Irish Bank Shares - Negligible Value Claim: Generally only realised losses are allowable for Capital Gains Tax purposes. However, if the Revenue is satisfied that the value of an asset has become negligible, they will allow the taxpayer to make a negligible value claim whereby the asset is deemed to have been sold and immediately reacquired at market value. This has the effect of realising the loss without actually disposing of the asset.

As a result of the provisions of the Anglo Irish Bank Corporation Act 2009 and the transfer of shares in Anglo Irish Bank to the Minister for Finance, the shares will be treated as of negligible value and a loss for 2009 may be calculated if a negligible value claim is made. This loss may then be set against other capital gains, as appropriate, in arriving at any Capital Gains Tax due for 2009. If unutilised, this loss can be carried forward to future years.

Mortgage interest relief discontinued in respect of any home loan in place over 7 years.

The deduction available for mortgage interest relief against rental income from residential properties is reduced from 100% to 75% with effect from midnight on 7 April 2009.

First Time Buyers

First Time Buyers who are within the first seven years of their mortgage will continue to get the relief automatically until the end of the 7th year of their mortgage.

Non First Time Buyers

With effect from May 01, 2009,  the Revenue said it was working closely with the relevant lenders to identify these accounts and the amount of loan in respect of which TRS (tax relief at source) is payable under the new rules. Where Revenue is in a position to decide with certainty from the information provided by the lender that an account holder is entitled to TRS then this account will be reactivated for TRS by Revenue.

In the case of non First Time Buyer accounts where it is not clear that they are entitled to TRS, and for whom insufficient information is available to determine entitlement Revenue will write to the account holder during the month of May requesting the necessary information.

TRS for Non First Time Buyers who are clearly no longer eligible for TRS, is not payable from 1st May.

A qualifying loan for the purpose of mortgage TRS is a secured loan, used to purchase, repair, develop or improve your sole or main residence, situated in  the State. With effect from 1st May 2009 the number of tax years in respect of which mortgage interest relief may be claimed is 7 years for first time and non first time buyers. You can claim mortgage tax relief in respect of the interest charged/paid on your main residence. You can also claim mortgage tax relief in respect of a mortgage paid by you for your separated/divorced spouse, and a dependent relative (i.e. widowed parent, elderly relative) for whom you are claiming a dependent relative tax credit. However, your mortgage TRS entitlement cannot exceed the maximum TRS allowance.

Switching lender or mortgage type to achieve a better interest rate does not equate to a new loan. However, moving home and taking out a new mortgage for this home with a new or existing lender is eligible for relief for 7 years from the date of first payment on the new home loan.

Qualifying loans taken out before 1 July 2011 will continue to get relief for 7 years. Transitional measures will be provided for qualifying loans taken out between 1 July 2011 and the end of 2013.

Those, whose entitlement to relief would, in the absence of this change, expire in 2010 or after;
will continue to qualify for relief at the applicable rate up until end 2017. Abolition of the relief entirely by the end 2017.

Tax Credit on Trade Union Subscriptions

Rent-a-Room Relief (private residence)

Private Use of Employer Van

The charge to BIK for the private use of an employer’s van is calculated at 5% of the ‘original market value’ of the van with effect from 1 January 2004. However, this charge does not arise where the employee performs at least 80% of his/her duties of employment away from the employer’s premises (subject to certain other conditions).

From 1 January 2004 employers are obliged to operate PAYE on non cash benefits provided to employees. These benefits are also liable to PRSI and the Universal Social Charge.

The main areas of benefit involved are as follows:

• Company cars.

• Company loans.

• Tax paid vouchers.

• Expense payments on behalf of employees/directors.

An employer can provide an employee with a small benefit to a value not exceeding €250 without applying PAYE and PRSI to that benefit.

Deposit interest retention tax (DIRT) is increased from 25% to 27% on standard deposit accounts and from 28% to 30% on certain savings accounts, life assurance policies and investment funds.

