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If you have recently moved to the UK and intend selling your home in Ireland, please be aware that even if you qualify for Principal Private Residence Relief under Section 604 TCA 1997 in Ireland you may not qualify for UK Private Residence Relief.

This article is aimed at individuals who have become UK resident and who are in the process of selling their Irish principal private residence.

In general, you do not pay Capital Gains Tax when you sell or ‘dispose of’ your home if all the following conditions apply:

• you have only one home and you’ve lived in this property as your main home for the entire time you’ve owned it
• you have not let part of it out (Please be aware that this does not include having a single lodger)
• you have not used part of the property for business purposes only
• the grounds, including all buildings, are less than 5,000 square metres in total
• you did not buy the property with the sole or main intention to make a gain

If all the above conditions apply you will automatically get a tax relief called Private Residence Relief.

Your period of ownership begins on the date you first acquired the dwelling house or on 31st March 1982 if that is the later date. It ends when you dispose of or sell the property.

The final 18 months of your period of ownership will always qualify for Private Residence Relief regardless of how you use the property during that time but providing the property has been your only or main residence at some point.

The following periods of absence are treated as periods of occupation for the purposes of calculating Private Residence Relief:

• Any periods of absence, for whatever reason, not exceeding three years in total
• Any period of absence when carrying out the duties of your employment outside the United Kingdom
• Any periods not exceeding four years in total which are due specifically to employment requirements.

In order for these periods of absence to qualify as “deemed occupation” there must be a time both before and after the absence when the dwelling house is the individual’s sole or main residence. It is important to keep in mind that absences due to the conditions of an employment will qualify for the Relief even if the individual does not return to the dwelling house afterwards provided the reason for not their returning is due to their contract of employment requiring them to live somewhere else.

Any period of absence which requires the individual to live in job/work related accommodation will qualify for Private Residence Relief if there is an intention to occupy the dwelling as a main residence at some point.

HMRC will, by concession, allow a period of up to one year before the individual begins to occupy the property as his/her principal private residence to be treated as a period of occupation provided the property is then occupied as his/her only or main residence. In exceptional cases, HMRC may extend this period to two years.

From April 2015, the PRR rules were amended so that a property may only be treated as an individual’s main or sole residence for a tax year where that person or his/her spouse/legally registered partner has either:

(a) been tax resident in the same country as the property for the tax year in question (For further information on residence rules please follows this link:  https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1) or

(b)  has stayed overnight in the property at least 90 times in that UK tax year.  Time spent in another property owned in the same jurisdiction/country can also be included in the ninety day count so that the total number of days in all properties in the territory in question are added together.

The new rules apply equally to a UK resident individual disposing of an overseas home as well as to a non-UK resident disposing of a home in the United Kingdom.

Finally, Lettings Relief may be available in circumstances where Principal Residence Relief is restricted because all or part of a property has been rented out.

This Relief is particularly important for individuals who, due to the current economic climate, experience difficulty selling their former home and, as a result, find they need to rent it out while they’re trying to sell it.

A maximum gain of £40,000 per owner is exempt from Capital Gains Tax provided that property has at some time been the main or only residence of the owner.

From 6th April 2020 there will be a change to this Relief whereby Lettings Relief will only be available in situations where the owner shares occupancy with the tenant.

Traders (including farmers), professionals and other persons carrying on a business, as well as non-trading or non-profit making organisations and bodies of persons (including charitable organisations and statutory bodies) are required to file Forms 46G annually containing details of payments made by them to third parties for services provided.

For individuals / persons (other than companies) the return should include payments made

1. in the twelve month period to 31st December each year or
2. up to the date on which accounts of the trade or profession are normally prepared

The Form 46G must be filed on or before 31st October of the following year.

For companies, the Form 46G should cover all relevant payments in an accounting period and be submitted no later than 9 months following the end of the relevant accounting period.

A non-compliant taxpayer (i.e. where a taxpayer fails to deliver a true and correct return) may be liable to a penalty of €3,000. In addition to which a tax clearance certificate may not be granted and tax refunds may be withheld.

Details of payments must be returned where the total amount paid to one individual or company in the year exceeds €6,000.

Relevant payments include:

• Payments for services provided in connection with the trade, profession, business etc.
• Payments for services provided in connection with the formation, acquisition, development or disposal of the trade or business
• Periodical or lump sum payments made in respect of any copyright.

