Capital Acquisitions Tax

Income Tax. Corporation Tax. Capital Acquisitions Tax. Capital Gains Tax. Local Property Tax. VAT. Pay and File Deadlines.

January is a very important month in terms of pay and file obligations.  To avoid exposure to interest and penalties, please find below a list of pay and file deadline dates for January 2025 under the following tax heads: Income Tax, Corporation Tax, VAT, Local Property Tax, Capital Gains Tax, Capital Acquisitions Tax, Dividend Withholding Tax and Professional Services Withholding Tax.

1^st January 2025

• 2024 Employment Detail Summary is available.

• The minimum Wage Increased to €13.50 per hour.

• Changes to USC – The 4% rate is reduced to 3% and the entry threshold increases to €27,382.01

• Changes to Rate Bands from €42,000 to €44,000 for individuals. Married couples and civil partners with one income will increase to €53,000 and married couples and civil partners with two incomes will increase to €88,000.

• Increases from €1,875 to €2,000 for Single Persons, Employee PAYE Tax Credit, Earned Income Tax Credits and Widowed Person or Surviving Civil Partner with dependent child(ren).

• Commencement of phased payments for Local Property Tax.

• Increases in VAT thresholds for goods and services. From €40,000 to €42,500 for services. From €80,000 to €85,000 for goods.

• The increased thresholds for Capital Acquisitions Tax: From €335,000 to €400,000 (Group Class A), from €32,500 to €40,000 (Group Class B) and €16,250 to €20,000 (Group Class C)

10^th January 2025

Latest date for paying Local Property Tax in full through an approved PSP, or by debit or credit card.

14^th January 2025

• Monthly Return and payment for PAYE, PRSI and USC for December 2024 – The payment date is extended to 23rd for users who pay and file via ROS.

• Quarterly Return and payment for PAYE, PRSI and USC for the period October to December 2024 – The payment date is extended to 23rd for users who pay and file via ROS.

• Return and payment of Dividend Withholding Tax for December 2024

•  F30 Monthly Return and payment of Professional Services Withholding Tax for December 2024

15^th January 2025

Monthly direct debit payments for Local Property Tax (LPT) start and continue on the 15th day of every month, thereafter.  Date extended to 21st March 2025 if paying by Annual Debit Instruction.

19^th January 2025

• Monthly VAT3 Return & Payment for December 2024.

• Bi-Monthly VAT3 Return & Payment for period 1^st November to 31^st December 2024.

• Four Monthly VAT3 Return & Payment for period 1^st September to 31^st December 2024.

• Bi-Annual VAT3 Return and payment for period 1^st July to 31^st December 2024.

• Annual VAT3 Return and payment for period 1^st January to 31^st December.

Return of Trading Detail:

• where the VAT accounting period ends between 1st and 31^st December and monthly VAT3 Returns are filed.

• where the VAT accounting period ends between 1st November and 31^st December and bi-monthly VAT3 Returns are filed.

• where the VAT accounting period ends between 1st September and 31^st December and four-monthly VAT3 Returns are filed.

• where the VAT accounting period ends between 1st and 31^st December and annual VAT3 Returns are filed.

For ROS filers, the time limit for filing a VAT return is extended to the 23rd day of the month.

1^st to 21^st January 2025

• Corporation Tax Preliminary Tax for Accounting Periods ending between 1^st and 28^th February 2025

• Corporation Tax Returns for Accounting Periods ending between 1^st and 30^th April 2024.

•  Corporation Tax Balancing payments due for Accounting Periods ending between 1^st and 30^th April 2024

For ROS filers, the time limit for filing a CT Return and/or payment is extended to the 23rd day of the month.

31^st January 2025

• Payment of capital gains tax for assets sold between 1^st December 2024 and 31^st December 2024

• OSS VAT return and payment for the period 1^st October to 31^st December 2024

• IOSS Monthly Return and payment due for period December 2024.

For VAT details, please click:

https://www.revenue.ie/en/vat/vat-registration/who-should-register-for-vat/vat-thresholds.aspx

https://www.revenue.ie/en/vat/vat-ecommerce/import-oss/index.aspx

For information on Standard Rate Bands and Tax Credits, please click:

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/tax-relief-charts/index.aspx

For further information on Local Property Tax, please click:

https://www.revenue.ie/en/property/local-property-tax/paying-your-lpt/index.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Personal Tax. UK Taxes. Property Tax. Landlord Tax. Commercial Property.

The Chancellor of the Exchequer, Jeremy Hunt delivered his UK Spring Budget 2024 today.  As you are aware, the Furnished Holiday Letting (FHL) regime provides UK Tax relief for property owners letting out furnished properties as short term holiday accommodations.  From 6^th April 2025, however, the Chancellor is removing this tax incentive in an attempt to increase the availability of long term rental properties.

What is a Furnished Holiday Letting (FHL)?

According to HMRC’s guidance material, a furnished holiday let is deemed to be a furnished commercial property which is situated in the United Kingdom.

