On 24th October 2013 the Finance (No. 2) Bill 2013 was published which confirmed the measures introduced by the Budget.
As the main priorities in Ireland at the moment are job creation and enterprise growth the following tax packages were introduced:
I. ENTERPRISE RELIEF – This is a new Capital Gains Tax relief which is aimed at entrepreneurs investing in assets used in new productive trading activities. The purpose is to encourage individuals to reinvest the sales proceeds from the sale/disposal of a previous asset into new productive trading or a new company. The main aspects of the relief are as follows:
(a) It applies to an individual
(b) who has paid Capital Gains Tax on the sale/disposal of an asset and
(c) invests in a new business
(d) at a cost of at least €10,000
(e) between 1st January 2014 and 31st December 2018.
(f) The investment cannot be disposed of earlier than three years after the investment date.
(g) Once the new investment is sold the Capital Gains Tax arising with be reduced by the lower of:
• the C.G.T. paid by the individual on a previous disposal of assets from 1st January 2010 onwards and
• 50% of the C.G.T. arising on the disposal of the new investment.
What type of assets are involved?
The assets must be chargeable business assets. Goodwill is included in this definition as are new ordinary shares in micro, small or medium sized enterprises after 1st January 2014. The main conditions are:
• The investor has control of the company and is a full time working director and
• The company is carrying on a new business.
NOTE: Please be aware the commencement of this measure is subject to E.U. State Aid approval.
II START YOUR OWN BUSINESS – This is an exemption from Income Tax but not from Universal Social Charge and PRSI for a long term unemployed individual who is starting up a new, unincorporated business.
What is meant by long term unemployed?
It means some one who is continuously unemployed for the previous fifteen months.
What does this measure actually provide?
The first €40,000 of profits earned per annum will be exempt from Income Tax for two years.
III ENHANCEMENT OF EMPLOYMENT & INVESTMENT INCENTIVE – The main points of this new measure are:
• The initial 30% relief available for investments under the E.I.I. has been removed from the High Earners Restriction for three years.
• A maximum of €115,000 can be invested per individual per annum.
• The aim is to encourage individuals to invest more funds in the E.I.I. Scheme which focuses on job creation and expansion.
IV STAMP DUTY – The transfer of shares listed on the ESM (Enterprise Securities Market) of the Irish Stock Exchange will be exempt from Stamp Duty. The ESM is the ISE’s market for growth companies.
The current stamp duty rate is 1%.
NOTE: Please be aware that this measure is subject to a commencement order.
V RESEARCH & DEVELOPMENT TAX CREDIT – The aim of this change is to assist smaller companies to access the tax credit without reference to the base year. The following changes have been made and will take place in the accounting periods starting on or after 1st January 2014:
• The amount of expenditure eligible for the R&D Tax Credit (without reference to the 2003 base year) has increased from €200,000 to €300,000.
• In order to qualify for the R&D Tax Credit, the limit on the amount of expenditure on research and development outsourced to third parties has increased from 10% to 15%.
• With regard to existing clawback provisions, under Section 766(7B)(c), the Bill provides that the tax foregone can be recovered from the company instead of the employee.
VI VAT – There have been two major VAT changes:
• The annual threshold for VAT on a cash receipts basis has increased from €1.25m to €2m.
• This comes into effect on 1st May 2014.
• The 9% rate for Tourism related goods and services has been retained so as to encourage growth in small businesses within the Irish Tourism Sector.
See Part II and Part III to follow.
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