Revenue provides a list of services that must be specifically disclosed. This list should be reviewed prior to filing a Form 46G on an annual basis.

The following categories of services were recently added:

• Call Centre/Customer Service
• Childcare
• Fitness, Sport & Leisure Services
• Fleet Management Services
• Health & Safety Services
• HR/Recruitment Services
• Internet & Information Technology related services (including website design or re-design, cloud services etc.)
• Landscaping/Gardening/Horticulture
• Marketing /Business Analysis
• Printing & Publishing
• Research

Certain payments are not required to be disclosed such as:

• Payments for essential services/utilities such as electricity, gas and telephone
• Payments from which income tax has been deducted
• Payments from which withholding tax has been deducted.  This includes payments which are subject to PAYE, fees paid subject to withholding tax, payments subject to Relevant Contracts Tax (RCT), etc.
• Payments to non-residents
• Payments for services where the value of any goods provided as part of the service exceeds two thirds of the total charge

For further details, please follow the link:

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-38/38-03-13.pdf

Has your business incurred VAT costs in another EU member State between 1st January and 31st December 2018?

If the answer is “yes” then you should begin preparing your ‘EVR’ refund claim.

As you’re aware, if you are an Irish VAT registered business who has incurred VAT in another E.U. state, you can’t reclaim this VAT in your Irish VAT 3 Form.  Instead, you must submit an online claim through the Electronic VAT Refund (EVR) service.

This EVR claim is made via the tax authorities’ portal in the trader’s own country.  In other words, an Irish VAT registered business must submit its application to the Irish Revenue Authorities via ROS.

It is the responsibility of the Irish Revenue Authorities to then forward the EVR claim to the E.U. state in question to process the refund.

The EVR application must include the following:

• The Supplier’s details
• The Country
• Import information
• The VAT details
• Details regarding the type of supply made
• In some member states invoices may need to be included with the claim.

The EVR application must be filed on or before 30th September 2019 in relation to VAT incurred between 1st January and 31st December 2018.

The refund payment will be made by electronic funds transfer (EFT) to the bank details provided in the claim.

A maximum of five applications can be made via the EVR  in a calendar year.  The refund period can’t be greater than one calendar year (i.e. 1st January to 31st December) and it can’t be less than three calendar months except in circumstances where the application is in relation to the last quarter of the year.

It is not possible to amend a claim to increase a VAT refund.

Please be aware that EVR reclaims are governed by the VAT recovery rules of the E.U. member state to which the claim relates.  In other words, if you are an Irish VAT registered business making an EVR reclaim in, say, France then you must comply with the French VAT rules and not the Irish rules.

If, however,  you are registered or have an obligation to register for VAT in a particular EU member state then, any reclaim of VAT incurred there must be made directly to the tax authorities of that particular E.U. jurisdiction.

For further information, please click on to the link:

https://www.revenue.ie/en/vat/reclaiming-vat/irish-vat-registered-traders-reclaiming-vat-from-european-union-eu-member-states.aspx

From 1st January to 31st December 2021 (i.e. for a three year period) there will be no Benefit in Kind charge on vehicles solely powered by electricity if the original market value is less than €50,000.

Please be aware this favourable treatment does not apply to hybrids.

In situations where the open market value of the vehicle is greater than €50,000 the excess will be liable to tax as a Benefit in Kind.

Electric vehicles valued at in excess of €50,000 that were provided to the employee between 1st January 2017 and 9th October 2018 continue to be exempt from a BIK charge.  Please keep in mind, however, that this exemption could be affected if the electric car which was provided to the original user  between 1st January 2017 and 9th October 2018 is subsequently provided to a new user.

For further information, please follow this link:

https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/private-use-of-company-cars/exemptions.aspx

There have been two updates to SARP legislation in the most recent Finance Act.

Revenue’s guidance on Special Assignee Relief Programme (SARP) has been updated to take into account the recent changes introduced by Finance Act 2018:

1. Details of the cap of €1 million introduced from 1st January 2019 for the years 2019 (for new entrants only) and 2020 (for all claimants).

A cap has been reintroduced on the amount of the employment income to which SARP relief can apply.

The upper income threshold of €1 million will apply to any relevant employee who first arrives in Ireland on or after 1st January 2019.

For the tax year 2020, the upper income threshold will apply to all relevant employees.