It must be available to let for a minimum of 210 days in the year.

It must be commercially let as holiday accommodation for a minimum of 105 days in the year.

Guests must not occupy the property for 31 days or more, unless, something unforeseen happens such as the holidaymaker has a fall or accident or the flight is delayed.

Currently, FHLs benefit from the following tax advantages:

• There is a full deduction of interest on borrowings from FHL income.

• Currently, profits from furnished holiday lettings are treated as relevant earnings. Therefore, profits generated from FHLs can be treated as earnings for the purposes of making tax advantaged pension contributions.

• Capital Allowances on items such as furniture, fixtures and equipment can be claimed on your Furnished Holiday Let. You can also claim tax relief on certain refurbishment costs.

• On the disposal of the FHL, Business Asset Disposal Relief (10% CGT rate), Business Asset Rollover Relief and Gift Hold-over Relief may apply.

• Provided there is sufficient business activity to demonstrate a trading activity, FHL properties can qualify for Business Property Relief thereby reducing the value of the business for Inheritance Tax purposes by up to 100%.

So, what happens from 6^th April 2025?

• Mortgage Interest Relief will be given as a 20% tax credit. This will result in a reduction in tax relief from 40% for higher rate taxpayers and 45% for additional rate taxpayers.

• The normal residential property CGT tax rate of 24% will apply.

• Relief may be available for the replacement of domestic items in line with the regulations for long term lets.

• FHL profits will no longer be treated as relevant earnings for the purposes of making pension contributions.

• Properties will no longer qualify for Business Property Relief, thereby increasing Inheritance Tax liabilities.

What actions can you take?

You may wish to consider your options before the rules are abolished in April 2025.

Options include:

• Continue renting your property as before but without the current tax advantages.

• Sell the property with the aim of benefitting from the 10% CGT rate.

• Gift the property with the aim of benefitting from Business Asset Disposal Relief and Gift Hold-over Relief.

• Change your rental strategy by renting your property on a long term basis.

For further information, please click: https://www.gov.uk/government/publications/furnished-holiday-lettings-tax-regime-abolition/abolition-of-the-furnished-holiday-lettings-tax-regime

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Close Relative Loans – Gift Tax Advice – Capital Acquisitions Tax (CAT). Inheritance Tax. Succession Planning.

Introduction

With effect from today, Capital Acquisitions Tax (CAT) rules have changed.  A new mandatory Capital Acquisitions Tax filing obligation is imposed on a person in receipt of a gift in respect of certain loans from close relatives. An interest-free loan is a gift on which Capital Acquisitions Tax must be calculated and any arising CAT must be paid. The value of the gift is the highest rate of return the individual making the loan could obtain if that person invested those same funds on deposit. It applies to existing loans as well as new loans made since January 2024, irrespective of whether or not any gift or inheritance tax is due.  So what does this means for you in terms of succession planning?

Previous CAT Legislation

Until 31^st December 2023, there was no requirement to file a Capital Acquisitions Tax Return in respect of this type of loan, until 80% of the recipient’s group class threshold had been exceeded.

What’s the aim of the new Capital Acquisitions Tax (CAT) legislation?

The aim of this new requirement is to provide the Revenue Commissioners with greater visibility with regard to loans between close relatives in circumstances where the loans are either interest free or are provided for below market interest rates.

So, what has changed?

The individual is deemed to have received the benefit on 31^st December each year which means the relevant Capital Acquisitions Tax (CAT) return must be filed on or before 31^st October of the following year.  Therefore, the first mandatory filing date will be 31^st October 2025.

What is a “Close Relative”?

A close relative of a person, includes persons in the CAT Group A or B thresholds, and is defined as follows:

• a parent of the person,

• the spouse/ civil partner of a parent of the person,

• a lineal ancestor of the person,

• a lineal descendant of the person,

• a brother or sister of the person,

• an aunt or uncle of the person, or

• an aunt or uncle of the spouse/ civil partner of a parent of the person.

What about Loans from Private Companies?

There are certain “Look Through” provisions which must be applied to such loans.  In other words, loans made to or by private companies will be “looked through” to determine if the loan is ultimately made by a close relative.  Generally private companies are under the control of five or fewer persons.  The holding of any shares in a private company is sufficient for these provisions to apply, including where the shares in the company are held via a Trust.

If someone receives an interest free loan of say €500k from a close relative’s company, the recipient of the loan would be deemed to take the loan from their close relative. As this exceeds the €335k threshold, this loan would be reportable.

These mandatory tax filing obligations apply in the following situations:

1. Where the loan is from a private company to a person in circumstances where the beneficial owner of the company is a close relative of the borrower.

2. Where the loan is from a person to a private company in circumstances where the beneficial owner of the company and the lender are close relatives.

3. Where the loan is from one private company to another private company in circumstances where the beneficial owners of both companies are close relatives.

What Loans must be Reported?

