Tax Rates and Tax Bands. BUDGET SUMMARY 2008 The tax rates remain unchanged at 20% and 41%. The standard rate tax band (20%) has been widened. INCOME TAX The table below sets out the tax rates and bands. In his Budget Statement on 5 December 2007, the Personal 2007 2008 Minister for Finance announced a number of changes to Circumstances ? ? the personal tax system. Single/Widowed without 34,000 @ 20% 35,400 @ 20% Tax Credits dependant Balance @ 41% Balance @ 41% The table below outlines increases for 2008. children Single/Widowed Tax Credit 2007 ? 2008 ? qualifying for 38,000 @ 20% 39,400 @ 20% Single Person 1,760 1,830 One Parent Balance @ 41% Balance @ 41% Married person 3,520 3,660 Family Tax PAYE Credit 1,760 1,830 Credit Widowed person (without 2,310 2,430 Married Couple 43,000 @ 20% 44,400 @ 20% dependant children) one spouse with Balance @ 41% Balance @ 41% One Parent Family Credit 1,760 1,830 Income Incapacitated Child Credit Max 3,000 3,660 Married Couple 43,000 @ 20% 44,400 @ 20% Blind Tax Credit both spouses with increase of with increase of Single person 1,760 1,830 with Income 25,000 max. 26,400 max. One Spouse Blind 1,760 1,830 Balance @ 41% Balance @ 41% Both Spouses Blind 3,520 3,660 Widowed Parent Exemption Limits Bereaved in 2007 - 4,000 The exemption limits for persons aged 65 years and over 2006 3,750 3,500 have been increased as indicated in the table below: 2005 3,250 3,000 2004 2,750 2,500 Personal 2007 2008 2003 2,250 2,000 Circumstances ? ? 2002 1,750 - Single/Widowed Age Tax Credit 65 years of age 19,000 20,000 Single/Widowed 275 325 & over Married 550 650 Married Couple Dependent Relative 80 80 65 years of age 38,000 40,000 Home Carer 770 900 & over The limits for Single/Widowed persons aged under 65 and The following reliefs remain unchanged: Married couples aged under 65 remain unchanged at ?5,210 and ?10,420 respectively. Relief 2007 2008 (Allowed at the taxpayer’s top ? Max ? Max Marginal Relief will continue to apply where income does rate of tax) not greatly exceed the relevant exemption limit. Employing a Carer 50,000 50,000 The above exemption limits are increased by ?575 for each of the first two dependent children and by ?830 for the third and subsequent children. Changes to Standard Rated Reliefs are as follows: (Allowed at 20% rate band) Tax Relief at Source – Mortgage Interest Relief Rent Tax Relief 2007 2008 The current annual ceiling on the amount of interest that ? Max ? Max can be allowed on a mortgage is being increased with Single - under 55 1,800 2,000 effect from 1 January 2008 for first-time buyers from Married/Widowed - under 55 3,600 4,000 ?8,000/?16,000 single/married to ?10,000/?20,000 Single - 55 & over 3,600 4,000 single/married. The additional relief will be available for Married/Widowed - 55 & over 7,200 8,000 the first seven years for which there is an entitlement to mortgage interest relief. Trade Union Subscriptions 300 350 The ceiling for non-first-time buyers remains unchanged Service Charges at ?3,000/?6,000 for single/married. Relief on service charges remains unchanged. A maximum of ?400 tax relief is granted (at 20% tax rate) in 2008 for charges paid in the year 2007. Rent-a-Room Scheme The limit of the exemption from income tax which applies to rent received, where a person rents out a room or rooms in his or her principle private residence, is to be increased from ?7,620 to ?10,000.
