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BUDGET IRELAND 2025 – Business Taxes

Corporate Tax Advice

Business Tax Advice

 

The Minister for Finance Jack Chambers published his first Budget today  announcing a number of changes to our corporate tax regime.  A raft of tax measures and policies will be introduced to support Irish start-ups, small and medium-sized enterprises (SMEs) and multinational businesses.  Budget 2025 provided for a total budget package of €10.5b

 

Our focus in this article is purely on Business Taxes under Capital Gains Tax, Corporation Tax, VAT and Employer/Employee Taxes.

 

 

SUMMARY OF BUSINESS TAX MEASURES:

 

  1. There will be an increase in the VAT registration thresholds

 

  1. There will be an extension of the temporary 9% VAT rate in relation to supplies of gas and electricity for an additional six months.

 

  1. There will be an increase in the farmer’s flat rate addition from 1st January 2025.

 

  1. A new 9% VAT rate on heat pumps has been introduced.

 

  1. Employer/Employee Tax Changes – Amendments to Benefit-in-Kind (BIK) on cars

 

  1. Employer/Employee Tax Changes – There will be an increase in the annual employee Small Benefit Exemption from €1,000 to €1,500. A business will also be able to give five non-cash benefits to their employees in a single year.

 

  1. CGT Changes – Amendments to Retirement Relief.

 

  1. CGT Changes – Amendment to Relief for Angel Investors.

 

  1. Corporation Tax Changes

 

  1. Participation Exemption – Exemption for companies in receipt of Foreign Dividends

 

 

 

VALUE ADDED TAX (VAT)

 

  • With effect from 1st January 2025, the VAT registration thresholds will be increased from €40,000 to €42,500 for services.

 

  • The VAT registration thresholds will be increased from €80,000 to €85,000 for goods with effect from 1st January 2025.

 

  • The unregistered farmers flat rate scheme will be increased from 4.8% to 5.1%.

 

  • There will be an extension of the reduced 9% VAT rate on electricity and gas up to 30th April 2025.

 

  • From 1st January 2025, the 9% VAT rate will also apply to heat pump installations. This will have the effect of reducing the cost of replacing inefficient boilers.

 

 

 

EMPLOYER / EMPLOYEE TAXES

 

SMALL BENEFIT EXEMPTION

 

  • There will be an increase in the annual limit of the small benefit exemption from €1,000 to €1,500.

 

  • It has also been amended to allow five non-cash benefits, up from two, to be granted by an employer in a single year. The cumulative total of the first five benefits in a calendar year cannot exceed €1,500.

 

  • From 1st January 2024 an employer is required to return details of all qualifying incentives provided to employees where the small benefit exemption applies.

 

  • This benefit can be given to any employee of the company, including directors and shareholders, providing they are on the payroll.

 

 

BENFIT-IN-KIND

 

  • Budget 2025 introduced a BIK exemption for home car chargers provided by employers. It provides for an exemption from Benefit-in-Kind where it is the employer who incurs the cost of providing a facility for electric charging of vehicles at the home of an employee or director.

 

 

  • The proposed tapering of Benefit-in-Kind Relief for electric vehicles has been deferred. The universal relief of €10,000 which applied to the Original Market Value of a vehicle in Category A – D is being extended to 31st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31st December 2025.   Therefore, the highest mileage band is entered into at 48,001km.

 

 

CAPITAL GAINS TAX

 

Retirement Relief

 

Retirement Relief (CGT) supports the cost effective / tax efficient transfer of businesses and farms from one generation to the next.

 

Finance Act 2023 introduced a number of amendments to the Retirement Relief regime which included:

 

  1. an increase in the upper age limit from 66 years old to 70 years old.

 

  1. A cap of €10 million of proceeds / market value where the individual disposing of the assets to a child is aged from 55 to 69 years.

 

  1. The current limit of €3million will continue to apply but only from age seventy.

 

These changes were to come into effect on 1st January 2025.

 

Budget 2025 will retain the increased upper age limit. It also introduced a clawback period of twelve years on the Relief.

 

This means that any tax arising due to the cap of €10 million will be abated provided the assets are retained for twelve years.

 

In other words, the €10 million cap, due to be introduced on 1st January 2025, will only apply in circumstances where the child disposes of the assets within twelve years.

 

 

Angel Investor Relief

 

Angel Investor Relief, introduced in Budget 2024, was aimed at encouraging business angel investment in innovative start-ups.

 

Finance Act 2023 introduced a reduction on this rate for angel investors, bringing it down from 33% to 16% or 18%.

