting periods commencing on or after 01.01.2015.

Where a company that has claimed a capital allowance of a specified intangible asset transfer such asset to a connected company after five years, the transferor is not subject to a balancing charge and the acquirer can claim capital allowances on the asset’s tax written-down value. Effective 23.10.2014.

41.Chargeable gains groups.Where a company leaves a group with an asset acquired from another group member within the previous 10 years, tax arises in the accounting period in which the company leaves. Tax is charged at the rate that applied at the on the earlier deferred chargeable gain.

42.Accounting Standards. Extends transitional arrangements to companies that are changing to the new Irish and UK Financial Reporting Standards (FRS). Effective 01.01.2015.

43.Company residence.Ends “Double-Irish” type schemes by ensuring that an Irish-incorporated company is subject to Irish tax and a non-Irish company which is managed and controlled in the State is subject to Irish tax. Effective for new companies from 01.01.2015; effective for existing companies from 01.01.2021.

44.Participation exemption.TCA 1997 s 626B exempts a disposal by a holding company of a shareholding of 5% or more in a subsidiary, provided that holding has been held for at least one year. TCA 1997 s 590 allows a gain by an offshore entity to be attributed to its Irish participators. TCA 1997 s 626B does not allow a holding company to escape s 590 unless the participator is a company.

Capital gains tax

45.Time limits.Deletes existing the time limits for retirement relief and disposal of assets to a charity. This means thee general four year time limit now applies for the purposes of making assessments.

46.Temporary non-residence.Assets disposed of by an individual during a period of temporary non-residence are deemed to have been disposed of (and reacquired) at market value on the last day of the tax year of departure. If there is an increase in the value of the assets between that last day and the date of disposal, the market value on the disposal date is used.

47.Works of art.Works of art regarded as items of plant do not qualify for the wasting asset exemption.

48.Vodafone payments.A special dividend “return of value” payment from Vodafone plc to a shareholder in respect of bonus C shares is treated as a capital payment for tax purposes (and therefore subject to CGT) unless the recipient elects for the payment to be treated as income.

49.Farm restructuring relief.Extends the deadline for the first restructuring transaction to 31.12.2016 (previously 31.12.2015).

50.Retirement relief.Extends relief to leased farm land which is disposed of outside the family on or before 31.12.2016. Each letting must have been to the same tenant and for a minimum of five years in the 25 year (previously 15 year) period ending with the disposal. A similar relief is given for land let under conacre arrangements which prior to the conacre letting met the preceding conditions. In all cases the land must have been farmed by the retiring farmer prior to being let.

51.Payment entitlements.Exempts chargeable gains arising from the disposal of payment entitlements under the Single Payments Scheme where the entitlement owner was advised to transfer his entitlements to an active farmer before 15.05.2014.

52.Entrepreneur reinvestment relief.This relief reduces the CGT rate (by up to half- giving an effective 16.5% rate) on the disposal of “reinvestment” assets, i.e., chargeable business assets (for example, shares in a qualifying micro, small or medium-sized enterprise) into which the proceeds of a previous disposal were reinvested between 01.01.2014 and 31.12.2018.

Value-added tax (VAT)

66. Records.Where a VAT issue is the subject of a claim or audit, the records and linking documents must be retained until the issue is finally determined.

67. Flat rate addition.Increased from 5% to 5.2%. Effective 01.01.2015.

68. Invoice-type “document”. Revenue may require an accountable person to issue an invoice-type “document” containing all of the particulars that would be required on a VAT invoice.

69. VAT evasion.Revenue can impose joint and several liability where where a person participates in a supply which that person knows is connected with the fraudulent evasion of VAT.

70. VAT assessment.Changes the basis of an appeal from “aggrieved” to where the appellant considers the assessment “excessive.”

71. VAT rates.Extends VAT exemption to:

(a) green fees and membership fees for member-owned golf clubs (effective 01.03.2015),

(b) fostering services, and

(c) management of defined pension contribution schemes (effective 01.03.2015).

Clarifies that the zero-rate applies to supplies of tea and herbal tea.