2. Clarification regarding the requirement to file Form SARP 1A within the 90 day time limit

From 1st January 2019 the time limit for the submission of the form SARP 1A will be extended from within 30 days of the date the employee first arrives in Ireland to carry out his/her employment duties to 90 days.

For further information, please click on the following link:

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/income-and-employment/special-assignee-relief-programme/index.aspx

If you are facing retirement or redundancy, it is important to understand the tax treatment of your severance package. The following attract beneficial tax treatment:

1. Statutory redundancy payments
2. Ex-gratia Termination payments
3. Pension lump sums

Statutory redundancy payments

Statutory redundancy payments are tax exempt.  They are based on two weeks’ pay for every year of service plus one additional week’s pay with maximum weekly earnings capped at €600 per week.  Income in excess of €31,200 is ignored when calculating Statutory redundancy payments.

Ex-gratia termination payment

Lump sum payments paid by an employer on retirement or redundancy may be taxable.

All or part of the ex gratia termination payment may qualify for tax relief.

The termination payment tax reliefs are not available, however, to any payments made to an employee under the terms of their employment contract. In other words, any contractual payments made by the company to its employee are treated in the same way as a salary payment.

Only complete years are counted for purposes of the reliefs i.e. part of a year cannot be taken into account for the purposes of the calculation.

There are three types of tax reliefs available:

1. Basic Exemption – This exemption is calculated as €10,160 plus €765 for each complete year of service.

2. Increased Basic Exemption – The Basic exemption may be increased by a further €10,000 less the current actuarial value of any tax free pension lump sum receivable now or in the future from the company/occupational pension scheme. This relief is available provided the employee hasn’t claimed an exemption in excess of the Basic Exemption within the previous ten years.

3. Standard Capital Superannuation Benefit (SCSB) relief – This Relief is based on the employees’ average annual remuneration for the last 36 months up to the date of termination.

The tax free amount is calculated as follows:

(A × B) − C

15

where

A = the average remuneration for the last 36 months of service up to the date of termination.  The value of any taxable benefits can be included in the figure for emoluments.

B = The number of complete years of service.

C = Any tax free lump sum received or receivable under the employer/occupational pension scheme.

There is a lifetime cap of €200,000 on the tax-free amount of a termination payment an employee is entitled to receive.

The amount of the termination payment in excess of the relevant exemption/relief is liable to Income Tax and Universal Social Charge at the employee’s marginal rates.

There is no employee and employer’s PRSI payable on a termination payment.

Before making any decision, please keep in mind that claiming either (i) the Increased Basic Exemption or (ii) the SCSB Relief can affect an employee’s ability to receive a tax-free lump sum from their employer pension scheme on retirement.

Pension Lump Sums

When you retire, you can opt to take a tax-free retirement lump sum which is capped at €200,000 under current legislation.

The amount between €200,001 and €500,000 is taxable at the standard rate of tax being 20%

Any amount over €500,000 is taxed under the Pay As You Earn system at the taxpayer’s marginal tax rate of 40%.

For further information on Termination Payments, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-05-19.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.

The Chancellor announced today that the government will extend first-time buyers relief to all first-time buyers of shared ownership properties in England and Northern Ireland.

The relief will not apply to purchases of properties valued over £500,000.

This amendment will apply to relevant transactions with an effective date of on or after 29^th October 2018.  The measure will also apply retrospectively to transactions with effective dates on or after 22^nd November 2017, which was the date first-time buyer’s relief was originally introduced.

The relief must be claimed in an SDLT Return or by amending an SDLT return which has already been filed.

For those who completed their transaction before 29^th October 2018, the opportunity to amend their SDLT Return will be extended by a further 12 months until 28^th October 2019.

A technical correction was included to extend the time frame in which the 3% SDLT on additional dwellings can be reclaimed.  This applies to situations where an individual sells his or her home within three years of making a replacement purchase.  The amendment, which comes into effect from 29^th October 2018, extends the reclaim period from three to twelve months following the sale of the old home.

The Chancellor announced two key changes to Entrepreneurs’ Relief in today’s budget which will impact shareholders and business owners.

What is Entrepreneurs’ relief?

Entrepreneurs’ Relief reduces the rate of Capital Gains Tax on disposals of certain business assets from 20% to 10%.

What changes were introduced today?