Contribution
Rate

Earnings
Ceiling 2011 €

Earnings
Ceiling 2010 €

10.75% (1)

No Ceiling

No Ceiling

(First €127 of weekly earnings exempt)

4%(2)(3)

No Ceiling

75,036

   4%)

No Ceiling

Legislation was passed in 2010 covering chargeable periods commencing on or after January 01, 2011. The regime will not apply to contracts or terms and conditions agreed before July 01, 2010. Any new arrangements or amendments to existing arrangements after this date will be within the scope of the new regulations.

Small and medium enterprises (broadly defined as enterprises with less than 250 employees and either a turnover of less than €50m or assets of less than €43m on a global consolidation basis) are excluded from the scope of this legislation.

The larger companies to whom transfer pricing will apply should maintain sufficient documentation to show compliance and must ensure that such documentation is made available on request.

Start-Up Companies
New start-up companies, which commenced trading in 2009 or 2010, will be exempt from tax,
including capital gains, in each of the first three years.

The value of the relief will be linked to the amount of employer’s PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee.

• The company must be incorporated on or after 14 October 2008,

• The company must commence to trade during 2010 or 2011,

• The trade must be a new trade, and

• Professional services companies cannot qualify for exemption.

The payment date in respect of disposals in the period January to November is December 15 and the tax arising on disposals in the month of December is due by the following January 31.

In order for the equipment to qualify, it must be maintained on a list published by the Sustainable Energy Authority of Ireland.

A revised scheme of capital allowances and leasing expenses for cars used for business purposes has been introduced, under which the allowability of allowances and expenses is linked to the CO2emission levels of the vehicles.

Intellectual Property Allowances - - see R&D section below.

VRT relief of up to €1,250 will be provided where a car of 10 years or older is scrapped in accordance with certain criteria and a new car of emissions bands A or B (i.e. with CO2 emissions of 140g/kg or less) is purchased.

The VRT relief for series production hybrid and flexible fuel vehicles, due to expire on 31 December 2010, is being extended for two years until 31 December 2012, with the rate of relief provided being up to €1,500.

This is being increased from €50 currently to €200 per year

In respect of motor vehicle purchases on or after 01 July 2008, the allowability of allowances
and expenses are linked to the CO2 emission levels of the vehicles. The vehicle emission
categories are as follows.

Vehicle category CO2 Emissions (CO2g/km)
A 0g/km up to and including 120g/km
B More than 120g/km up to and including 140g/km
C More than 140g/km up to and including 155g/km
D More than 155g/km up to and including 170g/km
E More than 170g/km up to and including 190g/km
F More than 190g/km up to and including 225g/km
G More than 225g/km

The qualifying cost for capital allowance purposes for each category is as follows. In each case,
the specific amount equals the lower of the purchase price of the car or €24,000.
(a) in the case of a vehicle in category A, B or C, an amount equal to the specified amount,
(b) in the case of a vehicle in category D or E, where the retail price of the vehicle at the
time it was made was:
(i) less than or equal to the specified amount, 50% of that price, and
(ii) greater than the specified amount, 50% of the specified amount, and
(c) in the case of a vehicle in category F or G, nil

The method of calculating the relief is on an incremental basis using a base year threshold amount to determine the level of incremental expenditure.

The base year is fixed at 2003 until 2013.

Partial relief is also available to companies for the cost of sub-contracting research and

development work to unconnected parties.

Cash Rebates of R&D Tax Credits

For accounting periods commencing on or after 1 January 2009, it is possible to claim a rebate of excess R&D tax credits over the corporation tax liability of a company for the same and previous accounting period.

The rebate is payable in three installments and is restricted to the greater of the following two amounts:

• the aggregate corporation tax paid by the company for the previous 10 accounting periods;

or

• the aggregate Irish payroll tax liabilities accounted for by the company for the accounting period in question.

Any rebate due will be paid in three instalments over a period of 33 months from the end the accounting period in question. The relevant dates and amounts are as follows:

• 33% of the refund will be payable by 9 months from the end of the accounting period;
• 50% of any remaining excess credit will be payable by 21 months from the end of the accounting period;
• the remaining excess credit will be payable by 33 months from the end of the accounting period.