 

Budget 2025 provides Capital Gains Tax Relief for a third party individual who takes a significant minority shareholding (i.e. between 5% and 49% of the ordinary issued share capital of the company) for a period of at least three years,  in a certified innovative start-up small and medium enterprise (SME) company which is less than seven years old.   The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €20,000 or €10,000 if acquiring between 5% and 49% of the ordinary issued share capital of the company.

 

Qualifying investors will be able to avail of an effective reduced rate of CGT of 16%, or 18% if through a partnership, on a gain up to twice the value of their initial investment.

 

There was previously a lifetime limit of €3 million on gains to which the reduced rate of CGT will apply.  Budget 2025 has increased this limit to lifetime gains of up to €10 million.

 

 Therefore, the amount on which the reduced CGT rates of 16% or 18% will apply is the lowest of the following:

  1. The actual chargeable gain.
  2. Twice the amount of the investment.
  3. €10 million less the total of all/any other chargeable gains that may qualify under this Relief.

 

 

 

CORPORATION TAX 

The following will be extended for a further two years until 31st December 2025:

 

  1. Employment Investment Incentive (EII),
  2. Start-Up Relief for Entrepreneurs (SURE) and
  3. the Start-Up Capital Incentive (SCI)

 

In addition, the EII limit on the amount that an investor can claim relief on will be doubled i.e. increasing from €500,000 to €1,000,000.

 

It is proposed to increase the SURE relief available to a maximum of €140,000 per year or a total of €980,000 over seven years.

 

 

Research and Development (R&D) Tax Credit

As you’re aware, the existing Research and Development (R&D) Tax Credit provides a 30% tax credit for all qualifying R&D expenditure.

 

The first year payment threshold will now increase from €50,000 to €75,000.

Companies with claims of between €75,000 and €150,000 will benefit from a €25,000 increase in the first instalment of their claim.

 

Companies with claims of in excess of €150,000 will continue to receive a first instalment amount based on 50% of the Research & Development Tax Credit claim.

 

 

Two new Audio-visual incentives

 

  1. Tax Credit for Unscripted Productions

 

A new tax credit will be introduced for the unscripted film production sector.

 

The relief will take the form of a 20% Corporation Tax Credit for certain production expenditure up to a maximum limit of €15 million per project.

 

The commencement will be subject to State Aid approval from the European Commission.

 

A cultural test will be introduced.

 

 

  1. Scéal Uplift

 

The second incentive is an 8% uplift referred to as the “Scéal Uplift”.

 

This involves an uplift of 8% to the existing film credit in respect of certain feature film productions.

 

It will be applied to the existing film credit and will result in a tax credit rate of 40% for projects with a maximum qualifying expenditure of up to €20 million.

 

This incentive is for small to medium budget productions under the Section 481 film tax credit.

 

As with the Tax Credit for Unscripted Productions, the Scéal Uplift is subject to State Aid approval.

 

  

FOREIGN DIVIDENDS

A new Participation exemption for foreign sourced dividends from subsidiaries in EU/EEA and tax treaty jurisdictions will be introduced with effect from 1st January 2025.  The aim is to simplify existing Double Taxation Relief provisions.

 

Currently, Ireland operates a worldwide corporate tax regime.  This means that all the profits (both domestic and foreign) earned by an Irish resident company are subject to Irish tax with Relief for any foreign taxes deducted under, a ‘tax and credit’ regime.

 

Under the new rules, a company will have the option of either (a) claiming the participation exemption or (b) continuing to use existing tax-and-credit relief.

 

To do this, an election will have to be made in the company’s annual corporation tax return. It will apply to all qualifying dividends in that particular period.

 

For non-qualifying jurisdictions, the existing method of claiming double taxation relief should continue.

 

The new participation exemption for foreign source dividends will come into effect from 1st January 2025.

 

 

 

For full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

 

 

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.

 

Employee or Self Employed – New Irish Revenue Guidance

Employer Employee Tax Advice

Employee (Payroll) versus Self Employed Taxes (Income Tax)

 

As Accountants, Personal Tax Advisors and Payroll Tax Consultants, the distinction between what constitutes an employee and what are the requirements to be considered a self employed contractor has occupied our minds for many years.  It is often very difficult to determine with complete accuracy whether an individual has been employed under a contract of service or if that same individual could be deemed to be a Sole Trader, providing a contract for services. Over the years a number of tests have been developed to determine the status of the taxpayer.  There has also been considerable case law on this matter.

 

 

What’s New?