 Today’s Budget introduced two new additional tests to be met:

1. The First one which extends the qualifying holding period from one year to two years for disposals on or after 6^th April 2019.  In other words, it increases the holding period for shares held by individual shareholders. Individuals will now be required to hold the shares for at least 24 months rather than the current 12 months before they can claim Entrepreneurs’ Relief on the disposal of their shares. This change will apply to disposals made on or after 6 April 2019.
2. The second change immediately introduces two further tests that must be satisfied before Entrepreneurs’ Relief is available. These tests will require the claimant to have at least a 5% interest in both (a) the distributable profits and (b) the net assets on a winding up of the company. The measure will have effect for disposals on or after 29 October 2018.

What does the 5% Rule mean?

 The changes introduced in today’s Budget mean that along with existing conditions that an individual must hold at least 5% of the ordinary share capital and voting rights of a trading company, the individual must also be entitled to:

a)       5% of distributable profits and

b)       5% of assets available on a winding up of that company.

How is Entrepreneurs’ Relief affected by Dilution?

 As previously announced, the Government confirmed that legislation will be implemented from 6^th April 2019 in relation to individuals’ shareholdings diluted below 5% as a result of a commercial cash investment.

These individuals will be able to elect to preserve their Entrepreneurs’ Relief on gains to the date of dilution by treating their shareholding as having been disposed of and simultaneously reacquired at market value at the time of dilution. Another way of looking at this is, under the new rules, a shareholder can elect to claim Entrepreneurs’ Relief on the capital gains accrued before dilution below 5%.  This is provided the dilution resulted from an issue of new shares for cash. The Entrepreneurs’ Relief will be claimed on the eventual disposal of those qualifying shares.  There is, of course, the prerequisite that the share issue has not occurred for the purposes of tax avoidance.

There will also be an election allowing the individual to defer any tax due until a future liquidity event.

It is important to keep in mind that this provision will also not be available if the percentage entitlement falls below 5% due to a part-disposal of shares.

What about Entrepreneurs’ Relief in situations where there has been a transfer of a business to a limited company?

 The changes to Entrepreneurs’ Relief introduced in today’s Budget will affect the availability of the relief on the sale of shares originally issued after the incorporation of a trade.

A transfer of a trade in exchange for shares in a trading company should benefit from Entrepreneurs’ Relief if the trade existed for at least two years prior to the date of incorporation.

Under the current regime the claimant was required to hold the resultant shares for at least two years prior to the date of disposal.

Therefore, this amendment to the Entrepreneurs’ Relief is deemed to benefit sole traders who incorporate the trade shortly before selling their business.

Current UK Legislation

Principal Private Residence Relief (PPR) is a capital gains tax relief on the disposal of an individual’s only or main residence.

Under current U.K. legislation, an individual can claim relief for any period where the relevant property is deemed to be the individual’s “Principal Private Residence” (PPR).

The individual can claim Principal Private Residence relief for the final eighteen months of ownership providing the property had been that individual’s principal or main residence at any point during his or her ownership.  In other words, the final eighteen months always qualify for Principal Private Residence Relief even if the dwelling was no longer the individual’s only or main residence.

Lettings relief currently provides relief of up to £40,000 to individuals who let out a property which is or has been their main or principal residence.

Budget 2018 Amendments

The government proposes to make the following two changes with effect from April 2020:

1)      The Lettings Relief will be reformed so that it only applies where the owner of the property is in “shared-occupancy” with a tenant.  The relief can reduce the capital gain, per person, by up to £40,000, giving a potential tax saving of up to £11,200 (£40,000 x 28%) and

2)      The final period of exemption, which applies if a property has been an individual’s PPR at any point during their period of ownership, will be reduced from eighteen months to nine months.   There are no proposed amendments to the thirty six months that are available to disabled persons or those residing in a care home.

The government will consult on the proposed changes before legislating.

For taxation purposes, Capital Allowances are deemed to be amounts a business can deduct from its profits in respect of “qualifying Capital Expenditure” which was incurred on the provision of certain assets (i.e. plant and machinery) used for the purposes of the trade.

As depreciation is not allowable for the purposes of calculating tax, Capital Allowances allow the taxpayer to write off the cost of the asset over a certain period of time.

The 2018 Finance Act introduced the following amendments to Capital Allowances as follows:

Accelerated Capital Allowances for Energy-Efficient Equipment

Section 285A TCA 1997 came into effect on 9^th October 2008 to provide relief to companies purchasing energy efficient equipment for the purposes of their trade.

