Budget 2009 (No1 Oct 2008) - Summary

BUDGET 2009

TAXATION

INCOME TAX CHANGES

Personal Tax Package

The main elements, including associated costs, of the personal tax package, which take effect from 1 January 2009, are as follows:

 

Changes to Income Tax
New Standard Rate Bands from 1 January 2009:
	Current	Proposed
Single	€35,400	€36,400
Married One Income	€44,400	€45,400
Married Two Incomes	€70,800	€72,800
*With a maximum transferability between spouses of €44,400 in 2008 and €45,400 in 2009
Income Levy
Income levy of 1% on income up to €100,100 (€1,925 per week) and of 2% on income in excess of €100,100 (this levy excludes social welfare payments, contributory and non-contributory pensions)
Total (yield)

Income Levy

A new income levy is being introduced that will apply at the rate of 1% to gross income up to €100,100 per annum or €1,925 per week. A rate of 2% will apply to income in excess of that amount.

The levy is paid on gross income, before deductions for capital allowances or contributions to pensions.

The levy does not apply to social welfare payments including contributory and non-contributory social welfare pensions.

OTHER INCOME TAX

Mortgage Interest Relief

The current rate of mortgage interest relief is being increased from 1 January 2009 for first-time buyers from 20% to 25% in year 1 and year 2 and to 22.5% in years 3, 4 and 5. The additional relief will be available to new first-time buyers and first-time buyers who have bought a house in the last 4 years.

The rate of mortgage interest relief for non-first-time buyers is being reduced from 20% to 15% from 1 January 2009.

Health Expenses Relief

Health Expenses relief will be granted at the standard rate only from 1 January 2009, with the exception of nursing home expenses which will be standard rated from 1 January 2010.

Levy on car parking facilities provided to employees by their employers

A flat rate levy of €200 per annum will be charged on employees whose employer provides them with car parking facilities. The levy will be confined to employer provided car parking facilities situated in the main urban centres.

Cycle to work scheme

From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to cycle to work will be treated as a tax exempt benefit-in-kind. The exemption may only apply once in any five year period in respect of any employee. There will be a limit on the value of such purchases of €1,000 for each employee. The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of his/her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented, they must be completed over a maximum period of twelve months.

Increase in the Specified Rates for Preferential Home Loans and Other Loans

An employee in receipt of a preferential loan is charged income tax on the difference between the interest actually paid and the amount which would have been payable at the "specified" rates of interest for the loans. To reflect changes in interest rates, the specified rate in respect of loans (other than home loans) is being increased from 13% to 15%. These changes will take effect from 1 January 2009.

Tax relief for the donations of heritage items

The tax relief in respect of the donation of heritage items to approved State institutions is being limited to 80% of the market value of the heritage item donated.

The tax relief in respect of the donation of heritage property to the Irish Heritage Trust is being limited to 80% of the market value of the heritage property donated.

The ceiling on the aggregate value of donations qualifying for each of these schemes in any one year will remain at €6 million.

Change in basis of Benefit-in-Kind (BIK) charge for company cars to relate it to the cars’ level of CO2 emissions

The Finance Bill will contain provisions to change the basis of the BIK charge on company cars to relate it to the cars’ level of CO2 emissions.

PRSI CHANGES

Employee PRSI annual ceiling

As from 1 January 2009, the PRSI contribution ceiling will increase from €50,700 to €52,000.

VAT

Increase in standard VAT rate from 21 per cent to 21.5 per cent.

The standard rate of VAT will be increased from 21 to 21.5 per cent with effect from 1 December 2008. This increase will apply to all goods and services which are currently subject to VAT at 21 per cent.

 

EXCISES

Increase in Mineral Oil Tax on Petrol

The mineral oil tax on petrol will be increased by 8 cent per litre (including VAT) with effect from midnight on 14 October 2008.

Tobacco Excise

The Excise Duty on a packet of 20 cigarettes is being increased by 50 cent (including VAT) with a pro-rata increase on other tobacco products, with effect from midnight on 14 October 2008.

Alcohol Excise

Excise Duty on a standard bottle of wine is being increased by 50 cent (including VAT) with effect from midnight on 14 October 2008. Pro-rata increases are also being applied to other wine, and certain other fermented and intermediate products.

A reduced rate of excise duty, at 50% of the full appropriate excise duty rate for beer and cider, will be introduced for low alcohol beer and cider (beer and cider products with an alcohol by volume content of 2.8% or less), with effect from midnight on 14 October 2008.

Excise Licences

A range of alcohol-related licensing fees, including off-licences, but excluding pub licences, are being increased to €500 in each case. These increases will apply from the appropriate annual renewal dates in 2009.

Betting duty

The betting duty rate will be increased from 1% to 2% with effect from 1 January 2009.