On 20th October 2023, the Supreme Court delivered its unanimous decision in The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza [2023] IESC 24 (the “Karshan Case.”  It was held that delivery drivers of Domino’s Pizza should be treated as employees and not independent contractors.  Today Revenue published their “Guidelines for Determining Employment Status for Taxation purposes” which outlines a five step decision making framework to determine the employment status of individuals for tax purposes: eBrief No. 140/24

 

 

What is Revenue’s view?

According to Revenue:

 

“Where an individual is engaged under a contract of service, i.e., as an employee taxable under Schedule E, income tax, USC and PRSI should be deducted from his or her employment income through their employer’s payroll system on or before when a payment is made.

 

Where an individual is engaged under a contract for service, i.e., as a self-employed individual taxable under Schedule D, he or she will generally be obliged to register for self-assessment, to pay preliminary tax and file their own income tax returns using the Revenue Online Service (ROS).”

 

 

What does the new Guidance Material say?

 

The guidance material asks the following questions:

 

1. Does the contract involve the exchange of a wage or other remuneration for the work carried out?

 

In other words, there must be an exchange of work for wage/remuneration before a working relationship can be categorised as a “contract for service.”

 

A contract is considered to be an engagement where there is a payment by the business to the individual regardless of whether or not there is a written contract in place.

 

 

 

2. If so, is the agreement one pursuant to which the worker is agreeing to provide their own services, and not those of a third party, to the employer?

 

This test distinguishes between a situation where a worker provides services to a business personally versus where it’s possible for that worker to engage others to provide the services on his/her/their behalf.

 

 

 

3. If so, does the employer exercise sufficient control over the putative employee to render the agreement one that is capable of being an employment agreement?

 

The court judgment placed a strong emphasis on the degree of freedom the individual has to decide how the work is carried out.

 

It is essential to establish the level of control the business has over the individual worker.  For example, can it decide what the particular duties are, as well as how, when and where the work should be carried out?

 

Is the worker carrying on the business of the organisation he/she/they work(s) for or is this individual working on their own account?

 

In other words, to what degree is the worker/individual integrated into the business?

 

 

 

4. If the above three requirements are satisfied, the decision maker must then determine whether the terms of the contract between employer and worker and the related working arrangements are consistent with an employment contract, or with some other form of contract.

 

Apart from reviewing any written agreement in place, it is vital that the facts of the working arrangement are examined to establish if the individual is working for the business or is providing services on his/her/their own account.

 

 

 

5. Finally, it should be determined whether there is anything in the particular legislative regime under consideration that requires the court to adjust or supplement any of the foregoing.

 

 

 

If the answer to any of the first three questions set out above are “No”, a contract of employment is not deemed to exist and the individual should not be treated as an employee.

 

If, however, the answer to the first three questions is “Yes”, then questions 4 and 5 of the framework must be considered to determine if a contract of employment exists.

 

The Guidelines also include nineteen practical examples which demonstrate the application of the five step framework to assist in determining how workers, in a number of different situations, will be taxed.

 

 

 

Conclusion:

 

  • If required by Revenue, taxpayers must be able to demonstrate, using the five step framework, how they determined that a worker should be treated as self-employed rather than as an employee with payroll taxes deducted at source by their employer.

 

  • If a business previously treated a worker as self-employed rather than as an employee, but having reviewed the five-step framework it would appear that this individual is in fact an employee for tax purposes, the business must immediately rectify the situation by operating payroll taxes.

 

  • If the business has incorrectly treated the worker as a self-employed contractor rather than as an employee, the Revenue Commissioners may seek the repayment of uncollected payroll taxes, Employer’s PRSI as well as interest and penalties.

 

  • It is advised that businesses carry out an urgent and comprehensive review of the five step framework to determine employment status of their workers.

 

 

 

Practical Issues

For Tax Advisors and Accountants, the most significant difference is the requirement on an employer to pay employer’s PRSI in respect of payments to employees, currently at the rate of 11.05%  on weekly salaries over €441 or 8.8% if the weekly remuneration is below €441 per week.

 

Class A is applicable to most private sector employees with payroll taxes deducted at source:

  • The Employer Rate is 11.05%
  • The Employee rate is 4%
  • The 8.8% Employer PRSI applies to class A employees with weekly earnings up to €441. Employees
  • Employee PRSI does not apply for employees with weekly earnings of €352 or less.

 

Class S is applicable to Self-employed individuals:

  • A 4% PRSI rate is payable on all income.
  • The minimum annual PRSI contribution is €500.
  • PRSI is not due and payable if the annual income is less than €5,000.