This Capital Allowance Relief was provided in the form of a deduction which equalled 100% of the value of the equipment in the year of purchase provided certain conditions were met (see Schedule 4A TCA 1997).  In other words, this relief reduces the taxable profits, in year one, by the full amount incurred on the purchase of the equipment.

Finance Act 2017 amended the definition of “relevant period.”  As a result, the qualifying period was extended until 31^st December 2020.

On 14^th February 2018, Revenue issued eBrief No. 22/2018 confirming that the Tax and Duty Manual has been updated to reflect the extension of the relief to 31st December 2020.

Section 17 FA 2018 contains further amendments to the scheme.

It sets out criteria as to which products qualify for accelerated wear and tear allowances.

To qualify for the relief, the equipment must be new.

Section 17 FA 2018 makes reference to the Sustainable Energy Authority of Ireland (SEAI) being allowed to establish and maintain a list of energy-efficient equipment under the scheme.  In summary, in order for energy equipment to qualify for the accelerated capital allowances, it must appear on the SEAI list.  These amendments remove the requirement for government to issue Statutory Instruments, on a regular basis, setting out the criteria for “qualifying assets.”

This section of legislation comes into operation on 1st January 2019.

Energy-efficient equipment that has not been approved but is deemed to be plant and machinery can of the normal wear and tear allowances being 12½% over an eight year period.

Capital allowances on childcare and fitness centre equipment and buildings

Section 12 Finance Act 2017 introduced a new accelerated capital allowances regime for capital expenditure incurred on the purchase of equipment and buildings used for the purposes of providing childcare services or fitness centre facilities to employees.

The section amended the Taxes Consolidation Acts 1997 to include two new sections: s285B TCA 1997 and s843B TCA 1997.

The Relief was subject to a Commencement Order which was never issued.

Section 19 of Finance Act 2018 amends Parts 9 and 36 as well as Schedule 25B of the TCA 1997.

The scheme commences from 1^st January 2019.

Finance Act 2018 amends the definition of “qualifying expenditure” making the relief available to all employers, as opposed to just those carrying on a trade which wholly/mainly involves childcare services or the provision of facilities in a fitness centre.   In other words, the relief will be available to all employers since the restriction that the relief is only available to trades consisting wholly/mainly of the provision of childcare services or fitness facilities has been removed.

Where a person has incurred “qualifying expenditure” on “qualifying plant or machinery” a 100% wear and tear allowance is allowed in the year in which the equipment is first used in the business under Section 285B TCA 1997.

Section 843B TCA 1997 allows employers to claim accelerated industrial buildings allowances of 15% for six years and 10% for the seventh year in relation to capital expenditure incurred on the construction of “qualifying premises” i.e. qualifying expenditure on a building or structure in use for the purpose of providing childcare services or fitness centre facilities to employees of the company.

The facilities must be for the exclusive use of the employees and can be neither accessible nor available for use by the general public.

The relief will not be available to commercial childcare or fitness businesses nor will it be available to investors.

Accelerated Capital Allowances for gas vehicles and refuelling equipment

Section 18 Finance Act 2018 introduced accelerated allowances for gas vehicles and refuelling equipment which provides for an accelerated capital allowances rate of 100% on “qualifying expenditure” incurred between 1^st January 2019 and 31^st December 2021.  This section amends the Tax Consolidation Act of 1997 by inserting Section 285C.

Qualifying expenditure is defined as capital expenditure incurred during the relevant period on the provision of “qualifying refuelling equipment” or “qualifying vehicles” used for the purposes of carrying on a trade.

“Qualifying refuelling equipment” includes the following:

• a storage tank for gaseous fuel
• a compressor, pump, control or meter used for the purposes of refuelling gas vehicles or
• equipment for supplying gaseous fuel to the fuel tank of a gas vehicle.

The equipment in question must be new and installed at a gas refuelling station

“Qualifying vehicle” is defined as a gas vehicle, which is constructed or adapted for:

• the conveyance of goods or burden of any description
• the haulage by road of other vehicles or
• the carriage of passengers.

The vehicles in question must be new and do not include private passenger cars.

This section comes into operation on 1^st January 2019.

Disclaimer This article is for guidance purposes only. Please be aware that it does not constitute professional advice. No liability is accepted by Accounts Advice Centre for any action taken or not taken based on the information contained in this article. Specific, independent professional advice, should always be obtained in line with the full, complete and unambiguous facts of each individual situation before any action is taken or not taken.  Any and all information is subject to change.