A mandatory filing obligation arises for the recipient of the loan where:

• there is a loan between close relatives,

• he/she is deemed to have taken an annual gift,

• no interest has been paid on the loan within six months of the end of the calendar year and

• the total balance on the loan and any other such loan exceeds €335,000 on at least one day during the calendar year.

Whether or not a person exceeds the €335,000 threshold would need to be considered in relation to each calendar year.

A loan is deemed to be any loan, advance or form of credit. It need not necessarily be in writing.

All specified loans must be aggregated.  Therefore, if a person has multiple loans from a number of different close relatives, the amount outstanding on each loan, in the relevant period, must be combined to determine if the threshold amount of €335,000 has been exceeded.

The first returns must be submitted by 31^st October 2025 in respect of the calendar year ending 31 December 2024.

What Information must be Reported?

The CAT return must include the following information in relation to reportable loan balances:

1. The name, address and tax reference number of the person who made the loan,

2. The balance outstanding on the loan and

3. All other such information as the Revenue Commissioners may reasonably require.

 For further information, please click: https://www.revenue.ie/en/gains-gifts-and-inheritance/filing-obligations/index.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

ROS Pay and File self assessment Income Tax and Capital Acquisitions Tax (CAT) Deadline

Revenue has confirmed that the extended ROS Pay and File deadline is Wednesday, 17th November 2021.  This applies to ROS return filing and payment for self-assessment Income Tax and Capital Acquisitions Tax (CAT).  For taxpayers who don’t use ROS to file their tax return and pay their tax bill, the deadline remains 31st October 2021.

For self assessment Income Taxpayers who file their 2020 Form 11 Tax Return and make the appropriate payment through the Revenue Online System in relation to (i) Preliminary Tax for 2021 and/or (ii) the balance of Income Tax due for 2020, the filing date has been extended to Wednesday, 17th November 2021.

This extended deadline will also apply to CAT returns and appropriate payments made through ROS for beneficiaries who receive gifts and/or inheritances with valuation dates in the year ended 31st August 2021.

To qualify for the extension, taxpayers must pay and file through the ROS system. 

In situations where only one of these actions is completed through the Revenue Online System, the extension will not apply.  As a result,  both the submission of tax returns and relevant payments must be made on or before 31st October 2021.

The Revenue Commissioners have confirmed extended opening hours for the ROS Technical Helpdesk and Collector General’s Division in the days leading up to the ROS Pay and File deadline.

On 17th November (Pay & File Deadline) the phone lines of the ROS Technical Helpdesk will operate between 9am and midnight while those of the Collector General will operate from 9am until 8pm.

For further information, please click: https://www.revenue.ie/en/tax-professionals/ebrief/2021/no-0882021.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget 2019 – Tax changes under Income Tax, Business Taxes, VAT, CAT, CGT, property Taxes – Property, Investment and Agricultural Sectors

The Minister for Finance, Public Expenditure and Reform Paschal Donohoe T.D. delivered Budget 2019 today, 9^th October 2018.   From 1st January 2019 there will be a considerable number of tax changes in relation to Business Tax, Income Tax, Employment Taxes, Property and Construction, VAT, Agricultural Sector and Capital Acquisitions Tax.

PERSONAL TAX

A number of changes aimed at easing the tax burden on low and middle income earners were announced in this year’s budget which include the following:

INCOME TAX

The income tax standard rate band will increase by €750 for a single earner.

This will raise the entry point to the 40% income tax rate

a)      from €34,550 to €35,300 for single earners and

b)      from €43,550 to €44,300 for married couples (with one earner).

The marginal rate of tax on income on earnings up to €70,044 per annum is now 48.5%.

The marginal rate of tax for those earning over €70,044 will remain at

a)      52% for employees and

b)      55% for self-employed individuals earning in excess of €100,000.

BENEFIT IN KIND

The 0% rate on BIK on electric cars has been extended to 2021 subject to a €50,000 cap in car value.

UNIVERSAL SOCIAL CHARGE

There will be a reduction in the third band of USC from 4.75% to 4.5%.

There will be an increase of €502 in the existing lower band of USC. This is worth a maximum of €139 per annum.   In other words, the band to which the 2% USC rate applies will be increased from €19,372 to €19,874.

TAX CREDITS

There will be a €200 increase in the Earned Income Credit for the Self Employed from €1,150 to €1,350.

There will be a €300 increase in the home carer credit from €1,200 to €1,500.   This credit can be claimed by a jointly assessed couple where one spouse/civil partner works in the home to care for children or other dependents, as defined.

PRSI

The weekly income threshold for the higher rate of employer’s PRSI will be increase from €376 per week (€19,552 per annum) to €386 per week (€20,072 per annum).

There will be a 0.1% increase in employers’ PRSI in 2019 from 10.85% to 10.95% and from 10.95 to 11.05% in 2020.