Air Travel Tax

An air travel tax applying to all departures from Irish airports will come into force on Monday 30 March 2009. The general rate applying will be €10 per passenger with a lower rate of €2 for shorter air journeys (those under 300 kms).

An indicative schedule listing the destinations from particular Irish airports to which the lower rate will apply is set out below. Other destinations from Irish airports in excess of 300kms will attract the €10 rate.

The Finance Bill will provide that the tax will be payable by the appropriate airport authority to the Revenue Commissioners in respect of passengers departing from Irish airports on and from 30 March 2009. In effect the airport authority will collect the tax from the airlines.

The air travel tax will not apply to

- passengers under two years

- disabled passengers and assisting persons

- aircraft with less than 20 passenger seats

- transit passengers

- members of the crew

- air services to and from Irish offshore islands

- aircraft departing airports that in the previous calendar year had less than 10,000

departing passengers.

Destinations to which the lower Air Travel Tax of €2 will apply^(a)

 

From	To
Dublin	Blackpool; Cardiff; Cork; Donegal; Derry; Galway; Glasgow; Glasgow (Prestwick); Isle of Man; Knock; Kerry; Liverpool; Manchester; Shannon; Sligo
Cork	Dublin; Newquay
Kerry	Dublin
Shannon	Dublin
Sligo	Dublin
Donegal	Dublin; Glasgow
Waterford	Galway
Galway	Dublin; Waterford
Knock	Dublin

 

(a) This list is for illustrative purposes and only includes scheduled air services. Chartered flights will be subject to the air travel tax with the lower rate also applying to destinations no further than 300kms from the departure point.

 

FARMER TAXATION

Farmers flat rate addition

The farmer’s flat rate addition is being maintained at 5.2% for 2009. The flat rate is designed to recoup non-VAT registered farmers for the VAT they incur on their inputs.

Extension of Stamp Duty Relief for Young Trained Farmers

Stamp duty relief is available for farmers acquiring land, who are aged under 35 and have specific agricultural training. The relief is due to terminate on 31 December 2008. This relief is now being extended for 4 years and the relief will apply in respect of instruments executed no later than 31 December 2012.

Extension of Stamp Duty Relief for Farm Consolidation

Stamp duty relief is available to a farmer consolidating his/her holding. The relief is due to terminate on 30 June 2009 and this termination date will be extended to 30 June 2011.

Farmers Stock Relief

Provision is being made to renew the 25% general farming stock relief and the special 100% stock relief for Young Trained Farmers for a further 2 years to 31 December 2010.

Farm Pollution Control Relief

Provision is being made to extend the 31 December 2008 deadline of the scheme of capital allowances for expenditure on certain pollution control measures relief to 31 December 2010.

CORPORATION TAX

Tax Credit scheme for Research and Development Expenditure

The current 20% rate of tax credit for incremental expenditure undertaken by a company on qualifying research and development (R&D) is being increased to 25%. This will apply to accounting periods commencing on or after 1 January 2009.

Preliminary Tax payment dates for Large Companies

Companies with a corporation tax liability of more than €200,000 in their previous accounting period are obliged to pay preliminary corporation tax, amounting to 90% of the liability for the current accounting period, one month before the end of the current accounting period (and not later than the 21^{st of the relevant month). The current single payment for large companies’ preliminary corporation tax will be split into two instalments. This will apply to accounting periods commencing on or after Budget day, 14 October 2008.}

The first instalment will be payable in the sixth month of the accounting period (e.g. 21 June for a company with calendar year accounts) and the amount payable will be 50% of corporation tax liability in the preceding accounting period or 45% of corporation tax liability for the current accounting period.

The second instalment will be payable (as at present) in the eleventh month of the accounting period (e.g. 21 November for a company with calendar year accounts) and the amount payable will bring the total preliminary tax paid to 90% of corporation tax liability for the current accounting period.

3 Year Tax exemption for Start-up Companies

New start-up companies which commence trading in 2009 will be exempt from tax, including capital gains, in each of the first three years to the extent that their tax liability in the year does not exceed €40,000.

This measure is being examined to ensure it is in compliance with EU rules on State-Aid. Further details of this incentive will be contained in the Finance Bill.

CAPITAL ALLOWANCES

Capital Allowances Scheme for certain energy-efficient equipment

The tax incentive (introduced in Budget and Finance Act 2008) which provides for capital allowances of 100% of expenditure incurred by companies in the year the equipment is purchased is being extended from three categories to seven categories. The new categories to be included in this scheme are:

• Data server related systems and large energy saving office equipment associated with Information & Communications Technology.
• Efficient heating/electricity provision equipment and control systems.
• Efficient electrical and control equipment associated with Process & Heating Ventilation and Air-conditioning systems.
• Alternative fuel vehicles.