Specified Rates for Preferential Home Loans and PRSI & HEALTH CONTRIBUTIONS Other Loans An employee in receipt of a preferential loan is charged The following changes are effective from 1 January 2008: income tax on the difference between the interest actually paid and the amount which would have been payable at Employee’s Annual Earnings Ceiling the “specified” rates of interest for the loans. To reflect The employee’s annual earnings ceiling (above which they increases in interest rates, the specified rate in respect of pay no social insurance contributions) is being increased home loans is being increased from 4.5% to 5.5% and the from ?48,800 to ?50,700. specified rate in respect of other loans is being increased from 12% to 13%. These changes will take effect from 1 Employee income thresholds January 2008. The threshold for employee PRSI is being increased from ?339 a week to ?352 a week. BUSINESS EXPANSION SCHEME (BES) The requirement that recycling companies must have The threshold for payment of the 2% Health Contribution received grant assistance before availing of the Business is being increased from ?480 a week to ?500 a week. Expansion Scheme (BES) is to be replaced by a requirement that their business proposals must be The additional 0.5% Health Contribution on earnings certified by an industrial development agency or County exceeding ?1,925 per week (equivalent to ?3,850 per Enterprise Board before they avail of the scheme. As the fortnight and to ?8,342 per month) is unchanged. BES is an approved State aid, it will be necessary to advise the European Commission of this proposed change. The annual earnings threshold for the Health Contribution is being increased from ?24,960 to ?26,000. Extension of S481 Film Relief Employee's PRSI-Free Allowance The current provisions in relation to the tax relief for The PRSI-Free Allowance for employees in Classes A and investment in films are due to terminate on 31 December H with weekly earnings of more than ?352 remains at 2008. The scheme will be renewed for another 4 years to ?127 per week and at ?26 per week for all employees in 31 December 2012. Any revisions that may be necessary Classes B, C and D.: to the scheme will be provided for in the Finance Bill 2008. VAT Capital allowances and (and expenses) for business cars VAT Registration Threshold for SMEs A revised scheme for capital allowances and leasing The VAT registration thresholds for small businesses are expenses for cars used for business purposes is being being increased from ?35,000 to ?37,500 in the case of introduced. The revision will link the availability of such services, and from ?70,000 to ?75,000 in the case of allowances and expenses to the CO2 emission levels of the goods. These increases will take effect from 1 May 2008. vehicles. Cars will be categorised by reference to CO2 emissions with the emissions bands being broadly Reduced VAT rate for certain agricultural inputs consistent with the new VRT system, as follows: used to produce bio fuel The VAT rate on the supply of seeds, and of roots, bulbs, rhizomes and similar supplies used for the agricultural Category A Category Category Category production of bio fuel crops, e.g. elephant grass, will be Vehicles B/C Vehicles D/E Vehicles F/G Vehicles reduced from 21% to 13.5% with effect from 1 March 0 –120g/km 121 – 155 156 – 190 191 g/km + 2008. g/km g/km Review of VAT on Property Transactions Cars with CO2 emission levels in Category A/B/C above Provision will be made in the Finance Bill for the will benefit from capital allowances at the current car introduction of a new system for applying VAT to property value threshold under the existing scheme of ?24,000, transactions. The changes are designed to simplify the regardless of the cost of the car. Cars in Category D/E rules, while ensuring a more equitable treatment for will receive allowances of 50% of the current car value taxpayers. The new rules will apply to both residential threshold or 50% of the cost of the car, if lower. Cars in and commercial property supplied in the course of Category F/G will not qualify for capital allowances. business. The VAT charge on sales of residential property remains unchanged. The new system will take effect from Leasing Expenses 1 July 2008. Cars in Category A/B/C above will benefit from a proportionately higher deduction than the actual leasing Reverse charge mechanism in the Construction expenses where the cost of the car is less than ?24,000. Sector Cars in Category D/E will get 50% of the leasing expenses A reverse charge mechanism for VAT on supplies made by they would otherwise benefit under the current scheme. a subcontractor to a principal contractor in the Cars in Category F/G will not qualify for a deduction for construction sector is being introduced with effect from 1 leasing expenses. September 2008. The revised scheme will come into effect in respect of cars A reverse charge means that instead of the subcontractor purchased or leased on or after 1 July 2008. charging VAT on his supply to a principal and accounting to Revenue for the VAT, the principal contractor will account to Revenue for the VAT. Both the subcontractor and the principal will continue to claim input credits.
FARMING TAXATION Tax Credit Scheme for Research and Development expenditure The Farmer’s Flat Rate Addition The base year for expenditure which is used to calculate The rate of the flat rate addition payable by VAT the qualifying incremental expenditure on research and registered traders on purchases from non-VAT registered development (R&D) under the tax credit scheme is being farmers remains unchanged at 5.2%. fixed at 2003 for a further four years to 2013. The change will provide an additional incentive for increased Tax relief on the dissolution of farm partnerships expenditure on R&D in future years and it will offer more A new relief from Capital Gains Tax on the dissolution of certainty to industry in relation to the tax credit scheme. farm partnerships will be introduced in the Finance Bill. The relief will run for a period of 5 years and full details It will be necessary to inform the European Commission will be contained in the Finance Bill. about these changes from a State Aid perspective. Milk Production Partnerships Where a farmer on income averaging enters a milk STAMP DUTY production partnership the provisions that result in a claw back of income tax will no longer apply. Residential Property - New Rate Structure A simplified system, incorporating an exemption of Sugar Beet Diversification ?125,000 with 2 rate