The National Training Fund Levy will increase from 0.8% to 0.9% from 1^st January 2019. The levy forms part of employer’s PRSI for Class A and Class H employments.

BUSINESS TAX

The corporate rate remains at 12.5%, as expected. A number of Business Tax Reliefs were amended as follows:

Key Employee Engagement Programme (KEEP)

There are Increases to the KEEP scheme. The scheme provides for tax relief for certain share remuneration provided to key employees by unquoted SMEs. The three separate amendments are as follows:

1. The ceiling on the maximum annual market value of shares that can be awarded must equate to the full amount of the employee’s salary.
2. A replacement of the three-year limit with a lifetime limit.
3. An increase in the value of shares granted under the scheme from €250,000 to €300,000.

Further clarification on these measures is expected in the forthcoming Finance Bill.

Film Relief

Film relief which was due to expire at the end of 2020, has been extended until 2024.

Three Year Start Up relief

The Start up Relief from corporation tax has been extended until end of 2021.

Controlled Foreign Company (CFC) rules

Controlled foreign corporation rules are to take effect from 1^st Jan 2019.

Capital Gains Tax Exit Tax

CGT Exit Tax at 12½% is to apply from midnight on 9th October 2018 for companies ceasing to be Irish tax resident on any unrealised capital gains arising as well as in situations where the company transfers assets out the State.  This new exit tax regime is to ensure compliance with the EU Anti-Tax Avoidance Directive (ATAD) by 1^st January 2020.

AGRICULTURAL SECTOR

Income averaging

The Minister has proposed removing the restriction on income averaging for farmers with income from a non-farming source.

The current situation is that where a farmer or his/her spouse

a)      carries out another trade or profession or

b)      owns more than 25% of the share capital of a trading company

then they cannot avail of the income averaging provisions.

Stamp Duty Relief for Young Trained Farmers

The Young Trained Farmer Stamp Duty Relief which was due to expire at the end of 2018 will be extended for a further three years to 31^st December 2021.

Stock Relief

The current stock relief measures will be extended for a further 3 years up to and including 31^st  December 2021.

PROPERTY TAX

Interest relief for landlords

Interest relief on loans used to purchase, improve or repair a rental property will be increased from 85% in 2018 to 100% in 2019.

Review of local property tax

Any future changes will be moderate and affordable.

INDIRECT TAX

The Minister confirmed that the reduced 9% VAT rate which applies to certain tourism activities will be increased 13½% from 1^st January 2019.

The 9% VAT rate which applies to the provision of facilities for taking part in sporting activities is being retained.

The 9% VAT rate which applies to certain printed matter  will also be retained, e.g. newspapers

The VAT rate on e-books and electronically supplied newspapers will be reduced from 23% to 9% with effect from 1^st January 2019.

CAPITAL ACQUISITIONS TAX

CAT Threshold

The CAT Group A tax free threshold has been increased to €320,000 for gifts and inheritances received on or after 10^th October 2018.

Group A generally applies to gifts and inheritances from parents to their children.

Additional Measures

• The VRT relief available for hybrid vehicles including plug-in electric hybrids is being extended for one year i.e. until 31^st December 2019.
• A 1% VRT surcharge will apply to diesel engine passenger vehicles registered in Ireland from 1^st January 2019.  This VRT rate is being introduced across all VRT bands.
• Betting Duty on bets entered into by a bookmaker with an individual in Ireland will be increased from 1% to 2% effective from 1^st January 2019.
• From 1^st January 2019, the duty on commissions earned by betting exchanges or intermediaries which are used by persons in Ireland will be increased from 15% to 25%.
• The measure to allow accelerated capital allowances for employer provided fitness and childcare facilities, as introduced by Finance Bill 2017, will now take effect from 1^st January 2019.
• An accelerated capital allowances scheme will be introduced for refuelling equipment and gas propelled vehicles.

For further information, please click:

https://www.oireachtas.ie/en/debates/debate/dail/2018-10-09/3/

https://www.gov.ie/en/department-of-public-expenditure-ndp-delivery-and-reform/collections/budget-2019/

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Discretionary Trusts. Inheritance Tax. Gift Tax. Discretionary Trust Tax. Estate and Succession Planning.

Effective estate and succession planning enables you to tax efficiently transfer your assets, during your lifetime or at death, to your beneficiaries.  Trusts can play an important role in estate planning.   When setting up a Trust, it is essential to take into consideration the following tax heads: (i) Income Tax, (ii) Capital Gains Tax, (iii) Capital Acquisitions Tax, (iii) Stamp Duty and (iv) Discretionary Trust Tax.

INCOME TAX

The tax residence of the trustees is what determines the extent of their liability to Irish income tax.

If all the trustees are Irish resident then they are liable to Irish income tax on the worldwide income of the trust from all sources.

If, however, the trustees are resident in say France or the U.S. for tax purposes, then the trustees will only be liable to Irish income tax on Irish source income.

