Business Tax
Finance Bill 2013
by Pádraic Whelan, Tax partner, Head of Real Estate and Business Tax
T: +353 1 417 2848
E: pwhelan@deloitte.ie
For the business community, the Finance Bill has introduced the measures announced in the recent Budget and has also focused on a number of new areas some of which are welcome.
In terms of Research & Development tax credits, there has been some loosening of the rules in relation to certain individuals who might be able to avail of the tax credit in that they now only need to spend 50% of their time (rather than 75%) previously on R&D activities.
Such individuals will still need to meet the other conditions of the relief which are still quite restrictive. The extension of the Employment and Incentive Investment scheme to cover the operating of hotels and guest houses is welcome as is the extension of the scheme to 2020 for investments generally. The expected take up on this scheme, previously known as BES, has been disappointing to date.
The much heralded REIT regime (Real Estate Investment Trusts) brings Ireland into line with over 30 jurisdictions which have such property vehicles and allows everyone to participate in a regulated listed property vehicle.
Essentially the vehicle is exempt from tax as long as it distributes 85% of its income to shareholders who then pay tax as appropriate. Whilst the market in Ireland is small, this vehicle does facilitate investment in quality assets going forward.
Staying with property and in particular for those individuals who deal in land, there are new rules being introduced to restrict the offset of land losses against other income. In addition where debt related to trading land is released or written off, it will become taxed as trading income. This measure will put pressure on persons struggling with debt repayment and impact seriously on cash flow. It limits the ability to use losses arising from the crisis.
There are some new initiatives to be introduced to try to attract owner occupiers back into urban areas and rebuild old Georgian houses and commercial buildings in urban areas which is a welcome measure that will help some level of job creation in the construction sector once it starts.
The Pension changes announced will allow some flexibility to those with Additional Voluntary Contributions (AVCs) where they can access up to 30% of same and pay tax under the PAYE system in the normal manner.
It is good to see the government taking the initiative on REITs to help the property market recover. Most of the other measures were expected other than the moves against property traders and the limitations on the use of losses.