Note that the second and third instalment must be offset firstly against any corporation tax arising in respect of the company’s subsequent and next subsequent accounting period respectively, with any remaining balance being refundable in the manner specified above.

Finance Act 2010 introduced the concept of a geographical R&D centre. Where a company carries out qualifying activities in a fixed base during 2003 and subsequently the base ceases to operate, subject to meeting certain criteria, the amount of expenditure incurred at that base can be excluded from the base year threshold amount for the purposes of calculating the current year R&D tax credit.

Capital allowances are available in respect of capital expenditure incurred in relation to the acquisition/internal generation of intellectual property assets on or after 7 May 2009.

The tax deduction allowed is equal to the amount of accounting amortisation or impairment charged in the annual financial statements of a company. Alternatively, a company may elect to claim the tax deduction over 15 years (7% per annum and 2% in year 15). The 15-year period applies to all capital expenditure incurred on that asset and the election, if availed of, is irrevocable.

The definition of IP assets is broad and includes the acquisition of, or the licence to use:

• patents and registered designs,
• trademarks and brand names,
• know-how,
• secret processes, formulae or other secret information concerning commercial, industrial or scientific experience (effective from 4 February 2010),
• domain names, copyrights, service marks and publishing titles,
• authorisation to sell medicines, a product of any design, formula, process or invention (and any rights derived from research into same),
• certain computer software and or right to use/deal with computer software (effective from 4 February 2010), and
• goodwill, to the extent that it directly relates to the assets outlined above.

The tax deduction is only available for utilisation against trading income generated from the exploitation of the IP assets and is subject to certain other restrictions.

The minimum period of ownership of an intangible asset that a company must have in order to avoid a clawback of capital allowances on the disposal of said asset has been reduced from 15 years to 10 years.

Capital allowances are also available in respect of capital expenditure incurred on intangible assets prior to the commencement of a trade.

There is cap of €115,000 for 2011 (€150,000 for 2010) on the amount of earnings on which tax relief may be obtained for contributions by individuals to Retirement Annuity Contracts and Personal Retirement Savings Account. This cap also applies for employee contributions to occupational pensions schemes.

The earnings limit for 2010 will be deemed to be €115,000 for the purposes of contributions paid by an individual in 2011 which are to be treated as paid in 2010.

The Standard Fund Threshold is capped at €2.3 million with effect from 7 December 2010. A higher threshold may apply if the value of an individual’s pension rights is greater than €2.3 million and lower than €5,418,085, i.e. the current SFT value.

With effect from 1 January 2011, an overall life time limit on the amount of tax-free retirement lump sums that an individual can draw down from a pension is reduced to €200,000. The excess of this amount will be liable to income tax at the standard rate up to €575,000 (i.e. 25% of the SFT). Any further excess will be taxed at the individual’s marginal rate of income tax.

(90% of turnover must be from the sale goods for this threshold to apply)

 €75,000 ( €70,000 up to 1 May 2008)

 €37,500 ( €35,500 up to 1 May 2008)

Note 4.
A registration threshold of €nil also applies to certain persons acquiring certain services in Ireland from abroad.

21.0%

This standard rate applies to all supplies not chargeable at other rates.

13½%

Heating fuel, electricity, restaurant services, newspapers, hotel and B&B lettings, property and Child Car Seats (with effect from 1 May 2007, please see below)

0%

25% for gifts and inheritances

25% for gifts and inheritances

Parents to child/spouse €331,839*

Blood relative €33,185*

Others €16,592*

* Subject to indexation factors.

Consideration

Small Companies

1. Choice of 90% of current year liability or 100% of previous year liability due one month before year end (but no later than the 21st day of that month);

2. Balance of tax to be paid on date the Corporation Tax Return is due.

A small company is a company with a corporation tax liability of less that €200,000 in the preceding year.

Other Companies

1. Choice of 45% of current year liability or 50% of previous year liability due in sixth month of accounting period (but no later than the 21st day of that month);

2. Payment bringing total preliminary tax up to a minimum of 90% of current year liability due one month before year end (but no later than the 21st day of that month);

3. Balance of tax to be paid on date the Corporation Tax Return is due.