The Trustees must pay income tax at the standard rate of 20% on any income arising but they will not be entitled to claim any of tax credits, allowances or reliefs as they are not deemed to be individuals.

If the income of the trust has not been distributed within eighteen months from the end of the year of assessment in which the income has arisen, there will be a 20% surcharge on this accumulated income.

In circumstances where a beneficiary has an absolute right or entitlement to the trust income as opposed to the Trustees then Revenue will assess the beneficiary directly.  In other words if the terms of the trust state that income is to be paid directly to a particular beneficiary as opposed to the trust then the beneficiary will be liable to Income Tax on the amounts received.  That individual must file the appropriate tax return and pay the relevant taxes within the deadline dates.

CAPITAL GAINS TAX

For the purposes of CGT, the trustees will to be Irish resident and ordinarily resident if the general administration of the trust is carried out in Ireland and if all or the majority of the trustees are resident or ordinarily resident in Ireland.

In general, if the trustees are resident or ordinarily resident in Ireland they will be liable to Irish capital gains tax on their worldwide gains.

If, however, the trustees are not resident or ordinarily resident in Ireland they will be liable to Irish capital gains tax in respect of any gains arising on disposal of specified assets including:

• Land and buildings in Ireland .
• Minerals in Ireland including related rights, and exploration or exploitation rights in a designated area of the continental shelf.
• Unquoted shares deriving their value, or the greater part of their value, from such assets as mentioned above.

Please keep in mind that, just as for Income Tax purposes, the trustees are not deemed to be individuals and are therefore not entitled to the annual CGT exemption of €1,270 which is only available to individuals.

Apart from selling/distributing the trust assets, the trustees will be deemed to have disposed of assets for CGT purposes in the following three situations:

1. Where the trustees cease to be Irish resident or ordinarily resident.
2. Where a life interest in the trust property has ended but the property continues to be settled property.
3. Where a beneficiary becomes absolutely entitled in possession to the settled property except in situations where it occurred as a result of the death of the individual with a life interest in that property.

Market Value rules are imposed on this event with the Trustees being deemed to have disposed of and immediately reacquired the property at open market value.  As with all CGT computations, the liability is calculated on the difference between its base cost and the deemed market value.

CAPITAL ACQUISITION TAX

Capital Acquisition Tax is only payable when the beneficiary actually receives a gift or inheritance.  Where a beneficiary receives the gift/inheritance under a deed of appointment from a trust then he/she/they will be taxed as if the benefit was received from the settlor/testator.

Capital Acquisition Tax at 33% is payable by the beneficiary and is charged on the value of the gift or inheritance to the extent that it exceeds the relevant tax-free threshold amount.

A charge to Irish Capital Acquisition Tax will arise in the following situations:

• If the beneficiary is Irish resident or ordinarily resident on the date he/she/they receives the benefit.
• If the settlor is Irish resident or ordinarily resident either (a) at the date of setting up the trust or (b) on the date the beneficiary receives the benefit.
• In circumstances where the settlor is Irish resident or ordinarily resident at the date of his/her/their death a liability to Irish CAT will arise on any benefit taken on the settlor’s death
• Where the property, which comprised the benefit, is situated in Ireland.

Points to keep in mind

• The creation of a discretionary trust or the transfer of funds to a discretionary trust will not give rise to a charge to capital acquisitions tax.
• Distributions from a trust, however, can potentially give rise to both an Income Tax and a Capital Acquisitions Tax liability. You’re probably asking yourself if a double charge to tax has arisen.  It has.  Regular or periodic distributions to a beneficiary will be subject to the individual’s marginal rate of Income Tax but can also, at the same time, be liable to CAT.  A Revenue concession exists where CAT is chargeable on the net benefit i.e. the benefit after Income Tax has been deducted.  Don’t forget, the small gift exemption of €3,000 per annum can also be deducted.

STAMP DUTY

Stamp Duty can arise on the transfer of assets into a trust at 1% in the event of shares, residential property valued at less than one million euros, etc. or 2% in the event of commercial property, business assets, etc.

There is no Stamp Duty on the transfer of assets into a trust that is created by a Will.

Where trust assets are appointed by the Trustees to the beneficiaries then no Stamp Duty charge will arise i.e. there is an exemption from Stamp Duty in this situation.

DISCRETIONARY TRUST TAX

Discretionary trust tax of 6% is a once off charge based on the value of assets comprised in a discretionary trust.

If the Trust is wound up and all the assets are appointed within a five year period then 50% of this initial charge will be refunded i.e. 3%

The initial charge is due and payable on the later of the following dates:

• The death of the settlor or
• Where the last of the “principal objects” (i.e. spouse, child or child of a predeceased child of the Disponer) has reached his/her 21st birthday.

A 1% annual charge on undistributed assets comprised in a discretionary trust will arise every year on 31st December.  This annual levy, however, will not arise within the same twelve month period as the initial charge of 6% has been levied.