 

The tax implications are not the only issues that should be focused upon.  Employee rights must also be considered by Employers.  These include:

  1. Minimum wage
  2. Unfair dismissals.
  3. Equality legislation.
  4. Holiday and Sickness payments.
  5. Working Hours.
  6. Redundancy.
  7. Contracts
  8. Other Entitlements.

 

If you require any assistance, please contact us.

 

 

 

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.

Finance (Covid-19 and Miscellaneous Provisions) Bill 2021-Income Tax, Payroll Taxes, VAT

Best Personal Tax Advisors Dublin

Finance Bill – Income Tax, Corporation Tax, VAT, Employer and Payroll Taxes

 

The Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 was published today.  The provisions contained in the Bill include amendments to existing supports which were announced in the Economic Recovery Plan in addition to the introduction of the Business Resumption Support Scheme.  These tax relief measures income Income Tax, Business/Corporation Tax, Employer and Payroll Taxes and VAT.

 

 

Reduced rate of VAT (9%) for the hospitality sector

Section 6 of the Bill amends section 46 VATCA 2010 to provide for the extension of the reduced 9% VAT rate until 31st August 2022 in relation to the following services:

  • Restaurant and catering services
  • Guest and holiday accommodation
  • Entertainment services to include admissions to cinemas, theatres, museums, fairgrounds, amusement park and sporting facilities
  • Hairdressing
  • The sale of certain printed matter including brochures, maps and programmes.

 

In summary, the reduced 9% VAT rate for the tourism sector has been extended from 31st December 2021 to 31st August 2022.

 

 

Employment Wage Subsidy Scheme (EWSS)

The Employment Wage Subsidy Scheme (EWSS) is a scheme that subsidises the cost of getting employees back to work.

The extension of the scheme should provide reassurance to businesses affected by the pandemic and enable them to plan for the months ahead.

 

Section 2 of the Bill amends the Employment Wage Subsidy Scheme (Section 28B of the Emergency Measures in the Public Interest (Covid-19) (No.2) Act 2020) to provide for the following changes:

  1. the extension of the Employment Wage Subsidy Scheme (EWSS) until 31st December 2021.
  2. the retention of the enhanced subsidy rates up to 30th September 2021.
  3. the retention of the qualifying criteria of a 30% reduction in turnover or customer orders threshold.
  4. An increase in the reference period to assess eligibility for the scheme from six to twelve months with effect from 1st July 2021.

This employer/payroll tax scheme requires that employers have valid tax clearance to enter the EWSS and that they maintain this tax clearance for the duration of the scheme.

 

 

Covid Restrictions Support Scheme (CRSS) 

The COVID-19 Restrictions Support Scheme (CRSS) was introduced by the Finance Act 2020.

It provided support for businesses which had to temporarily cease as a result of public health guidelines.

At such time as the affected businesses are allowed to re-open, those claimants will have to exit this scheme.

As some of those businesses will remain financially affected, the new measures introduced in the Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 published today will extend the scheme. In addition, there will be an enhanced re-start payment for businesses exiting the scheme equal to up to three weeks at double rate of payment, subject to a €10,000 cap.

 

Sections 3 and 4 of the Bill amend the Covid Restrictions Support Scheme (CRSS) and provide for the extension of the specified period until 30th September 2021.

 

Section 4 of the Bill provides for the enhanced restart week payment scheme.  The level of payment a business may claim on reopening, following the restrictions, will depend on the actual date that business reopens.

  • For restart weeks between 29th April to 1st June 2021, the restart payment will equate to two weeks at double the normal CRSS rate subject to a cap of €5,000, being the maximum weekly amount.
  • For restart weeks between 2nd June to 31st December 2021, the restart payment will equate to three weeks at double the normal CRSS rate subject to a cap of €10,000, being the maximum weekly amount.
  • In all other cases, the standard rate of one week at the normal CRSS rate will apply, subject to a cap of €5,000, being the maximum weekly amount.

 

Please be aware:

  • According to Revenue’s guidelines, an eight week deadline applies to the submission of enhanced restart week payment claims.
  • A business can qualify for (a) the double restart week payment or (b) the triple restart week payment once.
  • The Minister for Finance has the power to extend this scheme to 31st December 2021 by order.