bands of 7% and 9%, is being Provision is being made to allow farmers in receipt of the introduced for instruments executed on or after 5 Diversification Aid element of the Sugar Beet November 2007. The 7% rate applies up to ?1,000,000 Compensation Package to spread these payments over six and it is charged on the excess of the consideration over years for the purpose of calculating taxable income. More ?125,000. The 9% rate applies where the consideration information will follow. exceeds ?1,000,000 and it is charged on the excess of the consideration over ?1,000,000. FISHING INDUSTRY Consideration (or Rate of Duty Provision will be made for amending the taxation code to Aggregate assist the take-up of the decommissioning scheme to Consideration) exceeds support the restructuring of Ireland’s fishing fleet. Full ?127,000* details will be contained in the Finance Bill. First ?125,000 Nil Next ?875,000 7% Excess over ?1,000,000 9% CORPORATION TAX *To fully preserve the existing exemption, transactions, Preliminary tax payment arrangements for small where the consideration (or aggregate consideration) does companies not exceed ?127,000, are exempt from stamp duty. Small companies have the option of paying their preliminary tax at the lower rate of 90% of the final Reduction of Claw back Period liability of the current accounting period or 100% of the The claw back period for first-time buyer relief and owner-final liability of the previous accounting period. The occupier relief is being reduced from 5 years to 2 years in corporation tax liability threshold for treatment as a small certain circumstances. company is being increased from ?150,000 to ?200,000. This will be effective from preliminary tax payments dates Financial Cards arising after 5 December 2007. The stamp duty chargeable on financial cards is being reduced. The changes are set out in the table below. Preliminary Tax payment arrangements for New or Start-up Companies Card Type Old New Under the measure introduced in last year’s budget new Charge cards & ?40 ?30 or start-up companies with a corporation tax liability of Credit card ?150,000 or less, for their first accounting period are not ATM cards ?10 ?5 required to pay preliminary tax in respect of that first Debit cards ?10 ?5 accounting period. They will, of course be required to pay Combined ?20 ?10 their final CT liability for that accounting period at the ATM/Debit cards same time as they are required to submit their tax returns (9 months after the end of the accounting period). The Cheques/Drafts Tax liability threshold under this arrangement for new or The stamp duty chargeable on cheques/drafts is being start-up companies is also being increased to ?200,000 increased from 15 cent to 30 cent. and this change will also be effective from preliminary tax payment dates arising after 5 December 2007. Site to Child Exemption The exemption threshold for a site, which is transferred International Financial Reporting Standards (IFRS) from a parent to a child for the purposes of constructing Rule the child’s principal private residence, is being increased Transitional arrangements which relax the interest charge from ?254,000 to ?500,000. A similar change will apply on underpaid preliminary corporation tax for companies in for CGT purposes. These changes will be contained in the very specific circumstances for certain companies whose 2008 Finance Bill. accounts are based on International Financial Reporting Standards (IFRS) will be changed in the Finance Bill 2008 so that these arrangements can be used on a permanent basis.
STAMP DUTY AND CAPITAL GAINS TAX Vehicle Registration Tax (VRT) The current VRT system uses engine size as the criterion An exemption from Stamp Duty and Capital Gains Tax to determine the VRT rate to be applied to a car. Under applies where a parent transfers a site, with a market emissions of a car will the revised VRT system the CO2value not exceeding ?254,000, to a child to enable that replace engine size as the criterion to determine the VRT child construct his/her principal private residence. This rate payable on the car at point of registration. Lower threshold has been increased to ?500,000 for transfers on emission cars will attract reduced VRT rates and higher or after 5 December 2007. emission cars will be liable to higher rates. The VRT rates will continue to be applied to the Open Market Selling Price of the car. The revised VRT system will take effect on CAPITAL ACQUISITIONS TAX 1 July 2008. There were no changes announced in the Budget. The following Table sets out the CO Emission Bands and 2 the relevant VRT rates under the revised VRT system. EXCISES Emissions g CO/km * VRT Rates CO22 Bands Tobacco Excise A 0 - 120g 14% The Excise Duty on a packet of 20 cigarettes is being B 121 - 140g 16% increased by 30 cents (including VAT) with a pro-rata C 141 - 155g 20% increase on other tobacco products, with effect from D 156 - 170g 24% midnight on 5 December 2007. E 171 - 190 g 28% F 191 - 225g 32% The new rates are set out in the table hereunder: G 226g and over 36% Description of Product Rate of Tax * This refers to the amount of CO2 produced per Cigarettes ?160.57 per thousand kilometre by a car under certain test conditions. This together with an amount amount is indicated for each model of car in its Certificate equal to 17.92% of the of Conformity. price at which the cigarettes are sold at retail The existing 50% VRT relief scheme for series production hybrid electric and flexible fuel cars, which is due to expire Cigars ?229.917 per kilogram on 31 December 2007, is being extended to 30 June 2008. Fine-cut tobacco for the ?194.016 per kilogram From 1 July 2008 the relief for these cars will be adjusted rolling of cigarettes to give a relief of up to ?2,500 on the VRT payable. This is Other smoking tobacco ?159.507 per kilogram in addition to any benefit accruing from the new VRT CO2 emission related banding. Alcohol Licensing Regime Licensing fees for Off-licences are being increased from ?250 per licence to ?300 per licence with effect from 1 With effect from 1 January 2008, series production electric October 2008. cars and electric/battery-assisted cycles will be exempted from VRT for a period of three years. EU Tax Issue Following discussions with the European Commission, the tax treatment of investment income and income attributable to the exercise of foreign employments outside the State will extend to the UK-sourced income. The Finance Bill will extend the relevant treatment from 1 January 2008. www.revenue.ie December 5 2007