The Finance Bill, just published has many changes that may affect you. Kevin McLoughlin writing in the Sunday Business Post brings you through some of them.
Complex Finance Bill contains crucial far-reaching measures
23 January 2011
Despite the expectation of a brief Finance Bill to give effect to the essential revenue-raising measures announced in the budget, some 223 pages of complex technical legislation were published last Friday.
Normally, the committee and report stages would add a further 50 per cent in paperwork terms.
While the government is driven by a political imperative to pass the bill before the upcoming general election, it is unacceptable that such complex, far-reaching legislation will not be given sufficient time to allow for a proper consultation and meaningful debate. As a comparison, Britain will often publish legislative proposals a year in advance.
Interaction with Revenue
The Revenue’s ability to recover unpaid taxes from individuals still in employment will be strengthened by the bill, which allows it to issue a notice of attachment to the individual’s employer.
This will require that the employer deducts from the employee’s salary amounts specified by the Revenue. The bill also proposes a new provision to deal with the confidentiality of taxpayer information.
This provides for penalties of up to €10,000 to be imposed on Revenue officials guilty of unlawful disclosure of information. It also sets out the circumstances under which the Revenue may legitimately provide information to third parties.
The bill contains a surprise for the self-employed and other non-PAYE taxpayers who pay tax under the self-assessment system.
The income tax deadline for self-employed for payment has been brought forward by a month, from October 31 to September 30.
The due date for payment of the balance of tax, and for the filing of returns, has also been brought forward to September 30. This will be effective for the 2011 tax year onwards.
Therefore, preliminary tax for 2011 will be payable on September 30this year and the due date for filing a 2011 tax return will be September 30, 2012.
Taxpayers using the Revenue Online Service (ROS) will continue to benefit from a 14day extension period for filing and payment. The payment dates for capital gains tax will remain unchanged.
These changes, primarily intended to accelerate the receipt of income tax payments by the exchequer, will introduce further complexity into a system that many taxpayers already find difficult to comprehend.
In the first year of operation (2011), a taxpayer with income tax and capital gains liabilities could have as many as five different dates for filing returns, meeting their tax liabilities and paying pension contributions.
None of this is likely to enhance the smooth operation of the self-assessment tax return system in Ireland, which has been tinkered with to such an extent in recent years that it now bears little resemblance to the ‘pay and file’ system initially intended.
Although the period allowed for filing and payment is relatively long compared to similar systems in other jurisdictions, the Irish system’s complexity – its multiple deadlines and inconsistencies between return filing and payment dates for different taxes – makes it difficult for many to understand.
The proposed changes will do little to improve the position.
Personal health insurance
The Health Insurance (Miscellaneous Provisions) Act 2009 provided for an age-related tax credit in respect of private health insurance premiums paid to authorised insurers between January 1, 2009, and December 31, 2011.
This applied to those aged 50 years or over on the date the contract was entered into. An age-related tax credit may be given for the years of assessment 2009, 2010 and 2011 only.
However, in the case of private health insurance premiums payable under contracts of insurance renewed or entered into this year, where the premium is payable in instalments and some of those instalments are payable in 2012, an age-related tax credit may be given in the year of assessment 2012.
The age-related tax credit is given at source by authorised insurers.
The bill contains an amendment to the age-related tax credit. It abolishes the credit for individuals aged 50 to 59 and increases the amount of the credit for those aged 60 years and over for relevant contracts renewed or entered into on or after January 1, 2011.
For those aged between 60 and 69, the tax credit has increased from €525 to €625. For those in their 70s, it has increased from €975 to €1,275, while those aged over 80 will see their tax credit rise from €1,250 to €1,725.
The authorised insurer will grant the age-related tax credit and the income tax relief at the standard rate of tax at source, meaning a lower net premium payable by the individual. Perhaps the intent of the increased credit is to lessen the impact of much-publicised increases in medical insurance premiums.
There was a very strong backlash to December’s budget proposal that the facility to offset property capital allowances against rental income from properties other than the specific tax-based property would come to an end in 2011.
Friday’s Finance Bill has kicked this issue to touch and it will now be a matter for the next government to decide how to proceed.
The bill sets out the changes in the tax acts required to bring these proposals into effect, but the Minister for Finance has deferred the implementation of the changes until the completion of an impact assessment.
The bill makes it clear that the changes cannot come into effect before 2012 and can only do so once the minister signs a commencement order.
There remains great uncertainty regarding what will happen in 20 12.
At least the opportunity is now available, through the proposed impact assessment, to demonstrate the type of financial carnage that could be created through the implementation of the restriction.
Should the minister, whoever it may be at the time, decide to proceed with the implementation of the restrictions in the manner proposed by the Finance Bill then, for passive investors, any capital allowances in respect of investment in a building or structure can only be offset against the rent arising from that particular building or structure and will not, therefore, be available to shelter rental income from other properties.
These restrictions apply both to property-based capital allowance investment schemes and to residential investment property, often referred to as ‘‘Section 23 relief’’.
As well as the blanket restriction on the offset of excess capital allowances by passive investors against other rental income, the Finance Bill contains provisions to limit the extent to which unused capital allowances from these investments can be carried forward.
These changes, too, will only be implemented once the impact assessment has been comp l e t e d, and can not be implemented prior to 2012. Individuals and companies entitled to property capital allowances arising from an active trade will continue to have full access to these capital allowances.