Stamp duties

73. National Treasury Management Agency (NTMA).Removes the NTMA from the list of accountable persons.

74. Leases.Exempts a lease (5 to 35 years) of land farmed on a commercial basis with a view to a profit by a lessee who spends not less than 50% of his normal working time on such farming activity.

75. Securities.Exempts certain securities issued by the Minister for Finance or NTMA.

76. Assessments.Empowers Revenue to make an assessment in respect of financial institution levies.

77. Consanguinity relief.Reduces (by 50%) the duty payable on a transfer of farmland where:

(a) the transferor is aged 65 or under, and

(b) the transferee farms the land on a commercial basis with a view to a profit and spends not less than 50% of his normal working time on such farming activity.

78. Young trained farmers.Adds a new course to the “young trained farmer” qualification list.

Capital acquisitions tax

80. Discretionary trust tax.Removes the territorial requirement that an exempt trust be created exclusively for charitable purposes in the State or Northern Ireland.

81. Child maintenance payments.Confines the exemption to:

(a) minor children, and

(b) orphaned minor children,

aged under 25 in full-time education.

82. Agricultural relief.Restricts the relief to a beneficiary who actively farms the agricultural land or who leases the land on a long-term basis to an active farmer.

83. Business relief.Business assets owned personally by a person who controls a company can qualify for relief if transferred to the beneficiary who receives the shares. The definition of “control” so that the shareholdings of spouses or civil partners, when taken together, constitute control of a company.

Miscellaneous

85. Domicile levy.Revenue can require a person to file a domicile levy return and pay any associated levy within 30 days of the notice. Revenue can also impose penalties on a person who fails to file a domicile levy return or who deliberately or carelessly files an incorrect return.

86. Self-assessment.A PAYE taxpayer whose only non-PAYE income is interest subject to DIRT is not required to file a self-assessment return.

87. Tax avoidance.Removes the requirement for a Revenue officer to:

(a) form an opinion that a transaction was a tax avoidance transaction,

(b) issue a notice of that opinion to the taxpayer.

Revenue can now deny a tax advantage by simply making or amending an assessment on the taxpayer.

The surcharge for tax avoidance transactions is 30% (previously 20%) of the tax advantage but the surcharge does not apply to a taxpayer who has made a valid protective notification.

A person who has not made a protective notification can make a voluntary disclosure and pay any tax and interest due, together with a reduced surcharge (10%, 5% or 3% depending on the circumstances).

It is not possible to make a protective notification in respect of a transaction which is subject to mandatory disclosure.

88. Mandatory disclosure.Requires Revenue to issue a unique transaction number to each scheme notified.

Transactions involving use of a discretionary trust are now disclosable.

On a determination from the Appeal Commissioners in relation to an anti-avoidance transaction (specific or disclosable), Revenue can issue a payment notice to the person who engaged in the transaction, and also to persons who engaged in like transactions.

89. Accounts information.The information to be provided electronically with the corporation tax return is the information specified on the return form.

90. Disclosure of information.Revenue can disclose taxpayer information in relation to film investment relief, where required to provide information to the EU in relation to State aid.

91. Records.Extends the retention period until the inquiry, investigation, or appeal process has concluded, and provides for retention of records by the personal representative of a deceased person.

92. Bank returns.Extends the definition of “financial institution” to include agents of NTMA in relation to State savings products.

93. Security for taxes.Revenue can require a business person to provide security in relation to PAYE and VAT (TCA 1997 s 960S). This aligns the income tax legislation with the equivalent VAT law.

94. Late return surcharge.No late return surcharge arises in the case of a person on whom a penalty has been imposed for filing a timely but incorrect return.

95. Electronic tax clearance.Allows Revenue to review a taxpayer’s tax clearance status on an ongoing basis, and issue, refuse or rescind a tax clearance certificate depending on the results of that review.

96. Tax treaties.Adds Botswana and Thailand to the list of treaty countries and revises the law to take account of the new protocols to the treaties with Belgium, Denmark and Luxembourg.

97. Technical amendments.