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| TAX PLANNING TIPS FOR 2010 |
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Planning Considerations
Finance Bill 2010 - Some of the measures that will affect small and medium enterprises are as follows:
Start-up Companies – As announced in the Budget the relief from corporation tax for start-up companies under Section 486C TCA 1997 has been extended to those companies commencing to trade in 2010.
Capital Allowances on Energy Efficient Equipment – As noted in the Budget speech, the categories of energy efficient equipment qualifying for 100% capital allowances in the year of purchase, where purchased for trading purposes, are being extended. The new categories include refrigeration and cooling systems and catering and hospitality equipment.
PAYE Credit for Proprietary Directors - The Bill provides that the credit can only be given to the extent that PAYE has been deducted.
VAT Treatment to Public Bodies – Changes to the VAT treatment of public bodies are outlined, on foot of successful EU Commission proceedings. As a result of these amendments, Local Authorities in particular will be subjected to VAT at the underlying rates on services where there could be a distortion of competition (e.g. waste disposal, leisure facilities, etc.) and on certain other activities listed in the Directive e.g. port and airport services. Where appropriate, input VAT on these supplies will be recoverable.
Rent a Room – Rent a room relief will not be available where the recipient is an employee or office holder of the person making the payment.
RCT – A number of changes to RCT administration have been made. These include the possibility for a reduced return/payment frequency for principal contractors and they enable Revenue issue certificates of authorization (C2s) to cover 2 tax years, rather than the current legislative limit of 1 year. Revenue can also increase the limit on a relevant payments card (C47) unilaterally.
Restriction of Reliefs for High Earners – Section 22 of the Finance Bill outlines the means of increasing the effective rate of income tax for ‘high income’ individual taxpayers to 30% (previously 20%) applying greater restrictions on the use of certain income tax reliefs |
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 | The full restriction will apply where adjusted income is over €400,000 (previously €500,000).
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| The entry level to which the restriction will apply is reduced from €250,000 to €125,000.
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| The formula for calculating the restriction in Section 485E TCA 1997 is amended so that the amount of specified reliefs allowed is the greater of €80,000 (previously €125,000) and 20% (previously 50%) of the individual’s adjusted income for the tax year. This should give an effective rate of income tax of at least 30% where adjusted income is over €400,000.
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| There is no change to the list of specified reliefs as contained in Schedule 25B TCA 1997.
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| The changes do not appear to simplify the legislation or clarify an anomaly in relation to the new reduced entry point of €125,000 and the current permitted annual income tax relief of €150,000 for BES investments.
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| The changes apply from 2010 and subsequent tax years. |
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If you require any further information or advice in relation to this matter please contact this office. |
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