Budget & Finance Bill 2016

Budget & Finance Bill 2016

On Tuesday 13^th  of October the Minister of Finance, Michael Noonan announced the Budget for 2016.  This was followed by the publication of the Finance Bill on 22^nd of October. The Finance Bill outlines the detail of the budget and usually contains extra measures. In relation to the Professional Contractor & Self-employed business person there were a few relevant measures that may improve things. The reduction in the lower rates of USC is most welcome and will decrease the USC charge on an individual earning €75,000 per annum by €900 approximately and an individual earning €50,000 would decrease their USC charge by €600. It is disappointing that the top rate of USC of 11% remains for self-employed Sole Traders as we expected some relief for higher earners.  It should be noted that this does not apply to self -employed Proprietary Directors. A new tax credit of €550 will be introduced for the self-employed including Proprietary Directors.  This is expected to be brought in line with the PAYE tax credit over the next 3 years. The Finance Bill has increased the BIK Small Gift Exemption to €500 form €250 form 1^st January 2016.  This will allow our Contractor’s to claim this once per annum.  Currently Icon Accounting partner with One4All and roll it out to our clients through their payroll.

Tax Treatment of Travel & Subsistence We are disappointed that the Government have not used the Finance Bill to implement and clarify changes to the Travel & Subsistence regime in relation to the flexible workforce. We feel there is an unfair treatment for the mobile worker in relation to their “normal place of work” and their inability to claim expenses when working away from their home on contract. The Bill however does change the treatment of the non-executive Directors travelling to Ireland as they will now be allowed claimed vouched expenses when travelling to here for business purposes.

Below is a Summary of Measures:

Personal Tax Tax Rates and Tax Bands: There are no changes to the rates of income tax of 20% and 41% or to the tax bands. Universal Social Charge: As had been widely expected, the 7% rate of USC will be reduced to 5.5% and at the same time the lower rates each reduce by 0.5%.  Disappointingly, there is no change in the upper rate of USC, 11%, which applies to self-employed individuals with earnings over €100,000.

Tax Credit for Self-Employed: An 'earned income credit' of €550 for self-employed individuals with trading, farming or professional income in Ireland or abroad.  No commitment was given to increasing this although pre-budget leaks indicate that this credit will be brought in line with the PAYE tax credit over a period of three years.

Home Renovation Scheme: The home renovation scheme is being extended until 31 December 2016, it was due to expire at the end of this year.  It should be noted that the scheme was amended last year to include properties owned by landlords.  Persons intending to claim this relief should also note the requirement for the builder to pre-register the development works with the Revenue Commissioners.

Local Property Tax: In a measure that has nothing to do with the next election, the Government is intending to postpone the revaluation date for local property tax from 2016 to 2019.

Home Carer Tax Credit:  The Home Carers Credit has increased to €1000 for 2016.  If the Home Carer has income in his or her own right, the tax credit is reduced by one-half of the amount of income that exceeds €7,200 (€5,080 in 2015). Additionally, where Home Carer Tax Credit is claimed, the increase in the standard rate income tax band that is available to couples in a marriage or civil partnership who are jointly assessed to tax does not apply.

Business Taxes Employer's PRSI: The weekly threshold at which liability to employer's PRSI comes into effect will increase to €376.01 from €356.01.

Statutory Paternity Leave: The Government is to legislate for statutory paternity leave of two weeks commencing in September 2016. VAT: A commitment has been given to retaining the 9% VAT rate on tourism activities; however a change in this measure has been flagged given the increase in room occupancy rates.  The upper rate of VAT remains at 23%.

Commercial Motor Tax: A range of motor tax rates - to bring Irish rates in line with those in the UK - is to be introduced on commercial vehicles.  The rates will apply to all vehicles above 4,000kgs with the most significant reductions being targeted at larger goods vehicles.

Minimum Wage: The minimum wage is to increase from €8.65 to €9.15 per hour.

Excise Duties: There is no increase in excise duties on alcohol.  Excise duty on a packet of 20 cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on other tobacco products with effect from midnight tonight.

Capital Gains Tax “Entrepreneur Relief”: A revised CGT relief is being introduced for entrepreneurs. Gains on disposals of business assets made on or after 1 January 2016 will be charged at a reduced rate of 20% up to an overall limit of €1m. This will allow tax planning on sale of businesses.