For further information, please click:

https://www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part05.pdf

https://www.revenue.ie/en/gains-gifts-and-inheritance/discretionary-trust-tax/initial-once-off-6-charge.aspx

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-19/19-03-03.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Tax Advisors. Capital Acquisitions Tax. Agricultural Relief. Tax Relief for Farmers. Succession and Estate Planning

As Tax Advisers, we’re frequently asked to advise business owners stepping down from running their businesses; individuals passing the farm or business to one or more family members or providing for the next generation with assets other than business assets.  To provide the most accurate, relevant and comprehensive succession and estate planning advice possible, it is essential that we understand not just the basic conditions of the main Reliefs and Exemptions but that we have an in-depth knowledge of these rules including exceptions, anti-avoidance provisions, etc.  Agricultural Relief is one of the most significant Reliefs from Capital Acquisitions Tax i.e. the tax that affects recipients of gifts and inheritances.

As you’re probably aware, Agricultural Relief takes the form of a 90% reduction in the market value of the agricultural property which means that only 10% of the market value is liable to Capital Acquisitions Tax.

The relevant piece of legislation is Section 89 CATCA 2003 which provides tax Relief as follows:

1. To recipients who meet the “Farmer Test”
2. In respect of gifts and/or inheritances of “Agricultural Property”
3. On the “Valuation Date”

 Who is a “Farmer”?

To qualify for Agricultural Relief from Capital Acquisitions Tax, the individual receiving the gift or inheritance must be deemed to be a “Farmer” on the Valuation Date.

For the purposes of Agricultural Relief, a “Farmer” is defined as an individual in respect of whom at least 80% of the market value of his or her assets, after taking the gift or inheritance, consists of agricultural property on the valuation date of the gift or the inheritance.  This is calculated as follows:

                         Agricultural Property                         x 100% = 80% at least

Agricultural Property + Non-Agricultural Property

Finance Act 2014 Changes

The following conditions were introduced for gifts or inheritances taken on/after 1st January 2015 where the “Valuation Date” is also on/after 1st January 2015:

The beneficiary must:

1. Farm the agricultural property for a period of at least 6 years starting on the valuation date or lease the agricultural property for a period of at least 6 years beginning on the valuation date.
2. Have an agricultural qualification i.e. a qualification as listed in Schedule 2, 2A or 2B of the Stamp Duties Consolidation Act 1999 or farm the agricultural property for not less than 50% of his or her normal working time.
3. Farm the agricultural property on a commercial basis with a view to making a profit although the timeframe isn’t specified.

The individual may lease the agricultural property to a number of lessees as long as each lease and lessee satisfies the conditions of the relief.

If the beneficiary farms the agricultural property but then decides to lease it within the six year period, then NO clawback of Agricultural Relief will arise providing the lessee and the lease meet the relevant conditions for the remainder of the six year period.

If, following the gift or inheritance the beneficiary leases the agricultural property and within the six year period decides to farm it him/herself, NO clawback of Agricultural Relief will arise.

There is one exception to the “Farmer Test” requirement. To qualify for Agricultural Relief from Capital Acquisitions Tax, the beneficiary doesn’t need to meet the conditions of the “farmer test” where the agricultural property consists of trees or underwood.

This concession does not apply to the lands on which the trees or underwood grow.  To be eligible for Agricultural Relief on the lands, the beneficiary must meet the “farmer” criteria.

What’s included in the Farmer Test?

When carrying out the Farmer Test, the following must be included:

1. The gross value of any assets taken under the gift or inheritance and
2. The gross value of any existing assets held by the beneficiary prior to the gift or inheritance including cars, bank accounts, property, agricultural property, etc.

As you have seen, the liabilities of the beneficiary are not taken into account when carrying out the Farmer Test.  There is, however, one exception and that is any mortgage on the main or principal private residence of the individual, providing it is not deemed to be agricultural property.  Therefore, if the beneficiary’s dwelling house is not a farmhouse then he/she can deduct the amount of the mortgage from its value thereby reducing the value of this non-agricultural asset in the Farmer Test calculation. It is important to remember that the mortgage can only relate to borrowings used for the purchase, repair or improvement of that property.

This is known as the Farmer Test and only by meeting this test will the done or successor be eligible for the 90% Agricultural Relief.

The Farmer Test isn’t quite as straight forward as it seems.  If the individual is taking a life interest in agricultural property or some other limited interest, the gross market value of that interest should be included in the Farmer Test i.e. the value before the age/gender factor is applied.  This point can often be overlooked when carrying out the all too important calculations.

Another point to be aware of is where a benefit is taken subject to a condition in a Will or Deed of Gift that the benefit must be invested in agricultural property. If that condition is fulfilled within two years from the date of the benefit, then Agricultural Relief will apply providing the beneficiary passes the Farmer’s Test because the benefit is considered to be agricultural property both at the date of the benefit and at the valuation date.