Capital Allowances for newly constructed commercial buildings

Where newly constructed commercial buildings are used before being sold and the sale does not take place within one year of first use, the purchaser gets the value of available capital allowances on expenditure on a more restrictive basis. This makes the purchase of the building a less attractive option. Accordingly, the one year time limit for disposal is being extended to two years.

Seveso-listed industrial facilities

A new ring-fenced tax incentive scheme will be introduced to facilitate the removal and relocation of Seveso-listed industrial facilities which hinder the residential and commercial regeneration of Docklands in urban brownfield areas. The EU Seveso Directive (96/82/EC) seeks to protect public safety by placing land-use restrictions on new residential and commercial development near locations where potentially dangerous activities are undertaken. Further details will be outlined in the Finance Bill.

This scheme is subject to clearance by the European Commission from an EU State-Aids perspective.

STAMP DUTY

Stamp Duty on Commercial Property

The current Stamp Duty applicable to non-residential property is being changed in respect of Instruments executed on or after 15 October 2008. The top rate of duty is being reduced from 9% to 6% and the new rates are:

Aggregate Consideration	Rate of Duty
Up to €10,000	Exempt
€10,001 to €20,000	1%
€20,001 to €30,000	2%
€30,001 to €40,000	3%
€40,001 to €70,000	4%
€70,001 to €80,000	5%
Over €80,000	6%

Financial Cards

Changes are being made to the Stamp Duties applicable to ATM and Debit cards. The rate changes are summarised as follows:

Description	Current	New
ATM cards	€5	€2.50
Debit cards	€5	€2.50
Combined ATM/Debit cards	€10	€5

The changes for ATM and Debit cards will take effect for the year ending 31 December 2008, the duty for which is normally collected from bank customers by financial institutions in early 2009.

Bills of Exchange (including Cheques)

The Stamp Duty rate on Bills of Exchange is being increased from 30 cent to 50 cent in respect of Bills of Exchange drawn on, or after, 15 October 2008. In the case of cheques, the increase will apply in respect of cheques supplied by financial institutions to customers on, or after, 15 October 2008.

CAPITAL GAINS TAX

Change in Payment Dates

The payment date in respect of disposals in the period January to November is being changed to mid-December and the tax on disposals in December will now be due on the following 31 October (the existing pay and file date).

Change in Rate of Tax

The rate of capital gains tax is being increased to 22% from 20% in respect of disposals made from midnight on 14 October 2008.

TAX ON SAVINGS

Deposit Interest Retention Tax and Taxes on Life Assurance Policies and Investment Funds

The rates of retention tax that applies to deposit interest, together with the rates of tax that apply to (a) life assurance policies and (b) investment funds, are being increased by 3 percentage points to 23% and 26% respectively. The increased rates will apply to payments, including deemed payments, made on or after 1 January 2009. Full details in relation to Deposit Interest Retention Tax will be included in the Finance Bill.

PENSIONS

Contribution limit

The annual earnings limit for determining maximum tax-relievable contributions for pension purposes is being set at €150,000 for 2009 as compared with the 2008 limit of €275,239.

Indexation of maximum allowable pension funds

The adjustment, in line with an earnings index, of the maximum allowable thresholds for pension funds on retirement (the Standard and Personal Fund Thresholds) will not be made for 2009.

TAXATION IN RELATION TO CARS

New Motor Tax Rates and Fees for Trade Licence Plates

In order to support funding for local authorities, the Budget provides for increases in motor tax rates and fees for trade licence plates. The proposed increases are 4% for cars below 2.5 litres and CO₂ bands A to D, and 5 % for cars above the 2.5 litre threshold and CO₂ bands E, F and G. Goods and all other vehicles will also increase by 4% with no increase for electric vehicles. Trade plate licences will also increase by 4%

The new rates will apply to motor tax discs and trade licences taken out for periods beginning on or after 1 January 2009.

The proceeds of motor tax are paid directly into the Local Government Fund. This Fund, which was established under the Local Government Act 1998, is ring-fenced for local government. The motor tax paid into the Fund is supplemented on an annual basis by an Exchequer contribution. The Fund is used primarily to finance local and regional roads and the general purpose needs of local authorities.

CHARGE ON NON-PRINCIPAL PRIVATE RESIDENCES

The Government hasdecided to broaden the revenue base of local authorities. This will be achieved by the introduction of a charge on all non-principal private residences. The charge will be levied and collected by local authorities, and will be used to support the provision of local services.

The new charge will be set at €200 per dwelling, and will come into effect in 2009. It will be payable by the owners of private rented accommodation, holiday homes and other non-principal residences but will not be applied to new dwellings as yet unsold. The Minister for the Environment, Heritage & Local Government will bring forward legislation at an early date to give effect to these arrangements.