20 Oct 2017 | 11.19 am
Minister Publishes Finance Bill 2017
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20 Oct 2017 | 11.19 am
Tax and other measures announced last week in Budget 2018 will be implemented by the Finance Bill 2017, which the government has published.
It contains 78 sections, the majority of which implement changes announced on Budget Day together with a limited number of additional anti-avoidance measures and some technical changes in the tax system.
The Bill provides for reductions in the USC and the increase to the ceiling of the band on which the reduced 2% rate of USC will be payable, increases in income tax standard rate bands, plus increases in the home carer tax credit and earned income tax credit.
The Bill also contains details of the tapered extension to mortgage interest relief, and a tax measure to encourage owners of vacant residential property to bring that property into the rental market. It also provides for the excise increase on cigarettes of 50 cents as well as the so-called ‘sugar tax’.
The new KEEP incentive will be implemented by the Bill’s passage — a measure to change how employee share options are treated so that tax will be payable only when shares acquired under such schemes are sold on, and then at the fixed rate of CGT, currently 33%.
The Bill also provides for anti-avoidance measures across the tax code and for amendments to begin implementing the OECD BEPS Multilateral instrument, which will update Ireland’s tax treaties to be in line with international best practice.
Changes to stamp duty on non-residential property transactions, including agricultural land, are also included, as are measures covering capital allowances in respect of intangible assets.
Finance minister Paschal Donohue (pictured) said: “Finance Bill 2017 provides the necessary legislative foundation for implementing the tax measures announced in the budget. In line with our commitment to dudgetary reform, it has been published as soon as possible after Budget Day. It now moves forward to be debated in the Dáil and Seanad and I anticipate a constructive discussion on the Bill over the coming weeks with my parliamentary colleagues.”
SELECTED FINANCE BILL 2017 REACTION
Peter Vale, Tax Partner, Grant Thornton
Finance Bill 2017 contains few surprises, the majority of the content being legislative provisions reflecting Budget day announcements. In contrast with last year’s relatively short Bill, there are however a substantial number of anti-avoidance provisions in this year’s Bill. These are provisions that were not announced on Budget day.
The big question is what impact the provisions will have on tax revenues next year. For example, will the substantial increase in stamp duty on commercial property raise the predicted revenues?
Some of the provisions may result in unexpected revenues in the future. For example, the more benign share option regime for SMEs should encourage more employee share participation. Ultimately, this is likely to result in more CGT receipts on a future sale event. The extent of this will depend on how much companies (and employees) decide to avail of the new regime.
It is disappointing that the Bill did not include any provisions aimed at improving the CGT position for entrepreneurs, in particular in relation to the existing €1m cap on gains qualifying for the lower 10% rate. Despite the focus on Brexit, our regime lags well behind the UK equivalent, posing a risk to jobs here.
John Heffernan, Tax Partner, EY
With so much uncertainty surrounding the budget announcement of an amendment to the existing capital gains tax relief on disposals of land, the clarity provided through the Finance Bill today will come as great relief to those who invested with a view to realising their investment on its 7th anniversary.
The reduction in the holding period from seven to four years should result in more residential land being released to the market. There have been suggestions that a number of investors who acquired residential land in Dublin in 2013 and 2014 have been holding back the land until 2020 and 2021 waiting for the seven-year holding period to expire to avail of the capital gains tax exemption.
The Budget did not include any particular policies to support entrepreneurs, and there is nothing in the Finance Bill to change that. In particular there had been an expectation that the Minister would move to increase the €1m cap on the special 10% capital gains tax relief for entrepreneurs. This was not included in the budget and is not included in the Finance Bill. The equivalent threshold in Northern Ireland and United Kingdom is £10m.
We would very much welcome a commitment from the Minister that progress will be made in next year’s Budget and Finance Bill to provide more support to entrepreneurs and to increase the capital gains tax cap to nearer the UK level.
David Shanahan, Corporate Tax Partner, Deloitte
The Budget and subsequent Finance Bill made a number of minor provisions to the area of personal taxation. However, most of the measures have limited impact. There has been no movement in relation to key personal taxation areas such as CAT thresholds, CGT entrepreneur relief and the additional USC levy for self-employed individuals. The failure to introduce changes in these areas is disappointing but it is hoped measures might be introduced in the near future perhaps following the conclusion of the USC/PRSI review.
In Finance Bill 2017, provision is made for changes to certain anti-avoidance measures relating to offshore settlements and companies. These sections deem the income and gains of those structures to be the income and gains of Irish resident individuals in certain circumstances.
Previously if the foreign structure carried on a genuine economic activity in a relevant Member State and the taxpayer could evidence that the assets were not transferred with a main purpose being to avoid a liability to tax, then the deeming provision did not apply. The change now only requires the taxpayer to evidence that a genuine economic activity is carried on by the structure in a relevant Member State (essentially an EU or EEA Member State).
CGT farm restructuring relief applies where land is sold or exchanged by a farmer with a view to acquiring other lands in closer proximity to the farmer’s main holding (essentially rationalisation of farm land holdings).
The acquisition of the new lands must occur within 24 months of the disposal of the original lands. In relation to farmers who have claimed relief from CGT under the restructuring relief since 1 July 2016, they must now provide certain information to Revenue to enable Revenue determine the level of tax that would have arisen had the relief not applied.
Changes have been made where non-residents dispose of shares in a company where the shares in that company derive the greater part of their value from Irish land, minerals or exploration/exploitation rights (“relevant assets”). Finance Act 2015 introduced an anti-avoidance measure to prevent the introduction money to the company so as to ensure it did not derive the greater part of its value from relevant assets. This measure will now be extended to include introducing assets, other than just money, to the company.