The beneficiary cannot claim Agricultural Relief in respect of this benefit unless it was subject to the condition to invest in agricultural property. It is also important to remember that if the benefit is not invested in agricultural property then it will fail.  However, if the client inserts a “gift over” clause in the Will or Deed of Gift then even if the beneficiary doesn’t invest in agricultural property within two years as per the condition, he/she can still receive the benefit.

Anti-Avoidance Provisions 

If the individual is beneficially entitled in possession to (a) an interest in expectancy (e.g. a future interest) and/or (b) property contained in a discretionary trust which was set up by and for the benefit of the done/successor then these amounts should be included in the 80% Farmer Test Calculation.

This is to prevent the donee/successor from using artificial means to reduce his/her non-agricultural property in an attempt to meet the 80% Farmers Test and qualify for the 90% Agricultural Relief.

A future interest is taken into account whether it is vested or contingent i.e. it’s taken into account even where there is only a possibility that the beneficiary may actually receive the benefit.

In the event of a remainder interest, its value is arrived at by deducting the value of the life interest from the market value.

Shares in a company carrying on a farming trade

“Agricultural property” does not include shares in a company carrying on a farming trade.

Agricultural property and other assets used in a farming business carried on by a company may, if conditions are met, qualify for Business Relief.

Where both business relief and agricultural relief can be claimed by a beneficiary, Agricultural Relief must be claimed.

 Agricultural Relief and Dwelling House Exemption

In circumstances where the agricultural property includes a farmhouse on which Agricultural Relief is available, you should also check to see if the Dwelling House Relief also applies.

Where both Reliefs apply you should:

1. Include the value of the farmhouse in the Farmer Test Calculation
2. Then Claim Dwelling House Exemption
3. Apportion the costs and expenses between the farmhouse and the agricultural property in your computation.

Clawback

A clawback of Agricultural Relief arises if the agricultural property, contained in the gift or inheritance, is disposed of within a six year period commencing on the date of the gift or inheritance and is not replaced by other agricultural property.

For benefits received on or after 1st January 2015, a clawback of agricultural relief will also arise where the farmer or lessee ceases to farm all or part of the agricultural property, except for crops, trees or underwood, for at least 50% of that person’s working week within a six year period beginning on the valuation date of the gift/inheritance.

This clawback applies in all cases except where the farmer dies prior to the cessation of the farming activity.

In circumstances where there a clawback of agricultural relief arises, the CAT on the gift/inheritance is recalculated as if Agricultural Relief never applied in the first place.

There will be a clawback of Agricultural Relief if the agricultural property is sold, otherwise disposed of or compulsorily acquired within six years beginning on the date of the gift/inheritance and the full proceeds are not reinvested in replacement agricultural property within one year of the sale/disposal or six years of the compulsory acquisition.

If the disposal or compulsory acquisition takes place after the beneficiary dies the Agricultural Relief will not be clawed back.  Equally the Relief will not be withdrawn on the death of a life tenant within six years of taking the benefit or where the beneficiary receives an interest in agricultural property for a period certain which is less than six years.

If only a portion of the proceeds is re-invested in agricultural property, then only a portion of the relief can be clawed back. For example, if a Farmer disposes of 100% of the land he inherited but only reinvests 75% of the proceeds back into agricultural property then CAT will be calculated as if 25% of the value of that farm had not ever qualified as agricultural property.

If the beneficiary disposes of agricultural property that qualified for Agricultural Relief, he/she cannot use the proceeds from that sale to buy “replacement” agricultural property from his/her spouse/civil partner.

We referred above to a situation where an individual didn’t need to qualify as a Farmer to be eligible for Retirement Relief.  Where that beneficiary, in relation to trees or underwood, disposes of these assets within six years of the date of the gift or inheritance there will be no clawback of the relief.

For Development Land, the Clawback period is extended from six to ten years in the following circumstances where:

1. a gift or inheritance of agricultural property is taken on or after 2nd February 2006 and Agricultural Relief was claimed and
2. the agricultural property is “development land” which is disposed of in the period beginning on the sixth anniversary of the date of the gift or inheritance and ending four years after that date.

“Development land” is defined as land in Ireland where the market value at the date of a gift or inheritance exceeds the current use value of that land on that same date.  It also includes shares which derive their value, wholly or mainly, from such land.

As you are aware, when calculating agricultural relief, the relief is based on the market value. Where the market value is comprised of both development value and current use value and Section 102A CATCA 2003 applies, then only the relief relating to the development land will be clawed back.  This relief will be clawed back even if the sales proceeds were used to purchase replacement agricultural property.

In Summary

Therefore to fulfill the criteria of being a “Farmer” means:

• At least 80% of the individual’s assets must be agricultural as the date of transfer and he/she must farm or lease the land for a minimum of six years
• He/she must have an Agricultural qualification including the Green Cert or an Agricultural Science Degree or must secure that qualification within four years from the date on which the farm was transferred.
• He/she must farm that land on a commercial basis with a view to making a profit.
• If he/she doesn’t hold an agricultural qualification that individual must spend at least 50% of his/her normal working time farming (i.e. at least twenty hours a week farming)
• Even if the individual doesn’t meet these criteria, he/she may still be eligible for Agricultural Relief if he/she leases out the agricultural property transferred to him/her to a Farmer for six years, providing that individual meets the “Farmer” criteria as listed above.

