Budget 2016 sends a strong message of confidence to businesses and households alike with a little for everyone approach. O’KellySutton welcomes the positive measures for business, some of which are newly introduced, however there is more to be done over the next few years.
- There was a welcome introduction of the entrepreneurs relief of 20% capital gains tax rate (rather than the standard 33%) on gains arising from disposal by individuals of business and trade assets. However there’s a bit a go to catch up with the UK’s more favourable reliefs under this measure.
- The start-up relief for business has been extended as expected.
- The introduction of 6.5% tax rate under the Knowledge Development Box was announced as expected, notwithstanding it only relates to income earned under patents and copyright software arising from R&D in Ireland. Whilst this is very attractive for large and international companies it represents only limited opportunities for SME’s who find it difficult to fund R&D and patent developments in the first place.
- Capital Acquisitions Tax Threshold has been increased to €280,000 from €225,000. A step in the right direction however we would like to see this increasing to over €400,000 to allow for increased assets values over the coming years.
- Reductions in USC rates for those earning under €70,044 was welcome however the top rates remain at the penal rates of 8% over €70,044 and 11% on earnings over €100,000. For the first time since the supplementary Budget in April 2009 the marginal rate for middle-income earners has fallen below 50% which is good news.
- The introduction of the €550 earned income credit is long overdue for the self-employed, hopefully this will continue to increase over the coming years.
- The employment and investment incentive scheme (EIIS) has been further extended with the amounts that can be raised by a company increased to €5m from €2.5m among other extensions.
- On agri-taxation, farmers will be extremely satisfied with all the measures introduced in the budget. In particular, a ‘Family Transfer Partnership’ tax mechanism has been introduced which aims to promote farm family succession through a €5,000 tax credit. Collaborative farming is now very much at the forefront of assisting farm families deal with the real challenges of inter-generational transfer.
- Hauliers commercial vehicle tax has been reduced from over €5,000 to €900. This will mean reduced haulage costs in the coming years enabling Haulage businesses become more competitive with their counterparts across the border.
In general families will see a much needed boast with increases in child welfare, reduction in USC, increases in home carers credits & threshold and extending free pre-school childcare for children up to 5 years of age.
Overall it will leave additional money in tax payers hands which should help further stimulate the economy back to full recovery.
Somewhat concerning is that Revenue have received new funding of €75 million for audit and investigation activity. This is being supplemented by a new debt analysis tool, to reduce tax arrears. We anticipate the levels of Revenue Audits and Investigations to increase significantly over the coming years so tax compliance will; be more important than ever.
There are a number of tax planning measures that can be availed of over the coming year arising out of the budget announcements and for further information please contact Patrick O’Rourke or Pat Sutton.