Finance Act 2011 - The main points

• Income Tax
• Business Tax
• Financial Services

INCOME TAX

• The Income Tax filing date is 31^st October 2011 and has not been changed.
• The Universal Social Charge has been confirmed at the following Rates:

Note if you are self employed, you now pay 3% more than was planned in the budget.

• The USC is levied before pension deductions but after trade capital allowances and losses.
• The Age exemption has been reduced from €40,000 to €36,000 for married people and from €20,000 to €18,000 for single people. This exemption is being phased out under the National Recovery Plan.
• Rent relief has been reduced by 20% and will also be phased out under the National Recovery Plan.
• Professional and Trade Union subscriptions relief is abolished.
• Artists Exemption is curtailed to €80,000 and will be capped at €40,000 in future years.
• If you borrow to invest in certain trading companies after 7^th December 2010 will not attract interest relief. Existing loan Interest reliefs will be withdrawn on a phased basis, 75% will be allowed in 2011, 50% in 2012, 25% in 2013.
• Education fees relief is restricted by €2,000 for full time courses and €1000 for part-time courses.
• Energy Efficiency works will attract a credit of 20% on a spend up to a maximum of €15,000 for married couple and €10,000 for a single person.
• Film Investment relief has been extended to 31^st December 2015.
• Aviation personnel are liable to tax regardless of residence and location of work.
• Tax Credits for VHI insurance are increased.
• The relief for Employee Share Purchases have been abolished.
• PRSI and USC now apply to share awards, unapproved share options and Revenue Approved Share Option Plans, Professional Subscriptions and Childcare facilities provided by employer.
• Allowable Contributions to pension schemes has been reduced to €115,000 from 1^st January 2011. If the payment is made in 2011 for 2010, the cap is deemed to be in force for 2010. PRSI and USC apply to employer pension contributions.
• Income tax relief on pension contributions is 41% in 2011, 34% in 2012, 27% in 2013, and 20% in 2014.

BUSINESS TAX

• Where a group of companies obtain borrowings to purchase certain assets will no longer be tax deductable with an exemption for the acquisition of same trade assets.
• The BES (Business Expansion Scheme) has been replaced by a “new” Employment and Investment Incentive Scheme which enhances the old BES as we know it:

a.     More SMEs can avail of the EIIS

b.     R&D research companies can avail of EIIS.

c.     Investment holding period is now 3 years instead of 5.

d.     The lifetime maximum level of funding ahs been raised to €10m

e.     Green energy is also included

f.      The individual maximum is €150,000 per annum

g.     The Seed Capital Scheme has been enhanced by the same rules and the individual limit is €100,000.

• RCT – Registered Contractor taxes; the old C2 is gone and has been replaced by withholding taxes:

h.     Zero Rate Subcontractors (0%)

i.      Standard Rate Subcontractors (20%)

j.      Other Subcontractors (35%)

• Three year Corporation Tax relief has been extended to companies starting in 2011. However, in an effort to encourage employment, it will only be given to new 2011 companies who pay employers PRSI in 2011 and future years.
• Cash extractions upon retirement will be deemed as distributions for tax purposes.
• Capital Allowances for energy efficient equipment will continue to be allowed in full up-front.
• Credit for foreign taxes will be subject to a review of the offset charges.

FINANCIAL SERVICES

• Section 110 Companies are now allowed to hold a greater range of assets including not financial tangible commodities, plant and machinery leasing and other lease related assets.  This brings Ireland into line with what other countries are offering.
• DIRT or Exit Tax has been increased for onshore and offshore savings products by 2% to 27%.
• 12.5% Corporation Tax rate has been maintained.

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