For further information on Capital Acquisitions Tax, please click: https://www.revenue.ie/en/tax-professionals/tdm/capital-acquisitions-tax/cat-part11-20180131153037.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Business Tax. Corporation Tax. Finance Act. Research & Development. Capital Allowances.

CORPORATION TAX

For all those individuals currently preparing his/her own 2015 Corporation Tax Return, please be aware of the significant changes in Finance Act 2014, especially in the areas of:

1. Research & Development Tax Credits
2. Capital Allowances for the Provision of Specified Intangible Assets
3. Three Year Relief for Start-up Companies
4. Employment and Investment Incentive (EII)
5. Company Residence

Research and Development (R&D) Tax Credit

Up to 1st January 2015, Section 766 TCA 1997 provided that the 25% tax credit applied to the amount of qualifying Research and Development (R&D) expenditure incurred by a company in a given year that was in excess of the amount spent in 2003 (i.e. the base year).

For accounting periods beginning on or after 1st January 2015, the base year restriction has been removed which means the credit is now available on a volume basis as opposed to an incremental basis.

Capital Allowances for the Provision of Specified Intangible Assets

 This provides capital allowances for expenditure incurred by a company on the provision of certain intangible assets for use in a trade.

Up to 1st January 2015 the use of such allowances in any accounting period was restricted to a maximum of 80% of the trading income from the “relevant trade” in which the assets were used.  Another way of wording this is, for accounting periods ending on or before 31st December 2014 only 80% of the income from the “relevant trade” could be sheltered by the capital allowances and interest.

Finance Act 2014 introduced an amendment to this rule stating that for accounting periods beginning on or after 1st January 2015 the restriction has been removed meaning all the “relevant trade” income can now be sheltered.

Finance Act 2014 also introduced the following:

1. a flat five year period for all disposals on or after 23rd October 2014.
2. an amendment to the “connected party” rules stating that from 23rd October 2014 the purchaser can claim capital allowances on the lower of (a) the purchase price paid or (b) the tax written down value.

Three Year Relief for Start-up Companies

 This relief from corporation tax on trading income (and certain capital gains) of new start-up companies in the first three years of trading has been extended to new business start ups in 2015.

Employment and Investment Incentive

The EII is being amended as follows:

1. The amount a company can raise in a lifetime has been increased from €10 million to €15 million (s. 491(2) TCA 1997).
2. The amount a company can raise in EII funds in any one year had been increased from €2.5 million to €5 million (s. 491(4) TCA 1997).
3. The scheme has been expanded to include medium sized enterprises in certain non-assisted areas, the management of nursing homes and IFSC services, subject to certain conditions.
4. The period for which shares in an EII company must be held by an investor to avoid a clawback of the relief has been extended to four years (s. 496(1) and s.488(1) TCA 1997).
5. any claim for EII relief will not be allowed unless, at the time the claim is made, the company in which the investment is made qualifies for a tax clearance certificate

Previously income tax relief was given for 30/41 of the investment made. The remaining tax relief of 11/41 was given in the year after the holding period ended. Finance Act 2014 amended the income tax relief which will now be 30/40 and 10/40 respectively.

Company Residence

Finance Act 2014 introduced amendments to the corporate tax residence rules to address concerns about the “double Irish” structure.

The new rules state that an Irish-incorporated company will be regarded as Irish tax resident here unless it is deemed to resident in another country under the terms of a Double Taxation Agreement.  Therefore if, under the provisions of that treaty, an Irish-incorporated company is considered to be tax resident in another jurisdiction then the company will not be regarded as Irish tax resident.

These changes are in addition to the existing “central management and control test” which means that the new legislation does not prevent  a non-Irish incorporated company that is managed and controlled in Ireland from being considered resident for tax purposes in Ireland.

The new provisions take effect from 1st January 2015 for companies incorporated on or after 1st January 2015.

For companies incorporated before 1st January 2015, the new provisions will come into effect from 1st January 2021.

As an anti-avoidance measure, however, the new legislation take effect for companies incorporated before 1st January 2015 where there is (a) a change in the ownership of the company as well as (b) a major change in the nature or conduct of the business of the company within the time-frame that begins one year before the date of the change of ownership and ending five years after that date i.e. occurring within a period of up to six years.

The aim of this anti-avoidance provision was to restrict the incorporation of companies between 23rd October 2014 and 31st December 2014 to 1st January 2015 where the primary intention was to avail of the extension.

It is always essential to keep up to date with changes to the Finance Act especially if you are preparing your own tax returns.

For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/vat/vat-guidance-notes-fa2014.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.