 

 

Business Resumption Support Scheme (BRSS)

Section 5 of the Bill includes a new section, section 485A TCA 1997, which makes provision for a new Business Resumption Support Scheme (BRSS)

 

The main features of the scheme are as follows:

 

  • BRSS is available for affected self-employed individuals and companies who carry on a trade, the profits from which are chargeable to Income Tax or Corporation Tax under Case I of Schedule D.
  • It is also available to persons who carry on a trade in partnership (Income Tax), and any trading activity carried on by charities and sporting bodies.
  • To qualify, businesses must be able to prove that their turnover is reduced by 75% in the reference period (i.e. 1st September 2020 to 31st August 2021) as compared with 2019 but it will be a later period if the business commenced trading on or after 26th December 2019.
  • Qualifying taxpayers will be able to claim an amount equal to three times the amount as derived by 10% of their average weekly turnover during the reference period (i.e. 1st September 2020 to 31st August 2021) up to a maximum of €20,000 and 5% thereafter subject to a cap of €15,000.
  • Please be aware that these payments will be treated as an advance credit for trading expenses.
  • If the business was set up before 26th December 2019 the claim will be calculated based on its actual average weekly turnover in the period starting on 1st January 2019. For example, if the business was established after 1st January 2019, then the claim will be based on the period from the actual commencement date up to 31st December 2019.
  • If the business was established between 26th December 2019 and 10th March 2020 the claim will be based on the actual average weekly turnover arising between the date of commencement and 15th March 2020.
  • If, however, the business activity commenced between 10th March 2020 and 26th August 2020 then the claim will be based on the actual average turnover generated between the date of commencement and 31st August 2020.
  • The individual, company or persons carrying on a partnership must have an up to date Tax Clearance Certificate in order to make a valid claim under this scheme.
  • They must also be VAT compliant.
  • They must not be entitled to make a claim under the CRSS Scheme in relation to any week that includes 1st September 2021 and the business must be actively trading, with the intention of continuing to do so.
  • Those making a claim must register on ROS and file a declaration that they satisfy the necessary conditions to avail of BRSS.
  • Please be aware that the names of BRSS claimants can be published on the Revenue’s website.

 

 

Stamp Duty measures for the cumulative purchase of ten or more residential properties

Section 13 of the Bill gives statutory effect to the Financial Resolution that was passed on 19th May 2021 and inserts section 31E in the SDCA 1999, thereby imposing a 10% stamp duty rate on the acquisition of certain residential properties (houses and duplexes but excluding  apartments) where an aggregate of ten or more units is acquired during a twelve month period by a single corporate entity or individual.

Section 14 of the Bill introduces a provision which provides for an exemption from the new 10% rate of stamp duty in situations where the residential units are leased to local authorities for certain social housing purposes.

 

 

Tax Debt Warehousing

Section 7 of the the Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 inserts a new section 28D into the Emergency Measures in the Public Interest (Covid-19) Act 2020 which provides for the warehousing of EWSS overpayments received by employers.

Sections 8, 9 ,10, 11 and 12 of the Bill give effect to the extension of the Debt Warehousing Scheme for refunds of Temporary Wage Subsidy Scheme (TWSS) payments, Employer PAYE liabilities, Income Tax, VAT and PRSI:

 

This scheme will have three periods:

  • Period 1 (the “Covid-19 restricted trading phase”) will run from 1st July 2020 to 31st December 2021.
  • Period 2 (the “zero interest phase”) – will run from 1st January 2022 until 31st December 2022.  No interest will be levied on warehoused EWSS tax from Period 1.
  • Period 3 (the “reduced interest phase) –will run from 1st January 2023 until the relevant tax is repaid to Revenue. interest will be levied at a rate of 3% per annum on the Period 1 warehoused relevant tax, from 1st January 2023.

In circumstances where an employer does not meet the conditions for debt warehousing then (i) the zero interest and (ii) reduced interest rates will no longer apply.  Instead the 8% rate will be imposed.

 

In summary, the extension of the Debt Warehousing Scheme relates to refunds of Temporary Wage Subsidy Scheme (TWSS) payments, PAYE, Income Tax, VAT and PRSI.

 

 

 

For full and complete information, please follow the link: https://data.oireachtas.ie/ie/oireachtas/bill/2021/89/eng/initiated/b8921d.pdf

 

 

 

lease 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 CLEARANCE

globe on newspaper2

 

From 21st May 2021 Revenue will recommence their assessment of the tax clearance status of businesses.

 

Please be aware that this may result in the rescinding of the tax clearance status of businesses that are currently in receipt of the EWSS and/or the CRSS.  It is essential to check the status of your tax clearance as your business may becoming ineligible to receive further payments under these schemes until the compliance issues concerned are fully resolved.

 

If Revenue have contacted you to remind you of your requirement to file outstanding returns or to address other compliance issues in order to retain your tax clearance status, please make sure you do so as a matter of urgency.

 

In summary, businesses which are reliant on the EWSS and/or the CRSS should take immediate action by contacting Revenue and addressing the outstanding issues.