08 Oct 2019 | 02.53 pm
Donohoe Details €260m No-Deal Contingency
Budget 2020 details impacting on business
08 Oct 2019 | 02.53 pm
Finance minister Paschal Donohoe has presented details of Budget 2020, declaring that this year’s state budgetary planning process is “without precedent”.
The minister stated: “This is a budget that has been developed in the shadow of Brexit. And the context for Brexit has now shifted to no-deal as our central assumption. This does not mean that no-deal is inevitable, but equally we stand ready if it does happen.”
Intervening to support the economy in the event of a no-deal will see the surplus swing to a deficit of 0.6 per cent of GDP in 2020, the minister predicted.
“However, there is large uncertainty around this given the unprecedented nature of a disorderly Brexit,” Donohoe added.
The minister outlined a package of €200m, excluding EU funding, to respond to Brexit. The funding is being allocated in 2020 across a number of departments and agencies to increase the level of staffing, upgrade infrastructure at ports and airports and invest in IT and facilities management.
In addition, in the event of no-deal €260m will be made available to support the Agriculture, Enterprise and Tourism sectors.
According to the minister: “From this, €110m for enterprises has been identified for the first wave of funding for targeted new interventions to help vulnerable but viable firms adjust to a no-deal Brexit. These interventions will support firms of all sizes at all levels of difficulty, with a particular focus on sectors most exposed, including food, manufacturing and internationally traded services.”
Support will be by way of grants, loans and equity investment and will include:
• €45m Transition Fund
• €42m Rescue and Restructuring Fund
• €8m Transformation Fund for Food and Non-Food businesses
• €5m extra for Micro Finance Ireland
• €5m for a Local Enterprise Offices Emergency Brexit Fund
• €2m extra for Intertrade Ireland
• €3m extra for Regulatory Bodies.
€85m For Beef Farmers
Donohoe stated that €110m will be provided through the Department of Agriculture, Food and the Marine Vote in the event of a no-deal Brexit to fund supports for the beef sector and the fishing fleet.
“We also want to support food companies to re-orient towards new products and markets,” Donohoe stated. “To do this, €85m will be provided for beef farmers, €14m for fisheries, €6m for other livestock farmers and mushrooms sector, and €5m for the food and drinks processing industry.
“In addition, €40m of funding for the tourism sector will be provided,” Donohoe added.
As expected, Budget 2020 has hiked the Carbon Tax but there is good news for businesses too, with tweaks to several other government initiatives.
The Carbon Tax increases by €6 to €26 per tonne after midnight tonight on petrol and diesel; carbon tax changes to other fuels (e.g. home heating) won’t come into effect until May 2020.
There are no changes to income tax thresholds or rates in Budget 2020, while the earned income credit for self-employed people rises from €1,350 to €1,500. That still leaves the income tax difference between the self-employed and the PAYE sector at €1,500 vs €1,650.
For Capital Acquisitions Tax, finance minister Paschal Donohoe revealed that the category A threshold (which applies primarily to gifts and inheritances from parents to their children) is being increased from €320,000 to €335,000.
Among the changes to business-focused schemes are:
Key Employee Engagement Programme (KEEP)
- Companies operating through a group structure now qualify for KEEP
- Part-time/flexible working employees are now eligible for inclusion
- Existing shares to qualify for KEEP
Employment and Investment Incentive (EII)
- Full income tax relief (40%) will be provided in the year in which the investment is made. Hitherto, 30% relief was provided upon the initial investment and a further 10% is given after year three subject to certain conditions
- The annual investment limit will be increased from €150,000 to €250,000, and to €500,000 in the case of those who invest for a minimum period of 10 years.
Research & Development Tax Credit
- Amendments aimed at accommodating micro and small companies will see the R&D credit increase from 25% to 30%
- A new provision is being introduced to allow micro and small companies conducting pre-trading R&D to claim the credit before trading commences, limited to offset against VAT and payroll tax liabilities only
- The current limit on outsourcing to third-level institutes will be increased from 5% to 15% for all claimants.
Budget 2020 Headlines
No changes to personal tax rates or bands.
€150 increase in Earned Income Credit for the Self Employed to €1,500.
€100 increase in the home carer credit to €1,600.
0% BIK on electric cars extended to 2022.
The Special Assignee Relief Programme (“SARP”) and Foreign Earnings Deduction (“FED”) extended to 2022.
The Employment and Investment Incentive is extended and improved. There is an increase in the annual limit on investments to €250,000 (€500,000 for those who commit to investment for 10 years or more). Furthermore, from 8 October 2019, the full 40% income tax relief will be available in the year of investment rather than the previous arrangement whereby 30% was available at the time of investment and a further 10% was potentially made available after 4 years.
The dividend withholding tax (DWT) rate is to be increased from 20% to 25% in 2020. This is not a tax increase as such, but essentially an acceleration of the payment of tax on dividends. There will be a further change in 2021 to integrate DWT with the PAYE regime.
Strong reaffirmation of long-term commitment to 12.5% corporation tax rate.
Improvements to the KEEP scheme rules to make it more functional for SMEs. The scheme provides for tax relief for certain share remuneration provided to key employees by unquoted SMEs. It is stated that the improved rules can apply to existing options.
Improvements to R&D tax credit regime aimed at smaller businesses. Increase in value of R&D tax credit from 25% to 30% for small and micro businesses. Small and micro businesses will also be allowed claim for pre-trading expenditure. There is also an increase in the limit for spending outsourced to Third Level Institutes from 5% to 15% for all claimants.
Confirmation of introduction of anti-hybrid tax anti-avoidance rules and changes to transfer pricing rules with effect from 1 January 2020.
Introduction of a 1% stamp duty charge targeted at certain company acquisitions.
Increase in the rate of the Bank Levy from 59% of DIRT in base year 2015 to 170% of DIRT for base year 2017 in order to retain the yield at €150m.
Stamp duty on commercial property increased by 1.5% to 7.5% with effect from 9 October 2019. Some transitional measures for transactions in progress.
Introduction of anti-avoidance provisions to apply to REITs and IREFs.
Help to buy scheme extended to end 2021.
An increase from €20 per tonne to €26 per tonne in the rate of Carbon Tax which applies to auto fuels will take effect from midnight tonight and a similar increase will apply to other fuels from May 2020.
The 1% diesel surcharge introduced last year is being replaced with a nitrogen oxide (NOx) emissions-based charge, which will apply to passenger vehicles registering for the first time in the State from 1 January 2020.
VRT relief for hybrid vehicles will be extended until the end of 2020 (and will be subject to CO2 emission levels).
The Minister intends to increase the level of rebates payable to hauliers under the Diesel Rebate Scheme, details of which will be included in the Finance Bill.
A relief (capped at €50,000 per annum) from the amount of betting duty payable by independent bookmakers and betting exchanges/intermediaries will be introduced.
Excise duty on a packet of 20 cigarettes will be increased by 50 cent (including VAT) from midnight tonight, with a pro-rata increase on other tobacco products.
Capital Acquisitions Tax
Tax Free threshold for gifts and inheritances within Category A (generally parents to their children) is increasing from €320,000 to €335,000. Applies to gifts and inheritances from 9 October 2019.